Is the end nigh for the Euro? [vol. 2]

[Irish]

Steffan said:

Quite right Mermaid I was an articled clerk at the time Mr Cornfield was spinning his web. A pal of mine worked for him, saw the for what it was, got out well before the trouble. He always had the highest regard for the then king of Pyramid selling.

Sign on my age I am afraid.

I had to google that. Sign on my age I am afraid.

For others amongst us born in the 70s and later:

http://en.wikipedia.org/wiki/Bernard_Cornfeld

In the 1960s, Cornfeld formed his own mutual fund selling company, Investors Overseas Services (IOS), with principal offices in Geneva, Switzerland, although its legal place of incorporation was Panama. He also set up mutual funds in various jurisdictions, as noted below. Although the executive headquarters were in Geneva, the main operational offices of IOS were in Ferney-Voltaire, France, a short drive across the French border from Geneva.

In 1962, IOS launched its "Fund of funds," which meant investment in shares of other mutual funds, including some other IOS vehicles. The offering was very popular in the bull market times, and Cornfeld's one-line pitch, "Do you sincerely want to be rich?" became a by-word for its success. During the next ten years, IOS raised in excess of US$2.5 billion, bringing Cornfeld a personal fortune which has been estimated as more than US$100 million. Cornfeld himself became known for conspicuous consumption with lavish parties. Socially, he was generous and jovial, and generally surrounded by a bevy of beautiful young women, including for example Victoria Principal, later widely known as a star in the TV series "Dallas".

At its peak, IOS employed around 25,000 salesmen, who sold a series of mutual funds door-to-door all over Europe, especially in Germany, to small-time investors. He originally targeted US expatriates and servicemen who had no access to US investing, but the main growth of the business came from the public in countries such as Germany and Italy, who had until then had no other easy access to investment vehicles of this kind. Cornfeld called it "people's capitalism."

There were several reasons for the eventual rapid downfall of IOS, and there is no widely-accepted agreement as to the cause. But it may be true to say that, had the parent company not made a public share offering in 1969, it might have survived for much longer. The pressure to make the public offering came from the salesmen-stockholders, who were eager to cash in their paper fortunes, but the money raised by the company was used by the management to diversify in a number of ways that created a cash shortage. The domicile (but not the offices) of IOS was switched to Canada, and the public offering took place there in the summer of 1969.

Bernie decided that mutual funds should take their fees from the profits they made for their investors, not just a percentage of the money invested. That is the way the IOS Investment Program was structured. Unfortunately no other provision was made for operating funds and international stock markets suffered a bear market in late 1969. The value of the IOS mutual funds took a serious fall, eliminating income for IOS. By March 1969, IOS was running out of operating money.

At this point, a little-known American financier named Robert Vesco, head of International Controls Corporation, offered his help with $5MM. Vesco managed to take control of IOS and eventually evicted Cornfeld from the management. Having placed his men in key positions in IOS, Vesco succeeded in transferring over $ 200 million of cash belonging to the IOS funds into his own ventures, mostly in Costa Rica and other parts of Latin America. When the SEC issued a public complaint, Vesco fled to exile in a number of Caribbean hideaways, and was finally reported as having died in Cuba in 2008.

Following the SEC complaint, the Canadian authorities arranged for the IOS entities to be placed in liquidation.

[0a]

Mermaid said:

one of the last hurdles to be cleared before eurozone officials can sign off on a €130bn bail-out and save Athens from a messy default.

Of course they have 'agreed to measures' before but failed to implement them, unfortunately agreeing again doesn't save anyone from anything.

[Mermaid]

0a said:

Mermaid said:

one of the last hurdles to be cleared before eurozone officials can sign off on a €130bn bail-out and save Athens from a messy default.

Of course they have 'agreed to measures' before but failed to implement them, unfortunately agreeing again doesn't save anyone from anything.

I am no longer sure if an agreement is better for the Euro economy, rather than no agreement.

[Steffan]

Mermaid said:

0a said:

Mermaid said:

one of the last hurdles to be cleared before eurozone officials can sign off on a €130bn bail-out and save Athens from a messy default.

Of course they have 'agreed to measures' before but failed to implement them, unfortunately agreeing again doesn't save anyone from anything.

I am no longer sure if an agreement is better for the Euro economy, rather than no agreement.

Now that is an interesting point, Mermaid.

Nor am I. either way the Greeks will default.

On balance therefore the less they get the better. They simply cannot go on.

[Mermaid]

Steffan said:

..Nor am I. either way the Greeks will default.
.

Sure of that?

& if they or don't, how do you reckon stock markets will react?

[Steffan]

Mermaid said:

Steffan said:

..Nor am I. either way the Greeks will default.
.

Sure of that?

& if they or don't, how do you reckon stock markets will react?

I think the markets reaction generally will entirely depend on the `way that the EU and other power centres react to the Greek default.

At some point the writing will be displayed on the wall.

IMO Italy Spain and Portugal could go on within the Euro short term. But not for long unless permanent subsidy is kept up to keep the bond rates down for these countries. In the end this will slide into a real mess unless the EU faces facts and allows, indeed encourages a structured default by these countries.

At this stage it really will be crystal ball gazing time.

I do not like this latest idea that the EU will deliberately hide the losses and pretend everything is fine. As I said earlier at this point I think it becomes fraudulent to act dishonestly and i cannot predict the outcome.

I am certain the defaulters cannot continue as they are. The consequences will depend entirely on the reaction of the markets to the actions of the EU. Judging by the EU performance to date there will be an awful mess.

That is the problem with not facing difficulties and telling lies.

It always gets worse, not better.

[Gargamel]

The question facing the sane voices within the euro zone must be, spend 130bn on Greece, who will surely default whatever happens.

Or refuse to bail them out, and spend the 130 bn. On stopping "contagion".

Would have the effect of focusing the politicians in spain and Portugal, on making a proper effort on growth

[Steffan]

Gargamel said:

The question facing the sane voices within the euro zone must be, spend 130bn on Greece, who will surely default whatever happens.

Or refuse to bail them out, and spend the 130 bn. On stopping "contagion".

Would have the effect of focusing the politicians in spain and Portugal, on making a proper effort on growth

I agree. Unfortunately we do not run the EU.

I anticipate a steadfast refusal to face reality from the EU.

Which is what we have had to date. It will end in tears, I am afraid.

[bosscerbera]

Gargamel said:

The question facing the sane voices within the euro zone must be, spend 130bn on Greece, who will surely default whatever happens.

Or refuse to bail them out, and spend the 130 bn. On stopping "contagion".

Would have the effect of focusing the politicians in spain and Portugal, on making a proper effort on growth

And what will they make this 'growth' with?

[1point7bar]

So what is a good plan for the future?
Successfully answering the big question most likely involves a fair bit of perception (plentiful on this thread), confidence in your prophecies (slightly less abundant) and luck.
This applies to everyone, even the majestic egos of the eurobloc.
I am going to put my head on the block, dulce et decorum est pro PH mori:

This thread will celebrate it's second birthday.

[gingerpaul]

What I'd like to know is what are the conditions required to trigger a wave of CDSs being called in. I would imagine that whatever the bureaucrats are up to avoiding this event must be high up their list of priorities.

[Irish]

Europe is poor - Eastern view.

http://www.bbc.co.uk/news/business-16918000

[Norfolkit]

Interesting piece on Newsnight about the Greek 'agreement', first time I've heard them use the phrase 'soft default',.
The austerity package they've agreed to is sheer lunacy, unsurprisingly political support for the far left and the far right is on the increase.

[speedy_thrills]

So how long will this next bailout/other measures last for Greece?

[sussexjob]

Irish said:

Europe is poor - Eastern view.

http://www.bbc.co.uk/news/business-16918000

"Europe... has lost a lot of money and therefore you must be poor now relative to the past," he reasons in an interview with BBC World Service's Business Daily.

"And in Asia we live within our means. So when we are poor, we live as poor people. I think that is a lesson that Europe can learn from Asia."

Unfortunately Europe is like an overdrawn credit card, unless you start to pay it back, you won't get any more...but heads up we will forget about that and borrow some more...very hard landing on the way.

[speedy_thrills]

sussexjob said:

...very hard landing on the way.

Well if you are running a budget deficit at 9% of GDP in the UK and your aim is to break even by 2015/’16 that’s some pretty serious trimming just to break even, especially if the GDP figure is falling due to economic contraction.

By way of comparison the Greeks have only managed to cut their 2010 budget deficit from 10.6% to 9.1% of GDP. If a 1.5% trim is that painful and disruptive cuts exceeding 2 and approaching 3% per year for 3-4 years will be interesting in the UK.

[bosscerbera]

speedy_thrills said:

Well if you are running a budget deficit at 9% of GDP in the UK and your aim is to break even by 2015/’16 that’s some pretty serious trimming just to break even, especially if the GDP figure is falling due to economic contraction.

By way of comparison the Greeks have only managed to cut their 2010 budget deficit from 10.6% to 9.1% of GDP. If a 1.5% trim is that painful and disruptive cuts exceeding 2 and approaching 3% per year for 3-4 years will be interesting in the UK.

As a Scottish chum of mine says.... "Issnaw gunna happun"

[Digga]

bosscerbera said:

We live in interesting times - which is a Chinese curse isn't it?

Yes and prior to this, we spent nearly a decade of unfettered house-price rises and construction. There is, I beleive, an Arab curse along the lines of "may you have the builders in your house".

Whose curse is next?

[RichardD]

speedy_thrills said:

Well if you are running a budget deficit at 9% of GDP in the UK and your aim is to break even by 2015/’16 that’s some pretty serious trimming just to break even, especially if the GDP figure is falling due to economic contraction.
....

There seems to be a consensus that there is going to be more money printy printy to plug the UK deficit.

http://www.telegraph.co.uk/finance/economics/90691...

The BofE will keep doing this until more balance is restored imho.

But then what is balance? That much inflation that the country starts exporting shiny things to China!?

[bosscerbera]

I can't even be bothered to read the detail but an FT headline "New Greek demands threaten debt deal" has me chuckling.