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Author: loveoldcars Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 158  
Subject: Financial Doom in Eastern Europe Date: 10/17/2008 1:26 PM
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Hi Jeff,

What's your take on this from a Czech viewpoint? I wonder if the western EU countries will think that eastern europe, and particularly the Eastern EU countries are 'too big to fail'? Plus, the EU certainly doesn't want Russia getting involved with petro-dollars!

http://www.rferl.org/Content/Financial_Doom_And_Gloom_In_Eas...

"Many boom nations of eastern Europe, Asia and Latin America are among those abruptly stalling, leaving governments wrongfooted by an investment exodus. Economists have been drawing up a critical list of vulnerable countries - identifying those struggling with giant current account deficits, undercapitalised banks, overheated stockmarkets and exposures to short-term overseas borrowing.

"The three Baltic states along with Ukraine, Kazakhstan, Bulgaria and Romania - and of course Iceland - are at the top of the list," said Nick Chamie, of RBC Capital Markets. He singled out Hungary, Romania, Latvia, Lithuania and Estonia as least able to mimic the recent western bank bail-outs that have helped more mature economies reduce some of the most damaging effects of the crunch."


rk
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Author: lukematt One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 138 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/17/2008 7:49 PM
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Hi, Richard:

Your thread is very thought-provoking.

>
> What's your take on this from a Czech viewpoint?
>

1. This week, the Czech Minister of Finance was voted as the best minister of finance in Europe.

By whom? I'm not sure--the other ministers of finance, I think.

I read the story on Czech Television (CT2) teletext.

My wife, who got her information from a different source, says that he was voted the best minister of finance for the former Communist-bloc countries only.

2. This week, the same Czech Minister of Finance announced that the Czech financial system is sound. The Czech Republic will be minimally affected by the global financial crisis.

By the way, the guy's name is Miroslav Kalousek. Personally, I don't think it's such an important name to know.

3. This week, the not-so-small town of Hradec Kralove announced that they may lose 74 million Czech crowns because they had money invested in an Iceland bank.

You know me, Richard, I'm a not-so-small cynic. No, I'm not a cynic; I'm a realist because I *know* what's really going on here.

What the H*ll is a small-compared-to-other-major-cities-in-Europe townhall in the Czech Republic doing investing money in an Iceland bank?
It stinks as much as the fact that seemingly every financial institution in the world invested in sub-prime mortgages. OK, I read yesterday that Iceland just lowered its interest rate by 3.5% to 12%, but who in their right mind would invest money at 15.5% when the normal interest rate everywhere else is significantly lower? As Bruce Williams always said, "If it looks too good to be true, it probably is". To me, Hradec Kralove deserves to lose 74 million Czech crowns. At the same time, though, Hradec Kralove did not invest their money based on some cognitive process. No, they simply gave their money to their investment advisor at CSOB, the largest Czech bank. Their investment advisor invested the money in an Iceland bank. How friggin' convenient. It *STINKS*.

4. Let's go back to Kalousek's statement "The Czech financial system is sound. The Czech Republic will be minimally affected by the global financial crisis."

My response: Of course!!! Richard, you know the prudent principle--test everything on a small scale first; then, if it works, implement on a larger scale.

The current **global** crisis in the finance industry was first tested in the Czech Republic during the mid 1990s.

Tell me if these events don't ring extremely familiar to you:

** During the crisis in the Czech finance industry of the mid 1990s, all of the major Czech banks received huge assistance from the government.

** When Agrobanka was failing, GE Money Bank (GE Capital Bank, at that time) made a sweetheart deal with the Czech government. [Hint: JPMorgan and Bear Stearns]

Agrobanka was "broken into pieces" [Come on, where have we heard that strategy recently? Lehman Brothers?]. The good pieces went to GE Capital Bank, and the garbage went to the normal shareholders. [Sound familiar?]

** After Nomura tunneled Investicni a Postovni Banka (IPB) for $11 billion, the Czech government sold the "carcass" to CSOB for ONE CZECH CROWN. Viola, whereas CSOB previously had only one office in Brno, after the "acquisition" of IPB, they now had **hundreds** of offices, including one at every post(ovni) office. For ONE CZECH CROWN. How convenient.


Of course the Czech Republic will be minimally affected by the global financial crisis. The Czech Republic was its testing grounds in the mid 1990s.

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Author: lukematt One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 139 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/17/2008 8:41 PM
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Hi, Richard:

I told you that your thread was thought-provoking. (You got me started. Now, let's see you turn me off. :-)

>
> I wonder if the western EU countries will think that eastern europe,
> and particularly the Eastern EU countries are 'too big to fail'?
>

Cute.

Well, let's look at the article's list of countries....

"The three Baltic states" (that's Latvia, Lithuania, Estonia). I never really hear too much about them. Let me go wake up my wife; I think she told me something about them recently. (I'll blame you, okay? :-)

Don't worry--she was fine. :-)

A friend of our oldest son stayed with a host family in one of the Baltic countries during the summer. He simply said it's beautiful.

When my wife and youngest son were in Paris during the summer, they met an American couple who had just visited the Baltic countries. The couple simple said "Beautiful and very cheap".

That's it. The Baltic countries are quiet.


"Ukraine" A "vulnerable country" due to the global financial crisis??? When has the Ukraine ever been "a boom nation of Eastern Europe"? Just as the Americans import Mexicans to take the less-desirable jobs, the Czechs import Ukranians.

"Kazakhstan" Borat's country? When has Kazakhstan ever been "a boom nation of Eastern Europe"?

"Bulgaria" During Communism, Eastern-bloc citizens went to Bulgaria for beach vacation. I have a Bulgarian friend in Brno. He's filling a less-desirable position, but I don't think Bulgarians flock to the Czech Republic like Ukranians. My wife told me something recently about Bulgaria. Let me go wake her again. (We'll test her patience. :-)

People are starting to return to Bulgaria for beach vacations. (They've already been everywhere else since the walls came down? They're trying to relive the good old days?) However, it's expensive now, and the service is poor. My wife likens Bulgaria to Croatia--they want the tourist "dollar", but they're lazy (i.e. they want money with no work).

"Romania" I don't hear much about this country either. When I first came to Czechoslovakia, everyone here looked down at Romania. (Hmph. I thought all things were equal under Socialism :-) Basically, Czechs claimed that Romania was full of Gypsy thieves.


What am I trying to say, Richard? I'm not impressed with the list of countries mentioned in the article "Financial Doom And Gloom In Eastern Europe". These countries have never been "boom nations". If the article said that Poland or the Czech Republic was crashing, then it's newsworthy.


Two last countries mentioned in the article...

"Island" This country stinks big time. It always comes out of nowhere with some earthshaking story. Last year, Islandair purchased Travel Service, a large Czech airlines company that provides charter service for the Czech masses on their vacations. My reaction at the time--Islandair??? Huh???

Now, we suddenly hear that Iceland is crashing. No foreplay at all. One day, nothing. The next day, Iceland is crashing.

Iceland reminds me of the Cayman Islands, the Bahamas, etc. In a global economy, islands are DEAD. They are too isolated. Consequently, they are inclined to make deals with the least savory "organizations" to insure their economic survival.


"Hungary" I *like* Hungary. Repeat: I *like* Hungary. The people are very rebellious. Since the fall of Communism, they have refused to accept the Mafia version of Capitalism (unlike the Czechs, who have swallowed it hook, line, and sinker). Budapest is my favorite European city. Next week, my boys have a 5-day weekend, and my first thought was "Let's take a family trip to Budapest". I've never had a problem with the people in Hungary (unlike the Czech Republic :-( Economically, Hungary has always seemed to me as on the same level with Poland and the Czech Republic.

Hungary needed a 5 billion Euro bailout last week? I don't know what to think. Somebody gave them a bit part in the global financial crisis theatre?

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Author: lukematt One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 140 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/17/2008 8:57 PM
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[Note: Sorry. I misspelled "Iceland" a couple of times in the preceding reply. The Czech spelling is "Island"--it slipped into my reply :-]


THE LAST REPLY (I heard that! Stop screaming "Hooray!" :-)

Quotes from the article that you provided us:

"Ukraine is in talks with the International Monetary Fund over emergency LOANS"

"Hungary was on Thursday bailed out with a €5bn LOAN facility from the European Central Bank."

and other related sources

"California May Need $7 Billion LOAN from Treasury"

"The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department LOAN"

Etc. Etc. Etc.


I am very confused, Richard. Please help me. I thought that LOANS got the world into its current mess. The remedy is more LOANS? (Is this medicine like "the hair of the dog that bit you"?)

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Author: loveoldcars Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 141 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/17/2008 11:38 PM
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Hi Jeff,

I am very confused, Richard. Please help me. I thought that LOANS got the world into its current mess. The remedy is more LOANS? (Is this medicine like "the hair of the dog that bit you"?)

LOL! I think you're right! However, I think the 'loans', in practice, will have adjustable payment schedules or dates, depending on whether Hungary can pay or not.

I read awhile back, that one of the big problems that Hungary is having is the precipitous drop of the Florint vs the Swiss frank. During the big real estate boom in Hungary, the money was borrowed from the Austrian bank Reiffeisen(sic). Reiffeisen borrowed the money from UBS in Swiss franks, and loaned many billions to Hungary, and elsewhere in eastern europe. With the drop in the florint vs the frank, not only is Hungary having trouble with the loan, but the amt. of florints now required to make the payments has gone to the moon! The amt. of the loans Reiffeisen has make to eastern europe is sufficient, apparently, to bring them down, and in turn, UBS.

rk

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Author: lukematt One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 142 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/18/2008 3:20 AM
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It's my turn to LOL!

>
> However, I think the 'loans', in practice, will have adjustable
> payment schedules or dates
>

You are one smart cookie, aren't you?

If you had given me the opening (rather than filling it for me :-), I intended to write:

"...and what is necessary for those 'bailout' loans to become 'bailout' grants? One flick of an executive pen."

>
> the money was borrowed from the Austrian bank Reiffeisen(sic).
>

You gave me an opening!!! You gave me an opening!!! :-)

And who sits on the board of directors for Raiffeisen? Pavel Mertlik, former Czech minister of finance, who gave Investicni a Postovni Banka to CSOB for ONE CROWN.


Richard, you like Eastern Europe. I'm giving you a homework assignment (no, I'm **not** patronizing you--this assignment is real meaty). Vladimir Dlouhy is a former Czech minister of industry. He's the dirtball who greased the wheel so the international Mafia could steal the Czech Republic during privatization. He also now sits on the board of directors for a bank. Your assignment: Which bank?

I think you'll be shocked.


It's a small world??? Nah. It's a world that's controlled by a small group. By the way, didn't the U.S. have a Secretary of State named Madeleine Albright? Where's she from originally? (Ok, so you have two homework assignments :-)

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Author: loveoldcars Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 143 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/19/2008 10:25 AM
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Hi Jeff,

Found where Albright was born, haven't looked at Dlouhy yet. Check this out, spreading to Czech Republic now...

http://seekingalpha.com/article/100565-eastern-europe-sucked...

rk

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Author: lukematt One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 144 of 158
Subject: Re: Financial Doom in Eastern Europe Date: 10/19/2008 11:11 PM
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>
> Found where Albright was born
>

Good work!

>
> haven't looked at Dlouhy yet
>

Don't give up! :-)



I read the article that you mentioned. Here's my favorite sentence:

"After a decade long shopping spree, mainly focused on cars and home improvements, consumers in the Baltic and Balkan countries are tripping over loan payments and sustaining inflation."


I'm not exactly sure what "home improvements" means. From what I see, it should include everything from buying a house/apartment to buying home electronics. I also wouldn't limit the "tripping over" to Baltic and Balkan countries. Instead, start at the Iron Curtain, and go East. :-)

My wife likes our current discussion. She told me that she saw a note posted all around our housing suburb. Some lady is desperate to take a 30,000 Czech crown loan from anyone who will offer it. Hmmmm. I don't really want to discuss "personal finance stupidity" in Eastern Europe right now. Maybe in a future thread.


Let us know if you find where Vladimir Dlouhy is currently sitting.

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