Someone leaked a Bundesbank report today which claims that the exercise by Sr. Draghi and the ECB of which we spoke of yesterday, namely the "Draghi Put" on sovereign debt was contrary to EU rules inasmuch as the ECB has no mandate to save failed states. If that view is adopted in Germany across the board, I'm afraid it is game, set and match. Hearing this I was reminded that the German "commitment" to this activity is, at the present time, limited to 190 billion Euros. More importantly, the German Supreme Court only gave conditional approval to the scheme and is scheduled to re-visit the issue in June for a final ruling. Clearly, the leak was designed to influence official thinking and public opinion in the month and a half following.
This is no small matter. Reaction has not yet been fully expressed. I'm going to wait until next week before going further as this and the efforts in Italy to form a new government should dominate the weekend. In the mean time if you wish to have a laugh, read the op ed page of the Times today. Rugoff/Reinhart vs. Little Paulie. Hysterical. It brings to mind the comment of Henry Kissinger who, on speaking of battles within academia as being so fierce, remarked that the reason was that the subject matter was so unimportant.
Showing posts with label Bundesbank. Show all posts
Showing posts with label Bundesbank. Show all posts
Friday, April 26, 2013
Thursday, January 17, 2013
GOING HOME
Germany's Gold. It was announced today that all or a large portion of the gold stored in the vault of the Federal Reserve Bank of New York--for free, mind you--would be heading back across the pond to its new home in the Bundesbank. So I asked myself, self, why would they be doing that? I didn't have an answer and the reason given by the Germans, "For reasons of security," didn't quite have the ring of full honesty to it. Perhaps they have been reading Midwest Musings I thought, what with me wondering the other day just what things are worth. What a happy thought, but whatever the reason it certainly is part of a trend that began last year with central banks around the world increasing their purchases and holdings of gold. While this action is not an increase, keeping what is yours closer to one's self is not in contradiction to what we have been seeing. But it is still odd for if settlements or simple sales in gold between nations or central banks are required it is as simple of moving the requisite amount from one end of the floor in the Fed basement to the other and this from time to time occurs. Change afoot or a portent of things to come? Haven't a clue, but in light of Monday's effort, I thought interesting.
I've been doing a bit more thinking about the role of "banks" in today's market place...you know that musing about whether Goldman and Citi should be talked about in the same breath and how we got to where we are and why. There's part of this story that most people don't know but is is critical if one is to understand the answer to the question. It has everything to do with competition...oh not competition between investment banks and commercial banks but the competition between the afore-mentioned institutions and the so called "Universal" banks of Europe beginning in the early 1970ies in Europe.
It was in the late sixties that the great expansion of American Banks began in Europe, primarily in London. The New York institutions and one or two others had been there long before but by 1980 there was an American bank on every corner in the City except for where there was a Japanese. The investment banks arrived as well but the businesses of the two types of entities remained separate although wholly owned subsidiaries of commercial banks were set up in order to allow the institutions to engage in investment banking but only outside of the United States and to "learn the business" so to speak. Even then, there were thoughts of the time when the limiting Glass-Steagall Act would be no more.
One of the strongest arguments against Glass-Steagall was that of the competitive imbalance given the existence of the Universal banks who were under no such restrictions. The Swiss could, for example, make loans and underwrite securities--either in separate transactions or combined--creating a "bridge loan" to a future bond issuance which would pay off the original loan in what was in effect an internal syndication of risk. The Universal banks, especially the Swiss, were also huge managers of funds and therefor had a built-in distribution system for issues which they managed. As I used to say at the time, "You didn't have to be smart to be Swiss." I was not particularly well-received along Hauptbanhoffstrasse in Zurich in those days but what the hell, the Swiss didn't have a sense of humor...still don't except for my friend Helene who is and does but that's another story.
Well, Glass-Steagall went away and the brave new world of universal banks came to the United States. Banks had to decide what they wanted to be and how to get there and unfortunately, many made the wrong decisions whilst investment banks, having been run in the best of all business models the partnership, decided to "go public" not only to obtain the requisite capital for this new form of business model but, because they are not run by stupid people, to insure that the individuals would be insulated from personal liability and risk in a model that they knew was to be more risky. Mergers abounded as it was believed one had to be "big" and create "synergistic values" and of course more profit. Not surprisingly, there were monumental clashes of culture resulting in huge failures creating more mergers and institutions that grew so rapidly that they became almost impossible to manage. Add to that the explosion of technology to the assessment of risk--understood by few and lied about by many--and we arrived at 2007 ready for a real catastrophe, aided and abetted such craven politicians such as Messrs. Dodd and Frank who made it easy for the debacle that to occur.
Now what is this all about? Simply that we stand at a rather important juncture which few recognize. What is our financial system going to look like in the future and the near future to boot. If we don't know the business of an institution, governance is all but impossible and risk assessment becomes a guessing game. Does access to the Fed Window for an institution such as Goldman which has no retail business make sense as it does for Wells Fargo? What signal does this sent to the markets? Why does Goldman require implied Governmental support? Who does that protect, Saudi Arabia and IBM who list themselves among Goldman's clients? We are still unsure of what walks out there in this new world we are busily creating, and by distorting the assessment of what risks there might be certainly doesn't help.
Tomorrow, I want to talk about the above in the context of Citicorp which reported today--not good according to the street. It is, IMHO, a microcosm of the industry today. Dial in.
I've been doing a bit more thinking about the role of "banks" in today's market place...you know that musing about whether Goldman and Citi should be talked about in the same breath and how we got to where we are and why. There's part of this story that most people don't know but is is critical if one is to understand the answer to the question. It has everything to do with competition...oh not competition between investment banks and commercial banks but the competition between the afore-mentioned institutions and the so called "Universal" banks of Europe beginning in the early 1970ies in Europe.
It was in the late sixties that the great expansion of American Banks began in Europe, primarily in London. The New York institutions and one or two others had been there long before but by 1980 there was an American bank on every corner in the City except for where there was a Japanese. The investment banks arrived as well but the businesses of the two types of entities remained separate although wholly owned subsidiaries of commercial banks were set up in order to allow the institutions to engage in investment banking but only outside of the United States and to "learn the business" so to speak. Even then, there were thoughts of the time when the limiting Glass-Steagall Act would be no more.
One of the strongest arguments against Glass-Steagall was that of the competitive imbalance given the existence of the Universal banks who were under no such restrictions. The Swiss could, for example, make loans and underwrite securities--either in separate transactions or combined--creating a "bridge loan" to a future bond issuance which would pay off the original loan in what was in effect an internal syndication of risk. The Universal banks, especially the Swiss, were also huge managers of funds and therefor had a built-in distribution system for issues which they managed. As I used to say at the time, "You didn't have to be smart to be Swiss." I was not particularly well-received along Hauptbanhoffstrasse in Zurich in those days but what the hell, the Swiss didn't have a sense of humor...still don't except for my friend Helene who is and does but that's another story.
Well, Glass-Steagall went away and the brave new world of universal banks came to the United States. Banks had to decide what they wanted to be and how to get there and unfortunately, many made the wrong decisions whilst investment banks, having been run in the best of all business models the partnership, decided to "go public" not only to obtain the requisite capital for this new form of business model but, because they are not run by stupid people, to insure that the individuals would be insulated from personal liability and risk in a model that they knew was to be more risky. Mergers abounded as it was believed one had to be "big" and create "synergistic values" and of course more profit. Not surprisingly, there were monumental clashes of culture resulting in huge failures creating more mergers and institutions that grew so rapidly that they became almost impossible to manage. Add to that the explosion of technology to the assessment of risk--understood by few and lied about by many--and we arrived at 2007 ready for a real catastrophe, aided and abetted such craven politicians such as Messrs. Dodd and Frank who made it easy for the debacle that to occur.
Now what is this all about? Simply that we stand at a rather important juncture which few recognize. What is our financial system going to look like in the future and the near future to boot. If we don't know the business of an institution, governance is all but impossible and risk assessment becomes a guessing game. Does access to the Fed Window for an institution such as Goldman which has no retail business make sense as it does for Wells Fargo? What signal does this sent to the markets? Why does Goldman require implied Governmental support? Who does that protect, Saudi Arabia and IBM who list themselves among Goldman's clients? We are still unsure of what walks out there in this new world we are busily creating, and by distorting the assessment of what risks there might be certainly doesn't help.
Tomorrow, I want to talk about the above in the context of Citicorp which reported today--not good according to the street. It is, IMHO, a microcosm of the industry today. Dial in.
Thursday, September 6, 2012
CLEVER, OR TOO CLEVER BY HALF?
Mario delivered exactly what he said he was going to deliver and the stock markets, not fully understanding what it was went crazy. For once the leaks were correct; one to three years, not direct purchases but an unlimited amount to be available, pari pasu status with all private ownership, a requirement that the funds be requested and conditionality. Great. Just what everybody was looking for with the dded comments that this really didn't apply to Greece, that Greece was special, yada, yada. Salvation!...well, not quite but at least in place is now something with which the can can be kicked down the road a bit more.
But if you read the reports of the conference something very clever emerges. Firstly, Mario mentions that agreement was not unanimous (gee, I wonder who) but despite disagreement no one rises to speak against the plan. Secondly, the "conditionality" that had been constantly mentioned suddenly arrived in the form of an IMF directed restructuring of economies and the requisite oversight as to compliance with the IMF terms. Thirdly, nary one of the dumbo reporters at the conference managed to ask, "Hang on, what makes you think that either Spain or Italy is going to turn over it's economy to the IMF," whose general approach to these things is devalue (can't do that), cut expenses and raise taxes. Call me silly, but after the past few years, any Euro government that agrees to an IMF dictated fiscal plan will have a half-life of about 12 hours. Not on, my friends, not on.
But it's clever. Unable to get anywhere with a merging of Europe earlier in the year to form a fiscal union, why not slip in the IMF for the gruesome twosome to reject instead of the clowns in Brussels? Can't hurt, and when the Fund is rejected possibly the last thing remaining will be fiscal union. As I said, clever or too clever by half? And if I am correct, that's why the Bundesbank raised no formal or public objection.
Now as you probably know by now I love these little intrigues, but that has been the history of Europe and its states for centuries. If you go to Venice, never go in the summer; go in February when it is cold and foggy and wet and empty and scary...and you can almost hear the political assassinations being committed just down the canal and around the bend. That was Europe 500 years ago and certain things haven't changed much. At least in my mind they haven't, and while I'll
catch hell for this remember Super Mario's nationality; they are the best in the business at this business. If you don't believe me, ask Massimo.
Jobs number tomorrow. It should be good. The Leader gets to look at it before his speech (he's already seen it, trust me) which is why everyone is happy in North Carolina. Wonder if anybody trades it before tomorrow? The White House is the fount of all information of every kind. Watch carefully
But if you read the reports of the conference something very clever emerges. Firstly, Mario mentions that agreement was not unanimous (gee, I wonder who) but despite disagreement no one rises to speak against the plan. Secondly, the "conditionality" that had been constantly mentioned suddenly arrived in the form of an IMF directed restructuring of economies and the requisite oversight as to compliance with the IMF terms. Thirdly, nary one of the dumbo reporters at the conference managed to ask, "Hang on, what makes you think that either Spain or Italy is going to turn over it's economy to the IMF," whose general approach to these things is devalue (can't do that), cut expenses and raise taxes. Call me silly, but after the past few years, any Euro government that agrees to an IMF dictated fiscal plan will have a half-life of about 12 hours. Not on, my friends, not on.
But it's clever. Unable to get anywhere with a merging of Europe earlier in the year to form a fiscal union, why not slip in the IMF for the gruesome twosome to reject instead of the clowns in Brussels? Can't hurt, and when the Fund is rejected possibly the last thing remaining will be fiscal union. As I said, clever or too clever by half? And if I am correct, that's why the Bundesbank raised no formal or public objection.
Now as you probably know by now I love these little intrigues, but that has been the history of Europe and its states for centuries. If you go to Venice, never go in the summer; go in February when it is cold and foggy and wet and empty and scary...and you can almost hear the political assassinations being committed just down the canal and around the bend. That was Europe 500 years ago and certain things haven't changed much. At least in my mind they haven't, and while I'll
catch hell for this remember Super Mario's nationality; they are the best in the business at this business. If you don't believe me, ask Massimo.
Jobs number tomorrow. It should be good. The Leader gets to look at it before his speech (he's already seen it, trust me) which is why everyone is happy in North Carolina. Wonder if anybody trades it before tomorrow? The White House is the fount of all information of every kind. Watch carefully
Tuesday, September 4, 2012
HOLDING PATTERN
This is sooooo bad I might have to watch Michelle Obama tonight. Next night, no problem as the Giants open against the hated Dallas Cowboys which means that even William Jefferson Clinton is coming in second in the ratings but we really have to wait until Thursday to generate some interest out there as it is then that Draghi is scheduled to reveal all, unless...
It was all revealed today at what was supposed to be a hush, hush meeting between Draghi and assorted ministers and potentates at which he revealed that in his mind it was perfectly legal for the ECB to purchase a nation's debt provided the maturity in question was no greater than three years. It wasn't five minutes after the meeting ended that the news was all over the airwaves and shouts of 'Viva Mario" could be heard in the streets of Europe. Markets jumped at the news until another five minutes passed and the Euro equivalent of, "Say WHAT?" was being muttered. A great central banker, but a lawyer? Meanwhile, the boys and girls were all over the place. Angie was meeting with someone important, Frankie went to see the other Mario, German ministers were meeting with German ministers (they're good at that), and while all this was going on the Spanish were busy stuffing suitcases with Euros and hauling them out of the country. It didn't help that yesterday, the NY Times reported that American banks were making contingency plans on behalf of themselves and their clients for the eventuality of the Greeks abandoning the Euro. Frankly, I would say it would be criminal for them not to so do or in other words, what's the big deal?
The economic numbers all over the globe stink and unless they get better real soon, all the bond buying programs and monetary stimuli in the world may not have any effect. Further, the most important thing on the horizon is the outcome of the American election for unless a clear trend emerges I expect to see and even greater slow down in activity as we close in on the event. I don't think I have witnessed more fragility in the global marketplace than at this period of time. Of course that is but my opinion. If the best the Euros can hope for on Thursday is what was leaked today, I suspect the reaction will be moderately negative and possibly worse if the Bundesbank--which remained silent in the face of today's revelation--comes down hard in opposition. Where we go from there is anybody's guess but I still find it hard to conceive of any scenario where Greece is again viable as a member of the Union. Without further guidance, Thursday looms large. We shall wait.
It was all revealed today at what was supposed to be a hush, hush meeting between Draghi and assorted ministers and potentates at which he revealed that in his mind it was perfectly legal for the ECB to purchase a nation's debt provided the maturity in question was no greater than three years. It wasn't five minutes after the meeting ended that the news was all over the airwaves and shouts of 'Viva Mario" could be heard in the streets of Europe. Markets jumped at the news until another five minutes passed and the Euro equivalent of, "Say WHAT?" was being muttered. A great central banker, but a lawyer? Meanwhile, the boys and girls were all over the place. Angie was meeting with someone important, Frankie went to see the other Mario, German ministers were meeting with German ministers (they're good at that), and while all this was going on the Spanish were busy stuffing suitcases with Euros and hauling them out of the country. It didn't help that yesterday, the NY Times reported that American banks were making contingency plans on behalf of themselves and their clients for the eventuality of the Greeks abandoning the Euro. Frankly, I would say it would be criminal for them not to so do or in other words, what's the big deal?
The economic numbers all over the globe stink and unless they get better real soon, all the bond buying programs and monetary stimuli in the world may not have any effect. Further, the most important thing on the horizon is the outcome of the American election for unless a clear trend emerges I expect to see and even greater slow down in activity as we close in on the event. I don't think I have witnessed more fragility in the global marketplace than at this period of time. Of course that is but my opinion. If the best the Euros can hope for on Thursday is what was leaked today, I suspect the reaction will be moderately negative and possibly worse if the Bundesbank--which remained silent in the face of today's revelation--comes down hard in opposition. Where we go from there is anybody's guess but I still find it hard to conceive of any scenario where Greece is again viable as a member of the Union. Without further guidance, Thursday looms large. We shall wait.
Friday, August 31, 2012
HOW'S THAT AGAIN?
Got up early, two tv's on at 7:45, yellow pad and paper and pencils in hand, full pot of Joe on the burner, ready to record and comment of the soon to be uttered momentous words from the Chairman: we got bupkus.
Bennie said damn near nothing that we hadn't heard before except that the Fed was prepared to be more accommodating if required, which come to think of it we had heard that before as well. I immediately called a bud at Morgan Stanley and got him as he was going out the door to get an early start on the long Labor day weekend, and THAT was the story from this side of the pond. The markets did well on almost zero volume and the story that Draghi had managed to drive a wedge in the German wall of resistance to his Buy the Bonds program as the head of the Bundesbank threatened to resign over the concept. Some where, somehow this was deemed to be a good thing, as if speaking about some junior minister for south east Westphalia. It isn't. The Chairman of the Bundesbank is a very big guy indeed, not only in a financial sense but in a political sense as well. If he were to resign at odds with the government there would be hell to pay, especially for Angie who still has that meddlesome election coming up shortly. But the one of a few in New York that might have understood this and raised a question, was well on his way to Sagaponic and so the feeling of comfort continued for the night watchmen for whom 4:00 pm couldn't come quickly enough.
The view now shifts to Europe and next Thursday when Mario is expected to lay out his thoughts in some detail as to "whatever it takes" really means. Until then, the phone lines--what...oh yeah, we don't have "lines" any more--the airways will be burning up in Germany and between their northern neighbors as to how to deal with this crazy Ey-ty before next Thursday when he might get them all fired. I must say, I never thought he would get this far this soon. Maybe I've been wrong about the entire scenario (which wouldn't be the first time) but I simply can't see Germany folding on this critical constitutional issue without conditionality that would render the concept almost certainly unworkable. In any case it is the late afternoon and MY night watchman duty is officially ended and I look forward to the first weekend of college football and an extra day off on Monday. Labor Day. On which we do no labor. Odd.
See you Tuesday.
Bennie said damn near nothing that we hadn't heard before except that the Fed was prepared to be more accommodating if required, which come to think of it we had heard that before as well. I immediately called a bud at Morgan Stanley and got him as he was going out the door to get an early start on the long Labor day weekend, and THAT was the story from this side of the pond. The markets did well on almost zero volume and the story that Draghi had managed to drive a wedge in the German wall of resistance to his Buy the Bonds program as the head of the Bundesbank threatened to resign over the concept. Some where, somehow this was deemed to be a good thing, as if speaking about some junior minister for south east Westphalia. It isn't. The Chairman of the Bundesbank is a very big guy indeed, not only in a financial sense but in a political sense as well. If he were to resign at odds with the government there would be hell to pay, especially for Angie who still has that meddlesome election coming up shortly. But the one of a few in New York that might have understood this and raised a question, was well on his way to Sagaponic and so the feeling of comfort continued for the night watchmen for whom 4:00 pm couldn't come quickly enough.
The view now shifts to Europe and next Thursday when Mario is expected to lay out his thoughts in some detail as to "whatever it takes" really means. Until then, the phone lines--what...oh yeah, we don't have "lines" any more--the airways will be burning up in Germany and between their northern neighbors as to how to deal with this crazy Ey-ty before next Thursday when he might get them all fired. I must say, I never thought he would get this far this soon. Maybe I've been wrong about the entire scenario (which wouldn't be the first time) but I simply can't see Germany folding on this critical constitutional issue without conditionality that would render the concept almost certainly unworkable. In any case it is the late afternoon and MY night watchman duty is officially ended and I look forward to the first weekend of college football and an extra day off on Monday. Labor Day. On which we do no labor. Odd.
See you Tuesday.
Monday, August 27, 2012
ONE MORE WEEK
To August that is. Today is really slow as it is a bank holiday weekend over there and next week will be the Labor day weekend over here. Of course Those that Count have gotten a head start by showing up in Jackson Hole over the weekend to make sure they have a good seat for Ben's speech I guess. It is a beautiful spot: if you have never been there you should take a trip, especially our non-U.S. readers; we need the tourist revenue.
On the other side of the country the assemblage is about complete for the Republican convention in Tampa Florida which is being somewhat overshadowed by Hurricane Ike which is now heading straight for New Orleans and giving Democratic politicians visions of sugarplums along with their media allies who plan to turn the clock back this week in the biggest "Blame Bush" orgy in years. On the whims of the weather are elections decided.
Across the pond, kudos for the touring side from Greece. The Prime Minister made an excellent impression by all accounts. Proper contrite tone, grasp of the situation, proud but deferential but unfortunately not having a bean. From the creditors all the proper murmurs. Want to help, believe Greece is serious, working as hard as they can, must stick to plan...but not another bean ol' boy, sorry. We can talk about extensions, tho.
And talk they will whilst conjuring up some fiction of performance to hang on to the poor buggers until the end of the year at least wasting just enough time, effort and frayed psyches to keep from focusing on the bigger problem which faced another interesting twist over the weekend.
Sr. Draghi seems bound and determined to follow through with his plan to target yields for sovereign risk through the controlled purchase of bonds at issuance believing that he can target yields by the amount of bonds the ECB purchases. As you know, count me as skeptical, but I will say this: unlike Mr. Bernanke and the mobs of economists surrounding him, Sr. Draghi knows markets and therefore, rather than my usual "that's the stupidest thing I ever heard of" response I shall limit my self to, "I don't think it's going to work." Then again, the beauty of it is who's going to know? They can fudge this thing at the offerings seven ways to Sunday (Yes, Virginia, those things are done) but there are these lesser breeds called traders and they tend to take a less than benign view at the angelic efforts of central bankers and bid things at what they believe to be "appropriate levels." If Sr. Draghi's Spanish 10 year which he believes should yield 5% begins to trade at 91-92, a strategic re-thing may be in order.
Anyway, Angie was saying kind of nice things about this idea and in the background Frankie could be heard mumbling approval when Angie's own Bundesbank head popped up with a rather resounding, "Nein," calling the whole thing not only not a good idea but liking it to the printing of counterfeit money! Ach du Lieber! One would think that by now everyone is on the same page of the missal but I guess not. Now maybe this is designed to help the Greeks because while the elephants fight it out in the jungle another day goes by and every day helps a little (not really). But it sure as hell does no one else any good.
Meanwhile, in Spain, the finance guys have come up with a number of 65 billion Euros to fix the Spanish banks. Problem is the folks they hired at great expense to tell them how much they needed came up with 85 billion. Huummmm, I wonder what that means? And so it goes. Onward to Jackson Hole, gang. Problem is it's still August and it's still the silly season. God knows what will come out of that place.
On the other side of the country the assemblage is about complete for the Republican convention in Tampa Florida which is being somewhat overshadowed by Hurricane Ike which is now heading straight for New Orleans and giving Democratic politicians visions of sugarplums along with their media allies who plan to turn the clock back this week in the biggest "Blame Bush" orgy in years. On the whims of the weather are elections decided.
Across the pond, kudos for the touring side from Greece. The Prime Minister made an excellent impression by all accounts. Proper contrite tone, grasp of the situation, proud but deferential but unfortunately not having a bean. From the creditors all the proper murmurs. Want to help, believe Greece is serious, working as hard as they can, must stick to plan...but not another bean ol' boy, sorry. We can talk about extensions, tho.
And talk they will whilst conjuring up some fiction of performance to hang on to the poor buggers until the end of the year at least wasting just enough time, effort and frayed psyches to keep from focusing on the bigger problem which faced another interesting twist over the weekend.
Sr. Draghi seems bound and determined to follow through with his plan to target yields for sovereign risk through the controlled purchase of bonds at issuance believing that he can target yields by the amount of bonds the ECB purchases. As you know, count me as skeptical, but I will say this: unlike Mr. Bernanke and the mobs of economists surrounding him, Sr. Draghi knows markets and therefore, rather than my usual "that's the stupidest thing I ever heard of" response I shall limit my self to, "I don't think it's going to work." Then again, the beauty of it is who's going to know? They can fudge this thing at the offerings seven ways to Sunday (Yes, Virginia, those things are done) but there are these lesser breeds called traders and they tend to take a less than benign view at the angelic efforts of central bankers and bid things at what they believe to be "appropriate levels." If Sr. Draghi's Spanish 10 year which he believes should yield 5% begins to trade at 91-92, a strategic re-thing may be in order.
Anyway, Angie was saying kind of nice things about this idea and in the background Frankie could be heard mumbling approval when Angie's own Bundesbank head popped up with a rather resounding, "Nein," calling the whole thing not only not a good idea but liking it to the printing of counterfeit money! Ach du Lieber! One would think that by now everyone is on the same page of the missal but I guess not. Now maybe this is designed to help the Greeks because while the elephants fight it out in the jungle another day goes by and every day helps a little (not really). But it sure as hell does no one else any good.
Meanwhile, in Spain, the finance guys have come up with a number of 65 billion Euros to fix the Spanish banks. Problem is the folks they hired at great expense to tell them how much they needed came up with 85 billion. Huummmm, I wonder what that means? And so it goes. Onward to Jackson Hole, gang. Problem is it's still August and it's still the silly season. God knows what will come out of that place.
Tuesday, August 21, 2012
WELL?
Well what? What am I supposed to do make things up out of thin air? I told you nothing was going to happen and nothing did. I've been putting stuff together out of whole cloth and it wasn't until today that anything interesting bubbled up.
You might have noticed that there has been some talk about the ECB essentially guaranteeing a cap on Euroland interest yields...a verious curious thought indeed. I guess for it to occur the ECB would have to announce that they are a buyer whenever the Spanish 10 year approaches..........and there's the problem. What is the "right" yield for the Spanish 10 year, who decides it and if there is a difference between the 10 year of Italy--up or below--you know there is going to be hell to pay somewhere. I kind of dismissed the notion as did the Bundesbank yesterday but lo and behold the German politicians began making cooing sounds today at the prospect. I still don't think this has legs but in such a crazy time as this who really knows. Rather, I think it is just another way to keep the can moving and not much else. Of far more importance is the Greek PM, Samaras, meeting with Junker in Athens tomorrow. Problem is, nothing will come of it. The economy is awful, the numbers are worse, but there is aenough cash for the nextpayment to be made. "We are encouraged by the efforts of the Greece Goverment to deal with the crisis, work with the financial authorities of the Eurozone...blah, blah, blah." Or some variation on that theme. Meanwhile, Spanish and Italian yields have indeed come out of boredom if nothing else aided by the fact that there are few traders at desks anywhere. It's still August.
On this side there has been a remarkable rally in the stock market. I know nothing about the stock market so I will not hazzard a guess as to why for as it seems to me the economic situation has hardly changed, but I have taken notice of the fact that right at the forefront have been the banks which is equally puzzling given that they were considered toxic 4 months ago.
The Yankees are in first place, The Giants look good in pre-season, football has begun in Europe, God's in his Heaven and the world seems all right to just about everone. The again, August ends in 10 days. Write if you have news.
You might have noticed that there has been some talk about the ECB essentially guaranteeing a cap on Euroland interest yields...a verious curious thought indeed. I guess for it to occur the ECB would have to announce that they are a buyer whenever the Spanish 10 year approaches..........and there's the problem. What is the "right" yield for the Spanish 10 year, who decides it and if there is a difference between the 10 year of Italy--up or below--you know there is going to be hell to pay somewhere. I kind of dismissed the notion as did the Bundesbank yesterday but lo and behold the German politicians began making cooing sounds today at the prospect. I still don't think this has legs but in such a crazy time as this who really knows. Rather, I think it is just another way to keep the can moving and not much else. Of far more importance is the Greek PM, Samaras, meeting with Junker in Athens tomorrow. Problem is, nothing will come of it. The economy is awful, the numbers are worse, but there is aenough cash for the nextpayment to be made. "We are encouraged by the efforts of the Greece Goverment to deal with the crisis, work with the financial authorities of the Eurozone...blah, blah, blah." Or some variation on that theme. Meanwhile, Spanish and Italian yields have indeed come out of boredom if nothing else aided by the fact that there are few traders at desks anywhere. It's still August.
On this side there has been a remarkable rally in the stock market. I know nothing about the stock market so I will not hazzard a guess as to why for as it seems to me the economic situation has hardly changed, but I have taken notice of the fact that right at the forefront have been the banks which is equally puzzling given that they were considered toxic 4 months ago.
The Yankees are in first place, The Giants look good in pre-season, football has begun in Europe, God's in his Heaven and the world seems all right to just about everone. The again, August ends in 10 days. Write if you have news.
Tuesday, February 9, 2010
BEWARE OF GREEKS...
Well, we're back. The eulogy went well but in the time we were on Long island I lost a cousin and another dear friend who was exactly my age. Things come in threes so I guess I'm safe for a while. But when the Big Trader decides to lift your bid...anyway you can't worry about it.
What one can worry about is Greece. The Greeks owe a hell of a lot of people a hell of a lot of money and have to borrow nearly $40 billion in the next few months just to keen the loans rolling (remember, a rolling loan gathers no loss). It anit out there, at least not yet from the usual sources. Now Greece is no Iceland; it is a real country and the consequences of a default are more than a touch dire for the Euro Zone, Euro Banks and the entire fabric of the European Union. The Greeks are also a bit nuts...at least in my experience. One is never quite sure which Greek you are going to get when one wakes up in the morning. Consequently, there is more than a tiny chance that something could fly off the rails before this is over--not that I'm making a prediction but the chance is there.
Now I must admit prior to may absence, I was going to explore who holds the Greek debt and in what form as the answer to those questions will go a long way in determining how this rescue package is to proceed. late this afternoon, the Journal announced that the sing on the Greek Central bank was about to have added, "Deutsche Bundesbank, Prop." but that has yet to be confirmed. I can't imagine any of the governments going it alone on this one--or even in concert--without exploring the well-known concept of "burden sharing" on the part of commercial creditors but until we know the size and stock of the debt how this could be structured cannot be know. That's my job for tomorrow. Anyway, our stock market took heart and rallied so maybe somebody knows more than I do...which wouldn't be the first time. Most remarkable, however, is the fact that the Greeks were lying through their teeth as to the state of their finances FOR YEARS and neither the EU, the Fund or anyone else who should have cared picked it up. Of course, my really smart friend Larry has been blowing the whistle on this for a couple of years now but nobody listened. Waiting in the wings of course are Portugal, Ireland, Italy and Spain so how this is dealt with is of no little consequence. Things are changing overnight so we'll pick up this tale tomorrow.
Nice to be back.
What one can worry about is Greece. The Greeks owe a hell of a lot of people a hell of a lot of money and have to borrow nearly $40 billion in the next few months just to keen the loans rolling (remember, a rolling loan gathers no loss). It anit out there, at least not yet from the usual sources. Now Greece is no Iceland; it is a real country and the consequences of a default are more than a touch dire for the Euro Zone, Euro Banks and the entire fabric of the European Union. The Greeks are also a bit nuts...at least in my experience. One is never quite sure which Greek you are going to get when one wakes up in the morning. Consequently, there is more than a tiny chance that something could fly off the rails before this is over--not that I'm making a prediction but the chance is there.
Now I must admit prior to may absence, I was going to explore who holds the Greek debt and in what form as the answer to those questions will go a long way in determining how this rescue package is to proceed. late this afternoon, the Journal announced that the sing on the Greek Central bank was about to have added, "Deutsche Bundesbank, Prop." but that has yet to be confirmed. I can't imagine any of the governments going it alone on this one--or even in concert--without exploring the well-known concept of "burden sharing" on the part of commercial creditors but until we know the size and stock of the debt how this could be structured cannot be know. That's my job for tomorrow. Anyway, our stock market took heart and rallied so maybe somebody knows more than I do...which wouldn't be the first time. Most remarkable, however, is the fact that the Greeks were lying through their teeth as to the state of their finances FOR YEARS and neither the EU, the Fund or anyone else who should have cared picked it up. Of course, my really smart friend Larry has been blowing the whistle on this for a couple of years now but nobody listened. Waiting in the wings of course are Portugal, Ireland, Italy and Spain so how this is dealt with is of no little consequence. Things are changing overnight so we'll pick up this tale tomorrow.
Nice to be back.
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