AABP Award 728x90

An independent view: Don’t invest in Europe


Dear Mr. Berko:

I think you’re all wet with your negative comments on the European markets, especially France. Nigel Bolton manages European stocks for BlackRock, the largest money manager in the world, and the famous Mark Mobius is the executive chairman of Franklin Templeton Investments’ Emerging Markets Group. Both recently issued very positive positions on the European markets. They’re knowledgeable, expert professionals who have been running these funds for more than 20 years. They have access to huge amounts of data, they employ dozens of Ph.D. analysts, and they oversee huge research staffs. So how can you possibly disagree with Mobius, Bolton and other fund managers who are bullish on Europe? Is your ego getting in the way of your brain?

S.B., Phoenix

Dear S.B.:

I learned something a long time ago: Never ask a barber if you need a haircut, an auto salesman if you need a new car or a broker if you need a variable annuity.

I have a small, 12-by-17-foot office with two and a half desks, three computers and one and a half employees, and my front door is near the corner of an old, recently updated business complex. I’m between a travel agency and a beauty salon. There are a half-dozen mom-and-pop diners within walking distance. I’m 10 minutes from home and 10 minutes from the gym.

My costs are modest, I don’t have massive overhead, I’m not in the selling business, and I don’t need to attract investors with grand stock market projections. Therefore, I can afford to write honest advice. Sometimes, my advice may be wrong.

Now, when have you heard Bolton or Mobius publicly say, “Don’t buy my fund” or “Keep your cash in your pocket”? I’m paid by newspapers that publish this column. I’m not paid by a multibillion-dollar mutual fund, and I don’t earn brokerage commissions. So, unlike most on Wall Street, I have the wonderful liberty of honesty.

I suggest you glimpse the funds run by Bolton and Mobius, as well as some of the French banks in their portfolios. An extremely credible French source tells me that his country’s three largest banks are in trouble and might have serious solvency problems.

France is the second-largest economy in Europe, with a gross domestic product (GDP) of about $3 trillion, but the total debt of its three largest banks is $7 trillion. That’s equal to 233 percent of the French GDP. The total debt of the three largest U.S. banks – JPMorgan Chase, Bank of America and Citigroup – is $6 trillion, or 42 percent of the U.S. GDP.

A partial Greek default may be less than six months away, and those three French banks still carry $60 billion in Greek debt at par on their balance sheets, when the real value is less than $20 billion, if that.

Italy, also a very sick puppy, recently approached China, which owns foreign currency reserves of $3 trillion in euro assets, about buying $280 billion in Italian bonds.

Stay away from Europe and France, and when you next read a market opinion, ask who pays the author’s salary before you believe what he or she writes.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com

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