Too many haircuts ?
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Since my last interview, where I stated that banks were largely oversold, the sector had a very positive rebound. This is now endangered by yet another uncertainty: haircuts.

The renegotiation of the deal with the banks that accepted a 21% voluntary reduction to as much as 50%. This could trigger the need of even more recapitalization and force lenders to reduce risk.

New stress tests (depending on the requirements and implied stress) could require 100 to 300 billion of extra capital. Banks are reluctant to raise more capital as their stocks are mostly trading at much less than their book value.

The big question is how to get sure that the problem for banks writedowns remains confined to Greece, Ireland and Portugal that account for 50 billion of the 450bn held by the top 24 European banks.

European politicians should be careful because imposing more haircuts can have an highly negative impact to the already fragile banks that might face nationalization. The solution is probably finding the bearable amount that will not jeopardize bondholders AND a form of insurance that the problem will not spread to other peripherals economies.

Slow growth is NOT a recession
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With many markets pricing in a recession, especially European ones, I think that several opportunities are available to investors. While it is undeniable that European and U.S. growth will be modest, I don't think that we will enter into a recession.

Many European multinationals pay high dividends and are trading at very attractive valuations. Companies with non-cyclical products will endure this low growth environment and continue to maintain attractive dividends with lower volatility than other sector. I see this as a value opportunity.

I still think that some European Financials are attractive but I would be cautious as opacity in several banks translates in value traps

Strategy: High Dividends and Gold
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Till more clarity is achieved I see a renewed opportunity in high dividends paying multinationals with good cash reserves and recession-proof products or services.
Another opportunity is tech companies rich in cash and with an high level of growth that are not as impacted as other sectors.
Gold remains important in every portfolio both as an insurance and diversification from equities.