Tuesday, May 19, 2015


The Berkeley (pronounced BARK-LY) hotel is a lovely, newer (under 100 years old) place just off Knightsbridge, close to Horrods and the Tube station.  Used to have a wonderful dining room in which I found myself one night with a rather over-served Scot when Her Maj and entourage arrived.  The discussion suddenly became loud and one sided concerning the "English Queen," which brought silence to the room and my abrupt departure.  I avoided confrontation in my younger, more intelligent days.

Anyway, last night the old place hosted a conference at which the principal speaker was ECB big shot Benoit Coeure which had been arranged by a hedge fund in cooperation with the London School.  The audience?  Bankers and Hedgies of course.  It may not have come as a surprise but it was certainly a confiration when ol' Bennie Heart announced the the ECB was going to speed up its QE program so as not to get stuck in the mid-summer slowdown which as we have discussed is endmic throughout Europe.  Nothing wrong with that really, but when this is being done in the midst of Carre d'angeau (it used to be the best in town) and the remarks don't get released until this morning there is a chance--just a chance mind you--that the 99% of the market that gets the word 12 hours late might get a tad upset, especially if the Euro crashes at the opening and bonds find a rocket ship on which to take a ride.  "We must do better," said the ECB later in the morning.  No kidding.

We have a saying Over Here;  not ready for the big leagues which means you had best have him practice real hard somewhere else before you send out Bennie to bat for the side.  It would be especially important I think with the memory of the 400 billion blood bath that the markets took just a few short weeks ago but it's over, a lesson has no doubt been learned which isn't all a bad thing.  The problem is, various observers and scribes, desperate never to be wrong may be learning the wrong lesson from all of this to wit that this is the final signal that rates are going up sooner rather than later.  May I present an alternative view.

What struck me was not the anticipated reaction in the market at the news but the apparent recognition and concern on the part of the Bank that by July or August there may be no bonds for sale in order for it to complete its program.  Sure, activities slow in the summer especially in Europe, but never to the point that the ECB couldn't buy 60 billion in bonds or some number close to that.  They are not concerned about the holidays, they are concerned about the liquidity of the entire marketplace which was a major factor in the rout of last month and is looking no better today.  Then of course there is Greece with yesterdays follies having been proven to be just that looming as a dark shadow over the best of plans.

The moral of this tale?  Hell, I don't know but it just seems to me that there is some pretty fuzzy thinking going on out there and some pretty lousy execution at the same time.  Maybe there always has been but I think we used to do better.  I hope the spring lamb hasn't changed.  The had a hell of a souflee for dessert too.  I'll have to find someone who was there and get a report.

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