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Eurozone Renaissance? 30 January 2014

War Room. Eurozone Renaissance? 30 January 2014. HiddenLevers War Room. CE Credit. Macro Coaching. Idea Generation. Archived webinars. Open Q + A. P resentation deck. Product Updates. Scenario Updates. War Room. Market Update Eurozone Renaissance? Scenarios HiddenLevers Use Cases.

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Eurozone Renaissance? 30 January 2014

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  1. War Room Eurozone Renaissance? 30 January 2014

  2. HiddenLevers War Room CE Credit Macro Coaching Idea Generation Archived webinars Open Q + A Presentation deck Product Updates Scenario Updates

  3. War Room • Market Update • Eurozone Renaissance? • Scenarios • HiddenLevers Use Cases

  4. HiddenLevers Market update

  5. Market Update EM – Secret’s Out Diminishing QE Tech Banged Up Risk is Back

  6. Macro Snapshot US GDP and unemployment improving, but labor participation, CPI, and EM currencies are weak. Nat gas climb = Polar Vortex. Are these prices sustainable?

  7. HiddenLevers Europe Renaissance?

  8. Eurozone - Overview 2 Eurozone = second biggest economy Eurozone population = 330 million Unemployed population = 20 million France + Germany + Italy + Spain = Historically 75% of Eurozone economy 330m 20m 75 sources: HiddenLevers, Wikipedia

  9. Europe – Historical Scenario Overview • Two Euro Crisis Periods: • Nov 2009 – June 2010 • Oct 2011 – July 2012 • The 2011/2012 cycle ended with Greek default and bailout. • Summer 2011 correction driven by other factors (US downgrade etc) Euro Crisis II: Greek Default Euro Crisis I The Greek default impacted the Euro and commodities, but little S&P downside

  10. Europe Macro Picture: Unemployment Euro Zone unemployment is still over 12%, and significantly higher than the broader EU, United States, and Japan. Euro Zone EU USA Japan Youth unemployment exceeds 50% in Spain, Greece, and Hungary, and exceeds 25% in most of the EU. sources: Eurostat, Deutsche Welle

  11. Europe Macro Picture: GDP + Currencies And demand is flat. • Germany recovered strongly from financial crisis, but recent growth on par with France (in dumpster) • UK is accelerating, 2.8% Q4 2013 is almost on par with US • Despite growth weakness, major EU currencies outperformed USD in 2013 source: HiddenLevers

  12. Europe – Market Activity The S&P 500 has outperformed all major European markets since 2009. Germany’s DAX kept pace with S&P in 2013, while France (CAC 40) and UK (FTSE 100) lagged behind. source: HiddenLevers

  13. Europe – Focus on PIIGS 2014 = turnaround year for trouble makers PIIGS GDP as % of Eurozone GDP PIIGS ETFs have high volatility Spain Housing still falling into 2015 Unemployment stuck at 20% + for years source: HiddenLevers, Zero Hedge, Reuters, Irish Times, CBC News, Economist, Economist Data Center

  14. Europe – Comparison to USA • double-dip + severity • record level unemployment • brutal fiscal tightening • no decision-maker accountability • political agendas • poor corporate credit What prevents US style bounce back in Eurozone? 5y chart – Europe Markets recovery lags US 114% 28% source: HiddenLevers, Guardian UK, Financial Times , Forbes, Country Economy, Eurostat

  15. Europe Renaissance? – Recap Greek default = correct analogue PIIGS in healthier place EU won’t repeat US comeback Eurozone GDP clinging to positive

  16. HiddenLevers Europe renaissance? – Scenarios

  17. Good: Bona Fide Recovery EU equities + Economy both catch up to USA No countries in depression No removal of stimulus by ECB PIIGS must participate Monetary policy is now supportive Margins rising as EUR rises source: HiddenLevers, Reuters, Irish Times, CBC News, Economist,

  18. Mild: Recovery amidst US Correction Europe Currencies + Markets rising, US not so much Markets Recovery NOT Economic Recovery PIIGS need not participate USA risk back on table, no US boost Germany + France playing catch up source: HiddenLevers

  19. Bad: Euro Trashed Still many skeletons in EUR closet No abatement in debt + austerity Default in Euro Zone still possible political regime changes in Germany EU banks counterparty risk comes to fruition outlier scenario Merkel re-elected, Sept 2013 source: HiddenLevers, Guardian UK, Wall Street Journal

  20. Scenario: Eurozone Renaissance? • Good • Bona Fide Recovery • Mild • Recovery Amidst US Correction • Bad • Euro Trashed European growth accelerates, adding to global recovery and boosting US markets. European equity markets play catch-up, but real growth is slow, with no carry-over benefit to US. German politics or other black swan enables debt crisis to come back into play

  21. HiddenLevers loser winner Winners + losers

  22. Find it on HiddenLevers Eurozone Renaissance? War Room Macro Themes Economic Data Center Scenario Notes Scenario Library

  23. Product Update • Dashboard Page • Email Alerts • Data Center – Most Active Tab • Coming soon: • - Risk Monitoring • - Chart Improvements

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