I suppose one should simply conclude that Mario just wasn't ready despite his comments that the Euroland economy was robust and the future was looking bright. Funny, when I was growing up central bankers were viewed as exterminators and the bug they were after was inflation. Worse than a cockroach, inflation. Tall Paul, starting in 1979 killed most of Latin America and points east and west for a generation.But by God he killed inflation! Oh, he didn't mean to wipe out half the world but not even a guy as smart as Volker can always spot the Law of Unintended Consequences at work. But today? Mario has a strong economy, a strong currency, a tame IMF but what does he want? INFLATION, When does he want it? NOW! Until he gets it, free money for everybody. Why, one might ask.
I suppose there are really good reasons for this and in what was an attempt to justify the same there appeared a story in one of our great New York newspapers as to how Sr. Draghi's policies saved an Italian manufacturer of railway cars in a moderate sized Italian city. The names shall remain unmentioned here.
Seems as though this manufacturer was having a spot of trouble in obtaining financing to supply Ferrovia Della Stato, the national railway of Italy. Up pops Mario and his plan for quantitative easing and lo and behold the unnamed corporate heads straight to the bond market with the idea that there might be a bid out there for his debt (where did it get that from?). Corporate gets money, Ferrovia places an order, jobs come back and the town is saved! What could be better?
Now by this time you know I'm a suspicious sort but in this case there's nothing about which one should be suspicious. I mean, just because it appears that the lack of purchases might have been caused by the fact that technology had rolled past the Italian cho-cho manufacturer (it had) or that the manufacturer wasn't Italian any more--it had been sold to a Japanese competitor who apparently was on the cutting edge for the product. Which leads a stinker like me to wonder why the company needed subsidized financing at all unless.........and of course this could NEVER happen in the EU that someone dropped a dime to inquire about the availability of cheap financing if the going broke company in the declining city might negotiate a sale of itself to a White Kn...er...Samurai. Could it? Nah. So why should I be suspicious? I'm a troubled person, I really am.
Anyway, it's nice to see that stateism is alive and well in all corners of the EU. What would we do without it? And perhaps we can learn. Take Solyndra for example. Governments...even central bankers are not real good at picking winners. Not even graduates of the Goldman Sachs School of Crony Capitalism like brother Mario but he's better than most I guess. It was better when all these guys and gals needed to do their jobs was a can of Raid. When I was very young.
Have a great weekend.
Showing posts with label Draghi. Show all posts
Showing posts with label Draghi. Show all posts
Friday, July 21, 2017
Thursday, December 8, 2016
SUPER MARIO (AGAIN)
You have to admire the guy. Sr. Draghi pulled another rabbit out of the hat today which in the long run will have no effect upon the overall situation at all but in the short term will keep a lid on things and provide time for the politicians to get it right or wrong depending on one's view. Mario left the discount rate unchanged and continued his QE program through September of next year BUT he reduced it in size from 80 billion Euros a month to 60 billion. "It's not a Taper" says Mario. Well, of course it is but that statement allows anyone to call it what one wishes and solves--to an extent--a couple of gnarly issues for Sr. Draghi. When everybody else in the world is tightening he can tell the rest of the world, "So am I," but at the same time he can indicate to the Euro Zone that he is fully behind them. Clever, our ex-Goldman Sachs Man in Italy---oh, you didn't know he was a Goldie? Yep. Another one.
There were two other things that Mario did, far less politically motivated but perhaps more important. Before today the ECB was limited in it's asset purchases by the interests rate on the assets purchased. They could no go below -0.4% which is what the ECB pays on deposits to European banks. That standard effectively had wiped out any purchases of shorter-dated German paper and making it quite difficult to find enough paper to fulfill the monthly quota with obligations of lesser mortals. It also created an "ECB Put" which in turn created artificial value in other instruments. No longer is the thought. In addition, the minimal maturity of such purchases was reduced from 2 to 1 year. Clearly, this should afford a greater stock of debt BUT it is also designed to steepen the yield curve with emphasis on the short end which is thought to be a very good thing indeed for Mrs. Monte's little boy, di Paschi and all of his playmates. Bank shares Over There shot up at the news. Super Mario.
Of course it doesn't mean a damn thing. Our German friends would call it a nebelwerfer or fog thrower designed to hind the fact that the banking sector still stinks and the Italian banking sector is like walking into a gas chamber. But no harm done and whatever buys time for whatever might come can't be all bad.
Of course the real problem is that money is fungible and so are rates which will continue to rise as the euphoria surrounding the prospects of the United States remains in place. The Euro got hammered again today and will probably approach par in a month. Problem is I don't know if, in these crazy times, if anyone has a clue as to whether that is a good or a bad thing. What I do suspect is that there are some bond portfolios that have really been hammered but so far no real signs have emerged. That could be a major issue if my supposition is correct but for the time being everyone seems very content to simply buy the index. And I Romani? I have a classmate who happens to be a priest who lives in Rome. He claims it is his earthly reward although nothing works particularly well and the garbage men are on strike. "Must be tough," said I at lunch yesterday. "Tough," said he. "There is no such word in Italian. In Italy one lives as well as one can and is happy to do so. After all, it is Italy." I should have gotten him in touch with Massimo a long time ago. Massimo has lived well, and...then again...Massimo and a priest.........Quite a thought.
There were two other things that Mario did, far less politically motivated but perhaps more important. Before today the ECB was limited in it's asset purchases by the interests rate on the assets purchased. They could no go below -0.4% which is what the ECB pays on deposits to European banks. That standard effectively had wiped out any purchases of shorter-dated German paper and making it quite difficult to find enough paper to fulfill the monthly quota with obligations of lesser mortals. It also created an "ECB Put" which in turn created artificial value in other instruments. No longer is the thought. In addition, the minimal maturity of such purchases was reduced from 2 to 1 year. Clearly, this should afford a greater stock of debt BUT it is also designed to steepen the yield curve with emphasis on the short end which is thought to be a very good thing indeed for Mrs. Monte's little boy, di Paschi and all of his playmates. Bank shares Over There shot up at the news. Super Mario.
Of course it doesn't mean a damn thing. Our German friends would call it a nebelwerfer or fog thrower designed to hind the fact that the banking sector still stinks and the Italian banking sector is like walking into a gas chamber. But no harm done and whatever buys time for whatever might come can't be all bad.
Of course the real problem is that money is fungible and so are rates which will continue to rise as the euphoria surrounding the prospects of the United States remains in place. The Euro got hammered again today and will probably approach par in a month. Problem is I don't know if, in these crazy times, if anyone has a clue as to whether that is a good or a bad thing. What I do suspect is that there are some bond portfolios that have really been hammered but so far no real signs have emerged. That could be a major issue if my supposition is correct but for the time being everyone seems very content to simply buy the index. And I Romani? I have a classmate who happens to be a priest who lives in Rome. He claims it is his earthly reward although nothing works particularly well and the garbage men are on strike. "Must be tough," said I at lunch yesterday. "Tough," said he. "There is no such word in Italian. In Italy one lives as well as one can and is happy to do so. After all, it is Italy." I should have gotten him in touch with Massimo a long time ago. Massimo has lived well, and...then again...Massimo and a priest.........Quite a thought.
Monday, December 5, 2016
NOW WHAT?
Over Here, the jobs number came in bang on at 178,000 and every one went back to bed. The Donald is a Rock Star; it's great fun to watch the NY Times, MSNBC and CNN go slowly, collectively insane and everybody is buying equities and selling bonds and getting rich while doing it. So far so good. Even what was supposed to be the greatest foreign policy flap in history, the taking of a phone call from the President of Taiwan (OMG!!!!) fizzled. The guy is either really lucky or a hell of a lot better than anyone expected. Then again, he isn't in the job yet. Then there's Over There...
The Union dodged one bullet this weekend but took another one in about the eight-ring. Austria rejected a far right challenge but Italy soundly rejected PM Renzi, who promptly resigned, and with him it is thought the continuing concept of Italy remaining in the Union under Brussels. That remains to be seen but in the effort to form a new government things are going to get very messy indeed with predictions already emerging that Beppy Grillo and the Five Star movement just might pull it off and be in the driver's seat in the formation of a new coalition. How long it will take is another issue, the time line not only affecting the much-needed resolution of the Italian banking situation (nothing can be done without a government on an EU level) and the soon-to-come election in France which could be affected by either a government in place or NO government depending upon the trending politics in the latter situation. The Italians could very well drag this thing out through the French elections looking for emotional and political support--for either or any party! If the more populist Monsieur Filon comes out a clear winner, that is one thing, but if Mdm. Le Pen attracts enough support to become a force with whom one must reckon...well, that's a very different situation indeed. The certainty is that France will be governed far more to the right than under the past years with Frankie Holland in charge...as will Italy. Just how far right is the question. The survival of the Euro is no better than 50/50 at this point and of course we must keep in mind that in the Fall it's Angie's turn. Would she sacrifice the Euro in order to salvage what would remain of the Union and herself? There's too much space between now and then to answer that but we should keep in mind that the Union came before the Euro and that there is a growing body of opinion that holds the view that it (the Euro) wasn't a very good idea in the first place.
With all this going on, the markets were surprisingly quiet with the Euro holding firm after an early trading dip and that is a good thing. Of course the Italian result was widely expected but a positive none-the-less. Another good thing is that all of Europe has about 10 days left in the working year so if the lid stays on for that period we are looking at mid-January as the start of the Great Political Dance. I think the Italian banking system can stay above water for that long but what I'd like to talk about tomorrow is the problem all of this causes for the ECB and Sr. Draghi. The Grinch showed up early for him this year.
The Union dodged one bullet this weekend but took another one in about the eight-ring. Austria rejected a far right challenge but Italy soundly rejected PM Renzi, who promptly resigned, and with him it is thought the continuing concept of Italy remaining in the Union under Brussels. That remains to be seen but in the effort to form a new government things are going to get very messy indeed with predictions already emerging that Beppy Grillo and the Five Star movement just might pull it off and be in the driver's seat in the formation of a new coalition. How long it will take is another issue, the time line not only affecting the much-needed resolution of the Italian banking situation (nothing can be done without a government on an EU level) and the soon-to-come election in France which could be affected by either a government in place or NO government depending upon the trending politics in the latter situation. The Italians could very well drag this thing out through the French elections looking for emotional and political support--for either or any party! If the more populist Monsieur Filon comes out a clear winner, that is one thing, but if Mdm. Le Pen attracts enough support to become a force with whom one must reckon...well, that's a very different situation indeed. The certainty is that France will be governed far more to the right than under the past years with Frankie Holland in charge...as will Italy. Just how far right is the question. The survival of the Euro is no better than 50/50 at this point and of course we must keep in mind that in the Fall it's Angie's turn. Would she sacrifice the Euro in order to salvage what would remain of the Union and herself? There's too much space between now and then to answer that but we should keep in mind that the Union came before the Euro and that there is a growing body of opinion that holds the view that it (the Euro) wasn't a very good idea in the first place.
With all this going on, the markets were surprisingly quiet with the Euro holding firm after an early trading dip and that is a good thing. Of course the Italian result was widely expected but a positive none-the-less. Another good thing is that all of Europe has about 10 days left in the working year so if the lid stays on for that period we are looking at mid-January as the start of the Great Political Dance. I think the Italian banking system can stay above water for that long but what I'd like to talk about tomorrow is the problem all of this causes for the ECB and Sr. Draghi. The Grinch showed up early for him this year.
Friday, September 9, 2016
WELL, WHAT A WAY TO END THE WEEK!
The seeming near impossibility of officials of the Federal Reserve to keep their mouths shut was once again on display this morning. Eric Rosengren of the Boston Fed, who has been a bit quiet for at least a week hit a home run today by suggesting...contrary to all of his previous thoughts on the matter...that the time may be coming to raise rates. The markets had be musing over Mario Draghi's apparent lack of interest in all things earlier on in the week and concluded--and I am not kidding--that THIS was the signal; the central banks were working in consort and rates would be going up. The 10 year Bund traded to a positive yield, the 10 year ratcheted up to 1.67%; the DOW closed down about 400 and the NASDAQ was down 100. Quite a day.
In case anyone was paying attention, the economic numbers--allowing for the fact that fewer and fewer believe them any more--were in the past week or so mediocre at best and downright stinko at worst. Meanwhile, Over There, Germany export numbers were way down and French Industrial Production was awful. The election is looking tighter by the day. The Chinese have a problem, Houston (it will get fixed but not for a while) and the Japanese show no signs whatsoever of figuring this thing out. Raise rates? I don't think so but today's exercise proved one thing (again) the the crazy monetary policy of the past Lord-knows how many years has, as it always does, created bubbles that if and when they burst, burst with great suddenness and ferocity. This was a very small pop today of what was perhaps a trial balloon on the part of the Fed. Having seen the reaction I suspect September is completely off the table. Underneath it all may be the growing understanding that this economy is a Potemkin Village, built almost entirely on free and easy money with a serious lack of substantive and structural underpinning. Maybe that's a good thing, if enough people get the message. Then again, one has to be listening.
Have a great weekend.
In case anyone was paying attention, the economic numbers--allowing for the fact that fewer and fewer believe them any more--were in the past week or so mediocre at best and downright stinko at worst. Meanwhile, Over There, Germany export numbers were way down and French Industrial Production was awful. The election is looking tighter by the day. The Chinese have a problem, Houston (it will get fixed but not for a while) and the Japanese show no signs whatsoever of figuring this thing out. Raise rates? I don't think so but today's exercise proved one thing (again) the the crazy monetary policy of the past Lord-knows how many years has, as it always does, created bubbles that if and when they burst, burst with great suddenness and ferocity. This was a very small pop today of what was perhaps a trial balloon on the part of the Fed. Having seen the reaction I suspect September is completely off the table. Underneath it all may be the growing understanding that this economy is a Potemkin Village, built almost entirely on free and easy money with a serious lack of substantive and structural underpinning. Maybe that's a good thing, if enough people get the message. Then again, one has to be listening.
Have a great weekend.
Monday, December 7, 2015
A REALLY BAD DAY
Something happened that I don't really understand and given the commentary, not many other people do as well. With that in mind, a few quick thoughts.
Everything got hammered today; equities, bonds and currencies--especially the dollar. That doesn't happen a lot so you have to start looking for reasons but there aren't a lot hiding in plain sight or anywhere else for that matter.
I confess I'm in no better shape than anyone else...worst shape I suspect as understanding this market is impossible without being involved in the same and last time that happened was a long time ago. My best guess is that the Mario blooper of last week was not a one day event in the sense it revealed some structural shortcomings that were heretofore unnoticed or, frankly, being ignored which justified or not, caused an intense concern as to what risks were really out there among market participants.
In conversations with Max it was clear that the crowded or tight trade in the dollar/Euro which of course influenced various positions in all sorts of risk asset had trouble clearing and for some people probably never did. Forget about all the protestations to the contrary; the liquidity in this market stinks. Recognizing and admitting to the reality of course leads one to the conclusion that it is due to some extent--one can debate the true extent--of the emergence of the massive set of regulations over the past few years. While this is unsettling to the egos of some people, it also leads to a refusal to understand just what is going on in one sense and in an entirely difference sense, a mis-assessment of the risk overhanging the capital markets. That is not to make a judgement as to the amount or nature of risk in any way but what I think I missed last week was the when we spoke of certain players not even trying to unwind but simply taking and marking losses, was that as a result, market participants began to ask themselves as to the true state of very specific names; this is exactly what happened in 2008-09. When this happens, the cause of the problem if indeed it is liquidity-related, exacerbates, and moves from a simple ability to adjust positions to being able to fund continuing operations.
I am not suggesting an imminent collapse but it wouldn't be a bad idea if some adult out there--if there is one hanging about--have a few words to say on the subject of market sustainability just to let folks know that someone is thinking about these things which I am sure (hope?) they are.
Today was borne of deep uncertainty and nervousness. Those sorts of fears can be allayed if not terminated with some well-chosen words from the right people. The new leadership theory of "leading from behind" has no place here.
Everything got hammered today; equities, bonds and currencies--especially the dollar. That doesn't happen a lot so you have to start looking for reasons but there aren't a lot hiding in plain sight or anywhere else for that matter.
I confess I'm in no better shape than anyone else...worst shape I suspect as understanding this market is impossible without being involved in the same and last time that happened was a long time ago. My best guess is that the Mario blooper of last week was not a one day event in the sense it revealed some structural shortcomings that were heretofore unnoticed or, frankly, being ignored which justified or not, caused an intense concern as to what risks were really out there among market participants.
In conversations with Max it was clear that the crowded or tight trade in the dollar/Euro which of course influenced various positions in all sorts of risk asset had trouble clearing and for some people probably never did. Forget about all the protestations to the contrary; the liquidity in this market stinks. Recognizing and admitting to the reality of course leads one to the conclusion that it is due to some extent--one can debate the true extent--of the emergence of the massive set of regulations over the past few years. While this is unsettling to the egos of some people, it also leads to a refusal to understand just what is going on in one sense and in an entirely difference sense, a mis-assessment of the risk overhanging the capital markets. That is not to make a judgement as to the amount or nature of risk in any way but what I think I missed last week was the when we spoke of certain players not even trying to unwind but simply taking and marking losses, was that as a result, market participants began to ask themselves as to the true state of very specific names; this is exactly what happened in 2008-09. When this happens, the cause of the problem if indeed it is liquidity-related, exacerbates, and moves from a simple ability to adjust positions to being able to fund continuing operations.
I am not suggesting an imminent collapse but it wouldn't be a bad idea if some adult out there--if there is one hanging about--have a few words to say on the subject of market sustainability just to let folks know that someone is thinking about these things which I am sure (hope?) they are.
Today was borne of deep uncertainty and nervousness. Those sorts of fears can be allayed if not terminated with some well-chosen words from the right people. The new leadership theory of "leading from behind" has no place here.
Friday, December 4, 2015
ANOTHER DAY, ANOTHER MAX
Called the Madman in the early afternoon.
" G'day Max, still mad?"
"What? We playing word games today?"
"Ooow, doesn't this bright, warm December day cheer you up? The markets seem to have taken all of it in stride."
"Stride, hell. There's blood all over. What I didn't realize how tight that trade was. Everything was going in the same direction and when it hit the fan no matter what you were in you were getting out and there's no liquidity like I've been telling you for months so a lot of people just took their marks and went home. They killed a lot of people. I hope they're happy."
Max, I have to tell you I don't have a lot of sympathy for the poor, slaughtered lambs, but I don't think it was a considered strategy either."
"Then what the hell was it?"
"I think it was Mario finding out that he really doesn't run his bank. It's the old Golden Rule thing: He Who Has The Money Makes The Rules. Mario has a board--eight stooges and the German. Mario could have had all eight votes in which case he loses 1-9. Think about it. The guy isn't stupid; he must have know that there would be a reaction and on top of that his announcement was...shall we say...ill phrased. But he didn't have an option and the market overreacted just like the market always does...particularly so when when the market is so damn sure it's right and turns out to be so damn wrong."
"You really believe that?"
"Hell, Max, I don't believe anything anymore. It's just another theory as to what might have happened but I think it's a better one than we were bouncing around yesterday."
"Problem is, Charlie, you know us too well. We..."
"You don't like to be wrong."
"You're right."
"I know."
"You ever wrong?"
"Max, I live in the fly-over zone not Bronxville. What do you think?"
Early this afternoon, Mario Draghi, speaking in New York, indicated that there was considerable flexibility at what steps the ECB could take in reaction to future economic conditions, clearly indicating that the reaction to his statement of yesterday was an "Oh, S---" moment in his career as a central banker. He will certainly be more careful next time. The equity market, almost as an acceptance of an apology, closed up almost 400 points...with the clear message inserted within the remarks of all commentators that he better not make the same damn mistake again.
" G'day Max, still mad?"
"What? We playing word games today?"
"Ooow, doesn't this bright, warm December day cheer you up? The markets seem to have taken all of it in stride."
"Stride, hell. There's blood all over. What I didn't realize how tight that trade was. Everything was going in the same direction and when it hit the fan no matter what you were in you were getting out and there's no liquidity like I've been telling you for months so a lot of people just took their marks and went home. They killed a lot of people. I hope they're happy."
Max, I have to tell you I don't have a lot of sympathy for the poor, slaughtered lambs, but I don't think it was a considered strategy either."
"Then what the hell was it?"
"I think it was Mario finding out that he really doesn't run his bank. It's the old Golden Rule thing: He Who Has The Money Makes The Rules. Mario has a board--eight stooges and the German. Mario could have had all eight votes in which case he loses 1-9. Think about it. The guy isn't stupid; he must have know that there would be a reaction and on top of that his announcement was...shall we say...ill phrased. But he didn't have an option and the market overreacted just like the market always does...particularly so when when the market is so damn sure it's right and turns out to be so damn wrong."
"You really believe that?"
"Hell, Max, I don't believe anything anymore. It's just another theory as to what might have happened but I think it's a better one than we were bouncing around yesterday."
"Problem is, Charlie, you know us too well. We..."
"You don't like to be wrong."
"You're right."
"I know."
"You ever wrong?"
"Max, I live in the fly-over zone not Bronxville. What do you think?"
Early this afternoon, Mario Draghi, speaking in New York, indicated that there was considerable flexibility at what steps the ECB could take in reaction to future economic conditions, clearly indicating that the reaction to his statement of yesterday was an "Oh, S---" moment in his career as a central banker. He will certainly be more careful next time. The equity market, almost as an acceptance of an apology, closed up almost 400 points...with the clear message inserted within the remarks of all commentators that he better not make the same damn mistake again.
Thursday, December 3, 2015
MOMA, DON'T RAISE YOUR SON TO BE A CURRENCY TRADER
It was a slam dunk. Safest trade around. Long dollar, short Euro. Janet was going to tighten and Mario, despite facing criticism by many including me was adopting the "anything it takes" Mario posture of years past and was about to open the floodgates again.
Now the spooky thing about trading currencies is that the movement within the market is generally quite small and as a result the big players are generally geared up to their eyeballs because it's the only way to make real money. If you get it wrong you can also lose real money but this trade has been a slam dunk for months. Except it wasn't.
I called Mad Max this morning. He answered the phone with "(*#%&&^R$#@YH*)^%#@@%&(!!!.
"Long and wrong, Max?"
"Not me but ______ and _______ and ______ just got killed. I don't touch that stuff any more."
"So why the bad language?
"Because, Charlie, it's like the bas----- set us up. Nobody saw this coming; everything that was said pointed in the other direction. Draghi, who actually had some credibility..."
"Because he did everything you guys wanted..."
"So what? He's got nothin' now! NOTHIN!" The ECB's a *&%$#% joke; the Fed's a *&%$#% freak show. Draghi gets a call from Yellen asking him to cover her ass and he spits out all he's been sayin' for months. Charlie, it traded on a almost 4% move! You know what a 4% move in currencies is! There are guys who have NEVER seen a 4% move in their lives! I bet they're laughing their asses off!
"You really think Janet called Mario?"
"HELL,YES! Why else would this happen! You got another theory?"
I didn't and I didn't stay on the phone much longer with Max. I sure as heck didn't want to tell him that I was secretly pleased about being wrong in yesterday's column and that a little cooperation between central banks might not all be a bad thing, but Max is right in one respect; back in the old days when market activity in a currency was headed in a direction the governing central bank didn't like, you would often see a little"shock to the senses" to indicate displeasure. Fair nix, Gov, but this smacks far more of pure politics than monetary activism and I suspect a lot of people got burned badly.
Max is also right in believing that credibility was the real loser today...to the extent that is that there is any left to lose. The problem is there are very few institutions left to hold this thing together in case of another major risk event. So it would be nice to have around a smart person with a bit of grey hair to whom one could turn for some sage advice. From the market's standpoint, one of those types just took a big hit today. Too bad.
Ah, well, onward and upward. Let us see what tomorrow brings by way of reflective reaction. And let us see if I can get the smile off my face...God it was fun to watch!
Now the spooky thing about trading currencies is that the movement within the market is generally quite small and as a result the big players are generally geared up to their eyeballs because it's the only way to make real money. If you get it wrong you can also lose real money but this trade has been a slam dunk for months. Except it wasn't.
I called Mad Max this morning. He answered the phone with "(*#%&&^R$#@YH*)^%#@@%&(!!!.
"Long and wrong, Max?"
"Not me but ______ and _______ and ______ just got killed. I don't touch that stuff any more."
"So why the bad language?
"Because, Charlie, it's like the bas----- set us up. Nobody saw this coming; everything that was said pointed in the other direction. Draghi, who actually had some credibility..."
"Because he did everything you guys wanted..."
"So what? He's got nothin' now! NOTHIN!" The ECB's a *&%$#% joke; the Fed's a *&%$#% freak show. Draghi gets a call from Yellen asking him to cover her ass and he spits out all he's been sayin' for months. Charlie, it traded on a almost 4% move! You know what a 4% move in currencies is! There are guys who have NEVER seen a 4% move in their lives! I bet they're laughing their asses off!
"You really think Janet called Mario?"
"HELL,YES! Why else would this happen! You got another theory?"
I didn't and I didn't stay on the phone much longer with Max. I sure as heck didn't want to tell him that I was secretly pleased about being wrong in yesterday's column and that a little cooperation between central banks might not all be a bad thing, but Max is right in one respect; back in the old days when market activity in a currency was headed in a direction the governing central bank didn't like, you would often see a little"shock to the senses" to indicate displeasure. Fair nix, Gov, but this smacks far more of pure politics than monetary activism and I suspect a lot of people got burned badly.
Max is also right in believing that credibility was the real loser today...to the extent that is that there is any left to lose. The problem is there are very few institutions left to hold this thing together in case of another major risk event. So it would be nice to have around a smart person with a bit of grey hair to whom one could turn for some sage advice. From the market's standpoint, one of those types just took a big hit today. Too bad.
Ah, well, onward and upward. Let us see what tomorrow brings by way of reflective reaction. And let us see if I can get the smile off my face...God it was fun to watch!
Wednesday, December 2, 2015
WHICH WAY IS UP?
Janet sounded pretty confident today about the state of the economy and a rate increase. So confident in fact that she knocked the crap out of the equity market which appears to have finally agreed to believer her. Funny things are going on. A good deal of the talk leading up to December 12 was designed to increase the slope of the yield curve by moving the long end out in anticipation of steadily--if slowly--rising interest rates. Instead the exact opposite has happened with the long end remaining almost motionless and the short end closing in rapidly. In case you are wondering why, don't ask me but I suspect some of the underlying assumptions for this theory are not quite as sound as suspected, like that relating to an improving economy which is entirely dependent as to how one defines "improving." If you define it as "it stinks," you are in my camp but I admit there is an argument to be made. Of course, if you believe that any improvement in sectors such as consumer and autos is merely the result of zero cost of financing, the Fed's move might be questionable. Needless to say, industrial output which crashed today and cap spending levels which continue to decline belie the "improvement" argument...but then employment number is expected to show a good rise on Friday...unless you are like me who, more and more, thinks the number is crap.
But there are odder things about. While Janet is ready to raise, Mario is ready to lower...or at least announce QE II as far as the Euros are concerned...no doubt because his first effort had such a profound positive effect. Now liquidity is liquidity; if we raise Over Here and they "lower" Over There (the method is immaterial) the effect is going to be pretty much a wash. Dollars and Euros and Sterling and Yen and now, FOR THE VERY FIRST TIME, the Yuan whip around the world at the push of a computer's button. In some circles with all of these conflicting economic theories emerging from central banks who keep trying to tell us that they are on the same page may bring whispers of the Joys of Arbitrage and the soft singing of that catchy tune, "Spec u laaaa tion...COME ON! Perhaps the Lords of Finance got it all wrong in 1929 but at least they were on the same page; I'm not sure this mob is reading the same book.
Then again, we have the Brits. This week they announced, after months of preparing us for the opposite, that all the British banks had passed their stress tests and all was right with the world. As a result, Smart Mark expressed the view that adequate capitalization was in place and no rise would be necessary. Hang on. I just though Big Danny Tarullo had told us a lot more capital would be needed? I thought we were dealing in a global market place? The Brits' capital is good, ours isn't and we don't know what the deal is for the Euros yet? Of course the Chinese system is broke, the Japanese...who knows...and we're all slogging about in the same cabbage patch with God knows how many trillions being transferred and exchanged every day? But fear not, we have Dodd/Frank. Is it just me asking these questions or shouldn't I worry as--clearly--there is some great force of Genius and Good guiding all of this. Anyway, forgive this little outpouring; I collapsed late this morning with the Tripletitis which has yet to leave. I am mimicking the economy; improving but it's hard to define. Drink lots of fluids says the quack, quickly adding without mood enhancers. Yeah, sure. Post time.
But there are odder things about. While Janet is ready to raise, Mario is ready to lower...or at least announce QE II as far as the Euros are concerned...no doubt because his first effort had such a profound positive effect. Now liquidity is liquidity; if we raise Over Here and they "lower" Over There (the method is immaterial) the effect is going to be pretty much a wash. Dollars and Euros and Sterling and Yen and now, FOR THE VERY FIRST TIME, the Yuan whip around the world at the push of a computer's button. In some circles with all of these conflicting economic theories emerging from central banks who keep trying to tell us that they are on the same page may bring whispers of the Joys of Arbitrage and the soft singing of that catchy tune, "Spec u laaaa tion...COME ON! Perhaps the Lords of Finance got it all wrong in 1929 but at least they were on the same page; I'm not sure this mob is reading the same book.
Then again, we have the Brits. This week they announced, after months of preparing us for the opposite, that all the British banks had passed their stress tests and all was right with the world. As a result, Smart Mark expressed the view that adequate capitalization was in place and no rise would be necessary. Hang on. I just though Big Danny Tarullo had told us a lot more capital would be needed? I thought we were dealing in a global market place? The Brits' capital is good, ours isn't and we don't know what the deal is for the Euros yet? Of course the Chinese system is broke, the Japanese...who knows...and we're all slogging about in the same cabbage patch with God knows how many trillions being transferred and exchanged every day? But fear not, we have Dodd/Frank. Is it just me asking these questions or shouldn't I worry as--clearly--there is some great force of Genius and Good guiding all of this. Anyway, forgive this little outpouring; I collapsed late this morning with the Tripletitis which has yet to leave. I am mimicking the economy; improving but it's hard to define. Drink lots of fluids says the quack, quickly adding without mood enhancers. Yeah, sure. Post time.
Thursday, October 22, 2015
UNCLE BUCK
My Uncle Buck was a French-Canadian from Massachusetts. Simple guy with simple likes and dislikes. He liked to fish. Didn't like much else but boy, could he fish! I didn't realize it until a few years back but Bucky could have made one of the world's great central bankers. He had a simple approach to any problem:
"If it doesn't work, get a bigger hammer."
Mario Draghi announced today that the 800 billion or so Euros that constituted his first Quantitative Easing go-around probably hadn't made that much of an impact so he was probably going to do it again towards the end of the year...and oh yeah, he was thinking about the issue of negative interest rates a bit more. And so, a world sloshing about in liquidity gets a bit more which is certain to change things. Sure.
The moment the equity boys got a whiff of these goings-on, up went the indexes. It is so predictable as is the follow-up from the talking heads on "the basic soundness of the economy, blah, blah, blah." So I asked myself today, "I wonder what Uncle Buck would do?"
Well, for sure, he's give it a few whacks with the biggest hammer he had. But he was a fisherman and a fisherman knows that there are a lot of things that go into putting a fish on the bottom of a boat. It's called "fishing" not "catching" for a reason. He'd move location, change baits, change presentation until he found some combination of things that worked. He was good at what he did and he knew it but he never believed he knew it all. He used to say, "Every time I go out I learn something new," and most importantly he would admit that, "Sometimes, you have to drop the hammer before you break the thing."
Today's central bankers seem to learn very little as they stumble from one hackneyed solution to the next, swinging the same old hammer they have been using for years. The engine hasn't started despite repeated blows. Drop the hammer.
Still feel lousy but eleven hours of sleep really helps.
"If it doesn't work, get a bigger hammer."
Mario Draghi announced today that the 800 billion or so Euros that constituted his first Quantitative Easing go-around probably hadn't made that much of an impact so he was probably going to do it again towards the end of the year...and oh yeah, he was thinking about the issue of negative interest rates a bit more. And so, a world sloshing about in liquidity gets a bit more which is certain to change things. Sure.
The moment the equity boys got a whiff of these goings-on, up went the indexes. It is so predictable as is the follow-up from the talking heads on "the basic soundness of the economy, blah, blah, blah." So I asked myself today, "I wonder what Uncle Buck would do?"
Well, for sure, he's give it a few whacks with the biggest hammer he had. But he was a fisherman and a fisherman knows that there are a lot of things that go into putting a fish on the bottom of a boat. It's called "fishing" not "catching" for a reason. He'd move location, change baits, change presentation until he found some combination of things that worked. He was good at what he did and he knew it but he never believed he knew it all. He used to say, "Every time I go out I learn something new," and most importantly he would admit that, "Sometimes, you have to drop the hammer before you break the thing."
Today's central bankers seem to learn very little as they stumble from one hackneyed solution to the next, swinging the same old hammer they have been using for years. The engine hasn't started despite repeated blows. Drop the hammer.
Still feel lousy but eleven hours of sleep really helps.
Monday, June 29, 2015
THE VIEW FROM THE BRIDGE
He Who Knows All Things was wandering through Euroland last week. That's pretty much what he does these days, carrying a bit too much age and far too much money around to do much else, he wanders. He called the weekend.
"Hi. You OK? Thought you would be back on line Friday."
" Yeah, I'm fine, thanks for asking. Surgery was apiece of cake. That was the plan but I had no idea what the hell was going on with anything so I thought, 'why bother.' You back or still abroad?"
"Abroad." Will you ever enter into this century? Yes, I'm back."
"Not if I can help it. How's the mood over there?"
"They all hate us...well, perhaps that's a bit strong. Dislike is a better word."
"Any real reason?"
"The same. Don't like Bush but can't really remember why, Don't trust Obama or anyone around him. Don't understand our politics. Blame everything on us--especially the Ukraine--which of course they cocked up to a fare-thee-well. Fins and Poles are scared to death about the Russians and look to us. Everybody does as well but wont say it...too busy disliking us."
"So we are this century's Tommy Atkins."
"Who."
"Tommy Atkins." Don't you read Kipling."
'...For it's Tommy this and Tommy that and Tommy, 'ow's your soul"
'But it's thin red line of 'eros when the guns begin to roll.'
Tommy. Great Poem."
"Yeah, well, whatever."
"And our Greek friends? I confess I think I might have been wrong. This might really go bust."
"The Euros don't seem to be troubled. Like you and me they think something will get done in the end, but I must say the latest doesn't sound very good. Last I heard the Euros broke off talks and there is serious talk about closing the banks. The ECB is in a hell of a spot. The Greek banks can't survive but..."
"Every Euro they lend them increases the debt."
"Exactly! I can't say I'm positive, but I think they have reached the end of the line. If there was a glimmer of light Draghi would stay the course but I think things have broken down completely. It's no longer economics, hell, it's not even so much about politics. These people don't like each other very much. The politics are in Athens and Berlin, not in the negotiations."
"Well, we said this all along. Can you imagine Angie doing a fold job at this stage and having to listen to the Rock Star giving a speech a week as to how he, singlehandedly mind you, brought Angela Merkel to her knees! Not going to happen my friend. I think the Euros better start worrying 'cause if things stay the same it's going to get ugly Monday morning."
"There's another problem. You know who's the putative head of Europe if this goes to hell? Draghi, that's who. Angie..."
"No my friend, the putative head of Europe is Putin. But I take your point."
"Yeah you're right but if the Greeks go it's Mario who suddenly turns Dutch and has his finger in the Dike. No checking here or consulting there. He's running the show and if it appears that he's not..."
"Yep. Contagion rears it's ugly head. But you know what? I don't think that is going to happen. I have the feeling that there is a far greater realization on the part of Club Med as to what they have, whereas the Greeks wont know what they got 'till it's gone." It will hold together.
"How the hell did they once build the greatest civilization in the world and be so dumb? I mean there was a deal laying there. Nobody' s stupid enough to believe that with a debt to GDP ratio of 180% there was an economic solution. These clowns have nothing to sell but sunshine, olives and sponges. Of course there is going to be debt relief but that has to be sold up north and that take's time, due not doubt to a serious lack of candor on the part of the politicians! Take the pain and a bit of humiliation and live to fight another day!
"You're right of course, but have you thought about the even bigger problem of a Grexit from Angie's and the Euros' standpoint?"
"Wasszat?"
"Suppose the Greeks make it work..."
"Oh.............no I hadn't"
Nothing good happened for the rest of the weekend and as expected, markets were skittish at the open but there did not seem to be any signs of panic even in the face of the ECB throwing in the towel, as predicted. Nothing good happened all day and at the close the DOW was down 350 points. The 10 year fell from 2.48% on Friday to 2.34% today. I don't know if this constitutes panic but it is sure as hell attention-getting. The referendum will apparently go forward on Sunday as announced. Somewhere out there somebody has lost a hell of a lot of money and I suspect that there will be no good news tomorrow. I'm worried about that because as HWKAT said, the Euros at least and no one over here was taking this very seriously...until now. Tomorrow's opening should be watched carefully. The trend will start in Asia where not much good is going on either. We seem to be in the midst of the great Chines curse: "May you live in interesting times."
Oh yeah, we are also looking at a $60 billion default from the Commonwealth of Puerto Rico announced today. Surprise, surprise.
"Hi. You OK? Thought you would be back on line Friday."
" Yeah, I'm fine, thanks for asking. Surgery was apiece of cake. That was the plan but I had no idea what the hell was going on with anything so I thought, 'why bother.' You back or still abroad?"
"Abroad." Will you ever enter into this century? Yes, I'm back."
"Not if I can help it. How's the mood over there?"
"They all hate us...well, perhaps that's a bit strong. Dislike is a better word."
"Any real reason?"
"The same. Don't like Bush but can't really remember why, Don't trust Obama or anyone around him. Don't understand our politics. Blame everything on us--especially the Ukraine--which of course they cocked up to a fare-thee-well. Fins and Poles are scared to death about the Russians and look to us. Everybody does as well but wont say it...too busy disliking us."
"So we are this century's Tommy Atkins."
"Who."
"Tommy Atkins." Don't you read Kipling."
'...For it's Tommy this and Tommy that and Tommy, 'ow's your soul"
'But it's thin red line of 'eros when the guns begin to roll.'
Tommy. Great Poem."
"Yeah, well, whatever."
"And our Greek friends? I confess I think I might have been wrong. This might really go bust."
"The Euros don't seem to be troubled. Like you and me they think something will get done in the end, but I must say the latest doesn't sound very good. Last I heard the Euros broke off talks and there is serious talk about closing the banks. The ECB is in a hell of a spot. The Greek banks can't survive but..."
"Every Euro they lend them increases the debt."
"Exactly! I can't say I'm positive, but I think they have reached the end of the line. If there was a glimmer of light Draghi would stay the course but I think things have broken down completely. It's no longer economics, hell, it's not even so much about politics. These people don't like each other very much. The politics are in Athens and Berlin, not in the negotiations."
"Well, we said this all along. Can you imagine Angie doing a fold job at this stage and having to listen to the Rock Star giving a speech a week as to how he, singlehandedly mind you, brought Angela Merkel to her knees! Not going to happen my friend. I think the Euros better start worrying 'cause if things stay the same it's going to get ugly Monday morning."
"There's another problem. You know who's the putative head of Europe if this goes to hell? Draghi, that's who. Angie..."
"No my friend, the putative head of Europe is Putin. But I take your point."
"Yeah you're right but if the Greeks go it's Mario who suddenly turns Dutch and has his finger in the Dike. No checking here or consulting there. He's running the show and if it appears that he's not..."
"Yep. Contagion rears it's ugly head. But you know what? I don't think that is going to happen. I have the feeling that there is a far greater realization on the part of Club Med as to what they have, whereas the Greeks wont know what they got 'till it's gone." It will hold together.
"How the hell did they once build the greatest civilization in the world and be so dumb? I mean there was a deal laying there. Nobody' s stupid enough to believe that with a debt to GDP ratio of 180% there was an economic solution. These clowns have nothing to sell but sunshine, olives and sponges. Of course there is going to be debt relief but that has to be sold up north and that take's time, due not doubt to a serious lack of candor on the part of the politicians! Take the pain and a bit of humiliation and live to fight another day!
"You're right of course, but have you thought about the even bigger problem of a Grexit from Angie's and the Euros' standpoint?"
"Wasszat?"
"Suppose the Greeks make it work..."
"Oh.............no I hadn't"
Nothing good happened for the rest of the weekend and as expected, markets were skittish at the open but there did not seem to be any signs of panic even in the face of the ECB throwing in the towel, as predicted. Nothing good happened all day and at the close the DOW was down 350 points. The 10 year fell from 2.48% on Friday to 2.34% today. I don't know if this constitutes panic but it is sure as hell attention-getting. The referendum will apparently go forward on Sunday as announced. Somewhere out there somebody has lost a hell of a lot of money and I suspect that there will be no good news tomorrow. I'm worried about that because as HWKAT said, the Euros at least and no one over here was taking this very seriously...until now. Tomorrow's opening should be watched carefully. The trend will start in Asia where not much good is going on either. We seem to be in the midst of the great Chines curse: "May you live in interesting times."
Oh yeah, we are also looking at a $60 billion default from the Commonwealth of Puerto Rico announced today. Surprise, surprise.
Thursday, June 4, 2015
CHRISSY'S BAD DAY
It started off poorly and finished on a down note. To begin--and for what reason God only knows--Mme. Lagarde offered up her view that give the IMF's new numbers on the growth of the U.S. GDP (2.7%) the Fed should not consider tightening until next year. Big time No, No. IMF MD's do not offer advice such as that.
She followed up with the view that Greece needs debt relief. No kidding. But you are in the end game with Greece in conjunction with the entire EZ and the ECB. You do NOT express individual opinions. Dumb.
Finally, this afternoon upon learning that Greece had informed the Troika that they would be delaying all repayments due her organization until the end of June (as discussed here last week), her response was, "I did not expect that."
Chrissy, honey, the Greeks are not your friends: they are your opponents for the time being. They are going to take this down to the wire to see how much they can get and when they feel they have reached that point they will either agree or walk away. In the mean time they build up what is known as a "war chest" The last thing they are going to do is pay away anything they needn't. So let's get real. Everyone knows that you want a deal but this is not the way to get it. I would have loved to be around the Euros and Sr. Draghi.
And speaking of Sr. Draghi, his comments of yesterday provoked another beaut of a day in the bond trenches. This morning everybody picked up on his suggestion that everyone should expect more volatility and he got it in spades. The Bund hit 1.00% for a brief moment and the 10 year blasted up to about 2.45% before everyone took a deep breath and the buyers came back creating yields that were actually below yesterday's close. With gyrations like this one could bet that the drums would start beating that regulation has nothing to do with this and it's just all market movements. Crap. It's market movements alright but in a market that has less and less liquidity and THAT is primarily the result of regulation. Draghi's comments regarding the continuation of his QE sustained the vol but there was also murmurs that if the IMF's economy numbers were right on or even a touch too optimistic in their revision, the Fed might be tempted to get back in the bond buying game, adding to that lovely $4.5 Trillion balance sheet with little market discipline in the form of market makers.
I'm paranoid, obviously. Yesterday I was feeling pretty good; today I'm wondering whether these market swings are like a boat in a blow...back and forth, back and forth, back and.......blub, blub, blub.
Jobs data tomorrow. Should be a fun opening.
She followed up with the view that Greece needs debt relief. No kidding. But you are in the end game with Greece in conjunction with the entire EZ and the ECB. You do NOT express individual opinions. Dumb.
Finally, this afternoon upon learning that Greece had informed the Troika that they would be delaying all repayments due her organization until the end of June (as discussed here last week), her response was, "I did not expect that."
Chrissy, honey, the Greeks are not your friends: they are your opponents for the time being. They are going to take this down to the wire to see how much they can get and when they feel they have reached that point they will either agree or walk away. In the mean time they build up what is known as a "war chest" The last thing they are going to do is pay away anything they needn't. So let's get real. Everyone knows that you want a deal but this is not the way to get it. I would have loved to be around the Euros and Sr. Draghi.
And speaking of Sr. Draghi, his comments of yesterday provoked another beaut of a day in the bond trenches. This morning everybody picked up on his suggestion that everyone should expect more volatility and he got it in spades. The Bund hit 1.00% for a brief moment and the 10 year blasted up to about 2.45% before everyone took a deep breath and the buyers came back creating yields that were actually below yesterday's close. With gyrations like this one could bet that the drums would start beating that regulation has nothing to do with this and it's just all market movements. Crap. It's market movements alright but in a market that has less and less liquidity and THAT is primarily the result of regulation. Draghi's comments regarding the continuation of his QE sustained the vol but there was also murmurs that if the IMF's economy numbers were right on or even a touch too optimistic in their revision, the Fed might be tempted to get back in the bond buying game, adding to that lovely $4.5 Trillion balance sheet with little market discipline in the form of market makers.
I'm paranoid, obviously. Yesterday I was feeling pretty good; today I'm wondering whether these market swings are like a boat in a blow...back and forth, back and forth, back and.......blub, blub, blub.
Jobs data tomorrow. Should be a fun opening.
Tuesday, January 20, 2015
HOW MUCH IS THAT AGAIN?
Probably be hearing a good deal of that this week in Davos where all the geniuses of the world of commerce have gathered as they do every year to spend their shareholder money and accomplish absolutely nothing except to be seen and have their photos taken. Not that any one of them cares about cost but I suspect that more than a hand full might notice that the price is not quite what they had expected given the "GOTCHA" game the Swiss National Bank played on everybody last week. The guys for whom I feel sorry are the poor buggers who run units in corporations to whom these things get charged in the internal accounting. You see, if Jamie Diamond goes tooling off to Davos, it is probable that the head of his European Operations gets his P & L charged for all the good Jaime is doing for his business. So, he budgets in a couple of million only to wake up and it's more like $2.6 million and how do I make this up because at the end of the year no one will remember why I'm over budget and I'm screwed.
OK, I got that off my chest as I do every year but we still have to ask; how much good could $100 million do for the needy of this world? Will someone, sometime PLEASE ask that question?
Well, they are in Davos and there is nothing going on except the anticipation (yawn) of Il Duce's speech as to the state of the Union this evening and the anticipation of what comes out of the ECB on Thursday, assuming the trains run--it is Switzerland after all--and Draghi makes it back home. That I am afraid will be yawn number two for the week. The comes the real excitement a few days later when the Greeks get to decide who's going to run the place and ultimately, is it going to be run as part of the EU or not. One thing they may be deciding in Davos is who and how much money is going to be thrown at the Greeks to keep them in. That is probably how this plays out but it is less of a sure thing than in times past. There is no--and I mean NO--good news anywhere, and if the ECB pumps a gigantic new amount of unusable liquidity into the world system, things are just going to get worse. So let us just sit and wait and see what tomorrow brings.
OK, I got that off my chest as I do every year but we still have to ask; how much good could $100 million do for the needy of this world? Will someone, sometime PLEASE ask that question?
Well, they are in Davos and there is nothing going on except the anticipation (yawn) of Il Duce's speech as to the state of the Union this evening and the anticipation of what comes out of the ECB on Thursday, assuming the trains run--it is Switzerland after all--and Draghi makes it back home. That I am afraid will be yawn number two for the week. The comes the real excitement a few days later when the Greeks get to decide who's going to run the place and ultimately, is it going to be run as part of the EU or not. One thing they may be deciding in Davos is who and how much money is going to be thrown at the Greeks to keep them in. That is probably how this plays out but it is less of a sure thing than in times past. There is no--and I mean NO--good news anywhere, and if the ECB pumps a gigantic new amount of unusable liquidity into the world system, things are just going to get worse. So let us just sit and wait and see what tomorrow brings.
Friday, January 16, 2015
CH--DAY 2
Citigroup lost $150 million. Ditto DeutschBank. There's blood all over the place but so far only one or two real horror tales where a firm might go under. Citigroup can well absorb the number as the market seemed to recognize, the stock price barely moving. If they got aggressive early on they could have probably made it all back in the morning but I guess aggressive trading for one's book is a no-no these days. Probably might take them now two or three days to get square. But not for everybody else. The repercussions from this are just beginning to be felt.
Remarkably, everyone is mad at the Suissies. "They said they would support the peg," wailed one clown on the telly this morning who was clearly long and very wrong the Euro. Of course it didn't bother him to be trading when the SNB had his back(side). Take your losses, shut up and carry on. Ain't nothin' guaranteed these days.
Well, except for QE coming to the Eurozone near you it appears. Not a soul today so much as whispered the thought that Mario would not move on the 22nd; the only issue left outstanding was how much. It better be big said everyone or else we are in real trouble as though that's not what we are in right now. Super Mario is facing the Super Liquidity Trap of a lifetime. Whatever number he comes up with comes right Over Here into Treasuries or stays Over There in Bunds and whatever the Dutch have these days, or into Gold. One place it does NOT go is into a liquidity pool to stimulate economic growth in Europe...no matter how the plan is structured. But the poor bugger has to do it because the whole world expects it of him. I'm tellin' ya, "Sr, Il Presidente" is sounding better and better.
One overlooked aspect to this whole mess is where does Switzerland come out in all of this? I can remember many years ago in London getting the FT on one particular day of the week--I forget witch--to read the unemployment numbers. Switzerland would report on a regular basis unemployment of 345...or...293...or...401...or, as it happened one day...2. We haven't seen that for a while and we will not be seeing that anytime soon. The Swiss have just made themselves uncompetitive and the result of that little fact is going to be interesting to watch. The again, as the Swiss Miss who used to work for me despite being twice as smart put it today, "Who needs exports anyhow." If you manage gazillions of international funds as does she, I guess you CAN put it that way, and when you look at it rightly, that's what Switzerland does. It's not really a country, it's a state of mind. She also pointed out that under some agreement signed when the Pope was a Protestant, certain cantonals got a cut in the profits of the SNB and since the peg, there have been damn few of those. Ah, Federalism! In the end, because the town of Underskiliften came up a bit short of the ready at the start of the year and jumped up ugly, the entire international financial world takes one right between the horns. It's truer than ever before. You can't make this stuff up.
Holiday Over Here on Monday. It will be all about Somewhere Else.
Remarkably, everyone is mad at the Suissies. "They said they would support the peg," wailed one clown on the telly this morning who was clearly long and very wrong the Euro. Of course it didn't bother him to be trading when the SNB had his back(side). Take your losses, shut up and carry on. Ain't nothin' guaranteed these days.
Well, except for QE coming to the Eurozone near you it appears. Not a soul today so much as whispered the thought that Mario would not move on the 22nd; the only issue left outstanding was how much. It better be big said everyone or else we are in real trouble as though that's not what we are in right now. Super Mario is facing the Super Liquidity Trap of a lifetime. Whatever number he comes up with comes right Over Here into Treasuries or stays Over There in Bunds and whatever the Dutch have these days, or into Gold. One place it does NOT go is into a liquidity pool to stimulate economic growth in Europe...no matter how the plan is structured. But the poor bugger has to do it because the whole world expects it of him. I'm tellin' ya, "Sr, Il Presidente" is sounding better and better.
One overlooked aspect to this whole mess is where does Switzerland come out in all of this? I can remember many years ago in London getting the FT on one particular day of the week--I forget witch--to read the unemployment numbers. Switzerland would report on a regular basis unemployment of 345...or...293...or...401...or, as it happened one day...2. We haven't seen that for a while and we will not be seeing that anytime soon. The Swiss have just made themselves uncompetitive and the result of that little fact is going to be interesting to watch. The again, as the Swiss Miss who used to work for me despite being twice as smart put it today, "Who needs exports anyhow." If you manage gazillions of international funds as does she, I guess you CAN put it that way, and when you look at it rightly, that's what Switzerland does. It's not really a country, it's a state of mind. She also pointed out that under some agreement signed when the Pope was a Protestant, certain cantonals got a cut in the profits of the SNB and since the peg, there have been damn few of those. Ah, Federalism! In the end, because the town of Underskiliften came up a bit short of the ready at the start of the year and jumped up ugly, the entire international financial world takes one right between the horns. It's truer than ever before. You can't make this stuff up.
Holiday Over Here on Monday. It will be all about Somewhere Else.
Thursday, January 8, 2015
CO-ORDINATION ACROSS THE POND
The eye is lousy so let's see how far we can get.
Equity markets got a big boost today as rumors in Euroland spread that the ECB was about to begin its QE action on a far larger scale than anticipated amidst the latest soothing, dovish tones gurgling out of the Fed. It seams to me that Janet and Mario have been talking...a lot...but the real question is whether it is too little too late or given the new world order, is there really a chance they can make a difference this time around.
Sr. Draghi absolutely pulled a rabbit out of a hat last year with his "whatever it takes" talk which infused an enormous amount of zeal in markets driving interest rates down to historic low levels as a result. But that was then and this is now and I can't help but think the solution to past problems is not applicable to what is being faced today.
In the last crisis, the problem was simple; a lack of confidence in the Eurozone banking system caused in no little way by the overexposure to sovereign debt and the rapid collapse of public finance. The Draghi "put" was a clever--almost elegant one might say--solution manner in which to reduce fer and tensions without really spending a Euro. The ECB reaped kudos richly deserved but in retrospect that was an easy solution. For years credit had been mispriced throughout the international system resulting in a classic banking crisis and central banks are good at dealing with those sorts of things. First and last one maintains the liquidity within the system and in the mean time restore confidence with words like "whatever it takes." Works every time.
This is not then. When faced with the structural problems which the Euro Zone faces today; bloated public sectors, excessive labor regulation, "social contract" excesses, political and financial agreements between very different national groups that require enforcement but for which there is no mechanism and finally a common currency which in very real ways pits one political group against another, coupled with a real global collapse in economic advancement and the absolute collapse of a global energy market, can one honestly ask central banks to cure the ills faced? I am afraid I don't think that is possible.
I have cried wolf before much to my chagrin, I never believed that the EU was sustainable and felt even more strongly negative as to the success of the Euro. I suspect that in the past it was my desire to be proven correct that led my to a few rash predictions. I had not fully analyzed the risks, a state against which I had cautioned and taught all my life. I might be wrong now as well but this looks more and more like the perfect storm and in beating against it people are now tired to the extent that I am not sure they care. Maybe they still do and I am wrong again but I see no easy fixes. "Whatever it takes" doesn't cure this and it is for sure I don't know what does.
Eye is about gone. See you tomorrow...oh the wind chill is -23 as a write. Hope Al Gore is reading...probably in the Turks & Caicos. Very trendy this year.
Equity markets got a big boost today as rumors in Euroland spread that the ECB was about to begin its QE action on a far larger scale than anticipated amidst the latest soothing, dovish tones gurgling out of the Fed. It seams to me that Janet and Mario have been talking...a lot...but the real question is whether it is too little too late or given the new world order, is there really a chance they can make a difference this time around.
Sr. Draghi absolutely pulled a rabbit out of a hat last year with his "whatever it takes" talk which infused an enormous amount of zeal in markets driving interest rates down to historic low levels as a result. But that was then and this is now and I can't help but think the solution to past problems is not applicable to what is being faced today.
In the last crisis, the problem was simple; a lack of confidence in the Eurozone banking system caused in no little way by the overexposure to sovereign debt and the rapid collapse of public finance. The Draghi "put" was a clever--almost elegant one might say--solution manner in which to reduce fer and tensions without really spending a Euro. The ECB reaped kudos richly deserved but in retrospect that was an easy solution. For years credit had been mispriced throughout the international system resulting in a classic banking crisis and central banks are good at dealing with those sorts of things. First and last one maintains the liquidity within the system and in the mean time restore confidence with words like "whatever it takes." Works every time.
This is not then. When faced with the structural problems which the Euro Zone faces today; bloated public sectors, excessive labor regulation, "social contract" excesses, political and financial agreements between very different national groups that require enforcement but for which there is no mechanism and finally a common currency which in very real ways pits one political group against another, coupled with a real global collapse in economic advancement and the absolute collapse of a global energy market, can one honestly ask central banks to cure the ills faced? I am afraid I don't think that is possible.
I have cried wolf before much to my chagrin, I never believed that the EU was sustainable and felt even more strongly negative as to the success of the Euro. I suspect that in the past it was my desire to be proven correct that led my to a few rash predictions. I had not fully analyzed the risks, a state against which I had cautioned and taught all my life. I might be wrong now as well but this looks more and more like the perfect storm and in beating against it people are now tired to the extent that I am not sure they care. Maybe they still do and I am wrong again but I see no easy fixes. "Whatever it takes" doesn't cure this and it is for sure I don't know what does.
Eye is about gone. See you tomorrow...oh the wind chill is -23 as a write. Hope Al Gore is reading...probably in the Turks & Caicos. Very trendy this year.
Monday, January 5, 2015
THE GRANDCHILD ARMY RETREATS
They attacked in waves, pouring out of their armored vehicles in droves, armed to the teeth with crayons, tiny toys and that most fearsome of weapons, the loaded diaper, whilst constantly screaming their battle cry, the theme from "Frozen." It was non-stop; no quarter asked, none given, but in the end me and Trouble and Strife carried the day and the litter-strewn field that was once our home remained in our hands. Yet as the taillights signaled their defeat, there was the horrible thought that they would most certainly return when, as threatened, their strength would contain one more...in May no less. We have barely time to rearm and recover.
Anyway, as bad as it is in the fly-over zone, Europe is in worse shape. Whilst we were recovering the Greeks held an election...well, it really wasn't an election...rather some kind of vote in parliament for a new President. Now they have a Prime Minister which I would of thought was enough to run the place but I suppose they are as unsure as to what form of government they have as they are about anything else, but that means that they now have to hold national elections later this month and the odd-on favorite to win is the mob that makes up the Syriza party which has no idea what it wants either but is certainly to the left of everybody and nobody thinks that's a good thing.
If I didn't know better I would think that time has stood still because the scenario being suggested is that Syriza wins, immediately declares that austerity is out, pump-priming is in and as for the debts owed by the country to the IMF and everybody else...well, let's forget about that for a while until we decide how much more the creditors have to write off and until that happens we don't pay no mo.'
The EU has already announced that's not on and Germany at first stated that what the hell, we don't need the Greeks anyway until someone mentioned that as goes Greece, maybe so go Italy and Spain which as we have oft-stated are real countries and somewhat integral to the whole shootin' match. In short, we have the same mess on our hands that we had a year ago and no one has, or has had any new ideas.
It is almost stunning to contemplate that the only real plan on the table at this stage is for the implementation of Quantitative Easing by the ECB, stunning because of the vast body of evidence that points to the conclusion that QE undertaken by the Federal Reserve had practically no positive effect after four years of effort. None. What is going to happen if Draghi announces his plan and two days later the Greeks return to the Drachma? Chaos. While in the United States corporates and especially financial institutions have undergone vast restructurings, new industries have emerged, governments--at the state level at least--have streamlined and become far more business friendly and we have undergone the most enormous tax cut in history in the form of the decline in energy prices, not one of these events has occurred in Europe; not one. In fact the Europeans have taken steps to repel the structural changes that are desperately needed. The only thing that has grown in Europe is the vast, bloated, treasure-devouring, spirit-sucking colossus that is the European Parliament in Brussels. Higher taxes, bigger government and more regulation seem to be the answers to solve this mess. It is though all of Europe is one enormous monument to the supposed theories of Keynes whereas we must merely endure the rantings of the increasingly ridiculous Little Paulie Krugman.
The major difference today from a year or so ago is the timing or perhaps, the lack of time. The Euros really have only a few short weeks to frame a position and that is going to be very hard to do. Actually, I think this week may tell the tale and yet not all the decision makers are back in place from the Christmas break. It is though nothing need be done and that of course is the problem.
Anyway, as bad as it is in the fly-over zone, Europe is in worse shape. Whilst we were recovering the Greeks held an election...well, it really wasn't an election...rather some kind of vote in parliament for a new President. Now they have a Prime Minister which I would of thought was enough to run the place but I suppose they are as unsure as to what form of government they have as they are about anything else, but that means that they now have to hold national elections later this month and the odd-on favorite to win is the mob that makes up the Syriza party which has no idea what it wants either but is certainly to the left of everybody and nobody thinks that's a good thing.
If I didn't know better I would think that time has stood still because the scenario being suggested is that Syriza wins, immediately declares that austerity is out, pump-priming is in and as for the debts owed by the country to the IMF and everybody else...well, let's forget about that for a while until we decide how much more the creditors have to write off and until that happens we don't pay no mo.'
The EU has already announced that's not on and Germany at first stated that what the hell, we don't need the Greeks anyway until someone mentioned that as goes Greece, maybe so go Italy and Spain which as we have oft-stated are real countries and somewhat integral to the whole shootin' match. In short, we have the same mess on our hands that we had a year ago and no one has, or has had any new ideas.
It is almost stunning to contemplate that the only real plan on the table at this stage is for the implementation of Quantitative Easing by the ECB, stunning because of the vast body of evidence that points to the conclusion that QE undertaken by the Federal Reserve had practically no positive effect after four years of effort. None. What is going to happen if Draghi announces his plan and two days later the Greeks return to the Drachma? Chaos. While in the United States corporates and especially financial institutions have undergone vast restructurings, new industries have emerged, governments--at the state level at least--have streamlined and become far more business friendly and we have undergone the most enormous tax cut in history in the form of the decline in energy prices, not one of these events has occurred in Europe; not one. In fact the Europeans have taken steps to repel the structural changes that are desperately needed. The only thing that has grown in Europe is the vast, bloated, treasure-devouring, spirit-sucking colossus that is the European Parliament in Brussels. Higher taxes, bigger government and more regulation seem to be the answers to solve this mess. It is though all of Europe is one enormous monument to the supposed theories of Keynes whereas we must merely endure the rantings of the increasingly ridiculous Little Paulie Krugman.
The major difference today from a year or so ago is the timing or perhaps, the lack of time. The Euros really have only a few short weeks to frame a position and that is going to be very hard to do. Actually, I think this week may tell the tale and yet not all the decision makers are back in place from the Christmas break. It is though nothing need be done and that of course is the problem.
Friday, October 31, 2014
THE EARLY BIRD
Well not exactly. I couldn't sleep last night so there I was, up at 5:00am with a cup of Joe and nothing to do as it was too early for the newspaper delivery. Naturally, I turned on the TV and what do I find but the futures indicating a DOW opening of 188 points higher. OK, the ending of QE III was met with a yawn and things went up yesterday, but this? Ah ha! QE did not end! It simply slipped across the Big Pond to Japan.
In a surprise move, the Bank of Japan announced today their own version of Quantitative Easing involving trillions of Yen of asset purchases. Ben and Janet have nothing on these guys when they want to make a move. Of course the markets loved it and doubly so because the common thinking is that it would force Sr. Draghi to pull out his ol' bazooka and this time finally shoot it when the ECB gets down to brass tacks next week. Guess what? Anyone who believed that there is no connectivity in markets just got schooled. The other lesson is all QE is fungible. Right on schedule, the Dow opened damn near what the futures indicated as of 5:00am.
I was still trying to come to grips with all this when the other part of the day's doings that I had missed popped up again. Not only had the Bank of Japan stepped in with QE but the MOF announced that pension fund's allocation to equities and especially foreign equities would be dramatically increased to nearly 500 billion dollars. I watched equities all day which I never do (makes me cry) and the damn number didn't move. Oh sure, it dipped a bit and rose a bit but just now the DOW closed up 195. It was as though ALL of the buying followed the announcement from Japan. Damndest thing. Economic numbers were pretty good too, but they didn't influence the opening level one bit through the entire course of the day. Thank you BOJ.
Then I got to thinking. Janet shuts down her program and up pops Tenaka with his. Mario is on tap next week and the betting is now that you hear a boom from Frankfurt, so do you think that the three of them have been talking? Sure looks like it and mind you, I don't think that's a bad thing. Only problem is if the effect in Japan and in Euroland is the same as it was Over Here, what's plan B guys because plan A didn't work--or as we have said it didn't work enough to notice. The U.S. is slowly coming out of our economic malaise but that's because of the incredible restructuring of the American marketplace in spite of every obstacle the government has managed to set up along the way not the least of which has been the assault upon the banking system as we knew it which is being rapidly replaced by other sources of unregulated capital providers which in the long run may NOT be a good thing. Japan and Euroland with the exception of the UK have not restructured and had better take this opportunity to do so otherwise we're going to face this mess again, once there is no more Yen or Euros to print and the U.S. gets sick and tired of watching it's trade balance go to hell again despite our near energy independence because of of a world filled with central bank devalued currencies. In case you missed it, the Yen was down three points today--not three pips...POINTS! Tora...tora....tora.
Have a great weekend.
In a surprise move, the Bank of Japan announced today their own version of Quantitative Easing involving trillions of Yen of asset purchases. Ben and Janet have nothing on these guys when they want to make a move. Of course the markets loved it and doubly so because the common thinking is that it would force Sr. Draghi to pull out his ol' bazooka and this time finally shoot it when the ECB gets down to brass tacks next week. Guess what? Anyone who believed that there is no connectivity in markets just got schooled. The other lesson is all QE is fungible. Right on schedule, the Dow opened damn near what the futures indicated as of 5:00am.
I was still trying to come to grips with all this when the other part of the day's doings that I had missed popped up again. Not only had the Bank of Japan stepped in with QE but the MOF announced that pension fund's allocation to equities and especially foreign equities would be dramatically increased to nearly 500 billion dollars. I watched equities all day which I never do (makes me cry) and the damn number didn't move. Oh sure, it dipped a bit and rose a bit but just now the DOW closed up 195. It was as though ALL of the buying followed the announcement from Japan. Damndest thing. Economic numbers were pretty good too, but they didn't influence the opening level one bit through the entire course of the day. Thank you BOJ.
Then I got to thinking. Janet shuts down her program and up pops Tenaka with his. Mario is on tap next week and the betting is now that you hear a boom from Frankfurt, so do you think that the three of them have been talking? Sure looks like it and mind you, I don't think that's a bad thing. Only problem is if the effect in Japan and in Euroland is the same as it was Over Here, what's plan B guys because plan A didn't work--or as we have said it didn't work enough to notice. The U.S. is slowly coming out of our economic malaise but that's because of the incredible restructuring of the American marketplace in spite of every obstacle the government has managed to set up along the way not the least of which has been the assault upon the banking system as we knew it which is being rapidly replaced by other sources of unregulated capital providers which in the long run may NOT be a good thing. Japan and Euroland with the exception of the UK have not restructured and had better take this opportunity to do so otherwise we're going to face this mess again, once there is no more Yen or Euros to print and the U.S. gets sick and tired of watching it's trade balance go to hell again despite our near energy independence because of of a world filled with central bank devalued currencies. In case you missed it, the Yen was down three points today--not three pips...POINTS! Tora...tora....tora.
Have a great weekend.
Thursday, October 2, 2014
VIDI NAPOLI ET…NIENTE
In Naples today, the head of the European Central Bank announced no change in interest rate policy and nothing else. Oh yeah, there were some mutterings about larger balance sheets, covered bond purchases and even a bit of speculation as to the purchase of non-pristine sovereign debt--Greece, Cyprus and alike--but that was it. Nothing, Niente. European markets promptly went into the tank and the overall funk in Europe grew deeper.
Sr. Draghi is clearly unhappy with the course taken but I am not at all sure why the hoped-for aggression did not materialize. He has talked the Euro down rather successfully and that, coupled with what many people refer to a "stealth tightening " on the part of the Fed has succeeded only in making huge amounts of money for the big FX guys…I mean, one way traffic like this hasn't been seen in a long, long time. Perversely I suppose, I will really be anxious to see what the results at places like J.P. Morgan and Citigroup which are covered by Dodd/Frank are like when compared with non-regulated hedge funds. I would have thought that the ability to coin money on the part of banks might be a good thing as opposed to entities that provide nothing to the economy other than the price of real estate in Greenwich or Bronxville. Silly me, but I digress.
Whether Draghi is genuinely concerned that he's about reaching the bottom of his bag of tricks and this is a not so subtle way of a "over to you, Frankie" approach or he would like to move more in the direction of Federal reserve activism but those pesky Germans keep telling him that's just not on, is an issue to be pondered. Inasmuch as markets all over the place roiled all day, it appears that nobody else had much of a clue as to what was going on either.
One market, however, was working pretty much with certainty. If you're in energy, you lose. WTI traded below $90 at the open this morning and Brent fell sharply on the news that the Saudis indicated that they would not cut production but compete on price in order to maintain market share. Whilst there is no doubt that the new supplies in the U.S. are having an effect, world-wide demand is down reflecting the status of global economic activity which is far from robust and except for the U.S. is heading south. You know that old definition of insanity. Doing the same thing over and over and expecting a different result. What is then defined when everybody is doing the same thing and the results don't change? To make it even more curious, what is it that we see in the headlines? The EU beating up on Ireland again for alleged illegal tax breaks for corporations and Jacob/Jack babbling on some more about the Ebola-like effects of inversions. Maybe I'm nuts but I don't get it. Not in these times at least.
Big weekend coming up with a BIG football game. We expect almost 100 at the class tailgate, in lousy weather with Trouble and Strife not being a happy camper at all. We have a full house. She doesn't like that. Oh, He Who Knows All Things will be here as well. Maybe I'll be able to figure this out. See you Monday if I make it through the weekend unharmed.
Sr. Draghi is clearly unhappy with the course taken but I am not at all sure why the hoped-for aggression did not materialize. He has talked the Euro down rather successfully and that, coupled with what many people refer to a "stealth tightening " on the part of the Fed has succeeded only in making huge amounts of money for the big FX guys…I mean, one way traffic like this hasn't been seen in a long, long time. Perversely I suppose, I will really be anxious to see what the results at places like J.P. Morgan and Citigroup which are covered by Dodd/Frank are like when compared with non-regulated hedge funds. I would have thought that the ability to coin money on the part of banks might be a good thing as opposed to entities that provide nothing to the economy other than the price of real estate in Greenwich or Bronxville. Silly me, but I digress.
Whether Draghi is genuinely concerned that he's about reaching the bottom of his bag of tricks and this is a not so subtle way of a "over to you, Frankie" approach or he would like to move more in the direction of Federal reserve activism but those pesky Germans keep telling him that's just not on, is an issue to be pondered. Inasmuch as markets all over the place roiled all day, it appears that nobody else had much of a clue as to what was going on either.
One market, however, was working pretty much with certainty. If you're in energy, you lose. WTI traded below $90 at the open this morning and Brent fell sharply on the news that the Saudis indicated that they would not cut production but compete on price in order to maintain market share. Whilst there is no doubt that the new supplies in the U.S. are having an effect, world-wide demand is down reflecting the status of global economic activity which is far from robust and except for the U.S. is heading south. You know that old definition of insanity. Doing the same thing over and over and expecting a different result. What is then defined when everybody is doing the same thing and the results don't change? To make it even more curious, what is it that we see in the headlines? The EU beating up on Ireland again for alleged illegal tax breaks for corporations and Jacob/Jack babbling on some more about the Ebola-like effects of inversions. Maybe I'm nuts but I don't get it. Not in these times at least.
Big weekend coming up with a BIG football game. We expect almost 100 at the class tailgate, in lousy weather with Trouble and Strife not being a happy camper at all. We have a full house. She doesn't like that. Oh, He Who Knows All Things will be here as well. Maybe I'll be able to figure this out. See you Monday if I make it through the weekend unharmed.
Tuesday, August 26, 2014
WRITE ABOUT WHAT?
For the past few days we have been off visiting with the triplets who are a hell of a lot more interesting than anything going on in the financial world and especially in the world of banking. While the tree are growing at a rapid pace, gaining knowledge every day and innovating as they more fully understand the environment in which they live, the economies of the world, save for a few exceptions, show no growth, no innovation and remain maddeningly stupid. Makes one wonder whether one should be a political commentator but there's probably more of those than the politicians about which they write which in the end is probably a good thing.
Actually, I am being probably a bit harsh in throwing the USA in with all the rest for despite every obstacle set up by the administration to growth, we are surviving. Oh, it's still tough out there and every day there is more and more suspicion as to the believability of most of the economic numbers, but the mood in the Fly-Over Zone is generally OK, buoyed no doubt by the start of the new football season next weekend. Sport has an enormous influence on the Psyche of this nation, and what is of course unique it is affected not by one sport but by a multiplicity of sports all of which are internal. Indeed, cricket between India and Pakistan means much more than the result, and The Ashes, Down Under, is the yearly affirmation of the independence of a people. We have nothing of that sort but if anyone denies that at this time of year there isn't a different bounce in the step of many Americans just isn't very observant.
Anyway, there's not much of a bounce in Europe at all, so little in fact the Mario is considering his own prime the pump, buy, buy, buy bonds, flood the continent with money operation that was soooo successful Over Here to get those economies moving again and boost inflation to scary levels. Of course, there is some question as to whether he has any authority to do any of that but no matter, like Over Here it will be perceived of as "doing something" Over There and that will buy time for everyone unless the Ukraine thing really spins out of control which is a real possibility Putin being Putin. Although I think at this stage he has realized that he has bitten off more than he can chew. The more you see of this guy the more you realize that whilst cunning and vicious, he may not be the sharpest knife in the drawer, but he's sharp enough to cause a real hurt. He's also probably sharp enough to realize that one bullet changes the entire picture and it would be best not to put to much of a hurt on his pals should the picture go from bright and shiny to lights out.
And speaking of hurt, The Leader took one in the privates today as his chief tax advisor, Warren Buffett, announced that he was about to help finance the merger of Burger King with Tim Horton's, a Canadian firm that will be structured as an inversion. Who was it that wrote of the Liberal millionaire who fought all his life to have the government take more and more of his wealth and at the time of his death, he had failed miserably. That's Buffett. But not to be deterred, The Leader and his Sec Tres. Jacob/Jack babbled all day about the act of inversion on the part of the hamburger guys as being "simply Anti-American." Inasmuch as Burger King is owned by a Brazilian private equity firm you gotta ask yourself are these guys really that stupid or do they think we are? Then you have to ask yourself I wonder which is worse?
Thursday, August 14, 2014
WHAT'S IN A NAME
He Who Knows All Things called yesterday.
"The phrase you are looking for is "Structural adjustment."
"What are you talking about?"
"The point Stan was trying to make. What is needed is structural adjustment."
"Isn't that what I said?"
"No. You see it is vitally important that you use the exact phrase in these matters." You see, despite what you have implied, there are a number of people who have figured this out and they call it "structural adjustment."
"Anybody who counts?"
"Anybody who counts isn't smart enough to figure it out…but they have heard the phrase and have begun to think."
"Is that good?"
"In some cases it is, in other cases it's hopeless."
"But now with Stan…"
"Ah, Stan indeed. This is a very formidable guy. Larry Summers doesn't even get into the ring with him , and is a very smart guy. The problem is those who count and would get into the ring are not Larry Summers."
"Like Janet?"
"I didn't say that."
"You mean Janet isn't smart or that Janet doesn't count?"
"What an inappropriate question…I know, I know, there are no inappropriate questions, just inappropriate answers. Let me put it this way, Janet is going to be a good soldier unless the bullets start flying in great numbers. But then again, she is not the stake-holder in this. But Mr. Fisher has a big hill to climb."
"And the real stake-holders?"
"Oh stop, I don't have to tell you that."
"No, you probably don't, but what gets him to the top."
"Sadly, probably continuing failure, a Republican win in November, a combination of the same but more importantly, I think, what happens in Europe, both politically and economically. Both are disaster areas." The is no economic advancement with Germany now suffering from the overall malaise and France is stopped, economically. The President today asked for the intervention of Draghi into this mess. Curious, Draghi has been a lot of talk--very successful talk--but very little real action. And remember, that talk was limited to the financial system which is his bailiwick. I have a suspicion that Mario and Stan are not too far apart in their views. Will it happen? I doubt it but then one can never be sure."
"And politically?"
"Ask Putin." Although it seems clear that the dogs and cats that used to be the Ukrainian military are getting some help based on their recent performance, it's still up to him. It's quite scary."
"So, structural adjustment is the phrase of the day, eh?"
"Indeed, but use it wisely, otherwise Mum's the word."
"The phrase you are looking for is "Structural adjustment."
"What are you talking about?"
"The point Stan was trying to make. What is needed is structural adjustment."
"Isn't that what I said?"
"No. You see it is vitally important that you use the exact phrase in these matters." You see, despite what you have implied, there are a number of people who have figured this out and they call it "structural adjustment."
"Anybody who counts?"
"Anybody who counts isn't smart enough to figure it out…but they have heard the phrase and have begun to think."
"Is that good?"
"In some cases it is, in other cases it's hopeless."
"But now with Stan…"
"Ah, Stan indeed. This is a very formidable guy. Larry Summers doesn't even get into the ring with him , and is a very smart guy. The problem is those who count and would get into the ring are not Larry Summers."
"Like Janet?"
"I didn't say that."
"You mean Janet isn't smart or that Janet doesn't count?"
"What an inappropriate question…I know, I know, there are no inappropriate questions, just inappropriate answers. Let me put it this way, Janet is going to be a good soldier unless the bullets start flying in great numbers. But then again, she is not the stake-holder in this. But Mr. Fisher has a big hill to climb."
"And the real stake-holders?"
"Oh stop, I don't have to tell you that."
"No, you probably don't, but what gets him to the top."
"Sadly, probably continuing failure, a Republican win in November, a combination of the same but more importantly, I think, what happens in Europe, both politically and economically. Both are disaster areas." The is no economic advancement with Germany now suffering from the overall malaise and France is stopped, economically. The President today asked for the intervention of Draghi into this mess. Curious, Draghi has been a lot of talk--very successful talk--but very little real action. And remember, that talk was limited to the financial system which is his bailiwick. I have a suspicion that Mario and Stan are not too far apart in their views. Will it happen? I doubt it but then one can never be sure."
"And politically?"
"Ask Putin." Although it seems clear that the dogs and cats that used to be the Ukrainian military are getting some help based on their recent performance, it's still up to him. It's quite scary."
"So, structural adjustment is the phrase of the day, eh?"
"Indeed, but use it wisely, otherwise Mum's the word."
Thursday, July 10, 2014
THE SPIRIT IS FLAGGING
The acid test in proving who was a real international banker was to ask the question, "What's the difference between Espirito Sancto and Santo Spirito?" The answer? The former is the oldest, largest bank in Portugal whilst the latter is the Vatican bank. Believe it or not, a lot of folks got that one wrong. Not today. Everybody knows what Espirito Sancto is today.
The markets shuttered at the news that the Espirito Sancto group--not the bank--missed a couple of debt payments. Needless to say, the Euros cocked the entire thing up by not stepping on the idea that it was the bank that was in trouble until the ECB put out a statement that the bank was "ring-fenced" whatever the hell that is supposed to mean. Problem is everyone--including me--is fairly certain that the group, which owns 25% of the bank outright (and God knows how much else behind the curtain) probably owes a bundle to the bank because that is how these things always seem to turn out. Now, most of the know-nothings were quick to reassure all and sundry that Espirito Sancto was simply too small to present a systemic risk: crap. It is THE bank in a member of the EC which brings the whole shooting match into play again. So unless Sr. Draghi gets this one tidied up real quick, there's trouble ahead without any moonlight and music. Memo to Mario: Got you Covered, punto, works real well if spoken quiockly…like tomorrow.
One thing that will not get covered, however, is the mess that is still Europe. Indeed, the only thing looking anywhere decent (and that is a relative term) is Germany and England which is of course a myth because Little Paulie Krugman has told us it's, in effect, a failed state. Italy, doesn't look good; Spain, ditto, France, the most important of them all a political catastrophe and rapidly becoming an economic one. Funny, despite the heroic efforts of the ECB in propping up economies and the Euro with scads of money, the flight to safety is full speed ahead with the 10 year Bund under 1.20% today and the Treasury at 2.55%. Now how the hell the Bund can trade 140b.p. through Treasuries is beyond me but then again perhaps the Euros see what may appear to them to be a non-functioning government Over Here which may count for something. Which brings us to Janet and her band of merry men.
Yesterday I was wondering out loud how the markets could appear so sanguine at the Fed's announcement of the cessation of the bond buying program in October. If one takes a quick look it doesn't take long to figure it out. There is no change in the free money policy: reverse repos replace bond buying. Artificiality reigns and central control multiplies. We are rapidly coming to the point where everything in the financial world is mispriced--especially credit--and if it isn't, it's by accident. Of course, there appears very little chance of reversal as politicians both Over Here and Over There are locked into political cum economic policies which although having produced no discernible results in 5 years remain unchallenged, funded by central banks that are locked into academic schemes capable only of academics.
Anyway, while all of this is going on, we have over 50,000 children funneled across our borders and The Leader refusing to enforce laws already on the books. Israel has lined up 40,000 troops on the border with Gaza and the Leader is fund raising in Colorado getting offered a hit from one of its leading citizens. His latest beaut was to call Angie today to apologize for the CIA guy who was apparently spying on our ally…and got caught. Claims he knew nothing about it because the dog ate the memo or something. Think she believed him? Look, I don't think the guy has done a very good job but now I'm beginning to wonder if he gives a damn. That's a whole lot different. I keep crying wolf I know, but then again I keep hearing the howling outside my window. Nothing moment us will happen until Monday as the finals are this weekend. Sleep tight.
The markets shuttered at the news that the Espirito Sancto group--not the bank--missed a couple of debt payments. Needless to say, the Euros cocked the entire thing up by not stepping on the idea that it was the bank that was in trouble until the ECB put out a statement that the bank was "ring-fenced" whatever the hell that is supposed to mean. Problem is everyone--including me--is fairly certain that the group, which owns 25% of the bank outright (and God knows how much else behind the curtain) probably owes a bundle to the bank because that is how these things always seem to turn out. Now, most of the know-nothings were quick to reassure all and sundry that Espirito Sancto was simply too small to present a systemic risk: crap. It is THE bank in a member of the EC which brings the whole shooting match into play again. So unless Sr. Draghi gets this one tidied up real quick, there's trouble ahead without any moonlight and music. Memo to Mario: Got you Covered, punto, works real well if spoken quiockly…like tomorrow.
One thing that will not get covered, however, is the mess that is still Europe. Indeed, the only thing looking anywhere decent (and that is a relative term) is Germany and England which is of course a myth because Little Paulie Krugman has told us it's, in effect, a failed state. Italy, doesn't look good; Spain, ditto, France, the most important of them all a political catastrophe and rapidly becoming an economic one. Funny, despite the heroic efforts of the ECB in propping up economies and the Euro with scads of money, the flight to safety is full speed ahead with the 10 year Bund under 1.20% today and the Treasury at 2.55%. Now how the hell the Bund can trade 140b.p. through Treasuries is beyond me but then again perhaps the Euros see what may appear to them to be a non-functioning government Over Here which may count for something. Which brings us to Janet and her band of merry men.
Yesterday I was wondering out loud how the markets could appear so sanguine at the Fed's announcement of the cessation of the bond buying program in October. If one takes a quick look it doesn't take long to figure it out. There is no change in the free money policy: reverse repos replace bond buying. Artificiality reigns and central control multiplies. We are rapidly coming to the point where everything in the financial world is mispriced--especially credit--and if it isn't, it's by accident. Of course, there appears very little chance of reversal as politicians both Over Here and Over There are locked into political cum economic policies which although having produced no discernible results in 5 years remain unchallenged, funded by central banks that are locked into academic schemes capable only of academics.
Anyway, while all of this is going on, we have over 50,000 children funneled across our borders and The Leader refusing to enforce laws already on the books. Israel has lined up 40,000 troops on the border with Gaza and the Leader is fund raising in Colorado getting offered a hit from one of its leading citizens. His latest beaut was to call Angie today to apologize for the CIA guy who was apparently spying on our ally…and got caught. Claims he knew nothing about it because the dog ate the memo or something. Think she believed him? Look, I don't think the guy has done a very good job but now I'm beginning to wonder if he gives a damn. That's a whole lot different. I keep crying wolf I know, but then again I keep hearing the howling outside my window. Nothing moment us will happen until Monday as the finals are this weekend. Sleep tight.
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