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Saturday, 3 March 2012

fundblogiconBy David Cooper, Fund Advisers Europe

Hopes that the Greek debt crisis had been resolved were dashed last week.

At the start of the week the news seemed positive, with a plan in place to provide Greece with the money to avoid a default, and agreement in principle over the austerity measures needed to reform the ailing economy.

This included changing large portions of Greek sovereign debt into longer term bonds, paying back at a much reduced interest rate.

Immediately the main ratings agencies declared that they were going to regard this as a technical default and effectively declared Greece bankrupt.

All the posturing, political wrangling, negotiations and planning to avoid a default seemed to have been in vain. The one thing the bureaucrats had been so desperate to avoid was happening despite their best efforts.

Then the pendulum swung back the other way, with the main industry insurance body, The International Swaps and Derivatives Association, ruling that the Greek bonds had not suffered a ‘Credit Event’ - a phrase used to describe where there has been a significant worsening of terms - thereby, delaying any payment due from a default and further containing any risk of a spread of the financial contagion.

However, many commentators expect this position to change next week and a credit event could be declared as early as next week given the complexity of the restructuring of the Greek debt.

This is now looking like an inevitable event, and the reaction of the investment markets to this series of developments was muted.

Of more concern were the jobless figures announced for the Eurozone at the end of last week. Whilst there are some obvious success stories in the figures – Austria having a jobless rate of just 4% being one of them. The percentages in Spain, Greece, Ireland and Portugal are very worrying – Spain has 23.3% unemployment and over half of the working population below 25 is out of work! Scary figures for an economic area trying hard to get back to growth and not slip into a recession.

Enough gloom for this report. What good news is there to look at?

The US imported its lowest level of oil last year for a decade, prompting hopes that the changes in consumption patterns, focusing on new alternative energy sources and new extraction methods that are unlocking previously unobtainable reserves located in oil fields in the Midwest, could lead to the US attaining that long sort goal of ‘Energy Independence’. Why is this good news? As the world’s largest oil importer, removing the US consumption from outside suppliers, will drive down oil prices, lead to lower manufacturing costs, lower prices and help promote long term security and growth. It is a long way off at the moment, but that it is being discussed as a viable option is encouraging.

China has posted strong manufacturing results on the back of increased export orders and has an optimistic outlook for its housing projects and markets.

Car makers are producing strong results again and their influence on global economies should not be underestimated, The ‘Big Three’ in the US were all profitable in the past 12 months and the runaway success that is VW, looks likely to become the world’s largest car manufacturer.

So whilst politicians and bureaucrats look at Europe’s problems, the rest of the world is gradually easing into growth and has a positive feel to it.

We will remain cautiously optimistic and hold a significant cash reserve/non equity element, for our investors.

Fund Advisers Europe
Rue de Contamines 35
1206 Geneva
022 347 00 52
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Author Bio

davidcooperDavid Cooper is a Director of Fund Advisers Europe, a Financial Services company offering a  broad range of Investment and Insurance Services to clients across Europe and Latin America.  The majority of David’s early experience was gained by working for Lloyds Bank in the United Kingdom. David now has over 20 years' experience growing wealth management brokerages throughout Europe, the Caribbean and Latin America. The primary objective of his role at Fund Advisers is the creation of growth in Fund Advisers’ Wealth Management & Discretionary Fund Management division. David lives in Geneva with his family.

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