I've given up. I'm getting a new IPad this weekend. First the desk top stopped and now my old pad is about to give up the ghost. We're also visiting the grandkids later in the week so my son can help me buy it...I mean he'll pick it out and I'll pay for it. I should be so lucky.
I have been lucky in a way because while I have been trying to get this darn thing to work (I mean it's only 8 years old) there has been nothing worthy of my prose (I go to such lengths to avoid ending a sentence with a preposition). Like, it's dead out there. If you steer away from politics and the wee nut job in Korea as I try to do, we pundits are in deep do-do, Dude. Europe is far more interesting these days what with the French election this weekend and apparently all sorts of skull duggery going on over BREXIT with the Euros really beginning to bowl a bit short with bouncers every other moment as in promising Northern Island that shout they merge with the Republic, they're right back in the EU. Not cricket in the least. Then there's this boy Junker who apparently told Ms. May that the EU is not a golf club from which one can simply resign. Forgive me, but who would want to join if he's around? It ain't Augusta National. For a bunch that simply oozes confidence at every turn one has to wonder what's the big fuss if the Brits want out? Surely there is a deal to be done here. Easily? No of course not but things started off with an adolescent twist and have slipped to childishness ever since.
Now there is one thing that does deserve more notice which because of the ongoing national political debate has received very little and is very close to Home. The commonwealth of Puerto Rico is about to go bust in some form of a bankruptcy proceeding which frankly, I don't understand but which appears to make the GM monstrosity of eight years ago look like a give-away to creditors. There is some $18 billion in very, very senior debt involved out of a total of over $70 billion that apparently has no chance of being paid. One would think that in anticipation of the event...or non-event if you will...there might be a bit of nervousness about, but no, not a twitter. All Quiet on the Bond Front. Which makes me wonder whether I should spend the money on a new pad or some decent whiskey. As a matter of fact it's about that time.
Showing posts with label Europe. Show all posts
Showing posts with label Europe. Show all posts
Monday, May 1, 2017
Wednesday, December 23, 2015
CRYSTAL BALL I
I think I have survived and lived to think an extra day and it was quite a day. In equities, a full fledged Santa Claus rally led by a surprising drop in oil supplies which resulted in a overall commodities rally. The DOW was up 185 at the close and the ten year showed a 2.25% yield. Not a bad way to await the arrival of the Chubby guy or did we miss it and he's been here and gone?
It's an odd phenomenon. The United States which has always been a somewhat provincial nation seems in some respects becoming more and more of the same. And yet, we exist more and more in an integrated world--particularly in a financial sense--which we in this country continually overlook whenever it is convenient for us to so do. Stocks fall in Cushing...BUY OIL! The fact that 500,000 bpd are ready to spew out of Iran seems to make no difference. Are we aware of global events, immune to them or do we simply not care?
This past year has not been an easy one anywhere but the U.S. has indeed been fortune to whether difficult times better than most despite (or because of) what at times appears to be a dearth of leadership at various levels. And yet, one must also question our relative prosperity which is indeed occurring, and wonder whether we will be as fortunate in the coming year.
At the top of our success has been the recent uptick in worker compensation which has been flat for so many years. perhaps the unemployment number of 5% is responsible for this (I leave all discussion as to whether the statistics are reliable or not) as it could be but one is also faced with the terribly low utilization of work force number that remains depressingly low and has continued to decline all year which argues for a different result. So too, are the GDP figures which not only are subject to remarkable fluctuations between quarters but in any case remains stuck at below 3% with little prospect for an improvement in 2016. Most troubling is that these mediocre results have been achieved despite the astounding drop in energy costs caused primarily by the advent of fracking and the brilliant advances therein which, if viewed in terms of a tax cut and the stimulative effect thereof, would be the largest of all time. Surely, we should be expanding greatly but we are not: capital expenditures remain meagre despite profitability which has been used to return wealth to shareholders either in the form of dividends or buy-backs; consumer spending, though up remains below expectations as the reduction of debt was the primary focus of many; consumer confidence throughout the year has never achieved the high of January; M & A activity has been remarkably high which while providing a handsome living for a fortunate few, is hardly a sign of business confidence as is the increased number of corporate inversions which are he result of a ridiculous tax code and the lack of belief that this administration (or perhaps ANY administration) will correct the same...a view supported by the utterly incompetent efforts of Treasury to address the issue. Yet, we muddle along.
There would no doubt be more optimism on my part if it were not for the even deeper problem that surround many if not all parts of the world. We shall set aside the disgrace of the Middle East in itself and the complete lack of leadership on the part of the U.S. which either to one's chagrin or opinion reinforcement proves once again that the U.S. is the one, indispensable nation. Whilst hardly happy about it, the rest of the world is prepared to accept this designation: only the present leadership of the U.S. remains opposed to this clear reality.
Perhaps even with bold foresight and aggressive leadership the situation might be the same but the other reality is that the collapse of the region and the resulting mass of humanity made refugees will probably have a profound effect upon Europe which, in a moment of simple morality (for which Europeans have never been noted) agreed to play the role of savior to these oppressed--far too late came the realization that this, whist admirable, might not have been the best idea the Zone ever had. Europe will be profoundly changed in the coming years. Ms. Merkle, blinded somewhat by the fulfilling of the need required by Germany as a result of disinterest in the bedrooms of the nation, finds herself with hundreds of thousands of new workers who have absolutely no interest in becoming Germans or in German society, existing in an almost semi-autonomous state among their rescuers. To a lesser extent (except for France) how Europe deals with this issue will determine the fate of the continent over the next few generations. Everything will be affected. As will the United States.
China has overstepped. In a commercial sense but also in a geopolitical sense as it misinterpreted the full meaning of the Obama administration's "pivot" to Asia (probably because the administration had no idea what it was doing as well) and chose to repost in a military sense. China can...to the extent anything that large can...turn on a dime domestically but internationally and intra-Asia, correction is not so easy. A pull-back would be seen as a tremendous loss of face and undoubtedly affect the leadership within the country. As a result, unneeded tension will remain in the region throughout the coming year taking resources away from desperately need domestic reforms at the worst possible time; the year of a Presidential election. The continued confrontation with China ( with a small "c") will also affect U.S. domestic politics--no candidate will wish to be considered "weak"--leading to what could be some premature and therefore poor policy decisions which will affect the relationship in the years to come. This overhang of potential conflict will have its economic effect as well throughout the region. Asia is not the cure for what ails the world economy and will not be so in the coming year.
I could continue in this grand, global overlook in regard to our hemisphere but I think approaching this region is better done in a more individualistic sense. There's a lot more to come so I hope you stick with me through at least the middle of next week. I would really like to hear your views in regard to MY views, so please respond. Right now, I have to go and make sure the chimney is clean and clear...don't want that task left to the last minute.
It's an odd phenomenon. The United States which has always been a somewhat provincial nation seems in some respects becoming more and more of the same. And yet, we exist more and more in an integrated world--particularly in a financial sense--which we in this country continually overlook whenever it is convenient for us to so do. Stocks fall in Cushing...BUY OIL! The fact that 500,000 bpd are ready to spew out of Iran seems to make no difference. Are we aware of global events, immune to them or do we simply not care?
This past year has not been an easy one anywhere but the U.S. has indeed been fortune to whether difficult times better than most despite (or because of) what at times appears to be a dearth of leadership at various levels. And yet, one must also question our relative prosperity which is indeed occurring, and wonder whether we will be as fortunate in the coming year.
At the top of our success has been the recent uptick in worker compensation which has been flat for so many years. perhaps the unemployment number of 5% is responsible for this (I leave all discussion as to whether the statistics are reliable or not) as it could be but one is also faced with the terribly low utilization of work force number that remains depressingly low and has continued to decline all year which argues for a different result. So too, are the GDP figures which not only are subject to remarkable fluctuations between quarters but in any case remains stuck at below 3% with little prospect for an improvement in 2016. Most troubling is that these mediocre results have been achieved despite the astounding drop in energy costs caused primarily by the advent of fracking and the brilliant advances therein which, if viewed in terms of a tax cut and the stimulative effect thereof, would be the largest of all time. Surely, we should be expanding greatly but we are not: capital expenditures remain meagre despite profitability which has been used to return wealth to shareholders either in the form of dividends or buy-backs; consumer spending, though up remains below expectations as the reduction of debt was the primary focus of many; consumer confidence throughout the year has never achieved the high of January; M & A activity has been remarkably high which while providing a handsome living for a fortunate few, is hardly a sign of business confidence as is the increased number of corporate inversions which are he result of a ridiculous tax code and the lack of belief that this administration (or perhaps ANY administration) will correct the same...a view supported by the utterly incompetent efforts of Treasury to address the issue. Yet, we muddle along.
There would no doubt be more optimism on my part if it were not for the even deeper problem that surround many if not all parts of the world. We shall set aside the disgrace of the Middle East in itself and the complete lack of leadership on the part of the U.S. which either to one's chagrin or opinion reinforcement proves once again that the U.S. is the one, indispensable nation. Whilst hardly happy about it, the rest of the world is prepared to accept this designation: only the present leadership of the U.S. remains opposed to this clear reality.
Perhaps even with bold foresight and aggressive leadership the situation might be the same but the other reality is that the collapse of the region and the resulting mass of humanity made refugees will probably have a profound effect upon Europe which, in a moment of simple morality (for which Europeans have never been noted) agreed to play the role of savior to these oppressed--far too late came the realization that this, whist admirable, might not have been the best idea the Zone ever had. Europe will be profoundly changed in the coming years. Ms. Merkle, blinded somewhat by the fulfilling of the need required by Germany as a result of disinterest in the bedrooms of the nation, finds herself with hundreds of thousands of new workers who have absolutely no interest in becoming Germans or in German society, existing in an almost semi-autonomous state among their rescuers. To a lesser extent (except for France) how Europe deals with this issue will determine the fate of the continent over the next few generations. Everything will be affected. As will the United States.
China has overstepped. In a commercial sense but also in a geopolitical sense as it misinterpreted the full meaning of the Obama administration's "pivot" to Asia (probably because the administration had no idea what it was doing as well) and chose to repost in a military sense. China can...to the extent anything that large can...turn on a dime domestically but internationally and intra-Asia, correction is not so easy. A pull-back would be seen as a tremendous loss of face and undoubtedly affect the leadership within the country. As a result, unneeded tension will remain in the region throughout the coming year taking resources away from desperately need domestic reforms at the worst possible time; the year of a Presidential election. The continued confrontation with China ( with a small "c") will also affect U.S. domestic politics--no candidate will wish to be considered "weak"--leading to what could be some premature and therefore poor policy decisions which will affect the relationship in the years to come. This overhang of potential conflict will have its economic effect as well throughout the region. Asia is not the cure for what ails the world economy and will not be so in the coming year.
I could continue in this grand, global overlook in regard to our hemisphere but I think approaching this region is better done in a more individualistic sense. There's a lot more to come so I hope you stick with me through at least the middle of next week. I would really like to hear your views in regard to MY views, so please respond. Right now, I have to go and make sure the chimney is clean and clear...don't want that task left to the last minute.
Friday, February 22, 2013
A TALE OF TWO EUROPES...
...or maybe three. Things were looking pretty bad for equities the past few days and when someone asked if it was about Europe the predictable American response was, "Who cares about Europe!" This morning consumer confidence in Germany showed a very good number and suddenly it was, "Europe looks good! Buy!" Right now the DOW is up 100 so maybe people do care., but "about what," is the question coupled with, "and why?"
In every battle you will be able to find an American Infantryman with this posting somewhere on his uniform; "Yea, though I walk through the Valley of Death I shall fear no evil, because I am the meanest (*&^%$ ^%$*&^ in the Valley!" Sort of like German Consumer Confidence. The Germans are the meanest *&^%$# *^^$##^ in Europe. Consumer Confidence has nothing to do with economics or finances. That doesn't trouble German consumers. The lowest level for German Consumer Confidence was the week last year after Chelsea defeated Bayen Munchen for the title in the Champions League. You can look it up. But Americans love German Consumer Confidence and Europe when the former shows a bump. Ecco, Europe # 1.
Now, Europe # 2 might be called Europe as the Euros see it. Well, what do we have. Starting in the south, Greece remains a mess and because of that Cyprus is, effectively, bust it through its banking system filled to the gunnels with Greek risk. Greece will not hit their targets mandated by the EU and will need more bail-out money and it is here that the German Consumers count as they will be dead set against it (it's REALLY their money after all) and Angie does want to face reelection with the Bavarian Housefraus screaming down her neck. If the Greeks don't get bailed out, good-buy Cyprus which gets the Russians seriously ticked because that's where they hid all their money. Not a good show all around.
Moving north a bit, Italy has elections this weekend and results next week. Things look awful. Beppe the comedian looks like he might even beat out Berlusconi for second with the party of an ex-Communist winning the thing. Now, who's in the coalition? Nobody knows but one thing at risk is all of the fiscal and governmental advances made under Monti may well be reversed. The yield on Italian debt is looking very shaky indeed.
I was pretty much expected that Spain and Portugal might not make their mandated debt to GDP rations but France? Well, yeah, France. It looks awful. 2014 at best for some and 2016 is being muttered in halls of the parliaments. The credibility of the EU is in tatters and the ECB is caught between a rock and a hard place: their version of QE--pick a number--has no backing anywhere. And what the hell was the $2 billion in five year raised by Spain early this week all about? A dollar bond for Spain? A move to take on currency risk just to keep peoples' minds off other things? Oh I know, "It was an attempt to open other markets..." Right. And a bull fight is a battle among equals.
"We are in a recession, mes amis. We all know this except the Americans. On our success they buy their stocks."
Finally, Perfidious Albion is sizing this thing up as a developing scenario in which to ask the British people in a referendum should we be in or out, not from the narrow standpoint of, "What's in it for me?" but simply as a life-saving measure of abandoning a sinking ship. The Euros know that will occur and at that stage, it's probably game, set and match.
Europe # 3 can be called, "Europe as Mrs. James' little boy, Charlie sees it." It has the capacity to be the disaster of the year from not only its own standpoint but from our standpoint as well and it seems to me that nobody, certainly nobody in the administration is paying very much attention at least at this stage which is understandable given the mess we have created for ourselves. Despite unprecedented buying by the Fed, the yield on our 10 year has moved from the third quarter to today from 1.75% to 2.01%. With the type of intervention we have been witnessing, that is not insignificant. It's not the end of the world either, but it is the first clear sign that all is not as calm in capital markets land as we have been told. Should we see a spike in Euro yields as I think we will not only in the southern tier but for France as well, we may not be the safe haven we have been or at least not at the same level. As we have seen, markets move in fits and starts but at some point everyone has the same idea and that's when the trouble starts. The sequester is meaningless from a fiscal standpoint but very important from how the markets react. Before The Leader fully decides to extract maximum political gain, he should stop and think of this not only from a domestic standpoint but from the European aspect where I believe things are on more of a hair trigger than people realize. We talked ourselves into a nether-world complacency over the past few months. There is a growing chance that we are going to get caught out again.
Sorry about yesterday...I was trying to get this piece put together. Have a good weekend.
In every battle you will be able to find an American Infantryman with this posting somewhere on his uniform; "Yea, though I walk through the Valley of Death I shall fear no evil, because I am the meanest (*&^%$ ^%$*&^ in the Valley!" Sort of like German Consumer Confidence. The Germans are the meanest *&^%$# *^^$##^ in Europe. Consumer Confidence has nothing to do with economics or finances. That doesn't trouble German consumers. The lowest level for German Consumer Confidence was the week last year after Chelsea defeated Bayen Munchen for the title in the Champions League. You can look it up. But Americans love German Consumer Confidence and Europe when the former shows a bump. Ecco, Europe # 1.
Now, Europe # 2 might be called Europe as the Euros see it. Well, what do we have. Starting in the south, Greece remains a mess and because of that Cyprus is, effectively, bust it through its banking system filled to the gunnels with Greek risk. Greece will not hit their targets mandated by the EU and will need more bail-out money and it is here that the German Consumers count as they will be dead set against it (it's REALLY their money after all) and Angie does want to face reelection with the Bavarian Housefraus screaming down her neck. If the Greeks don't get bailed out, good-buy Cyprus which gets the Russians seriously ticked because that's where they hid all their money. Not a good show all around.
Moving north a bit, Italy has elections this weekend and results next week. Things look awful. Beppe the comedian looks like he might even beat out Berlusconi for second with the party of an ex-Communist winning the thing. Now, who's in the coalition? Nobody knows but one thing at risk is all of the fiscal and governmental advances made under Monti may well be reversed. The yield on Italian debt is looking very shaky indeed.
I was pretty much expected that Spain and Portugal might not make their mandated debt to GDP rations but France? Well, yeah, France. It looks awful. 2014 at best for some and 2016 is being muttered in halls of the parliaments. The credibility of the EU is in tatters and the ECB is caught between a rock and a hard place: their version of QE--pick a number--has no backing anywhere. And what the hell was the $2 billion in five year raised by Spain early this week all about? A dollar bond for Spain? A move to take on currency risk just to keep peoples' minds off other things? Oh I know, "It was an attempt to open other markets..." Right. And a bull fight is a battle among equals.
"We are in a recession, mes amis. We all know this except the Americans. On our success they buy their stocks."
Finally, Perfidious Albion is sizing this thing up as a developing scenario in which to ask the British people in a referendum should we be in or out, not from the narrow standpoint of, "What's in it for me?" but simply as a life-saving measure of abandoning a sinking ship. The Euros know that will occur and at that stage, it's probably game, set and match.
Europe # 3 can be called, "Europe as Mrs. James' little boy, Charlie sees it." It has the capacity to be the disaster of the year from not only its own standpoint but from our standpoint as well and it seems to me that nobody, certainly nobody in the administration is paying very much attention at least at this stage which is understandable given the mess we have created for ourselves. Despite unprecedented buying by the Fed, the yield on our 10 year has moved from the third quarter to today from 1.75% to 2.01%. With the type of intervention we have been witnessing, that is not insignificant. It's not the end of the world either, but it is the first clear sign that all is not as calm in capital markets land as we have been told. Should we see a spike in Euro yields as I think we will not only in the southern tier but for France as well, we may not be the safe haven we have been or at least not at the same level. As we have seen, markets move in fits and starts but at some point everyone has the same idea and that's when the trouble starts. The sequester is meaningless from a fiscal standpoint but very important from how the markets react. Before The Leader fully decides to extract maximum political gain, he should stop and think of this not only from a domestic standpoint but from the European aspect where I believe things are on more of a hair trigger than people realize. We talked ourselves into a nether-world complacency over the past few months. There is a growing chance that we are going to get caught out again.
Sorry about yesterday...I was trying to get this piece put together. Have a good weekend.
Monday, October 24, 2011
LITTLE PAULIE'S LAMENT
While calling yet again for the opening of the ECB spigot, and speculating that it wasn't going to happen because of silly things like constitutions, laws and regulations, Krugman finally came clean about his beliefs, agendas and as I have urged all to recognize, the true dogma of The Leader and the present administration. It was an remarkable unveiling and I wonder what the commentary will be if, indeed, The Times will print any, but I shall print the operative paragraphs and follow with my own commentary.
"The broader problem, however", Krugman writes, "is that the whole euro system was designed to fight the last economic was. It is a Maginot line built to prevent a replay of the 1970's which is worse than useless when the real danger is a replay of the 1930's...
That of course is utter crap. The Euro system was not in any way designed to address anything in the 1970's and had no thought of the 1930's except in the context of a study of economic history. The idea was a monetary union to be followed, as the midwives believed, by an inevitable political union in some shape and form not, to avoid another economic catastrophy but a political one as the wise men realized that Europeans, taken seperately, don't like each other very much. The facilitation of trade and the creation of wealth thru the mechanism of a common currency was the rational that drove the process. Krugman continued...
"The story of postwar Europe is deeply inspiring. Out of the ruins of war, the Europeans built a system of peace and democracy, constructing along the way societies that, while imperfect--what society isn't?-- are arguably the most decent in human history."
To say he is merely delusional would be inaccurate. He is a fool. Now being a fool doesn't mean one is unintelligent, it just means that one is a...well, a fool. The most decent in history? Hardly. The implication that the Europe's recovery was accomplished solely by Europeans...a monstrosity of a historical perversion. Little Paulie will no doubt point to things like universal health care and ignore the viscious racial incitement, violence and discrimination that has existed and appears on the increase since the War ended. Nor will he consider for a moment that the very freedom and existence of Western Europe hung by a thread at one point and was preserved only under the umbrella of American military might. He continues...
"Yet that achievement is under threat because of the European elite, in its arrogance, locked the Continent into a monetary system that recreated the gold standard...[and]...The bitter truth is that it is looking more and more as if the euro system is doomed...Europe might be better off if it collapses sooner rather than later"
No Mr. Krugman, what will collapse is the soft socialism of the welfare state that collapsed under its own weight as it was destined to do. What has collapsed is the belief that pitting class against class is a winning political strategy that can be counted upon to continually purchase votes with the false promise of social peace. What has collapsed is the false premise that everyone is "deserving" regardless of effort and that there is in every society an intellectual elite such as yourself whose duty in life is to guide the lessfortunate as to the manner in which and by what rules life should be lived. What has collapsed is Plato's false belief in the wise men. There are none so wise. And lament though you might, your "most decent society" is no more. It spent itself to death.
The flailing about on the part of The Leader and this adminstration, so painful to watch, is because of the beliefs shared with Mr. Krugman. It would appear that reality has finally interveened in the grand design and the fear, shock and desperation is almost palpable. They may survive politically, but the concept will not. If we fail to learn from the Euros we will almost certainly face even a graver crisis in the coming years...no matter what the political bent of the governmental leadership.
Enough of the Gospel according to St. Charlie. Barring something REALLY important, we'll go back to the Euros tomorrow and their wonderfully insolvent banks. It was a fun time over the week-end: Nikki and Angie jumped all over Silvio...a sure sign to the conoscenti that L'affair est mort...which is another way of saying they are just sick of one another. Anon.
Tuesday, September 6, 2011
A GOOD IDEA?
Well, we're back. I think we should have stayed away. If anything, the world looks worse than when we left it. The good news is the resolution of the Euro situation could be closer than most people realize what with a very important legal ruling in Germany tomorrow which might put all plans on stop or permanent hold. Frau Merkel's party lost the by-elections over the week-end which places her in a very scary place and while she remains steadfast in her committment to Europe (read, bailouts for Greece, Italy, etc with German money), if the German courts decide that the Euro-bailouts are illegal or that they must be approved in every single instance of German participation, Frau Merkel's heart may still be with Europe but her head might be bearing a sign of relief as this gets her off the hook. What that would mean for Euroland is anybody's guess.
Meanwhile, the talk of "The United States of Europe" is all the rage among the conoscenti who live in Georgetown and on West End Avenue. The argument seems to be that the union of European states centered about a common currency and a common monetary policy was flawed to begin with and therefore, let's just fix it with agreement on a common fiscal policy because that's the right, intelligent and the thing that makes the most sense sense to do. After all, didn't we do that and the Euro are sooooo much more intelligent than we. The NY Times was literally dripping with that advice over the weekend and into today.
I keep trying to remind these guys that across the pond we have a bunch who have been trying to kill each other for 1000 years but nobody listens. The Italians may be approaching Parliament with their reforms and the Greeks may have a list of items to be privatized but it is more probable that all will come to naught. It is the nature of the beast. Mme. Largrande, now of the IMF warned last week that Euro banks are dangerously under-capitalized, having not been asked what the hell did she do to fix this condition in her previous job (answer, nothing), and bank shares went right into the toilet on both sides of the Atlantic. Over night, she was told to first re-think the issue and then shut up which she did and the shares stabilized...at a far lower level, mind you. Nothing really seems to change. The Euro tanked, our 2-year was yielding under 2% this morning, The Leader keeps saying the same thing with a different modifier, and the Fed is engaging in some off-the-air re-run of Family Feud.
Then again, college football began with lightning and thunder across the Fly-Over Zone and the NFL kicks off this week.
Good to be back.
Meanwhile, the talk of "The United States of Europe" is all the rage among the conoscenti who live in Georgetown and on West End Avenue. The argument seems to be that the union of European states centered about a common currency and a common monetary policy was flawed to begin with and therefore, let's just fix it with agreement on a common fiscal policy because that's the right, intelligent and the thing that makes the most sense sense to do. After all, didn't we do that and the Euro are sooooo much more intelligent than we. The NY Times was literally dripping with that advice over the weekend and into today.
I keep trying to remind these guys that across the pond we have a bunch who have been trying to kill each other for 1000 years but nobody listens. The Italians may be approaching Parliament with their reforms and the Greeks may have a list of items to be privatized but it is more probable that all will come to naught. It is the nature of the beast. Mme. Largrande, now of the IMF warned last week that Euro banks are dangerously under-capitalized, having not been asked what the hell did she do to fix this condition in her previous job (answer, nothing), and bank shares went right into the toilet on both sides of the Atlantic. Over night, she was told to first re-think the issue and then shut up which she did and the shares stabilized...at a far lower level, mind you. Nothing really seems to change. The Euro tanked, our 2-year was yielding under 2% this morning, The Leader keeps saying the same thing with a different modifier, and the Fed is engaging in some off-the-air re-run of Family Feud.
Then again, college football began with lightning and thunder across the Fly-Over Zone and the NFL kicks off this week.
Good to be back.
Wednesday, August 10, 2011
TERROR DE JOUR
Les Banques Francais, or at least that's what the Wall Street Geniuses have finally figured out. As loyal readers know, Europe has always been about the banks and, indeed, there could be real blood in the water with Greece kaput and Italy and Spain very shaky. The bad one was reported to be Soc Gen (they say they're fine) and suddenly, all the talking heads on tv started yapping about the exposure of American banks to their Euro counterparts and, "Oh my God, what if..." I don't know what ifs but I do know that the Fed and the ECB and the central banks of half a dozen different countries are all over this one. Remember, it is about liquidity and I am 99.9% certain that this will not be like 2008 when liquidity dried up. In any case, the DOW was down 525 at the close led by the financial sector with the two year note at 90bps. Amazing.
Look, I'm not saying this is good but it has always been about Europe and the lack of leadership which is beginning to make The Leader look like George Washington in that catagory. Nor do I know what is going to happen but as I said yesterday the odds of Greece simply giving up the ghost are getting shorter and shorter as it appears almost certain that Frau Merkel can't deliver. The thing I worry about is that the paralysis that has gripped the Euros for the past year may well have affected their ability to plot the end game and have a plan if in fact they do lose Greece. I'm very much afraid that in the next couple of days we might find out. I haven't got much else to say so I'm just to wait it out another day and see what the 'morrow brings. Oh, by the by, France is still AAA at S & P. Vive La France!
Look, I'm not saying this is good but it has always been about Europe and the lack of leadership which is beginning to make The Leader look like George Washington in that catagory. Nor do I know what is going to happen but as I said yesterday the odds of Greece simply giving up the ghost are getting shorter and shorter as it appears almost certain that Frau Merkel can't deliver. The thing I worry about is that the paralysis that has gripped the Euros for the past year may well have affected their ability to plot the end game and have a plan if in fact they do lose Greece. I'm very much afraid that in the next couple of days we might find out. I haven't got much else to say so I'm just to wait it out another day and see what the 'morrow brings. Oh, by the by, France is still AAA at S & P. Vive La France!
Thursday, May 6, 2010
A TALE OF TWO CITIES
I said this was going to be a long one today, but it is not. It's going to be short and hopefully thought provoking. The two cities are Washington and Frankfurt, the time is the present and the issue is not the fall of French Royalty but perhaps of the European Union.
Back in 2008 Hank Paulson and Ben Bernanke, old DUSTOFF himself said, in effect, the American Financial system will not fail. Everybody believed them and the worldwide financial system did not fail. Today, Jean Claude Trichet said Greece would not default and every trader in Europe looked up from their stickey buns and said, "Bugger off." And therein is the difference. European liquidity dried up, dealers went home, the U.S stock market tanked in a nanosecond--not as a direct reaction to be sure--and the world is looking decidedly dicer today than at any time since 2008. The bailout of Greece will fail and the contagion will spread as the Europeans and their central bank have proven unable to deal with this crisis either in a timely or effective fashion. Money may enter Greece and if it does it will go straight out the door to the banks that hold the debt who will run like hell to get as far away from Greece as possible; Greece will be cut off from future flows, the amount of financing will in any case prove to be inadequate and what was deemed impossible will occur: an EU country will default. In the meantime, vultures are circling the obvious candidates and do not be surprised if the next headline involves the state of European banking or one or two individual banks who are faced with real difficulty.
The ramifications? All thoughts of the Euro as an alternative to the dollar will be, to understate it a bit, put on hold. The realization that this is not a political union but a gaggle of politicians will come to the fore. The chance of massive capital flight or repositioning of capital away from Europe is very real and the gap between Germany and the rest will widen to the point where it may be politically impossible to rationalize to the German people why the EU is good for them. This is a very, very awkward time gang and one in which this country is not in a position to play any sort of leadership role even if this mob in D.C. had a clue. One thing they should keep in mind, however: M. Trichet is powerless because he needs 16 politicians to agree with any of his pronouncements. The more "oversight" by pols over a supposedly independent central bank, the more paralysis one creates in times when action is required and needless to say (or perhaps not) the entrance of politicians is concurrent with the exit of credibility.
Looks like a hung parliament in Blighty. This is going to be a kick.
See you tomorrow
Back in 2008 Hank Paulson and Ben Bernanke, old DUSTOFF himself said, in effect, the American Financial system will not fail. Everybody believed them and the worldwide financial system did not fail. Today, Jean Claude Trichet said Greece would not default and every trader in Europe looked up from their stickey buns and said, "Bugger off." And therein is the difference. European liquidity dried up, dealers went home, the U.S stock market tanked in a nanosecond--not as a direct reaction to be sure--and the world is looking decidedly dicer today than at any time since 2008. The bailout of Greece will fail and the contagion will spread as the Europeans and their central bank have proven unable to deal with this crisis either in a timely or effective fashion. Money may enter Greece and if it does it will go straight out the door to the banks that hold the debt who will run like hell to get as far away from Greece as possible; Greece will be cut off from future flows, the amount of financing will in any case prove to be inadequate and what was deemed impossible will occur: an EU country will default. In the meantime, vultures are circling the obvious candidates and do not be surprised if the next headline involves the state of European banking or one or two individual banks who are faced with real difficulty.
The ramifications? All thoughts of the Euro as an alternative to the dollar will be, to understate it a bit, put on hold. The realization that this is not a political union but a gaggle of politicians will come to the fore. The chance of massive capital flight or repositioning of capital away from Europe is very real and the gap between Germany and the rest will widen to the point where it may be politically impossible to rationalize to the German people why the EU is good for them. This is a very, very awkward time gang and one in which this country is not in a position to play any sort of leadership role even if this mob in D.C. had a clue. One thing they should keep in mind, however: M. Trichet is powerless because he needs 16 politicians to agree with any of his pronouncements. The more "oversight" by pols over a supposedly independent central bank, the more paralysis one creates in times when action is required and needless to say (or perhaps not) the entrance of politicians is concurrent with the exit of credibility.
Looks like a hung parliament in Blighty. This is going to be a kick.
See you tomorrow
Wednesday, December 2, 2009
MUCH ABU ABOUT NOTHING
Ok, really cheesy as my daughter-in -law would say. But this thing in the Gulf is a real kick. Right out of Arabian Nights.
Once upon a time there were two Sheiks who were cousins from the marriage of convenience of two families why the heck back when. One sheik wound up growing up and eventually becoming the ruler of a sheikdom which has more oil and gas than any 10 square mile place on the face of the earth, The other guy, though just a hop, skip and a jump away would up with sand. Sheik #2 was a fun-loving guy, however--none of that stay away from booze stuff for him (three wives were ok and a bit on the side worked)--and he had big ideas. You see, he figured out that there was in fact a sucker born every minute and when you couple that revelation with the fact of many of those suckers had access to more money that they ever dreamed possible, you could have more fun than a herd of camels...assuming camels have fun which given the way they look and smell is hard to believe.
#2 was a pretty shrewd guy when it came to politics as well and he also figured out than unless you lived in the neighborhood he and the other sheiks looked pretty much alike to those people who were known as bankers and investors and who had all this money, but more importantly they also believed that the mutual interests of he and his cousin and all the other sheiks in the area were the same and when it came down to the good and dirty it would be all for one and one for all.
He was also a pretty good salesman. Now a while back I had wise old banker say to me, "Charlie, one day you're going to meet a guy who will tell you he can put 2 pounds of crap into a 1 pound bag and if you believe him, you are going to have 2 pounds of crap all over your boots." #2 was that guy, and sure enough, a lot of people believed him, and to be honest he probably believed himself. Anyway, he talked these bankers and investors (let's call them yield whores...oh hell, whores will do) into lending his little plot of land (called Dubai by the way) more money that Allah ever had to build a dream world to include a snow-ski jump in a place where the average temperature is about 92F. on the theory that build it and they will come. And come they did, fueled by the most incredible increase in world-wide liquidity anyone had ever seen and they kept coming until...the money stopped in far off places like New York and London and Zurich.
At this stage the whores had a problem 'cause Bernie Madoff had nothing on #2 and his boys. This was a Ponzi scheme to end all Ponzi schemes 'cause if the people stopped coming to fill up all the space #2 had built there was Zip there to service what the whores had lent. At first, there was little worry because the conventional wisdom was that the entire region was interconnected and the guys with the REAL assets wouldn't dare let one of their own collapse. Problem was no one took account of human nature, and as I keep saying in the end it is all about people, and in this case the other people--especially #1--had been quietly seething at the antics of # 2, so when a few of the whores asked #1 and his boys whether they were standing behind #2, jolly good show, brothers in arms, blood is blood and all of that, turns out #1 said, "Think again."
Horror and disbelief. One shakes one head and asks one's self, "Will they never learn?" The answer is apparently not. The good news for The Suit and Helicopter Ben is this one isn't on their watch; it is very much a European banking problem with the Brits having a substantial part of the action. But as we have all learned, oceans do not protect us from actions in some far away place and the repercussions of this in Europe may well affect us at some later date. Do I believe that this will be the case. Actually, no. Folks who know a lot more about this than I say it's really #1 trying to teach #2 a lesson and that some accommodation will be reached. Me, I'm more of a cynic. I suspect the fact that #1 and his buddies have all of their PRIVATE money with the folks who are the creditors of #2 may influence them to be of some assistance before bad things begin to happen to them. Then again, it's the Middle East. Inshalla.
Once upon a time there were two Sheiks who were cousins from the marriage of convenience of two families why the heck back when. One sheik wound up growing up and eventually becoming the ruler of a sheikdom which has more oil and gas than any 10 square mile place on the face of the earth, The other guy, though just a hop, skip and a jump away would up with sand. Sheik #2 was a fun-loving guy, however--none of that stay away from booze stuff for him (three wives were ok and a bit on the side worked)--and he had big ideas. You see, he figured out that there was in fact a sucker born every minute and when you couple that revelation with the fact of many of those suckers had access to more money that they ever dreamed possible, you could have more fun than a herd of camels...assuming camels have fun which given the way they look and smell is hard to believe.
#2 was a pretty shrewd guy when it came to politics as well and he also figured out than unless you lived in the neighborhood he and the other sheiks looked pretty much alike to those people who were known as bankers and investors and who had all this money, but more importantly they also believed that the mutual interests of he and his cousin and all the other sheiks in the area were the same and when it came down to the good and dirty it would be all for one and one for all.
He was also a pretty good salesman. Now a while back I had wise old banker say to me, "Charlie, one day you're going to meet a guy who will tell you he can put 2 pounds of crap into a 1 pound bag and if you believe him, you are going to have 2 pounds of crap all over your boots." #2 was that guy, and sure enough, a lot of people believed him, and to be honest he probably believed himself. Anyway, he talked these bankers and investors (let's call them yield whores...oh hell, whores will do) into lending his little plot of land (called Dubai by the way) more money that Allah ever had to build a dream world to include a snow-ski jump in a place where the average temperature is about 92F. on the theory that build it and they will come. And come they did, fueled by the most incredible increase in world-wide liquidity anyone had ever seen and they kept coming until...the money stopped in far off places like New York and London and Zurich.
At this stage the whores had a problem 'cause Bernie Madoff had nothing on #2 and his boys. This was a Ponzi scheme to end all Ponzi schemes 'cause if the people stopped coming to fill up all the space #2 had built there was Zip there to service what the whores had lent. At first, there was little worry because the conventional wisdom was that the entire region was interconnected and the guys with the REAL assets wouldn't dare let one of their own collapse. Problem was no one took account of human nature, and as I keep saying in the end it is all about people, and in this case the other people--especially #1--had been quietly seething at the antics of # 2, so when a few of the whores asked #1 and his boys whether they were standing behind #2, jolly good show, brothers in arms, blood is blood and all of that, turns out #1 said, "Think again."
Horror and disbelief. One shakes one head and asks one's self, "Will they never learn?" The answer is apparently not. The good news for The Suit and Helicopter Ben is this one isn't on their watch; it is very much a European banking problem with the Brits having a substantial part of the action. But as we have all learned, oceans do not protect us from actions in some far away place and the repercussions of this in Europe may well affect us at some later date. Do I believe that this will be the case. Actually, no. Folks who know a lot more about this than I say it's really #1 trying to teach #2 a lesson and that some accommodation will be reached. Me, I'm more of a cynic. I suspect the fact that #1 and his buddies have all of their PRIVATE money with the folks who are the creditors of #2 may influence them to be of some assistance before bad things begin to happen to them. Then again, it's the Middle East. Inshalla.
Friday, April 3, 2009
WHAT HAPPENED?
Nothing, actually. One interesting moment that transpired was when The Leader told the President of Brazil, Lula, that he was the best looking guy in the place. Memo to historians: another first. President Obama is the first visually impaired President in history. Then again, if he was right even I have a shot.
Gordon Brown. One wonders what the British people must think of this. If Blair was Dubya's poodle what the hell is poor Gordon? My God, that was embarrassing.
Of course, the GRAY LADY is sort of treating this thing like a 20-strong Neville Chamberlain event; Peace and Unity in our times and all that rubbish. Good. Hopefully that view will keep their mind off things for a while.
Anyway, politicians did what politicians do best; enter into an agreement to spend 1,000,000,000,000 dollars of somebody's else's money on an ill-defined mission to produce ill-defined results in an ill-defined time frame. The best part is the enlistment of the International Monetary Fund and The International Bank for Reconstruction and Development--quick, what's that?--that's right the World Bank--to get it done in part at least. For the better part of the last ten years these have been two players in search of a mission so this direction comes non-too-soon. No one really minds the World Bank but for a national leader to ask for assistance and the accompanying conditionality from the IMF, is in some parts of the world, an invitation to have your government overthrown. Therefore, there can be the expectation that not a lot of damage is going to be done soon, but there comes the realization that it is simply easier that the leaders of the G20 find it far simpler and preferable to turn over their constituents wealth to one of the greatest bureaucracies of the modern world and to get seriously involved themselves in the very real problems of the developing world. Sad. And the staff is all tax free in Washington...as Our Hero can attest. Remember that little interlude?
Unbridled joy at the announcement that THE ENTIRE WORLD has agreed to new, progressive, all-encompassing, robust and comprehensive regulation of the financial community WORLD WIDE! Ah, hold on.
Any idea what it's going to look like?
Well, no, actually, but it's going to be comprehensive and we will never experience another period such as the one we have just experienced.
Well, whose going to write it, then?
Don't know that yet, but the French are very keen.
The French? Aren't they a bit airy-fairy so they can interpret stuff any way they want?
Well yes, but we can work with them.
Really? Ever try to work with the French on regulations?
No.
This EU mob been trying to do that for 20 years haven't they?
Yes
Any luck?
Well, not much, actually.
Perhaps I was wrong. Maybe a great deal happened
A final note: read Krugman in the Times today. I think he read the blog. Poor bugger got it wrong again. Mr. Krugman seem not to understand the differences between Bills, Notes and Bonds and that they are specific instruments that should be referenced specifically. Nor does he understand the Chinese and their art of negotiation. Makes one wonder if he uses chop sticks at Sunday night dinner.
Have a good weekend.
Gordon Brown. One wonders what the British people must think of this. If Blair was Dubya's poodle what the hell is poor Gordon? My God, that was embarrassing.
Of course, the GRAY LADY is sort of treating this thing like a 20-strong Neville Chamberlain event; Peace and Unity in our times and all that rubbish. Good. Hopefully that view will keep their mind off things for a while.
Anyway, politicians did what politicians do best; enter into an agreement to spend 1,000,000,000,000 dollars of somebody's else's money on an ill-defined mission to produce ill-defined results in an ill-defined time frame. The best part is the enlistment of the International Monetary Fund and The International Bank for Reconstruction and Development--quick, what's that?--that's right the World Bank--to get it done in part at least. For the better part of the last ten years these have been two players in search of a mission so this direction comes non-too-soon. No one really minds the World Bank but for a national leader to ask for assistance and the accompanying conditionality from the IMF, is in some parts of the world, an invitation to have your government overthrown. Therefore, there can be the expectation that not a lot of damage is going to be done soon, but there comes the realization that it is simply easier that the leaders of the G20 find it far simpler and preferable to turn over their constituents wealth to one of the greatest bureaucracies of the modern world and to get seriously involved themselves in the very real problems of the developing world. Sad. And the staff is all tax free in Washington...as Our Hero can attest. Remember that little interlude?
Unbridled joy at the announcement that THE ENTIRE WORLD has agreed to new, progressive, all-encompassing, robust and comprehensive regulation of the financial community WORLD WIDE! Ah, hold on.
Any idea what it's going to look like?
Well, no, actually, but it's going to be comprehensive and we will never experience another period such as the one we have just experienced.
Well, whose going to write it, then?
Don't know that yet, but the French are very keen.
The French? Aren't they a bit airy-fairy so they can interpret stuff any way they want?
Well yes, but we can work with them.
Really? Ever try to work with the French on regulations?
No.
This EU mob been trying to do that for 20 years haven't they?
Yes
Any luck?
Well, not much, actually.
Perhaps I was wrong. Maybe a great deal happened
A final note: read Krugman in the Times today. I think he read the blog. Poor bugger got it wrong again. Mr. Krugman seem not to understand the differences between Bills, Notes and Bonds and that they are specific instruments that should be referenced specifically. Nor does he understand the Chinese and their art of negotiation. Makes one wonder if he uses chop sticks at Sunday night dinner.
Have a good weekend.
Monday, March 16, 2009
A WALK IN THE SUN
One of the greatest WW II movies (later ripped off to a fair thee well by Saving Private Ryan) was the magnificently casted film "A Walk in the Sun." In it is the classically cynical American G.I. brilliantly played by Richard Conte whose showcase line was, "Nobody Dies." Watching The Chairman on Sixty Minutes last night I continually returned to that line; "Nobody Dies." The Chairman was remarkably upbeat; one could almost see the green shoots emerging from beneath his feet in the form of the rebirth of the American economy which will hide the blood from all vision. Nobody dies.
Conte; "I am going to cut that farmhouse in half."
Loader: "If the ammo holds out."
Conte; "It had better hold out."
The Fed's ammo had better hold out as it became clear that the U.S. is going to find itself pretty much alone after the results of the G20 meeting this past weekend are tabulated. Not only are the Europeans not on the same page as the U.S. it would appear that they are not on the same page with one another. There are the Richard Contes among us who always questioned whether a group of nations whose constant efforts over the past 900 years or so were directed to the destruction of each other, could at some point come together in a political union that might force one or two of them to take a bullet to help out historical enemies. The answer seems to be not yet and to continue along the WW II theme, to take a bullet for good old Uncle was probably always A Bridge Too Far. Yet, fair try by our Hero, Tim and the reaction was at least civil. The Brits appear to be on our side (more or less--no difference there) and the Volk had made it quite clear that Ms. Merkel was to be on a short leash. The Euros tend to get a touch nervous when the Germans get stroppy. There is always the thought that in the back of the closet hangs Grandpa's fetching gray uniform. Oh well.
The Chairman did say one remarkable thing, however; he took zero off the table and bank equity investors reacting by bidding up bank shares today as though nobody would die. I think they are right but it is now clearly on the shoulders of the Fed to grasp the reins of the restructuring of the system whose future well-being the Chairman essentially guaranteed. To me, that is the best development we have witnessed in weeks because if the Fed with the resources at its disposal leads, the outcome may well be better than feared should the politics-first Treasury have grasped the mandate.
Surely, there will be a tremendous effort on the part of Congress to interfere with the restructuring of the system and it might well be argued that with the taxpayers' monies at risk the politicians should certainly be involved. They will certainly wish to create legislation that will increase oversight and control of the financial system. Nothing can be done to stop that effort and indeed, in some area more and certainly better regulation is needed. I always seem to get in trouble when I state that give me any new regulation and with 3 bright MBAs and a really good lawyer I can get around it in 72 hours if the price is right. I don't mean by breaking laws; I simply mean that in my 30 years in the business I have never seen a bullet-proof piece of legislation yet. We will not solve the problems we have uncovered by allowing Congress to convince us that it has the answers; it does not. More critically, if the upcoming legislative sessions are to be conducted in the confrontational, adversarial environment we witness today, what will result will be a disaster. Sadly, there aren't five legislators in either body that have any clue of what the business we call banking entails in the modern era. It is also critically important that before the politicians get to the point of working their craft that the crisis management approach of dealing with our banking sector give way to a reasoned understanding of where the problems lie and clear, understandable and reasoned cures be put in place and that those be clearly disseminated to the public. This is extremely important for as a result of ignorance, fanciful and dangerous solutions have gained traction for which there was no reason. "Nationalize the Banks" has been one of the greatest calls, supported by a whole host of those who should know better, the latest being former Secretary of the Treasury, James Baker. "We don't want zombie banks like Japan." We don't want to lose a generation!"" Dumb and dumber. Think about the role played by Japanese banks c.1990 and the role played by our institutions today. Compare the two and the role played by the MOF. More later this week and remember, "Nobody Dies."
Conte; "I am going to cut that farmhouse in half."
Loader: "If the ammo holds out."
Conte; "It had better hold out."
The Fed's ammo had better hold out as it became clear that the U.S. is going to find itself pretty much alone after the results of the G20 meeting this past weekend are tabulated. Not only are the Europeans not on the same page as the U.S. it would appear that they are not on the same page with one another. There are the Richard Contes among us who always questioned whether a group of nations whose constant efforts over the past 900 years or so were directed to the destruction of each other, could at some point come together in a political union that might force one or two of them to take a bullet to help out historical enemies. The answer seems to be not yet and to continue along the WW II theme, to take a bullet for good old Uncle was probably always A Bridge Too Far. Yet, fair try by our Hero, Tim and the reaction was at least civil. The Brits appear to be on our side (more or less--no difference there) and the Volk had made it quite clear that Ms. Merkel was to be on a short leash. The Euros tend to get a touch nervous when the Germans get stroppy. There is always the thought that in the back of the closet hangs Grandpa's fetching gray uniform. Oh well.
The Chairman did say one remarkable thing, however; he took zero off the table and bank equity investors reacting by bidding up bank shares today as though nobody would die. I think they are right but it is now clearly on the shoulders of the Fed to grasp the reins of the restructuring of the system whose future well-being the Chairman essentially guaranteed. To me, that is the best development we have witnessed in weeks because if the Fed with the resources at its disposal leads, the outcome may well be better than feared should the politics-first Treasury have grasped the mandate.
Surely, there will be a tremendous effort on the part of Congress to interfere with the restructuring of the system and it might well be argued that with the taxpayers' monies at risk the politicians should certainly be involved. They will certainly wish to create legislation that will increase oversight and control of the financial system. Nothing can be done to stop that effort and indeed, in some area more and certainly better regulation is needed. I always seem to get in trouble when I state that give me any new regulation and with 3 bright MBAs and a really good lawyer I can get around it in 72 hours if the price is right. I don't mean by breaking laws; I simply mean that in my 30 years in the business I have never seen a bullet-proof piece of legislation yet. We will not solve the problems we have uncovered by allowing Congress to convince us that it has the answers; it does not. More critically, if the upcoming legislative sessions are to be conducted in the confrontational, adversarial environment we witness today, what will result will be a disaster. Sadly, there aren't five legislators in either body that have any clue of what the business we call banking entails in the modern era. It is also critically important that before the politicians get to the point of working their craft that the crisis management approach of dealing with our banking sector give way to a reasoned understanding of where the problems lie and clear, understandable and reasoned cures be put in place and that those be clearly disseminated to the public. This is extremely important for as a result of ignorance, fanciful and dangerous solutions have gained traction for which there was no reason. "Nationalize the Banks" has been one of the greatest calls, supported by a whole host of those who should know better, the latest being former Secretary of the Treasury, James Baker. "We don't want zombie banks like Japan." We don't want to lose a generation!"" Dumb and dumber. Think about the role played by Japanese banks c.1990 and the role played by our institutions today. Compare the two and the role played by the MOF. More later this week and remember, "Nobody Dies."
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