Free Natty for Europe

EU natural gas will become very cheap. 

European diesel demand falling

European diesel demand is falling.

 

Europe energy consumption

 

EU Natural Gas Demand

EU natural gas demand is historically very depressed due to the warm weather.

Partly also due to switch to coal.

Natural Gas Flow To Europe Drops

Gas flows have been reduced due to Russian supply cuts. Europe has not been able to increase gas flows from other sources. 

Russian gas exports won't recover.

LNG is expected to stay above $30/mcf until 2025.

Because the demand in EU + UK is so high that LNG imports are maxed out.

Asia's LNG demand is expected to recover in 2023.

Fertilizer Shutdown Map

Current status of fertilizer shutdowns. 

Update as of Jan-2023:

European Natural Gas Storage Rising

Europe is able to replenish gas storage.

Energy Dependence Europe

Europe is shooting itself in the foot by banning Russian energy.

 

Europe Energy Supply

Europe has diversification in energy supply.

Coal is still more competitive to natural gas.

Coal prices are set to fall.

 

Unless Ukraine gets invaded.

Coal energy generation will increase.

In summary:

The new trend in Europe

Fintech and pharma are the place to be. 

Europe Most Advanced in Batteries

Western Europe is the most advanced in the battery supply chain.

 

European banks in trouble

Here is a list of European banks and their book value. If you decide to buy banks, I would suggest that you choose from the top end of the list.

Europe Vs. America

Investors are focused too much on the U.S., while they are totally ignoring what is happening in Europe. What they are missing is that Europe's economy is actually improving.

 I believe the euro will be heading north soon due to improving current account surplus and industrial production. European stock markets will fare better due to higher GDP growth, manufacturing PMI, consumer sentiment and retail sales. An improving employment picture in Europe will boost the overall economy.

To read the analysis go here.

Time To Go Into European Real Estate

Real estate in Europe hasn't been doing so well last year, with the exception of the U.K. and Germany (see chart below from The Economist). That will change in 2015.

I believe that the tide has turned when the ECB decided to do "whatever it takes" to defend the euro and proposed their expanded quantitative easing strategy in January 2015. Since 2012 and especially since that announcement in 2015, government bond yields in Europe have been declining at a supernatural rate, especially in Spain (see chart below from Yardeni). We are now at a point where some maturities have negative bond yields.

What is most interesting to note is that bond and bank deposit rates are very low at this moment, while the commercial real estate yields are very high. This translates into a huge spread compared to the historic average and that is why real estate in Europe is a very good place to invest in right now.

Read on here.

The effect of ECB negative deposit rate

The recent news about the ECB imposing a negative deposit rate in June 2014 has spurred a new trend. The deposits at the European banks is seeing outflows.

Who would want to hold deposits with negative rates? They will of course take their money out and hunt for higher yielding assets.

See what happens to the deposits of the periphery in Europe on this chart:

It's Europe's Turn to Fudge GDP Numbers

Remember when the U.S. GDP was recalculated 3% higher? If you don't remember, go here to read it. Well, now it's Europe's turn.

The European Union's statistics office will revise upwards the EU's annual gross domestic product figures by 2.4 percentage points when it switches to a new accounting standard in September, the European Commission said on Thursday (16 January).

What they will include is the same as for the U.S., mainly Research and Development will be added. These things aren't really parts of the economy that are material, but still they will add it to the "GDP". This will have an effect on the "Debt to GDP" levels of Europe and also on the "Spending as a Percentage of GDP" and many other metrics.

For our country Belgium it will be an increase of about 2-3% or 10 billion euro. For Finland and Sweden it's an increase of 5% in GDP. 

So we magically become richer overnight in September.

I wonder when China will start "recalculating" its GDP. They say it will be implemented in China end 2014.

PIIGS Bank Deposits Outflow Accelerating

As I noted a month earlier, Spain's bank deposits posted an outflow and this outflow is accelerating for the month of May 2013. This time, Italy is posting outflows too.

Greece, Cyprus are of course still in a decline. I expect bail-ins to come if this trend continues. Europeans should be worried about their deposits.

Unemployment: Getting Worse in Europe

Today, the unemployment number for Italy was released at 11.1% in October 2012. The number is very big, but the slope at which the unemployment is increasing in Italy is even more concerning. See Chart 1.

It is not getting better in Europe, only worse. Also France and the Netherlands are doing worse and worse.

Our country Belgium is actually doing very well as is Germany.

Chart 1: PIGS Unemployment

Comparing the Dow Jones and Shanghai Composite against Europe

Over the last few years after the 2008 crisis, I want to give a performance update for the Dow Jones vis a vis the Shanghai Stock Exchange. The Dow Jones has gone up 50% after the 2008 stock market plunge (Chart 1), while the Shanghai Stock Exchange has gone up first, but essentially lost all of its gains in the period between 2010 and 2012 (Chart 2).

Indeed, many economists have pointed out that the U.S. stock market has outperformed almost every market in the world. Marc Faber pointed this out in a recent interview on Bloomberg Radio.

Chart 1: Dow Jones Industrial Average

Chart 2: Shanghai Stock Exchange Composite Index

I want to analyze this further. How can there be such disparity? It can't be the exchange rate between the USD and the CNY, because the Chinese yuan has only gone up 5% against the USD between 2008 and 2012. So what are the reasons?

Let's take a look at the basic market metrics: P/E, dividends, book value in the full version of this article.

Iran Oil Embargo: Russia and The Baltic Dry Index Benefit

Albert's Animation



I really love macroeconomics, especially when it's about political themes. This Sunday 1 July 2012 Europe is starting a full oil embargo against Iran. It will not import oil from Iran.

Iran will lose 30% of its exports, while Europe loses 6% of its oil imports. This means tight supply of oil and a rising oil price (8%) as a consequence.

Chart 1: Crude Oil Price

Oil imports into Europe can be found here: http://ec.europa.eu/energy/observatory/oil/import_export_en.htm

Table1: Oil Imports to Europe

You can see that the biggest oil exporter to Europe, namely Russia (30%) will be the ultimate winner here.

Iran will definitely close the strait of Hormuz now. 20% of worldwide oil trade would be disrupted, the baltic dry index would spike and energy costs will rise.