Earnings season update and why be concerned about Europe?
Shares of Green mountain coffee roasters GMCR fell sharply after Monday’s short covering rally they are due to report earnings today for the last few months insiders have been quietly dumping shares. They remain under investigation by the SEC although not formally accused of accounting or disclosure fraud yet. It will be interesting to see their audited numbers.
Netflix NFLX A DVD and streaming video provider reported a $0.21 earnings beat in Q3, but warned that Q4 earnings and margins would be lower than consensus estimates shares were down -27% that’s a 60% decline prior to the Q3 report
Amazon AMZN shares fall 15% after reporting lower-than-expected revenue growth numbers
3m MMM also missed earnings shares falling sharply 5% down.
Laurel said to Hardy “Another fine mess you’ve gotten us into”
Markets are looking to the European Union’s grand plan to the debt crisis which was promised to be released today in the hope to avert a global recession.
But the plan is delayed, yet again, as governments failed to agree on details.
Italy’s growing debt is running at 120 percent of GDP they are the second highest in the eurozone after Greece at 170 percent.
The governor of Italy’s central bank, Mario Draghi, has already expressed concern that rising borrowing costs are threatening to eat up a chunk of the 54 billion euro in austerity measures approved by parliament last month.
For weeks, the European Central Bank has been buying up billions in Italian bonds, trying to keep Italy’s borrowing costs down.
Italy’s fate is crucial to the eurozone because it is the third-largest economy and issuer of sovereign debt to the tune of 1.59 TRILLION euros and would be too expensive to rescue
To avoid a collapse, the European Union is working on a 3 step plan –
1. How to bail out Greece
2. How to shore up the European banks’ capital levels so they can deal with those losses on Greek bonds.
3. How to increase the European Union’s bailout fund
Banks and private investors have been asked to take a 60% loss on their Greek bond holdings so far they are refusing taking to the streets and protesting.
Their concern is forcing losses onto banks could trigger big payouts of credit insurance and cause huge turbulence in global markets.
Greece got a 110-billion euro bailout in May 2010. But that wasn’t enough. So the country needed another 109-billion euro this July. Now THAT is proving inadequate, and an even BIGGER bailout is being discussed.
If things are this bad in Greece, how in holy heck is Europe going to be able to keep bailing out Ireland and Portugal?
Or Belgium, which is now seeing its interest rates and default swaps surging too?
Or Spain, which was just downgraded two more notches by Moody’s?
Or the granddaddy of them all, Italy?
There will be a Greece default it’s just a matter of whether there will be an orderly one and whether it will trigger a domino effect.
The collapse of Lehman brothers will be nothing compared to a Euro collapse.
The markets are going to continue to be volatile caused by rumours and promises, with big rallies and big sell offs becoming increasingly common. But the long-term outlook remains bleak given the huge debt challenges Europe faces.
When the former chairman of the fed Alan Greenspan speaks out it’s worth taking notice
“The European Union is doomed to fail because the divide between the northern and southern countries is just too great” former Fed Chairman Alan Greenspan told CNBC in a recent interview.
