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First, a quick recap of the crisis: many nations of the European Union (EU), especially Spain, Italy, Greece and Portugal (The PIGS) are suffering critical financial troubles. Several decades of reckless spending, unsustainable social programs, and massive amounts of debt have brought these nations to the brink of ruin, and they are facing the prospects of imminent bankruptcy and massive civilian unrest. To make things even worse, perhaps much worse major European banks are the primary lenders to these troubled nations, and these banks might also collapse along with the nations they have
2. Five years on, the Great Recession is turning into a life sentence China is sufficiently alarmed by the flint hardness of its "soft-landing" to talk up trillions of fresh stimulus. The European Central Bank is preparing to print whatever it takes to save Spain and Italy. Markets are pricing in an 80pc chance of yet more printing by the US Federal Reserve in September or soon after. There is no doubt that the three superpowers acting in concert can launch a mini-cycle of growth early next year - assuming they deliver on their rhetoric - but the twin headwinds of debt-leveraging and excess manufacturing plant across the globe cannot easily be conjured away. http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9471018/Five-years-on-theGreat-Recession-is-turning-into-a-life-sentence.html (Now even China is contemplating stimulus a euphemism for printing money.)
6. Swiss National Bank overwhelmed in desperate campaign to devalue franc There is a "new China" active in the currency markets, according to analysts, as Switzerland's battle to weaken the franc inflates its stockpile of foreign currency reserves. The Swiss National Bank was forced to buy tens of billions of euros in May and June after the Eurozone crisis worsened, creating strong haven demand for the franc and threatening the ceiling the central bank set for its currency last September. The SNB is prepared to buy as many euros as it takes to hold the franc at SFr1.20 against the euro to protect the country's exporters. http://www.ft.com/cms/s/d3176586-db29-11e1-be7400144feab49a,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0 %2Fd3176586-db29-11e1-be7400144feab49a.html&_i_referer=http%3A%2F%2Fwww.gata.org%2Fnode%2F11623#axzz24zOKGF B2 (Surprisingly, even the ultra-conservative Swiss have now resorted to a form of currency manipulation.)
7. Draghi tells Germans ECB action needed for stability (Reuters) - The European Central Bank must employ "exceptional measures" at times to fulfill its mandate of delivering stable prices, ECB President Mario Draghi wrote in an opinion piece on Wednesday aimed at calming German angst about the bank's policy course. The ECB is drawing up a new bond-buying plan to lower the borrowing costs facing Spain and Italy, which Draghi is expected to detail after a September 6 policy meeting. Germany's Bundesbank - highly respected by German voters - opposes the plan. http://www.reuters.com/article/2012/08/29/us-ecb-draghi-idUSBRE87S0AM20120829
8. Draghi: ECB to do "whatever it takes" to save euro
FRANKFURT, Germany (AP) European Central Bank President Mario Draghi promised Thursday to do whatever it takes to save the European single currency and raised expectations that he could step in to lower the high borrowing costs that are crippling countries like Spain and Italy. Draghi told an audience of business leaders in London that the ECB would "do whatever it takes to preserve the euro" and added, "believe me, it will be enough." http://news.yahoo.com/draghi-ecb-whatever-takes-save-euro-135406314--finance.html (No one is quite sure what exceptional measures, and whatever it takes means, but remember that a central banks one and only tool is control of the currency.)
History shows that once an enormous debt has been incurred by a nation, there are only two ways to solve it: one is simply to declare bankruptcy repudiate the debt. The other is to inflate the currency and thus to destroy the wealth of the ordinary citizen Adam Smith
So what conclusion can we draw from the recent news? It seems, at least for now, that Europe is more intent on printing money and increasing debt as their preferred means to deal with their crisis. If this is true then the preferred allocation includes a diversification to assets that tend to do well in times of excessive money printing and weakening currencies while still being very careful and cognizant of the level of risk in your portfolio in unusual times like these still the same thesis we have been advocating for a number of years now. Go Ride a Bike! To turn away from gloomy economic news for a moment, and to stay in synch with summertime, here are a couple of my favorite vacation ideas to try and (at least temporarily) escape reality, and enjoy some recreation and rejuvenation. Bicycle Adventures An old dear friend and former training partner of mine runs a bicycle touring company called Bicycle Adventures. If you have on driven on I-90 East from Issaquah recently, you might have noticed their building as the company headquarters are in Duvall. Bicycle Adventures runs guided and supported bicycle trips in various scenic locales in the US and around the globe. They basically do all the work for you; provide a guide, all the gear and bikes, make arrangements for lodging and food, and all you need to do is show up and pedal. Their trips are available at different levels from very easy to more strenuous, and are in some of the most beautiful areas imaginable. Some friends went on a tour with them to New Zealand and raved about their trip, and other families we work with have also used them. If you feel a little zest for a more energetic vacation you might consider them! http://bicycleadventures.com/ A Boat Cruise in Eastern Washington My family and another family planned a houseboat trip on Lake Roosevelt this summer. I have to confess that when my wife told me that we were going to spend 6 days stuck on a boat, I had some trepidation as I tend to be on the hyperactive side. My fears were unfounded though, as we had an absolutely exquisite adventure. Swimming, jet skis, fishing, hiking, reading and lots of eating filled our days, and we ended each night under the glow of a warm Eastern Washington sunset with a campfire, songs, and toasting smores. We had seven kids with us, and they all agreed, along with their parents, that it was the best time ever.
It may not be as luxurious as a conventional cruise ship, but we had a glorious time and are all eager to do it again someday. I would highly recommend it! http://www.lakeroosevelt.com/ I hope that you and your family have had a glorious summer. My family and I are enjoying the last few warm days of the year on a staycation. We have some traditional end of summer activities that we enjoy doing; river rafting, berry picking, a swim across Lake Washington (The Puget Sound Blood Center Swim for Life), and sleeping on our deck under the stars are all on the list as well as some mountain biking and fly fishing. I have to admit that it has been a little bittersweet, as my two oldest boys headed off for college at the end of August, leaving our home a little quieter than normal. All of my best wishes to you and your family, and I look forward to our next meeting and speaking with you again soon.
William R. Gevers Financial Advisor PS: We have been repeatedly asked by clients if they could share these e-mail notes with their friends or neighbors. Please feel free to forward this with the stipulation that it may only be forwarded if done so in its entirety with no portions omitted. We would be delighted to share our comments and opinions with your friends, and welcome your comments and feedback. If you received this and would like to be included on our newsletter list, please email us at wgevers@geverswealth.com
Gevers Wealth Management, LLC I-90 LakePlace Center 1605 NW Sammamish Road, Suite 250 Issaquah, WA 98027 Office: 425.657.2238 Fax: 425.657.2138 E-mail: wgevers@geverswealth.com
The views are those of William Gevers, Gevers Wealth Management, LLC, and should not be construed as individual investment advice. All information is believed to be from reliable sources; however, no representation is made as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Investors can not invest directly in an index. Please consult your financial advisor for more information.
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http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS#
(http://data.cnbc.com/quotes/.DXY/tab/2)
(http://www.finviz.com/futures_performance.ashx?v=17)