THE SLOWING OF THE TIDES

In case you missed the goings-on at the G-20 summit in Russia this past weekend--and I am sure many of you did--we here present as a public service exactly what occurred...nothing.  Well , that's not exactly correct because there was a joint communique (which is a tip-off that nothing important because if there were it would not be in anything "joint") concerning engaging in currency wars.  Not on, said the G-20 in unanimous formulation.  Of course it would be OK for nations to adjust the value of their currencies for a variety of different reason that would not constitute a currency war because that is a very bad thing but the adjustment of currencies to gain a competitive advantage is OK.  Now some of you may ask, "DUH?" but please understand that these are subtle and difficult issues not easily understood by folks like us but crystal clear to central bankers.  We must trust them and realize that they know what they are doing.  And thus ends our public service announcement for the day.

Over Here, The Leader, fresh from his three day golf trip with members of the 1% lectured everyone on the horrors of the sequester which is coming up next week.  This subject will dominate the news up until the moment of truth as The Leader will attempt to impress upon what a horrible idea the sequester is, blame it on the Republicans while at the same time trying to make everyone forget that it was his idea in the first place.  The fact is that if we had a budget which we don't because the Senate, controlled by The Leader's party refuses to pass one, it would be around $4 trillion with a deficit of $1 trillion of which a $60 billion sequester wouldn't amount to what my Massachusetts Yankee uncle used to refer to as "a pee-hole in the snow." Hell, 3 accountants named Schwartz with the aid of a slide rule could lose $60 billion from that mess in an hour.  But no, we are forced to listen to tales of teachers not teaching, cops not copping, borders becoming unprotected and worse.  And for over a week.   It's unfair. With  Euroland looking at the election of a new Pope and, oh, yeah, the Italian elections, the G-20 again entering into ANOTHER year without a new idea in their heads and this nonsense dominating out news, I'm dead.  Maybe I'll start a screen play, something about an old house in England or...what...it's been done?  See what I mean?  Dead.

WHERE'S THE LOVE?

Man, I got nothin.'  The Leader got up and babbled about nothing for an hour last night giving me no material whatsoever.  Poor Marco Rubio looked like a deer caught in headlights, setup in that awful setting and being forced to demonstrate his agility to remain in the "spot" whilst bending 45 degrees to the side to pick up a bottle of water which does nothing for us old timers who resent agility of any sort.  Where do the Repubs find these idiots who plan these events?

Anyway, I was looking for some really hot stuff from somebody last night to help out and got zip.  The Leader tried to get us to believe that fiscally, all is fine; that the economy is in it's fifth year of turning around; the world is a safer place and God's in his Heaven.  Somehow, I didn't feel much better after he was done.  There was one line in the speech that was important; the United States would begin a dialog with the EU on a trade agreement.  Now if Joe Biden could figure it out he would probably say something like, "This is a big, *&^)^%$ thing!"  but he can't and will not.  It is exactly that, however, as trade between the two continents totalled $800 billion dollars last year.  A big *&^)^%$ thing indeed.  Of course, we should not expect anything to occur in the breath of this administration: too many special interest at work (to be fair, Republicans have their share) and there are real divisions relating to the citizenry of both continents, for example as to genetically altered food that must be overcome in an area vitally important to the U.S.  But the journey begins and it is one that could lead to truly remarkable and beneficial future.  Strike me for saying it but this is far more important than the implementation of Basel III.

But as for financial and banking stuff, the next great hope is the G-20 meeting in Russia this weekend.  Russia in February:  now there's a really good idea.  Of course it will not be too crowded as every Russian with two Rubles to rub together will be somewhere else and because of that, something might get accomplished but probably not.  Currencies will be high on the agenda as they were at the G-7 pre-meeting yesterday where it was unanimously agreed that the manipulation of one's currency to gain advantage was simply not on and the G-7 would demand that the full G-20 agree to that principal...Come to think of it, maybe Russia IS the perfect venue for nonsense like that.  Nothing real has come out of there in 100 years.

And so we labor on in search of material.  Oh, the Bank of England announced today that the inflation target of 2% will continue to be exceeded until at least 2016.  As to what this meant in the great scheme of things remained undiscussed.  I'm beginning to think that even the reported 2 million+ nicker that they are going to pay Mark Carney may not be enough, then again he doesn't get there until July so things may have sorted themselves out by then.  We seem to be sinking deeper into the "phony war" syndrome.  I wonder when the shooting is going to start.

TIMING IS EVERYTHING

...and mine stinks.  With what is shaping up to be a monumental week, we are off today on a 12 day holiday/grandchild sitting duties journey back east.  Just to show you what I mean, take a look at was as occured over the weekend.

MF Global went toes up.  Now for certain Jon Corzine is having such a bad run that I wouldn't stand within ten feet of the guy for fear that I catch what he has, but I find it interesting why the public thinks the firm failed.  It appears back at the start of the year, ol' Jon, in an attempt to make a sleepy littly clearer look more like Goldie (who fired him, remember?) loaded up on Euro fixed income securities from the PIGS.  Well, we all know what has transpired in Euroland and suddenly everybody got the idea all at the same time that fixed income wasn't the place to be and...well, you see the result.  BUT, the funny thing is it wasn't a bad trade.  MF bought the stuff at a deep discount and there it sits, a couple of points below where it was purchased to be sure but earning a nice tidy yield which was the point of the exercise.  So why this reaction?  You might remember what Charlie has told you:  banks get sick on the asset side by die on the liability side.  Confidence was lost in MF, funding disappeared overnight and bankruptcy was the result.  It is always as such.  Now it appears that there my be a question of misplacement (to be kind) of client funds but this was unknown and played no part in the collapse.  What I would like to know is why the NY Fed pulled their Primary Dealership last week?  Maybe someone will tell me.

Just to enforce the fact that it aint over til it's over in Europe, the Greek Prime Minister announced last night that he was putting the austerity plan which of course is the basis of the bail out package from the Euros to a referendum.  Given that the polls show a 60%+ dissatisfaction with his governance, who knows what the result of this will be.  Just goes to show that survival is the first instinct of any politician.

The G-20 is this week and the agenda used to be how much was Japan and China going to kick into the bail-out.  Now it may well be is there going to be a Euroland because if the referendum goes the way I expect it to go that will become the question of the day.  Of course The Leader will be present and perhaps he can give some advice on how you win a tough  a tough vote in a place like Chicago--like adding Ghadafi and Bin Laden to the voter roles perhaps?  To make matters worse, somebody came up with the bright idea today to overrule the Basel II rules on soverign debt in regard to capital requirements related to the percentage of asset represented by a single exposure to a sovereign which will certainly impact French banks in re Italy, leaving aside for a moment the Italians who are already hurting.  Soc Gen crashed 15%  as I started to write and was headed south.  Italian fixed rate futures got murdered and like the great football coach everyone is screaming, "What the hell is going on out there?"

Anyway, that's what we are facing.  I'm going to break a life-long rule and continue to comment through this period, perhaps not every day, but as much as I can.  This is really too goodto let pass.  I would hate myself if I did...then again, Trouble and Strife is going to hate me when I do.

Happy Landings