Wednesday, March 26, 2008

“European banks are in horrible shape”

Schroders' Michele expects European interest rates to be slashed

Schroders’ bond fund manager Bob Michele has predicted rates in Europe will be slashed soon to aid the region's banks, which he says are in ‘horrible shape.’ Michele, who runs the top-performing Schroder Strategic Bond fund, said although the European Central Bank (ECB) had so far held rates at 4%, it would be forced to cut them as the economic situation in the region continues to deteriorate. He said: ‘Banks at present need capital formation, and although inflation is a concern, the reality is European banks are in horrible shape.

Posted by jack c @ 10:53 AM (1070 views)
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9 thoughts on ““European banks are in horrible shape”

  • sold 2 rent 1 says:

    The euro will dive when this happens.
    But will the capital flow back into the USD?

    IMHO I don’t think so.

    Sure the USD index will rise but this euro selloff is the trigger for the Elliott wave 5 blow off in gold.
    Watch gold from early April until June. Hope you guys are loaded up.

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  • Any one know of a list of banks and potential risk tables? I’m thinking Scandinavian banks are pretty secure (Iceland not included).

    Who hasn’t been gambling?

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  • Trichet said today that he would not be cutting rates in the forseeable future.

    Mervyn hinted at another small cut, soon.

    IMHO, Trichet will be heavily pressured to cut rates later in the year. The EU Aerospace, Car and Defence export markets will suffer, in the meantime.

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  • Alan – agreed Mr T will cut rates, they wont want the Euro above 1.60 in my view. BUT there may be some intervention first (either the covert / talking up the dollar or some real intervention). That would be enough to start an unwinding of the Dollar bear positions, what happens next? To me that gives a new sell off in the commodity complex…. and after that….new highs in gold? Well i’m yet to be convinced of that one S2R1. BUT having said all that am willing to go along with you and the other goldbugs at least for a while, and perhaps while suffering some pain.

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  • rocket robbie says:

    I am fully loaded with Gold at the moment but i read an article on bullionvault which said Trichet was holding IR for the time being. Does anyone know when the next euro IR decision will be??

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  • rocket robbie says:

    TC

    You can buy gold on Bullionvault or open up a trading account (im with TD waterhouse) and buy gold mining shares. If it helps the one im with is Rangold (RRS) and Avocet Mining (AVM). At the moment the larger producers are doing better than the smaller players but thats up to you.

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  • @ rocket robbie (5) – ECB Next decision:12:00 10th Apr 2008

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  • The Euro strength seems totally based on the strength of the German manufacturers. How long before they begin to see their margins cuts in the face of higher borrowing costs, higher inflation in the new target countries, China etc? Mervyn and the government seem determined on the destruction of sterling for the foreseable future, but when will Trichet and his Bundusbank (spelling?) pals realise that flooding the market with money, drives inflation and they will need to do something else to combat this, just as the European economy begins to go in reverse? I would like to believe that Trichet has a crystal ball and is seeing the future, but I am beginning to feel that the delaying tactics of the ECB (not cutting rates) may well backfire on the European economy and spell the end of the single currency in the long run. Germany may be flooded with confident business leaders (IFO), but the rest are struggling. The EU may as well be called the greater German republic, as exchange rates are being primarily influenced by reports comming solely from Germany ( I have nothing against Germany or German manufacture, but the EU and the Euro would have crumbled already if it wasn’t for Germany’s strength, and if this does begin to falter/ slow, then the rest of club med may well decide to go their own separate ways..) IMHO. Any thoughts???

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  • The question I have been asking myself recently is where to put my liquid GBP – which ain’t much. And and I was begining to think that all currencies (well, maybe just the usd, gbp, eur, aud) are doomed. Primarily because it feels like all of the economic growth for the past 13 years has been funded by massive debt, and now the bubble is contracting / deflating wildly. And if the banks are preserving capital with a massive ‘safe’ risk proflie, then maybe we should be adopting a similar strategy.

    I think tomorrow the UK announces its deficit figure which is expected to breach euro rules, or some such arbitary sh*t, which will make gbp fall – imho. So buying gold is the least risk strategy for wealth preservation – an the cost of which could be higher tomorrow afternoon.

    @Bystander – agree that Germany is the economic powerhouse of ‘Europe’ and She will suffer – She can’t not. Trichet seems to be ‘copying’ the same strategy as Britain and the US, so no help there then. I can only think that it’s the currency of oil, which will become the EUR, that’s keeping it high against the USD and now GBP. CHF perhaps? From a practicle sense though, again maybe gold is the way.

    Do remember though that the US govt made owning gold illegal during the 30s?

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