Photo by respres

Photo by respres

In 2009, we saw the possible collapse and eventual collapse of some of the biggest corporate names in the world – Lehman, Merrill Lynch, GM, AIG, Fannie Mae, Freddie Mac, etc.  With that behind us, I was of the view that there isnt another corporate failure/s big enough to frighten and spook markets in 2010.  In my Blog of 4 Jan 2010, I highlighted the risks of the withdrawal of fiscal stimulus and low interest rates and also the burgeoning debt of many economies especially in Europe (the three weakest were Greece, Spain and Italy) and lets not forget about the UK which is not part of the EU.  All the economies in the EU have exceeded that national debt to GDP limits which were conditions of the economic union.

I am therefore not surprised by the problems in Greece, Portugal and Spain which had led to severe weakness in the Euro and strength in the US$.  Because the world economy is recovering and corporate earnings are rebounding, it was only a matter of time for the fiscal stimulus to be withdrawn.  As regards to the national debt problems, I am of the view that some rescue from the bigger members of the EU such as Germany and France or even the G7 will alleviate problems – its only a matter of time. Read more…