Thursday, October 2, 2014


In Naples today, the head of the European Central Bank announced no change in interest rate policy and nothing else.  Oh yeah, there were some mutterings about larger balance sheets, covered bond purchases and even a bit of speculation as to the purchase of non-pristine sovereign debt--Greece, Cyprus and alike--but that was it.  Nothing, Niente.  European markets promptly went into the tank and the overall funk in Europe grew deeper.

Sr. Draghi is clearly unhappy with the course taken but I am not at all sure why the hoped-for aggression did not materialize.  He has talked the Euro down rather successfully and that, coupled with what many people refer to a "stealth tightening " on the part of the Fed has succeeded only in making huge amounts of money for the big FX guys…I mean, one way traffic like this hasn't been seen in a long, long time.  Perversely I suppose, I will really be anxious to see what the results at places like J.P. Morgan and Citigroup which are covered by Dodd/Frank are like when compared with non-regulated hedge funds.  I would have thought that the ability to coin money on the part of banks might be a good thing as opposed to entities that provide nothing to the economy other than the price of real estate in Greenwich or Bronxville.  Silly me, but I digress.

Whether Draghi is genuinely concerned that he's about reaching the bottom of his bag of tricks and this is a not so subtle way of a "over to you, Frankie" approach or he would like to move more in the direction of Federal reserve activism but those pesky Germans keep telling him that's just not on, is an issue to be pondered.  Inasmuch as markets all over the place roiled all day, it appears that nobody else had much of a clue as to what was going on either.

One market, however, was working pretty much with certainty.  If you're in energy, you lose.  WTI traded below $90 at the open this morning and Brent fell sharply on the news that the Saudis indicated that they would not cut production but compete on price in order to maintain market share.  Whilst there is no doubt that the new supplies in the U.S. are having an effect, world-wide demand is down reflecting the status of global economic activity which is far from robust and except for the U.S. is heading south.  You know that old definition of insanity.  Doing the same thing over and over and expecting a different result.  What is then defined when everybody is doing the same thing and the results don't change?  To make it even more curious, what is it that we see in the headlines?  The EU beating up on Ireland again for alleged illegal tax breaks for corporations and Jacob/Jack babbling on some more about the Ebola-like effects of inversions.  Maybe I'm nuts but I don't get it.  Not in these times at least.

Big weekend coming up with a BIG football game.  We expect almost 100 at the class tailgate, in lousy weather with Trouble and Strife not being a happy camper at all.  We have a full house.  She doesn't like that.  Oh, He Who Knows All Things will be here as well.  Maybe I'll be able to figure this out.  See you Monday if I make it through the weekend unharmed.

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