There were quite a few interesting stories in the markets last week so we’ll focus on some of the more interesting ones, or at least the stories that caught our attention and got us talking. And with Cyprus headlining the news, I think they take the cake with their unprecedented idea. For anyone who’s missed it, here’s the basic plot – Cyprus needs to raise EUR 5.8 billion in order to receive their next bailout of EUR10 billion and the way they were going to do this was by taxing personal savings accounts!
Yes that’s right…. The Cyprus government was going to go into each savings account and take a one off tax of 6.75% on accounts under 100,000 Euro, and 9.9% on accounts over 100,000 Euro! With this, all Cyprus banks closed for the week and subsequently froze all accounts until they could figure out their situation and find a more reasonable solution. This has never been seen in the past. Not to mention that it is a scary thought if this was to be passed and proceed. But we’ll have to wait and see and (hopefully) find out more this week.
Also in the headlines was the record order for Airbus, who will be producing 234 planes to Indonesia’s Lion Air. That tops Airbus’ last year’s record order of 230 planes to? You guessed it! Indonesia’s Lion Air. This shows that the emerging markets are a massive factor to driving a lot of the markets as the planes will be made in France helping add some jobs there, and all the developed economies could use more jobs. This helps indicate further resilience from some of the emerging countries as they have the capital to continue purchasing and the drive to continue moving their economies forward.
I’ve said it before and will say it again, job creation will be one of the best cures to start healing economies and putting things back on the right track. If people were able to find jobs they would start to rebuild their assets, governments would be earning more from taxes versus just raising taxes, and it would allow people to move to their new jobs and help strengthen the weakened housing markets. But creating jobs is not one of the easiest things to do so in the mean time keep a well balanced portfolio.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of markets at this time. For more updates on the world financial news please visit our Weekly Global Economic Outlook.
Co-Head of Portfolio Management,
Darren Cox
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com
