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Faber On Europe: Think GERxit Not GRExit

Tyler Durden's picture





 

In line with our views on Europe's endgame, Marc Faber opined on Bloomberg TV this morning that if he "was running Germany, [he] would have abandoned the eurozone last week". We suspect that given the lack of real steps forward and no additional exposure (as yet) for Germany that they can hang on a little longer before they reach the final phase of the game-theoretically optimal exit (that Credit Suisse and us share) of a mercantilist GERxit occurring sooner than many think (benefiting from deposit inflows and low-EUR-based high profitability from exports for as long as possible and not a moment longer). The "cosmetic fix" of this latest summit, as Faber calls it, simply does not solve the fundamental problem of over-investment in the euro-zone. He is bottom-fishing in some European equities (though avoiding banks) and is not long the Euro here as he sees the modest rally in risk assets in Europe as merely a reflection of illiquidity and a grossly oversold market reverting on 'not a total disaster' though he reminds us early on that "pooling 100 sick banks does not make them healthy."

 

Faber on the eurozone crisis:

“If you put one or 100 sick banks in a union, it does not change the fact that they're sick. In my view the markets are rallying because they were grossly oversold. When markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher. I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.”

 

“If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken. The first loss is the banks. In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.”

On whether he’s picking up European equities:

“Yes. In Portugal, Spain, Italy, and France, the markets are either at the lows of March 2009, or lower. Along with bad companies and the banks, there are also reasonably good companies. Stellar companies, but they have been dragged down. I see value in equities, regardless of whether the eurozone stays or is abandoned.”

 

“[I’m buying] anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%...I am not buying banks, but maybe they could rally. I am just not buying them because I think there will be a lot of equity dilution and recapitalization. I’m not that keen on banks.”

On whether he’s going long on the euro:

“No, I’m not going long on the euro because I’ve always maintained a diversified currency portfolio. I have U.S. dollars, euros, Singapore dollars, some Canadian dollars, and even some Australian dollars. And I have a lot of Asian currencies, Malaysia, Thai baht and so forth.”

 


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Mon, 07/02/2012 - 11:58 | Link to Comment veyron
veyron's picture

Why does bloomberg like taking a video of a TV screen of a still of Marc Faber?  And an unsteady one at that ...

Mon, 07/02/2012 - 12:17 | Link to Comment The Monkey
The Monkey's picture

All of this negative sentiment is creating a positive backdrop for the markets. Enjoy!

Mon, 07/02/2012 - 13:51 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

Faber is always optimistic about his pessimism.

Mon, 07/02/2012 - 12:56 | Link to Comment Zionist Jew
Zionist Jew's picture

Out in Thailand banging 13 year old boys again Mark?

Mon, 07/02/2012 - 14:40 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Hey Shalom, can I apply for a loan?

Mon, 07/02/2012 - 15:07 | Link to Comment Zionist Jew
Zionist Jew's picture

Sure, 20 points over prime is the going rate for anyone outside the tribe.

If you need $, an attractive young goy lady like yourself should come work for one of us in DC or NY.

Mon, 07/02/2012 - 11:58 | Link to Comment Falkor
Falkor's picture

Its Faber!

Mon, 07/02/2012 - 13:53 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Italy 1st to leave euro - Faber is good but now I think first to leave the eurozone will be Italy ...

They have a major export economy which is being stifled by the euro, and they have the stuff (design, clothes, Italian food) people buy, global depression or not.

Italians have much to gain from leaving the euro and little to lose. Their economy was nearing primary budget surplus when the EU-ECB pushed out Berlusconi, they have small household debt, they can stabilise public debt and banks if they can print.

Italians are actually richer per person than Germans. With their own currency back they can out-export and out-sell the Germans in the upcoming global economic storm.

Berlusconi will likely be back, the Italian lira will be back, and Berlusconi may be reading ZeroHedge and learned "... he who defects first defects best ... "

Mon, 07/02/2012 - 14:34 | Link to Comment Linus2011
Linus2011's picture

that is why i do not trust bank guys any more. especially stupid morons from brussels.

yeah right:

the lira was a great currency. it was so great we actually burned the bills when we were there in vacation.

italy outselling germany? in what? fiat cars or gay clothing?

 

Mon, 07/02/2012 - 14:37 | Link to Comment markar
markar's picture

not to mention their 2000 tons of gold

Mon, 07/02/2012 - 11:59 | Link to Comment NooooB
NooooB's picture

Bullshit. The markets are rallying because the Swiss are protecting the Franc. It would take trading to call it a rally...

Mon, 07/02/2012 - 12:04 | Link to Comment FXPortent
FXPortent's picture

Luke,  I am your Faber?

 

Wait, whaa?

Mon, 07/02/2012 - 12:11 | Link to Comment Debt-Penitent
Debt-Penitent's picture

I just can't help but injecting Mark's voice in my mind whenever I read his quotes.
Is it Austrian?

Mon, 07/02/2012 - 12:13 | Link to Comment FXPortent
FXPortent's picture

I know for a fact he received his degree in Switzerland. Check Wiki though, not 100% sure.

Mon, 07/02/2012 - 12:15 | Link to Comment Tirpitz
Tirpitz's picture

Helvetian. Our Austrian friends bear names like Hayek, Hitler and Moozart.

Mon, 07/02/2012 - 12:04 | Link to Comment Pinky
Pinky's picture

Just taking a lunchtime moment to share this article from Paris, I thought it was hilarious. Not a financial blog but a liberlal-leaning political comedy one:

http://wonkette.com/476988/around-the-world-with-lloyd-dangle-how-the-european-debt-crisis-is-like-grease-through-a-goose

"To understand the European debt crisis, you only have to look at the way the French make their famous foie gras. First you take a goose (sovereign government) and feed it rich food (cheap money) until it gets sick and bloated with cirrhosis of the liver (debt) and the farmer (the European Union) has to slaughter it (destroy its middle class with austerity measures). The fatty foie gras of course goes to the bankers in the form of bonuses and the rest of the stinking carcass lies around for three years with nobody willing to take responsibility for it."

 

 

Mon, 07/02/2012 - 12:23 | Link to Comment chubbar
chubbar's picture

“If you put one or 100 sick banks in a union, it does not change the fact that they're sick."

OR, if you take the bonds of 100 insolvent countries and make one (Euro) bond, it does not change the fact that they're insolvent"

Mon, 07/02/2012 - 12:05 | Link to Comment Manthong
Manthong's picture

Right about now, a few folks in the Fatherland have to be thinking, “We seem to be in about the same type of trick bag as we were in 1921 and we have as little chance to save the Euro now as we did of paying off the Treaty of Versailles back then”.

Mon, 07/02/2012 - 12:05 | Link to Comment FXPortent
FXPortent's picture

I've always liked his analysis, truly a brilliant man.

 

 

Mon, 07/02/2012 - 12:06 | Link to Comment ebworthen
ebworthen's picture

That would be a way to avoid the meetings, the summits, the press releases, and the wrath of the German taxpayer.

Mon, 07/02/2012 - 12:09 | Link to Comment wjkins
wjkins's picture

A Gerxit.. I aint gonna say nothin  

Mon, 07/02/2012 - 12:39 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Deuxit a little less visual?  

Maybe Deutchit?

Mon, 07/02/2012 - 13:47 | Link to Comment machineh
machineh's picture

I thought GERXIT was a brand of mouthwash ... puts germs on the run!

Mon, 07/02/2012 - 12:10 | Link to Comment francis_sawyer
francis_sawyer's picture

I disagree with Faber...

If I was Germany... I would have BEAT Italy (then Spain), in Euro 2012... Then... on the awards podium, announced that I was leaving the Eurozone...

THAT'S how to make a statement!... (For any of your future marketing needs, please contact francis_sawyer)...

Mon, 07/02/2012 - 12:14 | Link to Comment Wakanda
Wakanda's picture

After being defeated on the field, Germany will take the ball, go home, roll up the Eurozone, and then sulk for a couple of decades.

Mon, 07/02/2012 - 12:12 | Link to Comment Tirpitz
Tirpitz's picture

“If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…"

Ol'Mark Faber, the great chap - this time he got it wrong. No reason for Germany to exit the fatal union, as long as the Germans obediently keep lining up to hand out the zillions to their corporate export masters. As long as the Germans are happily welcoming the waves of human trash swamping across the borders in search of a solid social network, which they gladly and amply abuse. As long as they are leaving their good jobs to the guest workers and see themselves getting fired instead.

For the 'German' corporate establishment the euro membership is a never-ending bonanza, as much as it is an ongoing draw on the taxpaying citizen.

To break the endless euro impasse, however, the removal of bad debt from the system would be essential. Due to the fascist incestuous relationship between powerful corporate lobby groups and their political henchmen, such a break up is out of question, as it would remove the entire zombie world of high finance from the landscape.

Mon, 07/02/2012 - 12:18 | Link to Comment Dr. Engali
Dr. Engali's picture

I agrre with your assesment. The sheeple of all the western nations are going to let their politicians lead them down the road to perdition.

Mon, 07/02/2012 - 12:45 | Link to Comment JR
JR's picture

I’m sorry, did Faber say if he were the Americans, if he were running America… he would have abandoned the Fed dollarzone…?

We’re acting so tough, right?

Mon, 07/02/2012 - 12:13 | Link to Comment Mattress Money
Mattress Money's picture

I really wouldn't say brilliant man I would say common sense, which many of the new generation lack, because schools teacher taught test, instead of critical developingthinking

 

 

Mon, 07/02/2012 - 12:15 | Link to Comment Mattress Money
Mattress Money's picture

Does anyone have money in the markets? Or plan on buying land or house? Im considering a house in Wurzberg germany wife is from ther.

Mon, 07/02/2012 - 12:17 | Link to Comment fiddler_on_the_roof
fiddler_on_the_roof's picture

No GRExit or GERxit going to happen,

EURO going to beatSHIT out of dollar.

Mon, 07/02/2012 - 12:38 | Link to Comment MsCreant
MsCreant's picture

On a long enough timeline the survival rate for all fiats drops to zero.

Mon, 07/02/2012 - 13:03 | Link to Comment FEDbuster
FEDbuster's picture

Famed investor Marc Faber, Editor and Publisher of The Gloom, Boom & Doom Report said investors "should be their own central banks and gradually accumulate gold reserves as a currency", rather than speculating in gold.   (April 2011)

Mon, 07/02/2012 - 12:21 | Link to Comment Mercury
Mercury's picture

And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.
    If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken.

Oh great, here comes WW III over German debt-parations.

Mon, 07/02/2012 - 12:26 | Link to Comment Galactic Superwave
Galactic Superwave's picture

Exactly. A large war would be the perfect distraction for the MSM and would provide ample excuses when Europe's financial system blows up.

MSM example: "The ECB and Federal Reserve announced today that they will provide the  economies of Europe and the US with 8 Trillion dollars to help finance the war against <fill in your favorite bad guy here>. The stock markets of the world moved up an average of 10% on the news."

Mon, 07/02/2012 - 12:18 | Link to Comment asteroids
asteroids's picture

What WOULD push Germany to leave? Would their banks have to implode first. Once recession hits Germany in a few months, the people will start to suffer. The banks, will for a short time be ok. But, when the wall of shit hits all at once, it'll be too late. They should leave now.

Mon, 07/02/2012 - 12:28 | Link to Comment Winston Churchill
Winston Churchill's picture

How  does just about to lose EVERYTHING they have worked for since

WWii grab you as a reason.

Mon, 07/02/2012 - 12:18 | Link to Comment Rasna
Rasna's picture

A pretty face asking questions whispered in her ear does not promote gravitas...

I don't always agree with Faber or a lot of the other "gurus" that these stations bring on, but silly guys and dames asking 1-2 minutes of  fluff questions with no probing or drill down does no one any good.  This is titillation at best and sensationalism at worst and has very little news content.  Trying to pass herself off as a financial heavy weigh is laughable and requires a very finely tuned Bulls@*t meter.

This is why I've eliminated the channel (and channels like it) from the remote.  Cramers clown show atleast makes me laugh.

Mon, 07/02/2012 - 12:40 | Link to Comment magpie
magpie's picture

Same here. 

Mon, 07/02/2012 - 15:21 | Link to Comment Jack Sheet
Jack Sheet's picture

The dame looks like a transvestite. Something wrong with the eyebrows.

Mon, 07/02/2012 - 12:24 | Link to Comment poldark
poldark's picture

Germany will NEVER exit the euro while Merkel is in charge.

Her main mission in life is to form a USE.

Like a master chess player she will forfeit a pawn here and there 

to obtain the big prize.

Even if she loses power in next years elections the Bilderbergers (NWO)

have got control of the other main parties. Like the UK they think they

have a democracy.

Mon, 07/02/2012 - 12:29 | Link to Comment bdc63
bdc63's picture

Anybody who doesn't think that Germany is going to leave the Euro has not been listening to the change in their "tone" over the past month.  For God's sake, they aren't even trying to hide it anymore.

They have figured out how to protect their banks from a PIIGS collapse -- and they found out it's cheaper to do it directly than it is to pass money through Greek/Italian/Spanish banks first.  Plus, they are sick and tired of hearing all of the PIIG(S) squaling.  GERMANY IS LEAVING THE EURO.

All of the financially solid-ish countries are going back to their pre-millenium currencies.  The Euro will become the new Peso.

Mon, 07/02/2012 - 12:39 | Link to Comment poldark
poldark's picture

There is a poll in the UK Guardian newspaper, which is pro EU asking if you want in or out of the EU.

58% to 42% want out. 80% want a referendum but they will never get. Same with germany.

Mon, 07/02/2012 - 12:41 | Link to Comment magpie
magpie's picture

Free the United Kingdom ! (never thought i would say it )

Mon, 07/02/2012 - 13:11 | Link to Comment tiger
tiger's picture

Get rid of monarchy, prime sinister and all lords

Mon, 07/02/2012 - 13:19 | Link to Comment i8emallup
i8emallup's picture

Tone???? You must be listening to what they say.  You need to watch what they do.

Mon, 07/02/2012 - 12:27 | Link to Comment Everybodys All ...
Everybodys All American's picture

German exit to the Mark and along with a coordinated devalueing of the Euro by +20% might just be enough to save the whole mess. Germany would have to be willing to buy the remaining EU member bonds though with their own currency along with the rest of the world. I see no other way. A devaluation is coming to the Euro sooner or later.

Mon, 07/02/2012 - 12:27 | Link to Comment mark7
mark7's picture

I think it is going to be Mississippi first to exit the Union! What the hell they are doing with those Naah Yaar-kians in the same union, they do not even speak the same language!

Mon, 07/02/2012 - 12:30 | Link to Comment poldark
poldark's picture

Germany can't bail anyone out. Like a dodgy bank it is promising money it does not have.

Mon, 07/02/2012 - 12:34 | Link to Comment mark7
mark7's picture

Whatever Germans do, including group kissing Jesus in the cheek, giving two Beemers and five Bosch drill machines to everybody for free, they will be the bad guys in this story, yes?

Mon, 07/02/2012 - 12:37 | Link to Comment magpie
magpie's picture

Aren't you a pro-Euro person ? Be more constructive, ask France to annex Greece and Spain outright.

Mon, 07/02/2012 - 12:48 | Link to Comment bugs_
bugs_'s picture

imho the Germans will do anything to avoid getting the blame for screwing up

Europe (again) (again).

on the other hand bailing out all of Europe is starting to look like a modern version

of the Treaty of Versailles.

Mon, 07/02/2012 - 12:49 | Link to Comment i8emallup
i8emallup's picture

I'm assuming that the first, best loss is the EUR700Bio that goes poof out of Target2. That will be some good fun for Bundesbank Deutschland.

Nice neologism: "GERxit"  heh, heh.

Mon, 07/02/2012 - 12:58 | Link to Comment The Credible Hulk
The Credible Hulk's picture

Not going to happen.

 

The collective European inferiority complex and will for a European superstate has been in the driver seat for the past decades. Feasability or safety of its passengers has never been its concern and it's not going to step on the brakes now.

Plus, as others have pointed out, the Euro was the price for German reunification. I believe that was even made somewhat explicit in private meetings with Thatcher. The only thing the member states want less than a German-dominated EU is a German-dominated non-EU Europe. Loss of fiscal sovereignty, here we come.

Mon, 07/02/2012 - 13:11 | Link to Comment Klazy Plick
Klazy Plick's picture

Ah Germany, in the hot seat again, I see.  Don't let them shit on you, open your mouth.

Mon, 07/02/2012 - 13:15 | Link to Comment zrussell
zrussell's picture

This banter is all moot:

 

http://en.wikipedia.org/wiki/European_Stability_Mechanism

 

Check Germany's status.

Mon, 07/02/2012 - 14:23 | Link to Comment malek
malek's picture

Did you ever read any other ZH articles?

Also hint: Germany's status on Wikipedia it says "Presidential assent: <empty>"

Mon, 07/02/2012 - 13:59 | Link to Comment Zymurguy
Zymurguy's picture

There have been rumors - and some actual statements from currency manufacturers - here on ZH that could indicate that Deutschland is preparing to convert back to their own fiat and drop the Euro.

Mon, 07/02/2012 - 14:41 | Link to Comment Linus2011
Linus2011's picture

complete BS!

no way merkel will exit. as i said - our leading politicians will go down as hostage of their european charity dream.

all the support of the european parasite countries (including belgium and france) will only end after there is blood in the streets and when a new party arises. and yes - lets better hope it is not a far right wing party.

Mon, 07/02/2012 - 16:29 | Link to Comment Silvertrader
Silvertrader's picture

I don't see a German exit now. there is too much at stake. If they exit markets will plummit. Nice trading opportunity though!

Mon, 07/02/2012 - 17:44 | Link to Comment rayban
rayban's picture

The fact is that Marc Faber is not in charge of Germany. Next elections, and probably an early referendum, will decide whether Germany will stay or leave. Until then the chances of a GERxit are basically zero.

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