The weekly review...

Welcome to the weekly review. In case you like reading this review, could I ask a favour?
Each week, forward my email to another friend of yours who could benefit from it.


This week, the European Central Bank lowered its interest rate. Again... From previously -0.4% to now -0.5%. Those on a variable mortgage indexed on Euribor are having a laugh and a free mortgage... What more? The ECB also gave guidance that until probably at least mid-2020, the rates will stay the same or be lower... Meanwhile, the King of USA is wondering why the FED does not compete on this race to the bottom...

Get my weekly reviews to your mailbox at the end of each week.

You will never have enough education. Here I share my views of the financial market in general, and from time to time, how to profit from it.

If you like the content of this blog, make sure you read Out of the Rat Race, the book as you will find many eye opening facts and stories which I gathered over 25 years of learning.

Leave your details to receive my weekly review 
We Respect Your Privacy & Information

Something is broken in Europe, and it's not just the fault of Brexit. In addition to having -0.5% interest rate, the ECB also voted for a $20b (yes, "b" is for billions) per month of repurchase on the market (guilds, bonds, and co...). To put it in perspective, that's all the Brexit divorce bill with the EU printed over just two months. Or last year's entire UK deficit paid over a month and a half...

But the ECB is not going to stop printing money after two months... Let's get the calculator out (and a few internet searches too - source here)...

The GDP of the Euro area (19 countries) is around €15.8trillion. Its debt at average 80% floats at around €12.7t. Thanks to the motor or Europe (Germany, Netherlands, Luxembourg...) having surplus, the Eurozone overall deficit was last year at 0.6% of GDP, or €95b. So the ECB is going to print enough in 5 months to cover for all the deficit of European countries incurred last year.

I wonder... How much fiscal restreint will the politicians apply if at the slightest hint of a possible future recession, the central bank preemtively bails out everyone? And I wonder even more... after this, should the ECB print money for a year, what would they buy with the extra €140b (7 months)? It's a whirlpool and there is nothing left to buy after it.

Every way I look at it, I wonder in front of the enormity!

In the past 20 years, the ECB has added to its balance sheet (understand printed money) hummm let's sit down... I will round it up to avoid digging into inflation and other stuff, but if you are interested in the details they are here... So they printed... €3.5t (yes, "t" is for trillions)! That's a good 20% of last year's Eurozone GDP which has been printed... Well, you can argue that everyone should strive to get a 20% annual bonus from their boss ;-)

Anyway, the generous bonus seems a bit decoupled from the actual performance: inflation below 2% but growth below 2% too (predicted growth for the next 2 years is 1.2% and 1.4% respectively). Of course... financial assets growth is another story. Try to compare UK house prices of 2001 with those of today and you are not going to find a 2% growth, even with the most dramatic recession in the middle (2008-09 with 20-25% plunge in house prices).

In our post year-2000 area, the lesson seems to be always the same: Big Money wins by inflating financial assets such as stocks, properties, precious metals. There are rotation cycles favoring some assets over some others during certain periods, but overall, all those financial assets gain way more than growth and inflation. Those without such assets get the little growth (the one around 1.5% turning into 0 or less when applying real inflation to it). Those with such assets get the high growth (the one decoupled from inflation, the one played by the invisible man).

To your journey!

<< back to the blog posts...