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I wrote this missive yesterday, and wanted to share it with you because it may have some important lessons about the world for you as an investor. Cheers!
ON THE EC172 TRAIN SOMEHWERE IN THE CZECH REPUBLIC COUNTRYSIDE – It’s quiet here, this two-top table in the nearly-empty restaurant car of my train from Prague. My cell phone is alternating from “No Service” to minimal bars as the countryside … the small towns … the men fishing from cheap plastic chairs on the banks of the River Elbe … and a couple walking their baby in a blanketed pram pass by in a blur.
I’m not sure where I am exactly. And frankly, because of the biggest German rail strike in decades that you might have read or heard about, I’m not so sure exactly when I’ll make it to my ultimate destination – Berlin. What was supposed to be a direct trip may now involve stops in Dresden and Leipzig, along with two train transfers, or taking a bus rather than a train. Oh well – you have to roll with the punches I guess!
My trip has been a mix of business and pleasure, one that has given me the opportunity to connect with colleagues, old and new friends, and our European readers. And it comes at a momentous time – the 25th anniversary of the fall of the Berlin Wall on Nov. 9, 1989. The city of Berlin is alive with celebrations, commemoration ceremonies, visiting dignitaries, and a symbolic line of 8,000 white balloons that are poised to be released into the air soon, recalling the collapse of the Wall all those years ago.
Yet even as the celebration is raging, and I eagerly count down the hours until my arrival so I can join in, I can’t help but wonder about what is happening in Europe now. The train strike that paralyzed the regional, intercontinental and freight trains in Germany over the past few days isn’t the first over the past several months – and it hasn’t just been the train operators. Lufthansa pilots have gone on strike several times as well, resulting in massive flight cancellations and traveler headaches.
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| Germans this week celebrated the 25th anniversary of the fall of the Berlin Wall. |
That’s emblematic of the ongoing labor issues that Europe has faced for years – not to mention sometimes business-unfriendly rules and regulations that can make it a tough place to operate.
Speaking of airlines, my Delta flight to Munich was the emptiest I can recall in the five years I’ve been traveling here. Perhaps it’s just a coincidence, as the flight attendant from Poland that I chatted up said it’s generally been busier on recent days. But perhaps not.
Europe’s economy has been challenged for some time, and the euro has been falling sharply against the U.S. dollar. Maybe European companies are cutting back on travel to cut costs? Or maybe more European vacationers are finding it too expensive to travel to and spend in the U.S.? It’s not such a far-fetched conclusion to come to, especially when you consider the recent string of lousy economic data out of Europe.
Meanwhile, it’s hard to overlook the symbolism of former Russian President Mikhail Gorbachev coming to Berlin for the 25th anniversary celebration … but current Russian President Vladimir Putin nowhere to be found. I’m writing this piece from territory that used to be firmly in the Soviet Bloc. I walked the streets of Prague where Russian tanks and troops once suppressed a Czechoslovakian uprising in 1968.
The environment couldn’t be more different now. Street performers playing Andean music or dancing in giant panda suits can be found around the city, as can Western clothing and restaurant chains like Guess and TGI Fridays. Roving British stag or bachelorette party groups are more the norm, rather than roving bands of soldiers carrying machine guns.
But news broke today of more massive shelling in the Ukrainian city of Donetsk. And last time I checked, Putin hasn’t handed Crimea back to his neighbors. Sure, he hasn’t reconstructed a 21st century Soviet Union (yet) … at least not in the same way his predecessors did decades ago. But could he be in the process of doing so over the coming months and years, in a 21st century way? Via proxy armies of “rebels,” political arm-twisting, and economic pressure, perhaps involving the reduction or cutting off of gas supplies to Western Europe?
It’s not so far-fetched a theory – and when you talk to people on the streets here, it’s definitely in the back of their minds. You can’t escape it, like the cold November rain in Munich or the thick fog blanketing the hills here in the Czech countryside.
So as I see it, Europe is a Continent at a political, economic and historic crossroads. The joyous and raucous celebrations 25 years ago and today in Berlin can’t completely mask the underlying concerns, the worries that the way forward may be more complicated and potentially tumultuous than the past quarter century.
As an investor – even now with the Dow at new highs – you would do well not to forget that other markets and other parts of the world aren’t enjoying the same success we are. If we can’t pull them along with our strength, they may drag us down with their weakness.
| “If we can’t pull them along with our strength, they may drag us down with their weakness.” |
Now, it’s time to go back to enjoying the picturesque scenery. Na shledanou.
Any thoughts on how Europe and the rest of the world will affect our prospects here in the U.S.? European countries generally have more safety nets for citizens who find themselves in financial difficulties. But, critics say, they also have higher taxes and systems that stymie personal initiative. Do you have experience in Europe or viewpoints on the economic systems on the Continent vs. that of the U.S.? Click here to comment.
| Our Readers Speak |
Our column weighing the benefits and risks of raising the minimum wage brought a flood of responses from readers. Mike Larson will be back from assignment in Europe on Wednesday and he will be sure to review your comments and give his views. Click here to comment on the minimum wage issue or on any other matter.
| Other Developments of the Day |
It’s 50/50. Former President George W. Bush said the odds are evenwhether his brother, Jeb, will run for president in 2016. The former president said the former Florida governor is “wrestling with the decision” for the Republican nomination. W. told CBS’ Face the Nation broadcast that he’d be “all in” if Jeb decides to run.
In the recent survey, San Francisco posted the highest average ($3.27), while Memphis was the lowest ($2.65). Enjoy the lower prices while they last – and drive carefully!
Remember, you can click here to add your views on these matters or anything else!
Until next time,
Mike Larson
P.S. This week is your last chance to go for 7-fold gains on your CORE portfolio, funds that you can use to live a richer, safer retirement.
Reason: ALL enrollment for Martin’s Ultimate Portfolio, which could have given you 613% total returns since 2005, is about to END. Click here for more information before you miss this chance!
* For fair comparison, the performance of all investments is calculated on an equivalent basis. It represents each investment’s total compound returns (price appreciation plus dividends) before taxes and broker commissions. The Ultimate Portfolio uses the same measure, depicting what a hypothetical investor could have achieved if he had followed our new model during the same period. For details, see Terms and Conditions. Data Sources: Bloomberg, Weiss Ratings.
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 45 comments }
Only complete economic ignoramuses or committed collectivists (mostly one and the same) can blithely ignore centuries of experience, much less proven theory. A mandatory minimum wage defeats a free labor market and condemns willing low-productivity job-aspirants to unemployment (no one will hire them.)
Unleash voluntary Individualism (capitalism.)
Looking forward to your newsletter.
Ignoramus? We’ve had the minimum wage since 1938 and the labor market has not been defeated.
You Americans amuse me: you make a flying visit to Europe and think you understand centuries of European history .The American who comes closest to understanding what is going on in the Ukraine is Paul Craig Roberts and even he does not get it all right . The US is responsible for creating the mess in Ukraine not Russia , that is not to say the Russians are totally trustworthy . It is like “weapons of mass destruction ” . Where are they America ?
Please explain to us exactly how the U.S. is responsible for the Russian mess in Ukraine. This should be good.
Fred…read Mr. Roberts…and yes the truth IS always GOOD!
Wages should reflect a job’s worth. That’s pretty simple if you wish for the organization to be competitive. If government wants wages to rise it should cut regulations, cut taxes, and get out of the way. The resulting boom econmically would result in a tighter labor market thus causing wages and benefits to rise. Supply and demand works in the real world, but government seems to exist elsewhere.
Agreed! When did American business owners lose the right to advertise a job opening & set the wage based on requirements of the job? If workers don’t like the wage, let them look elsewhere. Laissez faire by the government! Remove government over-regulation & Obamacare, & allow free enterprise to fluorish & provide ‘high wage jobs’, not minimum wage jobs. America was built by independent business; not socialism.
The answer is they can set the wage as long it is not below minimum wage and it has been that way since 1938. Not much new there.
I was living in West Germany Forty years ago. Things have certainly changed a great deal there since then! I would like to get back there for a visit and see for myself what has happened there. AND, concerning the situation with Russia and the price of oil: I believe that the main cause of the final collapse of the Soviet Union was that the Saudis pushed the price of oil down from over $35 pb to less than $10 pb in the mid to late 1980’s. This did not provide enough income for the Soviet State to keep going. The exact same thing is happening now with the Saudis again pushing the price of oil down to the point where the Russian State will suffer. This is the reason behind the drop in both oil and gasoline prices. They are going to keep going down and stay there for a while (years not weeks)!
Does anyone remember that the price of gasoline was LESS THAN ONE DOLLAR per gallon just fifteen years ago? Well, it WAS! I think it could go to less than $2 per gallon in the near future!! Yes Really!
Wow Mike, you must have missed the “Communism in the Soviet Union collapsed and booted out of office” memo as well as “Russia now Capitalist, 15% Corporate income tax” memo too, or all the memos from the EU, you know about mass Muslim & African immigration, EU deficit spending “unsustainable”, EU govts “unsustainable”, EU bank account “seizures”, EU migrants burning cars-by the thousands, EU migrants rioting, EU’s need to cut spending but inability to cut spending.
“Putin hasn’t handed Crimea back to his neighbors” ??????
Why the hell should he? They* voted for Russia (*the majority, Democracy, self determination blah blah blah), and fuel access, and Capitalism, and sovereignty, and a 15% corporate income tax versus what?
What is the EU?
The EU is a non-state, an invasion conscript and sovereignty denial zone and future Caliph perhaps?
The EU Constitution is an assignment of liability for whateva…..and license to slavery to everybody in range, Germany, Italy, Spain are former states, their former citizens now “tenants” subject to EU dictates, not even the Swiss are immune, there will be no pull out, no evasion of liabilities for the mob, the EU is a broke Roach Motel and the only exit is mass murder.
I returned from Greece and Turkey last month. Tons of tourists and lots of money flowing into the local economies……but, the poor guy on the street is not sharing in that money flow. Turkey is better off than Greece. The Greeks are not going to get out of their mess. They need to leave the Euro. There are more billionaires on the Bosphorous than any where in a similar European area……….why do they want the Euro? Stay away from the Euro.
A friend has an auto parts business here and the exact business in England. During our downturn he had to cut health insurance, and lay off people. In England his business did much better. The publicly funded healthcare there, allowed him to keep his workers. He also experienced less employee sickness and time off there. “Socialized medicine” helped him to keep his business.
Which means Obamacare hurts American businesses!
I see a global financial crisis outcome. I believe the world is now in the land of malinvestment. The real estate values in New York are now out of reach for the super wealthy.
Raising minimum wages is a good idea-but not to the ridiculous levels of $15 to $20 or more, as is proposed in some states. Small businesses by the tens of thousands would be forced to close, thus driving up the unemployed numbers again!
Common sense would say that states should set their own rates, since the cost of living varies considerably among them.
So governments can set a minimum wage, but no one has said an employer must hire someone at any wage – yet. Maybe that is coming, They had it in the Soviet Union, after all. All wages were set by the bureaucrats in the Kremlin. Maybe the American people are ready for sovietism, hmm? At least the Soviet constitution made tax evasion only a civil violation, not a criminal matter as we do. Don’t believe it? Look it up.
Sad to see that even you are parroting the US government’s lies about Ukraine. Fact: the legally and democratically elected government of Ukraine was overthrown by a US funded coupe d’état. Fact: the ‘rebels’ in east Ukraine are opposed to the current government illegally installed with the help of US government interference – in other words, they are patriots. Fact: Russia has a valid strategic interest in eastern Europe just as the US has a valid strategic interest in Canada and Mexico – Russia has been invaded by Germany twice in the last 100 years. The US needs to quit sticking its nose into the affairs of other nations.
Agreed…AND the TRUTH!!!
The minimum wage is nothing more than Price controls, which every economist knows and history has proven does not work. Thus…. a minimum wage increase is only a political shell game to pretend that the politician’s are doing something when they are not. As an example: lets look at the fast food industry. General labor usually runs about some 30% of costs for both workers and managers. (owners not included.) And a proposed increase in the minimum wage from $8.50 per hr. to $12.00 (what President Obama wanted in the U.S.) is a 40% increase. Within three months of implementing such an increase that business’s profits would drop by a similar amount thus a 40% drop in profits unless the business increased their costs of goods sold an equal amount. But absolutely no business could do that because more than 35% of customers would then choose to shop somewhere else or stay home and cook. Additionally, if prices were increased then the workers at those and similar stores would also be paying the higher costs as well, thus no real increase in their long term benefit. Even Warren Buffett has told President Obama that a increase in the earned income tax benefit on the U.S. tax returns would help the lower income groups without destroying business. But our president is too arrogant to listen.
Hi Mike
It is not whether or not Mr Bush or Mrs Clinton would make a good candidate for president or not. It should be what is best for the country at the moment. Neither candidate is the right one for the job. We don’t need a golf player or someone with connections looking for popularity and a free ride to more lucrative benefits. The right candidate will probably not be in politics at the moment and may need to be drafted. The country needs someone who can give us honest figures on the state of the nation. We need someone who doesn’t need the job to pacify their ego or add to their collection of legislative failures. This country desperately needs a uniting force that can fix budgets, mend societies bridges, reduce the built up red tape bureaucracy and create a sensible tax code. A tax code that motivates local business and employment initiatives. We will not get much needed change without this and we will not get worthwhile jobs growth without this. If you can’t fix the country, then please don’t stand for office.
Just to add
Compassion is not lost on either side of political opinion. One side feels it should be mandated within a nanny state where we have everything managed. Another view is to say let’s help the poor and weak, but more importantly let’s motivate everyone to be more productive and do better. No one side of politics owns the compassionate debate.
You don’t give the poor a leg up by mandating effectively a tax on the middle class. Compassion at the point of a gun is a solution? Not!
You give the poor motivation by getting government out of the way — by teaching them how to fish…not by giving them a fish.
Exactly
A takeover of this country at the hands of the globalists can only continue if one if their pre-cleared puppets get in…expect a puppet as the people will not get what they want which is what you want.
Dear beg to differ
No citizen wants a take over at the hands of the globalists. We use to have an economy that was humming. Big spending, bloated and bureaucratic government doesn’t help get us back to business. On the contrary, it stifles business and so jobs. I’m hoping we can all get back to being united again.
I paid $2.56 for gasoline here in Bridgeport, Texas at WalMart.
Wonderful for you to share while riding the train in Europe. I recall in the late ’80s doing the same through numerous counties. I vividly remember in England, people on the train with tattered clothing, a hole here and there in their coats. Life then was poorer for most within Europe than the states. However, you’re right about social welfare being better in Europe for the poor. It was there I realized the system was a good system, caring for an entire population rather than leaving homeless and hungry to fend entirely for themselves. It was there I realized socialistic medicene was a good thing. My husband and I were there on this particular trip promoting publically traded stock for a heart pace maker company. We stayed in fine hotels and ate at the best restaurants. The trip was educating to see other systems and values outside of an American view. Thanks again for bringing back memories and keeping us up on Europe as it is today.
I followed your European travel experience. I was in Germany when the wall came down. The Eastern part had to brought up to Par. As for the Euro, many Germans did not like the conversion and inclusion of other European Countries. One reason; their working force is not the same as the German. As the old saying goes; The German lives to work, the others work to live. This has been a problem ever since. The expanded Socialism hasn’t helped either. Even with the present building boom, because of the cheap money, Mario Draghi is making the same mistake as our government. A separation from other European Countries is too late. The only thing I can say, the Germans & Eastern European are more resilient and German government is able to put matters faster into action than ours. I am glad you could make this memorable trip and hope you returned with new impressions and many happy memories. Aufwiedersehen and the best of luck in all your endeavors!
Remember Crimea recently voted to be in Russia as it was historically since Catherine the Great but those ruling the Ukraine are there through a coup d’état. Yes the Crimea was acquired long ago but then so was the now United States from the Indians and it’s not returned nor do the Indians get to decide to get a return of their land.
I lived for 25 years in the USA. I moved back to Europe for the following reasons. 1) I was geting very frightened of the move to a total police state in the USA. 2) The overall taxes house, school, insurance etc. has reached levels of most European countries, without any services been produced with these taxes. 3) I had a number of small businesses in the New York, and the rules and regulations have now passed those in Germany or Austria by a country mile. So having moved to Austria last year, I can only say that it has been a pleasure opening my own consulting company here, as well as a publishing business. The taxes are no more burdensome then back home, and the infrastructure services here are great. By the way health insurance here in Austria cost me less then 120 dollars a month with full cover compared to more then 600 dollars a month in New York. Overall the USA is still king of the world in marketing, everything else is not quite as it seams.
I thought that Crimea had a referendum in which they overwhelmingly voted to join Russia (and looking at the chaos that is Ukraine who could blame them?). Would you force them back to a country that wants to outlaw their native language?
Mike,
You said that European countries have more safety nets for citizen… it’s true but that attract
a lot of lazy people who took advantage from the hard working class; who want to work if they can have free phone, free housing, free food. free medical …etc….? these never have to retire people cause a lot of trouble for the society, a lot of crime created when they have nothing to do
I work very hard and paid my tax dollars for these free service, that really make me feel like I have to think again what I should do ? I heard the same thing from family and friend in Europe, that why their economic was pull down, we ‘re going the same path .
It is happening to us hard working middle class, too…it came out yesterday that the architects of Obamacare defrauded us so as to make the workers pay for all those that don’t work and won’t work due to government handouts…we are not participating in this crime of tripling of monthly premims and doubling of annual deductibles so they can incentivize the lazies tk never work and flood our country with millions of illegals that the citizen’s have to pay for. The Agenda is loud and clear….
I am troubled by Obama’s behavior in China while attending the APEC meeting. Smirking, and gum chewing on camera while the Chinese are sizing him up is foolish, even for Obama.
Having spent a few years in the South China seas, I know what is at stake in this region of the world. My sense is that China, and their new found buddy Russia will confirm their current opinions regarding Obama’s character/will, which will likely lead to more overt aggression in the region.
Obama’s reduction of the US Navy to pre-WW1 levels will only encourage aggression, which will ripple through the world economies, and stock markets.
Lastly, prepare for the next two years of Obama’s revenge. The telltale sign will be an expansion of concurrent disruptive actions by his administration to overwhelm systems, and the American people.
Loan and Mike,
true we currently have strikes in Germany and true they are not good. But overall the situation is a far cry for the 60ties and 70ties when strikes were the norm.
The main reason for Europe’s current problem is the unclar situation on its resposne to its own problem or evern the acceptance of the political class that there is a problem.
A research institute did a survey to a representative number of citizens of each European country in early 2012. The question was fairly simple – if you yourself are in a bad situation no job no money etc. are you yourself or is the society responsible to improve your lot? The answer was equally simple, in the Northern countries Germany, the UK, the Netherlands, Scandinavia the majority stated that it was their own responsibility to improve while the southern half opted for the society to help them. This includes France, Italy and Spain which are the 2nd, 3rd and 4th biggest ecomonies….
Unless the question of social responibility can be answered in an unified way, the European Union to respond because half of its members opt for more personal responsibility and the other half for more responsibility to the society.
This draws into the open the second issue, the question of who should respons to the problem. The central government in Brussel, the European Union has little means and political possibility to do so, while the local governments have the will but not the monetary instruments to do so. It needed a civil war in the United states to decide the question of the “location of Power” and while I am certain this will not happen in the Europe it is indeed 50/50 if the European union can come to a coordinated response or if the local “independence parties” will ripp the EU appart.
What is required is a compelling vision of Europe’s future and there is no party and no polititcian delivering this…
Raise the minimum wage one last time and then tie all future raises to be equal to that of Social Security recipients. Problem solved once an for all – not.
Denmark is a small country of about 6 million people. They have free education thru college, health care is free. Tax on the wealthy is 50% and the lowest pay 15%, then there is the 20% value added tax on all purchases by every citizen. Yes the minimum wage is 15 euro’s, and the price of the Big Mac is 15 euros. Is this the direction our country is heading?
Sir..right now in my city there are charter schools providing free education for illegals all the way through college, free healthcare, free housing, free spending money, and free food and they are being bussed in. This is not available for the citizens.
An increase in the minimum wage will hurt small business. Yet, if the consumer is unable
to find more money to spend, the economy will falter. Since 70% of our GDP is dependent on consumer spending we find ourselves in a “catch 22” situation.
What is your answer to this dilemma?
Nice commentary…….most of us are wrapped up in our own world. we don t understand all the forces at work in a world economy. Even with more information flowing– from so many sources– it seems the willingness and capacity to digest it rarely occurs with us gringos.
Please, get a editor and cut to the important part of your message. Most of us could care less about the scenery or your apparent desire to write a novel. Give us the economic facts and the supporting documentation and skip the irrelevant fillers.
We do not need any more Kennedys’, Carters, Clintons, obamas or McCains Or BUSHs’. Certainly would love to have another Ron Reagan. Also, need a little more elaboration of the causation and reasons for huge impact of Jan 28, 2015; Please. Thanks for the consideration.
If Russia cuts supplies to Europe who will supply the oil and gas? US, Canada, Saudi Arabia , ?. There may be an investment there. Could also be Shipping.
With oil prices down (maybe for some time) and potential inflation coming which companies are best to benefit short term and long term?