ODDS & SODS

Another day at the office.  On both sides of the pond the news that dominated was that of the "Fiscal Cliff" and whether the drag-racing Leader and Speaker would engage the brakes fast enough to prevent what the majority seems to believe is an impending disaster.  Frankly, it seems to me that The Leader would much rather a compromise not materialize (he's never been interested in draws)  and that the Speaker just wants to get it over with at this point.  Fun to watch the stock market, however, move in hundred-point intervals depending on the mood of the moment.  Clever these guys.

Over there, the Brits caught a lecture from The Leader's boys about how bad it would be if they left the EU.  You can imagine their reaction beginning with, "Sod off," and getting a bit more pithy from there.  It would appear that we can expect the same sort of relationship building in the second term as in the first.

Berlusconi, bless him, mused out loud that Italy might be better off outside the Euro Zone which of course did no one any good muting the call only in so much as it referred to what might happen if Germany did not give up it's objection to the ECB acting as a lender of last resort to everything that walks or crawls in the Eurozone.  You can imagine the reaction beginning with, "Sodden off," and getting more pithy from there.  But it plays in Perugia and that is all Silvio cares about.  Oh, he also announced he's marrying his 12 years old...sorry, she's 26...girl friend just as soon as he can finalize his divorce.  When asked was his health an issue in regard to the age difference, he replied, "If she dies, she dies."  It was very colloquial...I may not have translated his response correctly.

S & P UPGRADED Greece from simple (?) to B-, that's 6 grades sports fans.   Whoopy damn dooo.  Yields fell, prices rose and a couple of hedgies made fortunes on the debt they were still holding.   They also upgraded the outlook to stable in the midst of a 24 hour strike and rioting in the streets with a couple of people dead.  Good job S & P.  Got any newly minted AAA CMOs hangin' about?
Not to be left in the dust, the ECB announced that Greek debt was now available for collateral once again.  Why not, they own most of it anyway.

Finally, something not to be missed is the new P.M. of Japan announcing to the head of the central bank that he now works for him.  You can imagine the reaction being, "Honto Yo,"---which is not quite "Sod off" in Japanese but depending on the inflection could certainly mean, "Are you #%&((^*@ me?"  New Honcho wants more liquidity in system and inflation up around 3%.  Don't laugh, this is an important development that will certainly have global ramifications depending on who wins.  If there is a clear loser, say Sayanora to that guy.  All about face you understand.  I think I may spend more time watching that part of the world next year.  Later.

BACK HOME AND BAFFLED AS USUAL

The grandkids were great but I have no idea what's going on. I had expected a real brawl over in Blighty but the finance commission punted...or as they say over there kicked it into touch. Nobody knows what the rules relating to capital adequacy are going to be, no one knows as to what the structure of banks will be and it's beginning to look like everyone is getting tired of the entire thing. In the mean time, the three big guys are substantially more capitalized than any bank over here so the argument shaping up is heading in the, "What's the big deal" direction. Of course you all know my view that when the growth enhancer hits the rapidly turning object, the only percentage of capital that counts is 100% makes me yawn as well. But, the thing that shocked me was a Reuters' report that Barclays Bank, which has total footings of some 1.5 TRILLION POUNDS has but 100 billion pounds in demand deposits. And these guys are worried about capital at the end of the day and not liquidity? Waddya nuts?

Better over on this side of the pond? Ha! There is a widespread mindset forming within the Beltway and in the hallowed halls of finance that nobody understands Dodd/Frank and no one knows how to write regulations that conform to its mandates. Coulda told you so...wait, I did. Rah me. What will happen in the end of course is that the legislators will throw up their hands and turn to the banks to ask them what is it they do and how would you like us to regulate that activity. A veritable win/win...except for the taxpayer. Guys, I keep telling you this, don't regulate the institutions, regulate the people who run the institutions. If it goes wrong, somebody has to die--fiscally, of course. It's all about the money.

And speaking fiscally, the boys are standing eyeball to eyeball, and I think The Leader just blinked. The continuing resolution battle was, in my mind, a lot of hot air. The real fight is now in place over the raising of the debt ceiling and this one could be a doozy. No one wanted to shut down the government last week and everybody knew it. But what is also known is that there is no way...NO WAY the Speaker gets the debt ceiling raised through the House without a substantial pound of flesh on the deficit. The Leader knows that as well as anybody and also realizes that without such legislation things can get very tricky very quickly which is why I think tomorrow's speech may be the defining point of his Presidency. He has indicated that there might be compromises to be made. Let'ss hope he gets this right. We should know by publication time tomorrow.