Memorable reads of the week 7

Original source: G. Noels (2018, November 03). De grote kloof tussen de VS en Europe. De Tijd, p. 17

Geert Noels, economist, and founder of Econopolis shares his opinion about the “great chasm” that exists between de US and Europe.

The apparent chasm Mr. Noels talks about is the major discrepancy between the American and European stock market.  Besides his reasoning for this difference, he also shares a nice graph comparing the Nasdaq and S&P500 for the US vs. the Stoxx 600 and Stoxx 50.
There is a distinct difference visible on this graph between the US and Europe in terms of stock growth. Even with the stronger decline that took place in October, the US is still way ahead of Europe. Noels explains that there are two reasons for this:

1. The US has had a greater profit growth (explains 80% of the difference) though it should be considered overpriced at this point.
2. Europe relies heavily on banks while the US has a booming tech sector (think Apple, Microsoft, and even Tesla). This at the same time explains the first point.

Noels goes on and states there is a second gap. While the US stopped it’s QE and even raised it’s interested 8 times already, Europe has yet to end it’s QE officially (although planned for the end of the year) with rate hikes still far away.

I can’t help but agree with Mr. Noels who states that the policy of the European Central Bank (ECB) closely matches the policy of an economic retirement home instead of a competitive economy. He also correctly points out that Europe has an overweight bank sector with other sectors not taking over.

Original source: K. Van Hamme, (2018, November 03). Leggen ‘leveraged loans’ een bom onder het financieel systeem?. De Tijd, p.31

When the former chairwoman of the Fed warns about something, it’s in our best interest that we at least take note of it.
This holds especially true if it’s about the risk of another credit crisis. This is what made it a read worth remembering.
In case shit hits the fan again at least we can’t say we didn’t get warned.

The article explains how these ‘leverage loans’ might spell trouble for the financial market just like the mortgages in 2008.
I believe it at least is an interesting topic to read up on to be prepared for the future. Unfortunately, like with most things we’ll have to wait and see how things unfold.