tv Power Lunch CNBC May 25, 2012 1:00pm-2:00pm EDT
to me. zynga. >> pete. >> toll brothers hitting 52-week highs this week. but it's bbby. it's going higher. >> that does it for us. watch options action and "money in motion" tonight. follow me on twitter. throw some of those steaks on the grill and see you next week, "power lunch" begins right now. at least 70,000 people, these people are angry. >> announcer: fear. europe's in an economic crisis and your money is being whipsawed. >> this is a slow-rolling really intense car wreck. >> announcer: american stocks hanging in the balance as 27 europe countries with 27 competing opinions try to come up with one solution. can the problem be solved? and what's the worst case scenario if it isn't? today, how to keep your money safe and what must happen to calm the situation across the atlantic.
this is a cnbc special report, eurozone in crisis. now here's international correspondent, michelle caruso-cabrera. >> and the crisis in europe cast an enormous shadow over the american markets once again. so we are bringing you a full hour on the problems there and the impact on your money here. just today we learned that spain's fourth largest bank has its hand out yet again. it wants more than $20 billion of more bailout money. constant headlines like that causing such concern all over the world. the dow jones spain index down almost 45% from a year ago. over the last several weeks and months you've seen the carnage, the greek exchange down 60% in a year. the italian market down 40%. even the power players are down, germany off 11% over the last 12 months. the ftse in london, 9%. then the dollar/euro story. europe currency getting hammered losing 5% of value in a month
hitting a 23-month low today. the dow and s&p down about 5% in a month. 6.5% for the nasdaq. we're going to have more of the tough numbers, but also possible opportunities coming up in this hour. but before we move forward, i want to take you to greece. the epicenter of the european economic crisis. to show you just how much anger will tl is there and how violent life can be in athens right now. >> life for young people is terrible now. my name is nick. i protest because i don't agree with the way that the societies are governizing now. i'm not against violence. if the police hits me, i will answer.
>> since 2009, athens, the capital city of greece, has at times looked more like a war zone than one of the must-see destinations in europe. anarchists taking to the streets. turning the historic city into their canvas for expression leaving a path of destruction and lingering anger in their wake. the signs of civil unrest and rioting are visible everywhere in downtown athens from burned down buildings like this one set on fire during the worst and most violent of protests, to graffiti that's visible on nearly ere corner. anti-government, anti-authoritarian. this one, for example, says let's refuse to live as slaves. the frustration, anger and resentment to government stems from years of mismanaged budgets leading to a massive debt crisis swallowing greece and threatening the entire european union, an economic alliance in jeopardy of collapse. when signs of economic instability first surfaced, he
was the finance minister. is there anything you should have done differently during that time period? >> there are many things that should have been done differently a long time ago. people ask were you late in reacting? my answer, yes, about ten years late. we should have seen this coming. debt was already 10% by the end of 2008. it was just not known. and 16% by the end of 2009. >> so that shows you how far a country can descend into chaos during an economic crisis. we want to show you right now the s&p is cutting ratings on five spanish banks. another highlight, another headline yet again of the continuing problems in europe and how they are spreading. how do you protect yourself if things in europe get even worse? what is the worst case scenario for u.s. stocks and the u.s. economy? let's get to it. cnbc's tyler mathisen is here. kilburg capital's jeff kilburg, also ihs chief u.s. economist, nigel galt here as well. nigel, i'm going to start with you. how bad can it get, particularly what is the worst case scenario
for the u.s. if things explode over there? >> well, the worst case scenario would be if we had a greek exit from the euro followed by a breakup of the rest of the eurozone. so the contagion from greece could lead to bank loans across southern europe, people would flee from sovereign debt across southern europe. you would see more countries exiting the euro. spain, for example. italy even. you see major bank failures. and we would descend into a global financial crisis. there would be a freeze-up of bank credit around the world as a consequence. >> and we have seen something similar to that in the wake of lehman brothers, tyler, correct? >> yes. exactly. the money flew out of money market funds among other things at that time bringing one of them the prime reserve fund -- i can't remember which way it is, no matter, one of them went down. jeff kilburg, nigel has just
laid out the worst case scenario. how likely do you think that is, number one? is it all priced into the value of assets today, number two? and number three, how do i protect myself? >> well, tyler -- >> not to lay it all on you. >> no. bring itd on. first and foremost we hope we don't have a scenario like that. you will see the vix absolutely spike. i'm not in the camp of the armageddon camp, i think there's enough money and liquidity in the ecb. however, we are at a very, very risky situation right now. and if you do see that volatility spike in the vix -- >> what do i do? >> you grab treasuries, ty. we've talked about this on "power lunch" for quite some time that the 1.6 in the 10-year, the folks can play tlt. the mid-1.20 area could spike to 1.30 if people get nervous and see the 1.50 level. look at european stocks, great barometer, kind of the leading
blue chip. >> tlt you'll find some tlc. nigel, let me turn back to you. how likely is the worst case scenario? and how much is already into asset values? oh, there you are. >> yeah. i don't think much of the worst case scenario is yet priced in. i'm not even sure that people have fully priced in an immediate greek exit from the eurozone even though people probably think that ultimately that's going to happen. i do believe that the rest of the eurozone will, should greece exit, have to take a stand. have to step up with unlimited liquidity from the ecb. we'll have to step up with ecb bond purchases. and we'll have to take major steps towards a longer term fiscal union. the question will be, do they step up in time? that could put us in the worst case scenario. but i think still at the moment most likely we'll avoid that. >> all right. we'll end on that slightly optimistic note.
nigel, thank you so much. currencies of course are a core part of this story. after all, it is the survival of the euro that is in question. here's where the dollar stands against the euro right now. we've been seeing the dollar -- the euro fall all of this week. if you look at the month-long chart, you'll see the effect. it is down more than 5%. $1.2510 right now moving lower and lower throughout the session. the dollar has really picked up strength. sue herera has more on the currency side of the story from the new york stock exchange. sue. >> michelle, indeed. there's a real push and pull going on right now in several key currencies. not only the dollar as you just mentioned, but also the swiss franc and somewhat unlikely subject and that's the yen, but nonetheless that's where some of the money is flowing. the dollar's the obvious safe haven of course. but an increasing number of traders are telling me that they're a little wary of the dollar's move. it's maybe a bit overdone, if you will. keep in mind if europe continues to deteriorate and the ripple effects are felt here at home in a big way, then the prospect of qe-3 is looming very large over the greenback.
and that may be part of the reason that we're also seeing some of the funds leaving the euro and flowing into the swiss franc. and that is causing a big headache for the swiss central bank. they're trying to keep the euro from falling against the swiss se. there were lots of rumors in the market of large scale intervention but mark chandler, we're going to talk to him later in the show, he feels the street may be exaggerating the amount of money that the snb has been pumping in. but the flow of funds is creating a lot of volatility for both the dollar and swiss franc. and this morning we saw a lot of whipsaw trading going on. the risk-off trade is still in tact especially given the fact traders are very concerned with this long holiday weekend that it will result in more chaos, perhaps in greece. and the ultimate cost of recapitalizing the banks is weighing very heavily on the euro. a lot of traders that i talk to say that european leaders are underestimating what the real cost of that recapitalization will be. it's going to be a very nervous
weekend in the currency markets, michelle. >> yeah. absolutely, sue. thank you so much. before europeans change their currency to the euro, the britains said we'll stay out of it. was this the best decision ever? kelly evans is live in london. kelly, are the brits feeling smart about where they stand? >> michelle, may seem hard to fathom now, but just a decade ago back in the late '90s when britain was debating this very question, about half of british companies said they thought it would be good for britain's economy for the nation to be in the euro. you can look behind me at a poll taken in 1998. 40% of companies surveyed then said it would be good, 28% bad and others not sure. former prime minister once caught referring to the more euro skeptic numbers of his conservative party as if you'll pardon the phrase, the [ expletive ] . britains now think by opting out
of the common currency, they've dodged a bullet. 85% of the public here was against joining the euro. and no wonder. the eurozone's unemployment rate is nearly 11%, michelle. britain's is 8.2%. the imf expects britain will grow twice as fast as the eurozone over the next year. none of these growth rates look all that great, but at this point 2%, which is what they're expecting for britain next year, looks a lot better than the little to no growth the eurozone may experience. no picnic here in britain. again, recent figures show the nation slipped back into recession, debt levels are still quite high and doesn't help, by the way, europe is still britain's biggest trading partner. one thing seems clear, having just avoided the eurozone the first time, britain may well keep out of it for good. back to you. >> that's a pretty strong conclusion there. kelly, thanks so much. next up, the stock impact here in the u.s. we're talking about how you can profit from europe's problems. before the break, credit ratings throughout the old continent,
denmark, germany and uk on the high end, greece on the low end. back in two. [ man announcing ] what we created here. what we achieved here. what we learned here. and what we pioneered here. all goes here. the one. the accord. smarter thinking from honda. all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go.
ancient structures. president of chamber of commerce and industry joins us now. good to see you again, con stantine. what's the mood of the business leaders in greece? >> the situation unfortunately, michelle, is tragic. that is the phrase one can use in order to describe the situation the business community's facing here in greece. the lack of liquidity that the market has felt over the last six months is excruciating at the moment. and we do hope that the -- we do hope that the 18 billion -- we're off -- >> you're doing fine. talking about the 18 billion euros. >> earmarked by the ecb has been -- is going to be filtered through to the system. we do hope this will rectify the situation although the signs we have at the moment are not positive. we hope in the next few days that we will be able to revert
this situation. >> as they try to continue to recapitalize the banks there in greece, tell us what you think is going to happen with the elections on june 17th. are we going to see the greeks vote for a party that wants to stick with the austerity measures? >> hello? >> okay. i think we're having some trouble from the live shot in greece. we'll try to get that re-established. what if greece gets kicked out of the eurozone? what if they have no -- no longer have access to the currency? we're going to run you through one likely scenario right after the break. >> today my colleagues and i are cleaning paint thrown onto our doors and building by protesters. my name is katarina. this is the third time we've had to do this this year. it's very frustrating on a social level because the situation as it is and it touches everyone.
and people. and the planes can seem the same so, it comes down to the people. because, bad weather the price of oil those are every airlines reality. and solutions won't come from 500 tons of metal and a paint job. they'll come from people. delta people. who made us one of the biggest airlines in the world.
and then decided that wasn't enough. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. welcome back. what you see on your screen right now is a comparison chart of china's market versus the dow jones industrial average. yellow for europe. white is china. some say that could be evidence europe's problems are climbing the great wall of china and
creeping into their economy. >> the chinese economy is feeling the drag from europe. exports to the eu are down four months in a row. foreign direct investment fell in the january to april period. chinese investment bank cicc says china may need a 600 billion yen stimulus package to shore up growth. otherwise china's gdp may fall to 6.4%, a 22-year low. >> 6.4%. would sound great for us, low for china. and chinese growth helped drive oil up in the last few years. will europe help make it fall? as the u.s. and european markets dropped in the last month, oil also lost 12%. sharon epperson's live at the nymex with why the drop isn't translating into help for europe. sharon. >> michelle, it surely isn't. it's really a one-two punch for european consumers at a time when their economies are in turmoil, fuel costs are actually at all-time highs.
they're actually near levels we saw back during the financial crisis in 2008. surely all eyes are on europe right now, but you really need to look at the currency impact to find the main culprit for europe's high fuel costs. as the euro has crumbled, the dollar index has soared to 20-month highs. and that has pressured commodities like oil that are priced in dollars. now, both brent, which is the international, the european benchmark for crude oil and the u.s. counterpart, have fallen about 15% since the highs that we saw earlier this year. but take a look at this happen in terms of strong decline across the board in oil prices. we don't see that helping the european consumer. that is because oil that's been priced in their currency, priced in euros, has fallen by half as much. maybe even less in the past month or so. so even though we are at a time that the european consumer could certainly use lower prices at the pump, the fact that they pay a much higher fuel surcharge
than we do here in the u.s. as well as the currency impact has led them to not have lower prices right now. they could probably use it the most. michelle. >> that is tough stuff, sharon. let's talk about gold. you would think with fears of possible chaos in europe that you would actually see gold rising. but it's been getting hit as well. >> it's been getting hit as well. again, when you look at gold priced in dollars, it's hit across the board, but relatively speaking gold when priced in euros because of the decline of the euro has held up relatively well on the month. basically flat. despite the fact we've seen a $100 drop. that's why traders like dennis gartman say you want to look at gold as a currency priced in euros. that's the way you want to buy gold now, not in dollar terms because that's going to continue to perhaps see some weakness. and relatively speaking in euro terms, it should hold up pretty well. >> thank you so much, sharon. what if greece does leave the
euro? how do you make a new currency? what do you do? that's the question we're asking right now. if greece leaves the euro, what should happen? in theory if you're going to make a new currency, you want it done in secret. but that's going to be highly unlikely in that case. so what that means is likely capital controls on banks. what that means is if you're in greece and you have money in the bank, you're not going to be permitted to take it out. they're going to keep it in there. they're going to shut down banks maybe for several days. if you try to take out money later, they may limit the amount you can actually take out. in the meantime, while they wait, you're going to have to print some new currency. they put in orders from various companies around the world that actually print currency. they start the process, but this can take a year and a half if you want a high quality currency with a lot of security features in it. it can take as little as several weeks but accept a lower quality currency. what do you do in the meantime? you have to do something else. things we've seen in the past in similar situations, you just say, you know, there's only
going to be electronic transfers. everything with a debit card or credit card. you can also take euros that already exist in the system and stamp them and say, okay, these are no longer euros. these are a new kind of greek drachma. even though we don't know it would be called the drachma. they could call it anything. you could be reduced to bartering. if you're not getting money coming in, you could say to somebody i'll pay you next week for this food i'm buying right now as soon as the currency comes in. and i'm able to take more money out of the bank. government can print ious. we saw this in arran general ti as well. people start actually using them instead of actual bank notes. these are all different options that we'll have to wait and see. eventually, once the money is ready, how do you get it into the country? people involved in this process are very unwilling to talk about it. i'm told there will be massive plane shipments where they would bring it in and cross it over the border in big armored trucks but get it there physically, the
actual physical cash. all right. there's still a lot more ahead on this cnbc special eurozone in crisis. >> announcer: still to come this hour, europe's a mess. and it's making your money crazy. how can you protect yourself from the uncertainty in paris, berlin, athens and the rest of europe? answers straight ahead. also ahead, the people caught in the middle. >> life in greece is rather tough these days. >> announcer: the governments and societies may have made mistakes, but there's a human toll. that's straight ahead when this cnbc special report continues in two minutes.
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>> announcer: the eu, 27 countries, 27 policies, 27 interests, 27 opinions, two dozen languages. can they solve one problem impacting the entire world? the economy. our special coverage continues with international correspondent michelle caruso-cabrera. >> welcome back. we've put this hour together to help explain the risk and also possible rewards as the problems in greece and eurozone
intensify. just a few moments ago a new problem from europe, s&p cutting ratings on five spanish banks. that comes after news that one of spain's biggest banks, bankia, is asking for more and more money. now reports say the costs to save that bank will hit 25 billion more euros. more evidence the problems are not confined to greece. central banks and companies throughout the world should prepare themselves from belgium's foreign minister. the euro hitting a 23-month low against the dollar breaking the $1.25 mark earlier in the session. here's where we stand right now at $1.2522. despite the growing fear, the streets of greece are calm tonight. there's clearly anger amid the ruins. julia chatterly live in athens for us tonight. julia. >> thanks very much. from the people that i'm speaking to here in businesses, in cafes, in taxis, the next election result is wide open. but the overriding theme is the
greek people want to remain in the euro. listen to what they've been telling me all week. >> i would like to stay in the euro, to remain in the euro, but things have become so difficult in this country, taxes getting higher and higher. and the pressure is dreadful. >> i have to choose austerity measures. i know they're painful, but they're less painful than the exit of greece from the european union. >> i don't think they try to force us out of that. i mean, we were the ones who like tried to join the euro even if we weren't ready for that yet. so at least -- it's our fault mostly that we joined the euro group. >> but you know, it's just not that simple. one of the most memorable conversations i've had was with a student who said she doesn't feel greek. she's a european. and we need to stop fighting amongst ourselves. but for the greeks, they cannot take more austerity. if that means leaving the euro, then so be it. it just highlights the level of
desperation. these people are angry at the politicians. they're angry at austerity. and they showed that at the last election. the question is whether the fear of leaving the euro dominates at the next one. michelle, back to you. >> that's why we have june 17th circled on the calendar in bold. julia, thanks so much. that's the view from greece. french voters so upset with france's role in europe, the economy and austerity coming home, they gave president sarkozy the boot and brought in francois hollande. what's hollande's plan? and are the french people feeling any better? >> first of all, nicholas sarkozy may have been the political victim number one from the eurozone crisis although the austerity measures in france so far are nothing compared with the drastic measures in italy and spain. and even though the french economy proved to be much more resilient to the crisis than some eurozone economies, the left win in france could be seen
as the preemptive strike against harsher austerity here. the new president, francois hollande is more likely to implement some social measures to limit and get the impact of the crisis and austerity on the poorest people even if at the same time unlikely to implement structural reforms on which to build a solid recovery, michelle. >> that's what he wants to do in france. what do you think homd's impact is on the rest of europe. >> obviously the french and german relationship with sarkozy and merkel, it was decided between the two of them and submitted to the rest of europe. hollande promised from now on all european countries will have their word to say. that's the first plan. hollande would also like to change the way europe is dealing with the crisis. it's calling to set up a growth agenda within the european fiscal treaty. hollande already made clear that the treaty will not be renegotiated.
but the view here in france, michelle, is that hollande already won the first battle after the g-8 summit last week in camp david in the united states. precisely after the world leaders urged europe to back more progrowth policies. over to you. >> that's a pretty good assessment. thanks so much. what does the political assignment in france mean for the rest of europe? simon hobbs has that part of the story. >> europe's political landscape is going massive upheaval. it was always going to be this way. destroyed huge chunks of each economy. remember, the europeans have to rapidly close them. austerity has to come in europe because they don't have the luxury of america's very deep bond market. in fact, two years ago the highly respected governor of the bank of england reportedly warned that the political backlash in the uk would mean that whichever party won the coming election, they would be out of office for a generation. and as you just heard in france three weeks ago, nicholas
sarkozy has now become the 11th leader sacked by an angry electorate. so incumbents get kicked out precisely at the time europe needs strong leaders with strong mandates for big decisions. it's getting arguably opposite. voters are fragments from mainstream parties to extremists. greece is ungovernable with a country on the edge of financial oblivion, it's president is now effectively asking voters to change their choices when they rerun the election in four weeks. importantly, votes are also splitting along nationalistic lines. in the netherlands having brought down the dutch coalition, islamic politician hopes to ride the anti-sentiment into a referendum on europe and the single currency. so political forces are attempting to pull the eurozone apart when its solutions arguably lie in joint sacrifice, euro bonds or bank guarantees.
outsiders often find it remarkable how the eurozone's ever-changing group of leaders manages to still hang together. in part i can tell you that's because many harbor the fear that outside the single currency without the protection of the ecb they would be picked off and their economies smashed by the markets one by one. michelle, in a poll conducted across the eurozone yesterday, six out of ten voters who expressed a preference said they wanted to keep their countries in the euro. back to you. >> are they willing to bear the cost? simon, let me ask you this, when you talk about the rise of nationalistic parties, how should we look at these votes? are these votes for those parties for the new ways of thinking about europe? or were they simply rejections and throwing the bums out as we call it here in the united states? >> i suspect it's a mixture of both of them. you know, politicians, the main parties are going to be the anti-austerity parties because they have to go into government. and they have to face the bond markets. the ones on the periphery can say what they want. the trouble is those peripheral
views are now coming mainstream. and the views they have, for example in greece, anti-austerity frankly isn't going to work. it isn't going to cut it unless you're out of the euro. >> simon, great stuff. thank you so much. ireland has made significant cuts and strides in its effort to tackle its own debt crisis as well. how different is ireland from greece? barry oleary made his case on "squawk box" today. >> ireland is a very different case from greece because if you look at the profile of industry in ireland, we're very active in the modern sectors of the economy, the technology sector, the life science, the digital media. we can see a way of exporting significant businesses out of ireland so the economies are very, very different. >> absolutely. all right. kelly evans is back from london with more on that part of the story. kelly. >> yeah. hey, michelle, the main industries may be different, but
ireland and greece have one overriding thing in common, and that is the euro. the trouble for both ireland and greece is that when recession hit, their economies tanked but their currency did not. for example, imagine the benefit to irish exports, to greek tourism, if their currencies were to depreciate somewhere in the range of 50% to 60%, greece currently the figures making the rounds. of course ireland and greece along with the likes of spain and portugal have been ham strung by the by european bank. they wouldn't have had the fear of meanwhile overheating stronger nations like germany. so, despite mr. o leery's optimi optimism, still too early to declare problem solved in ireland. yields for example on 10-year debt are higher than spain or italy and near prior to bailout levels and requiring on monetary fund and through ecb there interbank mechanisms. the irish by the way face a key vote next tuesday on whether to approve the european fiscal
treaty. they haven't done this. they decided to put it up for a vote in the first place which unnerved investors and politicia politicians. this would decide effectively if they remain in the eurozone. reluctant the irish may be to giving over control to brussels. the almost certain return to recession imply to be far greater. michelle. >> another key test at the ballot box. thank you, kelly. we've said it before, we're going to say it again. whatever happens in greece and europe, will have an impact on you, particularly your money. tyler mathisen and jeff kilburg now with more on how to play it and how to stay away from it. guys. >> michelle, thank you very much. jeff, my question is really we can tall #talk all day long and into the night about the big macro issues, what happens if -- what happens, but what i care about is my portfolio, my money. how can i protect myself but also leave room for profit? >> absolutely, tyler. correction protection is what we're talking about right now.
you're going to find it in the u.s. dollar in the greenback, play that in the uup. but also precious metals. they become the safe haven. people get uneasy and on edge, they want to jump into gold or silver. and you can play that in the gld or slv which is the poor man's way to play the precious metals space. but i like them both for growth. >> long the dollar. play it via the power shares uup, which is an etf. >> yes. >> that buys dollar or other synthetic -- >> if you saw the crisis back a couple years ago, the dollar went up to 89. there's room to run on the uup. >> when you see gold, gold is not industrial, silver to a lesser degree is. when you see numbers like what came out of china, that the economy is really slowing there, isn't that likely to be a countervailing pressure negatively? >> in my mind, ty, it does not negate the central bank influence. you'll see central bankers across the globe continue to increase their purchases. therefore gold's going back up
to 2000. >> gld, slv, uup. >> thanks guys. next up, the street view. meet two men feeling the crisis in greece in very different ways than most people of the world. they are the face of austerity. regardless of where you stand, you have to see their stories coming up. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers.
what do you do when you're not trying to fix the economy? he's a politician in the country, today he's a leader of his own party. and he says the greek government is its own worst enemy. how horrendous is the level of bureaucracy in greece? >> it's unbelievable. it's an elephant that sits on your shoulder and thrashes you, thrashes you to the ground. >> kills the entrepreneurial
spirit. >> kills not just that. everything. i mean, imagine the elephant that tramples the ground, nothing's left after that. >> the struggling entrepreneur in greece has had to work a thousand times harder to make it in greece because of that elephant-like bureaucracy and the ensuing recession we've seen. i want to bring the conversation now down to the street level, literally, through the eyes of an athens taxi driver. >> i feel a bit sad sometimes because history was so great. and these days are not one of our best days as a nation. my name is tomas. i work as a cab driver in athens. i believe the italian attitude has changed here in greece. money in a different way. i have learned that you don't need money to have good time. >> as the economic crisis unfolds in greece, like it or not, greeks have had to adjust
to a new way of life. how's life in greece? >> life in greece is rather tough these days. >> this man is a venture capitalist and founder of ih holdings. >> it's tough because the crisis has really started affecting everyday life. it's not just a headline. it's not just finance. it's not just big government. but even the little guy is faced with a reduction in his spending, in his pay, that's really killing things. >> this man would agree. a married father of two and nearly 20% of his fellow greeks, he's unemployed. his wife, who is fortunate enough to still be working has seen her salary cut dramatically. her salary went from how many euros per month to now what? >> she used to be approximately 3,500 a month and now less than 1,700. we can still have some money sometimes. have no money other times, which is frightening.
we are trying to find new ways of living. >> for harry and his family the new way of living involves turning to his family. his in-laws and parents having their pay cut also. >>ly have to leave this apartment and move with my parents or my mother-in-law. i'm 40 years old. i'm out of my parents' house since i was 19 years old. so 21 years later. i hate going back. >> tough story. so many of them out of athens. check out the euro. it's dipping below $1.25. earlier today nearing a 23-month low. the last time it broke below $1.25 was july 6 of 2010. is parody on the way? sue herera's talking currencies and how you can play them. she's at the nyse. sue. >> thanks, michelle. and joining me to do that is mark chandler, chief global currency strategist with brown brothers and mike moran with senior chartered bank. mike, i'm going to start with
you. you think the risk of greece leaving the euro has risen extensively. does that mean you think they will? and what does that mean for the euro? >> really, the last election in may i think dramatically changed the odds for a lot of people. this anti-austerity message has really been quite deep. and i think now it becomes a political question. it's not so much the economics. the greek economy's contracted 20% in the last four or five years. so no one's buying into this austerity kind of program anymore. so i think the greeks are going to -- i think the risk of them leaving, you know, in the next six months before the end of the year are substantially higher than they were in may when there was still some buy-in. >> you're still short the euro or shorting the euro? >> we're still bearish on the euro looking at 1.20 or 1.22 over the next three months is our core view. one thing i would say is now the market is so short euros that it does leave the risk of a short squeeze and quite a powerful
risk. certainly our recommendation is not to sell the euro at the lows, which we've seen today. but look for a bit of a rally and sell into that rally. of course we have month-end next week as well. so, again, these are the kind of risks -- you don't want to sell at lows which is what you would effectively be doing right now. >> mark, do you agree? you think everybody's underestimating the cost of recapitalizing the banks which will have a ig impact. >> i agree we don't want to sell the euro here. the technical market is overextended. i would think the market would be exaggerating the risk greece drops out. they want to renegotiate, not a treaty, but a memorandum of understanding. and they're not the only ones. we've seen the french want to renegotiate the fiscal compact. we've seen the dutch are giving up on austerity as well. the spaniards and italians said they can't meet this year's fiscal targets to they need to renegotiate. so i don't know if renegotiating is grounds for ejection. >> so how would you play it then in terms of a currency bet?
what's a trade that you think, you know, if the euro's over extended to the downside, what currencies do you like against it? >> i like canadian dollar. it's got everything the u.s. has as far as strength of the north american economies and weakened by the weakness in the stock market, weakness in the oil market. i think canada when the currencies bounce back, canada does better than the euro. looking for ways to minimize my risk of a technical bounce that you could have by being long something against the euro besides the u.s. dollar. >> mike, a lot of people also feel that if europe does worsen, and certainly it's going to be a very tense weekend, if we don't have the political will from european leaders to make substantiative changes, qe-3 is back on the table here in the united states because of the ripple effects here in the u.s. do you agree with that? and therefore is the dollar over extended? >> i certainly agree that it does open the door wider for qe-3. i mean, this is not just a real economy. the u.s. and europe tradewise is not substantial. but it's the financial -- as you
saw only six months ago how much damage that can do. we're no longer siloed. we're all interconnected now. i think if it causes that kind of market disruption, equity markets, bond markets, certainly currency, i think the fed will have to, you know, reconsider their stance. but from an ethics standpoint in this kind of risk averse environment, look how badly em currencies have performed over the last three weeks. >> so mark's best was the canadian dollar. what's your single best play right now before we go? >> we want to be long dollars especially the high currency. the aussie been terrible performers. poland, hungary, mexico, brazil, a lot of currencies from investment from bond standpoint i begin to see a lot of those guys hedge those and help in the concern sis.
>> thank you both very much. if you want more on the currency markets, no problem. we've got it on "money in motion" tonight at 5:30 eastern time. by the way, the applause ntd background, there's some military personnel on the floor for fleet week. that's what we were hearing. >> got it. thank you. if you're traveling to europe this summer, prices may be very different than in the past. before the break, a lesson from greece. if you can't beat them, join them. a well-known greek business journalist. but not this 38-year-old greek national who in the early stages of the crisis lost his job. >> i had to leave the company just one year after i started working there because of the financial crisis. >> with no prospects in sight in his home country, rather than criticize germany, he's moved his family there. taking a job at pharmaceutical company bayer. >> i was seeing things were
getting worse and worse in greece. >> and he's not alone in that feeling. anna is a 28-year-old greek who also moved to germany in hopes of a better future. >> i took the risk. i didn't have anything to lose. it was difficult decision for all the things that i left behind. but i think i did the right thing. but proven technologies allow natural gas producers to supply affordable, cleaner energy,
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welcome back to "power lunch." i'm kate kelly with breaking news on continued losses to investors and market makers due to the glitch in trading of facebook last week on the nasdaq. we're told that citi group now has losses of at least $20 million in its market making unit related to trading glitches when the facebook stock opened last friday on the nasdaq late and with some confusing trading patterns. that brings the total number of losses that we know of so far to north of $90 million. a combination of knight trading group, citadel investments, citi group, a small one from e-trade and who knows how much more. nasdaq put aside $13 million to deal with this problem. that's a far smaller number than the losses we know of so far,
michelle. we'll track how nasdaq plans to deal with this and how the number grows in the coming days. >> kate, thanks so much. good freudian slip, spacebook. next up, how the crisis is going to impact you when you're overseas. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪
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the journey of the olympic flame is underway. right now it is in the uk. the summer games start in 63 days on the networks of nbc. so if you're traveling to london for the games and thinking of making the short hop to the european continent, our travel and leisure correspondent, simon hobbs -- we're joking, is with us to show you what to expect pricewise. simon, the euro's big fall going to have an impact? >> oh, yes. the team's been very hard at work for the tnl beat and they can show you the sort of savings you might make. you mentioned london, they've just been looking at the difference on the sanderson hotel from now and where they were a year ago. a year ago you would have paid a lot more. a word of warning about the sanderson, it's very trendy. the glass toilet boxes to be in the middle of the room. bear that in mind if you do book. and look at air fare virgin
atlantic you can save $500 because of the move you've had. what i would say to you is that tourism of course is very important to the european union. it accounts for about 10% of gdp there once you filter it all down, michelle. so they would probably like to see more american travelers there. it would help the economy though of course it's not a fix-all because the other 90% of the economy is all the usual stuff you have here in the united states. one other thing i want to mention to you, the dollar is higher across the board. so, actually holidays in india are quite cheap or south korea or indeed mexico at the moment. back to you. >> wouldn't it be nice to go to santarini. thanks, simon. when the greeks vote, i'll be there with them. before that watch for another special