Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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EUROPE’S HAPPY DAYS © Leo Haviland July 2, 2012

The European Council’s economic summit concluding on June 29, 2012 seemingly was a stellar success. First- and importantly given the modest (or low) expectations preceding the meetings, the rendezvous did not end in disastrous collapse. Players did not exit uttering unpleasant comments about or noisy threats toward their fellows.

Participants did not merely stress their desire to stabilize (protect) the European Monetary Union. Pacts, declarations, statements, and remarks by participants and politicians offered near-term support for the Spanish banking (sovereign debt) problem (though quite a few details remain).

Spanish banks will be recapitalized directly via the EFSF/ESM (the ESM stage assumes the ESM going into effect). Thus bailout money for this purpose will not go to the Spanish government, reducing Spain’s potential government indebtedness.

In addition, leaders made promises regarding European banking supervision. There also now are greater hopes for Europe-wide bank deposit insurance. Moreover, the extensive official statements related to budgets, fiscal union, and related matters were hopeful hymns to many enraptured audiences.

And no one can deny the sunny revival movements expressed via the sharp stock, interest rate, currency, and commodity forums following the conference.

However, a review of the lyrics in the documents issued by or directly related to this important European Council gathering shows that leaders made little progress in solving the underlying economic (fiscal, debt; structural, political) problems confronting Europe (and particularly the Eurozone). Thus widespread happiness regarding this summit probably will not persist. This money summit arguably makes more urgent appeals than prior ones. It does speak fondly of road maps, architecture, and building blocks. Talk of unified banking supervision and deposit insurance is some progress. However, as in other recent summits, fundamental problems are handled with vague language and nebulous standards. Issues of how to resolve such ambiguity thus permeate the documents. And binding mechanisms by which to effectively enforce current (and any future) fiscal standards for the various nations remain lacking.

The summit documents and related songs of confidence may buy politicians, central bankers, and other economic officials some time. However, the result is about the same as that from other recent European choruses- not much fundamental advance toward solving debt and leverage problems for Europe as a whole. It is way too soon to shout hallelujah. The persistence of the crisis (and especially further worsening of it) eventually may speed progress toward a solution. 

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Europe’s Happy Days (7-2-12)

EUROZONE- BREAKING UP IS HARD TO DO © Leo Haviland, January 3, 2012

The decline in the Euro FX does more than reflect Europe’s sovereign debt and banking crisis. Europe does not stand or act alone. Euro currency weakness underlines the continuing epic worldwide economic disaster that emerged in 2007. The sustained slump in the Euro FX since spring 2011 warns that the worldwide economic recovery that began around early 2009 is slowing. Some headway has been made in containing Eurozone (and other European) problems, but that progress has been insufficient and it probably will remain so for at least several more months. The Euro FX will depreciate further from current levels.

First, despite the major sovereign debt and banking problems, the Eurozone’s political and economic leadership has the political desire and (ultimately) sufficient economic power to preserve the Eurozone. This means keeping even members such as Greece within it. The problems of the so-called peripheral nations in key respects have become those of the entire fraternity. The Eurozone may rely on outside economic help from the International Monetary Fund or other countries to help pay for the repairs. However, the region as a whole will, “if push comes to shove”, resolve the thorny difficulties itself. And even if Greece did exit the Eurozone, remaining Eurozone members probably would band together to keep the Eurozone intact.

For some time, the so-called fixes may involve pushing the problem (dangers) off to a more distant future. The buying-time strategies (hoping that economic recovery eventually will enable a genuine escape) of course will have some costs. For example, picture inflation risks, slower growth, and some suffering by creditors.

The substantial role of the Euro FX in official reserves underlines the importance of the Eurozone and its Euro FX in the world economic order. Most of the world surely does not want the Euro FX to disappear entirely, or to suffer a massive depreciation (as opposed to a further small or even a modest depreciation). Thus at some point (“if really necessary”), the world outside of Europe would ultimately bail out Europe.

Consequently the declines in the Euro FX over the past several months confirm worldwide economic sluggishness (and slumps in stock marketplaces and commodities). So further falls in the Euro FX may reflect- or help lead to- even more declines in equity and commodity playgrounds. That additional Euro FX debasement may even reflect or accelerate an economic downturn (not just stagnation) in some regions, and not just European territories. Thus Euro FX currency depreciation alone will not solve the Eurozone’s (or overall European) problems.

FOLLOW THE LINK BELOW to download this market essay as a PDF file.

Eurozone- Breaking Up Is Hard To Do (1-3-12)