Grim Long Term Picture

The long term picture is grim. The economy is weak already and this was before the European slowdown, before the stimulus wears off, before comps get tougher,  before credit spreads widened and before the housing tax credit expired. I still think the market can hold up into expiration and possibly into quarter end but its going to be a long Summer after that.

4 comments:

Anonymous said...

Czechs elected a new right-leaning gov't this week. The gov't plans to make it easier to lay people off, reduce government worker's salaries, deal with budding problems in gov't health care and pensions and cut the deficit. The populace supports this because they are worried about the debt to GDP (over 35%) and the current deficit (6.3% in 2009). The banks are all solid, but the country's debt is rated far below Spain or Italy. I don't get this int'l finance stuff.

Anonymous said...

There's more. Roughly 60% of households own their homes mortgage-free and declaring bankruptcy is tantamount to debt slavery. It's capitalism with nationalized health and pension systems. And the Czechs have their own currency. Of course, the rating agencies are warning them of potential downgrades in the future. How I miss the good old solid USA. Praguer

PJ said...

The problem for the Czechs is that a lot of their debts are in Euros to foreigners, and devaluation of the Czech currency makes it harder for them to repay those debts.

The good news is that the collapsing Euro will help them out. The bad news is that the collapsing Eurozone will crush their exports.

Anonymous said...

The CZ korun has not moved much against the Euro. Over the last 5 years the range is 23 to 30 and it currently stands at 26. Euro-denominated loans are essentially zero in the housing and consumer sectors. This is not Hungary or a Baltic country.
Exports, primarily autos, are unfortunately EC-focused and exporters obviously have greater problems when the currency strenthens.