IS EUROPE MORE COMPETITIVE?
===========================

German business confidence raised to the highest level since 1991 this month and this is certainly good news in preparation for the March 11 EU Summit where Angela Merkel and EU leaders will discuss new ideas to ensure that the Euro zone maintains its competitiveness.

During the summit EU Leaders will also discuss the extension of the Financial Aid Programme to Greece and Ireland with the possibility to lower the interest burden on both countries.

While it is undeniable that Europe has its share of serious problems I think that the European consumers are in a better position than U.S. ones:

- Credit Card debt in America is still a big weight for consumers. Bank of America credit writedown doubled to 20.3 Billion while many European consumers have no credit card debts whatsoever;
- Sensitivity to gasoline prices is higher in the U.S. than in Europe as the highly taxed European price is already much higher than what U.S. consumers pay;
- Commodity price rise will soon reach consumers: Cotton price doubled, Coffee is at the highest price since 1977 and Cocoa is also increasing on Ivory Coast disrupted supply. This price increases will soon reach consumer across the board and possibly impact the recovery both in the U.S. and Europe

As the Euro is strengthening on a possible rate increase that will in my opinion come much sooner than in the U.S. I think that European markets are more interesting than U.S. ones. I particularly favor companies that will not be as impacted by the substantial rise in commodities and/or are in the position to pass a price increase to the consumer without major consequences. The Euro will also benefit from a possible rate increase.

MIDDLE EAST CRISIS
==================

The Middle East crisis has pushed WTI Crude over 100$ a barrel. According to Nomura analysts it could even reach 220$/barrel if the political unrest in North Africa spreads further and halt exports from both Libya and Algeria. As I previously recommended precious metals and oil exposure would have protected investors from the inevitable drop in stocks that sent European Shares at a 3 weeks low.

Any further increase in crude oil will have a negative impact on World recovery. Further devaluation of the U.S. dollar will also boost prices of both oil and precious metals in the short term.

What is find particularly dangerous is the time that some of the issues in Middle East will take to reach a full resolution. Fear and uncertainty could impact the markets negatively in 2011 and push oil prices higher.

STRATEGY
========

I continue to recommend exposure to commodities as the current middle east crisis might send oil and energy prices higher. Precious metals will continue to protect toward the inevitable high volatility and inflationary pressure.

For equities I remain bullish on Swiss equities and to selected European equities (in both cases with a strong favor for high dividend payers) and will take the current market drop as a buying opportunity in quality equities.

Summary:

- Europe is preparing for the March summit with a clear commitment to increase competitiveness. If the financing issues remain well confined to Greece and Ireland there is a potential to achieve these goals. On a relative basis I find European equities attractive but I would avoid these companies that will be negatively impacted by the substantial rise in commodity prices.

- Will maintain and possibly increase exposure to portfolio protections like precious metals and to some degree crude oil.

- Positive on Swiss equities with a good dividend and a business that will not be highly influenced by raise in energy and other commodity prices