From Alexander Green, chief investment strategist, The Oxford Club: I just returned from a fact-finding trip to Europe, with stops in London, Rome, Barcelona and several other major cities. Here are just a few observations… The first thing I’m happy to report is your dollars actually go somewhere in Europe today as the euro is trading somewhere closer to sanity – although parity with the dollar would be saner still, in my view. After all, European growth is slower, its taxes more punitive, its regulations more suffocating… and then there’s Greece. We can thank the Greeks for inventing democracy a few thousand years ago… and now for demonstrating what happens when you couple it with decades of fiscal irresponsibility. The final lesson is about to be revealed. And it’s going to be an instructive one.
Thanks to the stronger greenback, however, American tourists are actually spending money in stores rather than just gasping at prices. But it’s odd how many European small businesses don’t – or won’t – accept credit cards. If you plan to eat in a restaurant, hail a cab or even stop for a cone at a gelatarium, better check your pockets first. This is bad news for Americans abroad since a) credit cards offer your best exchange rate, b) many banks and hotels won’t change money for you anymore, and c) the ones that do apparently believe the euro hasn’t dropped much over the last year and tack on a fat exchange fee to boot. So before you hop in a cab or order dinner for six, better ask if Visa or MasterCard is accepted. Over a couple-week trip, it can make a big difference. Something I noticed in my conversations with locals is that Europeans today seem much less envious and resentful of economic success than the Occupy Wall Street-types here at home. That’s refreshing because I’ve always believed the historic European hostility toward wealth was more understandable. Visit the Hofburg Imperial Palace in Vienna, for instance, and you’re bowled over by the opulence: 18 wings, more than 2,000 rooms, lavish tapestries and decorations, gold faucets, porcelain dishes, enormous gemstones, and a dazzling selection of bejeweled crowns. Then you remember how the royals obtained this wealth. They didn’t earn it the old-fashioned way. They took it, through conquest and confiscation. No wonder the poor sods changing the sheets and washing the stable floors were seething with resentment. It was a long time ago, but old memories die hard… even (or perhaps especially) when they’re passed down over centuries. Another observation I had was how Spain appears to be struggling relative to the rest of the continent. According to official statistics, the Spanish economy is in the midst of a strong recovery, expanding 2.6% in the first quarter. However, Spaniards just endured a multiyear recession – and unemployment is still around 24%. That’s Depression-level joblessness. In the past, Spain’s problems would have been reflected in the peseta. As it drifted lower, it would have sparked Spanish exports and made local resorts and beaches more attractive for international travelers. But Spain outsourced its monetary policy to Frankfurt when it joined the eurozone. So it has to deal with the frustration of economic weakness and a (relatively) strong currency. Bear in mind, the euro, much like bitcoin, is still an experiment. It’s a bold experiment to be sure, considering that the eurozone on the whole is the world’s second-largest economy. But the currency serves different countries with different populations, different political needs, and different economic strengths and weaknesses. This hasn’t worked well for the Greeks. And the question beyond the headlines about Athens these days is clear… Who might be next? Good investing, Alex P.S. Over the past two decades, the average investor has earned less than 3.5% a year – grossly underperforming the broad markets. If your portfolio is in need of a “jump,” be sure to check out this short video. In it, you’ll discover the “7-minute habit” that could help you bring home as much as $121,139 before the year’s end. Click here to watch.↧