Wednesday, June 6, 2012

The Greeks have Fallen and they Can't Get Up!

When I was nerdy young man, I remember feeling proud when I heard the news reports talking about a strong US dollar. Yes! We are stronger than anyone! (I know... I listened to economic stuff even then, but I got my share of Zeppelin too.) Then I remember when someone would say the dollar was getting weaker and that made me feel like there must have been some kind of a conspiracy happening.

Today, where is the dollar? It's hard to say the dollar is strong. Sure we are still one of the world's reserve currencies, but we are more like the best-looking contestant in the ugliest beauty pageant. Today, that makes me feel well ..... sad for the Southern Europeans more than anything. 
The great social experiment that aligned several disparate countries around a single currency seems to be nearing an end; laid bare by the social-economic reality that the Euro isn't One Nation Under anything. No, I'm not predicting an end to the Euro, but there will be a change to the Treaty. The US might not be as strong as it was, but the Greeks have fallen and the Euro can't get up.

Looking at the chart above courtesy of Thompson Reuters from this morning, I wasn't surprised to see the precipitous drop in the currency relative to the USD and the forward contracts predicting even more of a drop as current trades move through technical support levels. That's something we predicted in this year's Silicon Valley Bank State of the Wine Industry Report. While we in the US have been slowly digging our way out of the Great Recession and feeling better by all Sentiment Surveys, our European brethren are finger-pointing at differences in values. How would you like to be the German's, the model of efficiency and chaste behavior in all things ( ... ignoring that little festival they have in October each year), sending their hard-earned cash down to the lazy Greeks who don't collect their taxes and whose socialist politicians love programs for all. That would make you angry!

The funny thing is, the German economy is an export economy. If they dropped out of the Euro, their currency would become a strong world reserve currency and kill their exports. So maybe they ought to rethink their perspective. Maybe the Greeks are the smart ones here. They are, with a few close EU country friends, holding back the Euro from strengthening, and that allows the Germans to keep up their exports.

The Greeks have fallen and they can't get up! The question is .... should they?


  1. Maybe I'm biased, but don't you think thats interesting stuff?

  2. Thanks Mark. You are my first fan ..... besides my mom but she would like a finger painting so that doesnt count.

  3. Glad I found this...keep up the postings, somebody's listening.

    After a few days in N. Cali with winemakers and growers the sentiment seems to be a bit of relief that the market for their wine prices are stabilizing and maybe even recovering. Growers seem to have pricing power. I hope that they don't get over-confident and allow the European wines to win shelf and by the glass spots while Napa & Sonoma wine prices start to increase. That occurred years ago with Champagne and now Champagne has lost serious by the glass placements to cheaper alternatives, Prosecco, Cava and others.

    Consider that years ago only Champagne was served in French restaurants in Metro NY, now there are alternatives. I sell more Prosecco by the glass then Champagne at a restaurant that used to be a bastion of French wine (still is a bit for Bordeaux, Burgundy & Rhone).

  4. Pricing power for domestic fine wines has mostly been from the demand of the US Consumer with an occasional meandering from foreign competitors such as the early 80's when the UD$ was strong and there were a lot of good cheap French Wines imported. A weak Euros is another in a list of issues that stall any pricing power for the US producer. (See the last post on Rodney King and the Consumer)


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