Posts Tagged ‘European debt crisis’
The last two years have obviously been extremely difficult for bank stocks. The financial crisis that took hold of not only America but the rest of the world as well has caused extreme strain across the entire financial sector. However, since the financial crisis several years ago, American banks have substantially shifted their risk and investment strategy and are on a much more solid footing now.
While smart investors used the selloff in bank stocks as an opportunity to buy, this investment strategy has not worked for all firms. Not all bank stocks have recovered what they lost, even though they all went up massively this year. While some bank stocks like JPMorgan Chase & Co. (NYSE/JPM) are only down approximately five percent over the last five years, Citigroup is still down a massive amount. Recently, the CEO of Citigroup, Vikram Pandit, was ousted by the Board of Directors, mainly due to the fact that during his tenure, the stock has gone down over 85%.
While he did take over during a difficult time for bank stocks, his investment strategy is obviously flawed. The Board of Directors has decided to appoint Michael L. Corbat as the new CEO. When it comes to bank stocks, Corbat appears to be an interesting choice. First, he’s a long-time member of the Citigroup family. He’s also slightly lower-key than top CEOs like Jamie Dimon. Communicating confidence and leading is extremely important for a CEO. Obviously, considering the strong rebound in the share price and performance of JPMorgan, Dimon is the true standout amongst CEOs for bank stocks.
I see two reasons the board … Read More
The U.S. national debt just surpassed the $16.0-trillion level and is accelerating with each passing minute. The problem is that with the U.S. economy slugging away and an unemployment rate of 8.3%, there are also less tax revenues to collect, which will ultimately impact the government’s balance of tax revenues and spending.
Ironically, while the U.S. is advising the eurozone countries to deal with their own European debt crisis (read “Global Economies Waving a Red Flag”), there is a growing and significant debt issue at home, but no one seems to want to discuss this.
I’m sure the pre-election talks will focus on the debt problem.
Spain has a national debt of around 712 billion euros, about US$892 billion or about US$19,391 per citizen. The European Central Bank’s (ECB) bond-purchasing program will help in the short term, but there needs to be a longer-term solution to deal with the financial crisis.
But while the economic situations in Spain, Italy, Greece, Portugal, and Ireland look bad, everyone seems to be somehow ignoring the massive $16.0 trillion of national debt in the U.S. That’s $50,921 per citizen, or more than double the debt of the Spaniards. The U.S. national debt is mounting and not going away anytime soon. Worst of all, it’s growing at an alarming rate every minute. The only plus here is the country’s low bond yields. If the U.S. had to pay out the high yields Spain does, the U.S. would be broke and facing a credit crisis.
This national debt will take decades to pay off or even get it to more manageable levels.
The … Read More
We are at the mid-point of the year, and so far it seems like a rollercoaster ride driven by heightened stock market risk. We had a stellar January, followed by some softness in February and March. April and May, followed by losses, but we saw some oversold buying in June. The key stock indices are still down from the end of the first quarter, and with many unknowns and stock market risk, it may likely be a rocky second half.
Taking a look at the mind of investors tells us the situation. Since May 15, there have only been five bullish investor sentiment days on the NYSE and seven on the NASDAQ. Compare this to the start of the year when each session in January and February saw bullish sentiment along with the majority of March. The second-quarter sentiment has been muted.
Not only do you have the European debt crisis dragging on in the eurozone, but China is stalling, and the U.S. economy, while growing, is relatively stagnant. Combined, it means high stock market risk.
There is also nearly $16.0 trillion in U.S. national debt and deficit levels, which adds to the stock market risk. California is nearly broke and many other states are trying to squeeze the coffers, looking for money. And while this is going on, you have about 13 million Americans looking for work and probably about 25 million Americans who are unemployed or underemployed.
We also have stock market … Read More
Many people have tuned out the European debt crisis and believe simply that another emergency meeting will be held in which nothing will be decided, allowing the eurozone to simply continue surviving as it has.
The problem with this line of thinking is that the unemployment rate and the economic recession continue to worsen in the eurozone, therefore prompting leaders to resolve the European debt crisis and get their citizens back to work instead of having them protest on the streets.
It is critical that something done very soon or there will be ramifications here in the U.S. as well. The eurozone could experience a banking crisis that will be worse than the Lehman crisis in 2008 and will lead to the European debt crisis reaching heights no one could ever imagine.
The best way to describe the situation is to use Portugal as an example. The debt and unemployment situation in Portugal is such that the country will most assuredly require another bailout from the eurozone.
Yet throughout this European debt crisis in 2012, there has been very little mention of Portugal. If its situation is just as bad as Spain’s, if not worse, then why hasn’t Portugal been in the headlines as the European debt crisis deepens?
The answer is that although Portugal will most likely require another bailout from the eurozone, the country does not need to roll its debt over until the first quarter of 2013. This is a very important concept to grasp, dear reader. It isn’t only the size of the debt that a nation carries that is critically important; when that debt … Read More
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