Tuesday, March 3, 2015


We're off on the grandparent road tomorrow to cover for some traveling parents.  Probably be gone for a week but I'll be able to check in as the little ones are in school.

One of the questions that has been floating around is how is it that with things so confused in Euroland everyone in sight is prepared to accept below zero interest rates on sovereign debt?  Don't ask me, I don't know, but the overall attitude is that in these times it's probably safer to pay a government to look after your money than a bank, or an investment advisor, or in a stock market anywhere as they are all driven by this massive ocean of liquidity that has been created in the past 6 years.  Austria is the latest "below zero" borrower even in the face of a Fitch downgrade which puts them in the same class as...as...the United States.  Go figure.

Then again, our ten year yields remains remarkably constant at somewhere between 1.80% and 2.10 per cent which I can't figure out either.  The spread against Bunds continues to widen.  Go figure.

In the face of all of this, next week marks the start of QE on the part of the ECB leaving open for the time being just what it is that they are going to buy because the governments have been issuing like crazy which may be a good thing or not depending on one's view.  I mean, think about a bidding war for Bunds between the market and the ECB?  Forgive me, but I simply don't understand the purpose behind all this when it is obvious that there is a ton of liquidity out there that perhaps is not being put to use in the manner like Little Paulie Krugman and politicians of various shapes and sizes may like, but it's there so why try to pretend that it isn't?  Go figure.

And speaking of the ECB, that little bunch is off to Cyprus this week for a bit of a chin wag, out of which will probably emerge some turgid statement relating to how all governments in these time must practice constraint and sound fiscal practices, blah, blah, blah.  Now I know that Cyprus is a hell of a lot cheaper than Frankfurt given that it's economy has been...ah...refocused in the past few years, but it does take a bob or two to get there in order to same exactly the same thing that you could say where you live.  Go figure.

Last but not least in a return to Austria, a little item that has been missed by everybody Over Here including me was the impending bankruptcy of region known as Carinthia which seems to have issued guarantees a number of years ago to a financial institution know as Hypo Alpe Adria which promptly set up a fund to invest in Eastern Europe, in particular, Hungary, Russia and Ukraine.  Well, Hypo is long gone but the debts--and the guarantees--survive.  Apparently, Wein has said "no more" or the Teutonic equivalent thereof.  Now this isn't a little thing:  Creditors are all over the lot including our latest geniuses The Blackstone Group, and while we are not talking Lehman by any means, the Austrian banks have been notorious for their coziness with Eastern Europe and their...shall we say...reluctance to come clean as to their exposure.  Forget about the Ukraine/Russian thing; think Swiss Franc and mortgages taken out in the same and funded by Austrian banks.  This is going to be fun to watch unfold over the next few months.  Now having always taken the view that the Austrians have had the best public relations firm ever, having convinced the world that Beethoven was Austrian and Hitler was German, if you really want a prediction as to the outcome, don't ask me.  I'm babysitting.

Back in a couple of days.

1 comment:

  1. Probably even worse than you state it.

    Investors are willing to PAY european governments that are seeing rising debt servicing costs (Debt/GDP) to hold their money. Or alternatively, the can give the money to the government of the one growing economy in the developed world (US). No wonder the $ is strong.