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Honest Information, Profitable Trading

Durudarshan - Investment Analysis

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Magnificent, the ECB Stimulus

Posted on January 25, 2015 at 5:08 PM Comments comments (8)
The Trillion Euro stimulus announced this afternoon by ECB President Mario Draghi is nothing less than magnificent in my view, and will help create jobs and industry for millions, and turn into wealth.  This stimulus augurs well for the European stockmarkets and for the Euro itself, which it now underpins with a very positive aspect.  It seems to have been announced at the right time, and although the immediate market reaction may not have been wildly enthusiastic, it is a complex stimulus, needing people to understand and digest its implications.

In plain terms, it is 60 billion Euros per month over 18 months, starting from March to September 2016, meaning a total of 1,080,000,000,000* Euros.  This was announced by Mr Draghi at the press conference in Frankfurt this afternoon.

It will serve the 19 nations that make up the Euro Area, or Eurozone, which now includes as from 1st January 2015 Lithuania.   However, it will not be available at the moment to Greece, which benefits from arrangements already in place from the IMF, which gave them two bailouts and numerous haircuts.  Perhaps there could be cross border mergers of some organisations which would benefit all?

There seems enough appetite for additional funds, especially by companies who have not been able to find funding from the banks so far.  This is a ready segment that will be glad to be served by this Stimulus.  As in England and Britain, where Mr Cameron has been visiting various companies, who have received funding now, something similar needs to be implemented in the Eurozone.  Money invested in companies which need capital for upgrades of machinery, or cash flow to keep the factories operating while their customers arrange to pay them, will maintain employment and sustain livelihoods and, hopefully, even create wealth in the long term.  That 'old school' way of trading had died recently in the credit crunch, and could well do with revival.  It may be the clue to bring Recovery back on stream.


This Trillion Euro Stimulus was long awaited, and probably is just in time, now joining the money flow in the U.S., Japan and China, to maintain the worldwide economic Recovery, which shall flourish to Prosperity for all nations.  The next stage surely must be for the BRICS nations to reduce their benchmark interest rates and for the Emerging Markets to do something similar, in due course to be followed by Africa perhaps?  Or even simultaneously, and soon?  Why not?  The national books can become squared internationally, as each nation develops its resources, trades with the other nations, and brings development and growth at home.  Would that not be the most marvellous thing to happen?


I wish you peace and prosperity, to every nation, man, woman and child.


Kind regards,

Duru-darshan


(c)  Copyright.

P.S. Earlier I left out three 0's.  Aw aw aw!


The ECB Stimulus, my opinion on this matter

Posted on November 13, 2014 at 10:49 AM Comments comments (4)
There seems some market optimism that the ECB will introduce the Stimulus for the Euro Area within the next few weeks.  However, realistically, if ratification of this idea and the introduction of a Sub Clause in the Treaty of European Union (the Maastricht Treaty) takes due time, everything may be in place by end of February 2015, in my opinion.

Of the 14 nations who are members of the Union where they use the Euro as their currency (I call it the Mother Currency of the 14 nations, each having stoved away their original currencies to participate with the Euro), France and Germany authorised the additional issuance of 400 Billion and 350 Billion Euros respectively in 2008/9, under Mme Merkel and M. Sarkozy, it may be recalled. With that yardstick, France could do with another 50Billion Euro stimulus to bring it to par with Germany.

Germany seems to have been doing well so far, and has resisted talks about a Stimulus recently, although now with their exports affected by the Russia/Ukraine situation, Germany's industrial production was down over 5percent about 7 weeks ago.  That set the DAX moving down, and was cause for pessimism.  It may turn out that trade with other nations, especially the Emerging Markets (bar Russia) may remedy the situation. 

I have been playing with some figures.  If the ECB is to bring in a Stimulus of Euro 1 Trillion to the table, they perhaps could consider dividing it thus : 100 Billion for Germany, 108 for Spain, 200 each for France and Italy, and 28 each for the remaining 14 nations (i.e. 392 Billion Euros) making a grand total of 1 Trillion Euros. 

The rationale for a Stimulus is that it will enhance the Recovery made from 2008, and hopefully bring all the European nations to a period of Prosperity, with growing support for job creation, businesses, building and construction, educational grants, support and loans, and infrastructure upgrade and development.  The U.S. had their Quantitative Easing, Japan under Mr. Abe has stepped on the pedal and expanded their economy, the U.K. has done an extra £375 Billion into the system.  The effectiveness has been proved with the strength of all these economies, and the ECB I believe should take courage and introduce the Stimulus at the earliest possible date, to continue the world economy grow in strength. 

That's it for the moment.  I will look forward to development optimistically.

Kind regards,
Durudarshan H. Dadlani




The envisaged ECB Stimulus....what a capital idea.

Posted on September 15, 2014 at 6:37 AM Comments comments (2)
The Stimulus envisaged by European Central Bank chairman Mario Draghi is a capital idea, whose time has come.  It has been broached over the last few years, and each time the hurdle has been that a) Germany won't allow it; and b) the E.C.B. Rules don't allow for it currently.  Why not?
Those are questions to which I shall not even presuppose a response.  I am sure we will hear on this issue from the authorities concerned over the coming weeks and months, as it becomes a pressing issue.

Only two years ago, I believe, there was the idea of refloating the Dexia Bank.  Provided it was managed well, that would be an excellent vehicle to park the extra cash.  Or maybe they could just create a new bank. 

I heard recently that European banks are in the process of clearing their books of some  $1.75 Trillion dollars worth of assets, and provided the European parliamentary legislators aren't too fussed, these could probably find buyers from among the Chinese and Japanese corporates and states enterprises.
Japan has a stimulus on tap, and the Chinese state coffers are said to have about $4 Trillion reserves, which could be used for shrewd investments.  (Figures of the Chinese having $20 Trillion are just hyperbolic, I would assume).

Readers on my blog and Guest Book know that I have been suggesting a Stimulus for the Euroland nations for some time now.  The efficacy of the Stimulus in the United States has been abundantly obvious, it has recreated lost ground and the economic Recovery has sustained so many livelihoods and created heatmaps of happiness.  The taper has just created a tiny amount of pain, but it is to be hoped that the robust Recovery will strengthen further and create sufficient jobs month by month to allow for the stimulus to wind down further.  Here I have suggested it should be wound down over 20 months, and not 12.  I get the indication that Dr Yellen at the Federal Reserve is likely to keep her policies in tune with this suggestion.

At the time the idea of an ECB stimulus was first broached, I recall both Mme Merkel and Mme Lagarde were quite enthused.  I believe the time now is just perfect for such a stimulus to be started.  It may take about six months, I imagine, for all the constituent members to have their reasoned decisions to conclude that yes, it would be a great idea.  Once that is conveyed to Germany, they would have considered in the meantime the insertion of a sub-section in the Treaty, authorizing such a monetary stimulus. 

Everything being equal, you could see people in bow-ties and ball gowns making their way to a celebratory party.  Go on, ladies and gentlemen, you owe it to yourself.

Kind regards,
Durudarshan H. Dadlani
 



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