ECB’s OMT a Much Needed Remedy
In many cases the European crisis was fuelled by a lack of confidence. The OMT programme was a much needed remedy to restore confidence in Europe and in the Euro. The fact that the OMT programme is conditional doesn’t mean that the ECB is now dictating fiscal policy or is outside its mandate.
The announcement of OMT was already a success in the case of Italy: the latest auction of 18 billion was four times higher than expectations allowing Italy to cover all the 2012 financial obligations. For a country with the highest private wealth to GDP ratio of any G-7 country the crisis of confidence is almost over.
Does it mean that the OMT is the solution to all European problems? Of course not. The main issue of some European countries is dealing with high unemployment and lack of competitiveness.
Luxury Slowdown: an Opportunity
From Burberry to Mulberry investors are rightly concerned about a global slowdown in the luxury sector and are taking profits. I think that the first distinction has to be made: while many luxury brands look similar there are substantial differences among them. For instance I see as a crucial competitive advantage where the luxury goods are produced for example in the case of Italian and French Luxury brands (like Brunello Cuccinelli +40% since IPO, Prada +90% since last year, Ferragamo +52% since IPO) is a buying opportunities in a selloff. This because, over the long term, they still maintain a distinct brand advantage vs the competition. This advantage is strongly anchored on where the products are manufactured and France and Italy are likely to remain long term leaders in this field.
In Short
- OMT will boast confidence in Europe and the Euro and is within the ECB mandate.
- Lack of competitiveness in many European countries is the main issue and it cannot be solved in the short term.
- Luxury Slowdown is a buying opportunity for unique brands with a sustainable competitive advantage. Despite the similarities not all luxury brands are the same.