THE PEACE PRIZE

Awarded yesterday to the European Union for refusing over the past 60 years to do what came natural to them; killing each other of course which may resume shortly if things don't shape up.

Berlusconi confirmed today everything that Massimo had stated yesterday; he's in the race and the gloves are already off.  At the present time his approval rating is in the dumpster but this is a formidable guy with a ton of money and less political morality than a Chicago Alderman--not to mention his own TV and radio network--on which he today labeled Mario Monti, "too German for Italy."   That plays.

Quite contrary to the common view, Italy is an enormously rich county; some have actually suggested (with a substantial amount of evidence behind them) that in so far as personal wealth, Italy is the richest country in Euroland...including Germany.  It is also one of the most disorganized, dysfunctional, bureaucratic, corrupt and backward for which over the years many have made a study as to how to "game the system" and made fortunes so doing.  The distribution of wealth is also immensely uneven both among regions and individuals.  The north is rich, the south is not.  And yet, in regard to external finances the Italians are in fine shape.  Indeed, the nation is, in many ways, like Japan...a nation of savers.  As more than one commentator has suggested, most recently Ambrose Evans-Prichard, who is a very good commentator indeed, Italy is an excellent country trapped in the wrong currency who would be much better off without the mill stone of the Euro around it's neck.  Whether he would believe a political argument along those lines or not, do not think for a minute that Berlusconi would not use it and that it would not be effective with a goodly sized percentage of the voters.  This is going to be a long, hard race and one which has just begun.  As for Euroland, whilst all the focus has been on Greece from the standpoint of a possible dissolution, now comes Italy seemingly out of nowhere, and as we have said before, Italy is a real country.

And speaking of Greece, apologies for the misinformation regarding the extension period which was in fact noon today not midnight.  The Greeks did get over 30 Billion in bonds put back but the price was such that it caused the seemingly magic 124% of debt to GDP figure so important to the IMF to swell to 128%.  As I have said, that number is about as meaningful as a bucket of warm spit but Chrissie put herself in a bit of a box and now the deal is how does one avoid the supposed consequences.  The ministers are now in session.  I hope they come up with something real: like a new present value analysis based upon the certainty of lower average interest rates for the period in question based upon new, solid, and irrefutable economic analysis just made available by...oh hell, who cares by who as long as it works.

Above all this is the seemingly absolute cock-up by Deutschbank and Morgan Stanley in running this thing. I have spoken to no one who can figure it out.  For their sakes I hope there is a real good explanation because if there isn't it's stupid is as stupid does.  And at that we shall leave it.

THE AUCTION IS ANNOUNCED

The game's afoot...until Friday at least.

The Greeks have announced plans to spend 10 billion Euros in a debt buy-back which, if successful, would reduce their outstanding debt by 60% (their figures).  The style is clever; it is a Dutch auction which puts maximum pressure on those who really want to get out of town.  With a limited amount to be spent and obvious pressure being placed on local entities such as Greek Banks who would expect to recoup their losses from the taxpayers of Europe, some folks might just bid early and bid often to be relieved of their holdings closer to the minimum band of 30% rather than waiting to chance the upper limit of 40-odd%. Depending on how much of this stuff has been bought recently by hedge funds and at what level, this could turn out pretty well for Hellas.

Now you have to forgive me but I'm a suspicious old guy and I've seen a lot of these things in my time.  The "book runner" so to speak in this operation is Deutschebank with Morgan Stanley in the background providing--well--I don't know what they provide.  Keep in mind that anything that gets this phase of the game in the history books is good for the Greeks, for Euroland but especially for Angie and anything that is good for Angie is good for Deutschebank.  Now I have no knowledge of the goings-on but if I were a betting man I would wager that Deutschebank has a damn good idea at what levels the hedge funds are owners and what their profit goals might be.  Rigged?  How dare you Sir!  But I bet they're in at less than 30 for the most part which means some serious money is about to be made.  Memo to bond holders: if you're looking for 37-38 there is a big disappointment in your future.  Never going to get there. Only four days to see if I am right.

Oh, the Spanish banks asked or a bail-out of 38 billion Euros.  Some commentator remarked, "Surely this is a good thing."  This is where we are.  A National government announces that five of its larger lending institutions are flat-on-their-butts broke and we can't cover them without help from out side and this is a good thing?  As I have said before, I should have retired to Bedlam.  Madness, pure insanity and now we all wait in joyful hope for the coming of the request from the government itself.  Once that happens we'll all be in great shape that is as long as the U.S. doesn't go down the gurgle tube at the end of the year or over the fiscal cliff depending on what image strikes your fancy.

And then there's the French.  Today they announced that hereto come, Euro financial transactions should be centered in Euroland with London being allowed to participate but not playing an important role.  They of course mean Paris, a city of incomparable beauty, lacking only the necessary infrastructure for such a role and a language not spoken anywhere else but in West Africa and Haiti.  Can't we all just get along?