This was supposed to be yesterday's effort, but right in the middle in walks the kitchen lady and two hours lady the Muses had left town. I pick up today...
The old saying that what goes around comes around also applies to people. The NYT reported today that Adam Lerrick, a well-know conservative economist, late of the investment banking business and presently of the American Enterprise Institute, is about to be appointed Deputy Under Secretary for International Affairs, reporting to no lesser a mortal than David Malpass who is to oversee all things international at Treasury. David is a lively figure; once the head economist at the little moarned house of Bear Sterns, he earned the nickname of "Punto," when he announced to all and sundry in 1983 that, "Mexico will never devalue, Punto!" Mexico promptly devalued. There was a rumor that Bear was a tad long the Peso and while there were no bodies laying in the middle of Park Avenue around 46th. street, there were no brass bands either. Anyway, just a short tale from the last century's book of international finance.
Since then Punto has moved on in the world and so has Mr. Lerrick. I kinda like ol' Adam as he represents a couple of principals I hold rather dear: markets are not free and capitalism is not capitalism unless people are allowed to lose money. The second principal is that the IMF is a total waste of time when it gets into anything much beyond its original mandate of assisting developing economies. Problem is principals don't always work in the real world and for a long time now Mr. Lerrick has had a hard time distinguishing between the two states. In the real world a government...let's say Mexico again...finds it rather useful to impose unpopular but necessary economic measures upon its citizens with the explanation that "the devil (IMF) made me do it!" Usually, I might add in exchange for a bucketful of money. Unfortunately, in the real world the IMF often winds up picking winners and losers and in the real world whenever a "winner" might be associated in some way with an entity that funds the IMF...such as a German or French bank owed money by Greece. Dogma is great for priests and rabbis; it's a lot harder for simple financial practitioners. It's going to be interesting to see the reaction of this true believer...and his boss...in the intersection of dogma with real life...as a practitioners.
Tuesday. Everything went to hell today as it appears that the health care bill might be in real trouble and if that's the case so is the thought of tax reform. Thoughts that what has happened in the equity markets has not been a Trump rally, or to be more accurate a Trump legislative rally, were put to rest today. As predicted, if the promised tax reform stalls, look out below. I don't think I've ever seen a "directional trade"so totally dependent on the politics of the country...or to be more accurate...the politics of one party! But of course if you guess right you can really make a bomb. Then again you can buy a lottery ticket. The opportunities are endless.
Showing posts with label IMF. Show all posts
Showing posts with label IMF. Show all posts
Tuesday, March 21, 2017
Tuesday, October 4, 2016
SOMETHING'S A BIT ODD
At least it feels that way. The pound fell to it's lowest level in thirty years today ostensibly on the announcement by Ms. may that talks will be begin in March on Brexit and the top of the agenda will be immigration. Supposedly, this put the fear of God into all markets that the UK will be out in the cold, alone, like a poor waif straight out of Bleak House. Of course this view overlooks the fact that the price of the pound has caused a small boomlet in the British economy through a big jump in exports and the British public seems not to give a toss about it in the first place. Then again, we are still working off the old EU compact but if the Brits take this attitude and get thrown out.......and with that will end the export of 900,000 German motor cars to the U.K. Dancing in the streets of Sheffield and Dagenham East to the latest Korean and Japanese pop tunes. 900,000 is a big internal market for the likes of KIA. As my sons say to me, "Keep in real, dad." Life is not so easy, and by the by
1. There is no joy in the EU as to immigration...certainly not to the extent of losing the Brits over the issue, and
2. Ms. May and her mob are a long way from being dumb. Their timing, as suggested here and other places, may be perfect.
Then there's the small issue of whether the Pound is tanking on it's own or is it because of pressure from the Dollar whose country of origin is desperately trying to convince itself that higher rates are coming, as if a 1/4 of a point even in December would really make a fundamental difference. Rubbish, but there may be a silver lining in this cloud of uncertainty that being that perhaps--just perhaps--the realization is beginning to set in that we all got this collectively wrong guys and we had better to start trying to figure out ways to get out of it before a bounty is put on the head of any Central Banker found anywhere.
Curiously, if that scenario were to be the case,the this is the week in which to set the gears in motion. The World Bank, IMF annual meeting is underway in Washington and whilst nothing of note ever happens in the few days that it runs aside from the list of CAN YOU TOP THIS cocktail parties and Nirvana for The World's Oldest Profession from six bordering states (alas, Madame Claude is no longer with us hence the class formally brought to the proceedings will be absent), the rumor mill will be in full throated roar and I suspect we shall soon see if Yellen & Cie. are prepared to test the waters.
Anyway, intrigue such as this might be welcome as a replacement (for however brief) to the nonsense we have endured for so long. Besides, a really good trader's market might come out of this thing for a while. Good for ol' Charlie as well. Good, hard copy we call it. The stuff of dreams.
1. There is no joy in the EU as to immigration...certainly not to the extent of losing the Brits over the issue, and
2. Ms. May and her mob are a long way from being dumb. Their timing, as suggested here and other places, may be perfect.
Then there's the small issue of whether the Pound is tanking on it's own or is it because of pressure from the Dollar whose country of origin is desperately trying to convince itself that higher rates are coming, as if a 1/4 of a point even in December would really make a fundamental difference. Rubbish, but there may be a silver lining in this cloud of uncertainty that being that perhaps--just perhaps--the realization is beginning to set in that we all got this collectively wrong guys and we had better to start trying to figure out ways to get out of it before a bounty is put on the head of any Central Banker found anywhere.
Curiously, if that scenario were to be the case,the this is the week in which to set the gears in motion. The World Bank, IMF annual meeting is underway in Washington and whilst nothing of note ever happens in the few days that it runs aside from the list of CAN YOU TOP THIS cocktail parties and Nirvana for The World's Oldest Profession from six bordering states (alas, Madame Claude is no longer with us hence the class formally brought to the proceedings will be absent), the rumor mill will be in full throated roar and I suspect we shall soon see if Yellen & Cie. are prepared to test the waters.
Anyway, intrigue such as this might be welcome as a replacement (for however brief) to the nonsense we have endured for so long. Besides, a really good trader's market might come out of this thing for a while. Good for ol' Charlie as well. Good, hard copy we call it. The stuff of dreams.
Friday, July 29, 2016
TWTWTW
Gotta be my age to remember that one. Anyway, this is what happened.
The Democrats had their convention. Big whoop.
The Fed did nothing (and will do nothing). Bigger whoop.
The Bank of Japan did bery little. Bit of a surprise, leading some people to believe that it has decided that it has run out of bullets. The Yen strengthens. Ouch!
The ECB announced the results of their stress test which wasn't really a test at all because there were no markers set up and no one really knew or understood what was being tested. Therefore, nobody failed except that Monte di Paschi (there's a shocker), DeutscheBank (another mind-blower) and Barclays (Hummm) were cited as not being in the best of shape capital-wise. Quality of assets? Sorry, don't look at those things. Portugese and Greek banks? None of your business. We'll keep that among us boys. In short, a complete nonsense.
And the U.S. economy...absolutely worse than anyone expected with the first quarter revised downward to 0.9% and the second quarter coming in at 1.2% It was so bad that some were taken to argue that things were really looking up because inventories fell meaning that when rebuilt, up will go the GDP again. Of course missing from this piece of economic genius was the fact that this was the fifth consecutive month in which inventories fell...a feat unmatched in about 70 years. Somehow, consumer spending looked quite good which may bode well for the future...or may not if incomes remain relatively flat and the job participation rate stays in the crapper. I'm sure Little Paulie Krugman will have an answer for this next week. I hope someone does.
Yale University announced that they are going to begin a Masters Program in systemic risk. Among the "faculty" will be Tim Geithner and just about everybody else from the good ol' days. Now some of us were confused at all of this as there are clearly people around who must have at least one if not more Ph.D's in systemic risk having contributed so much to the creation of the same over the years but I guess this program is designed to keep it from happening again...and to generate oodles of cash for old Eli. Might I suggest that a Masters in Critical Thinking and Analysis might be of more lasting value? Want to know how to prevent systemic risk? Stop doing stupid things. Like setting up systemic risk Master's programs and thinking you have contributed to the solution. Or flooding the world with money, destabilizing markets and demolishing any basis for the pricing of risk. Oh, the 10 year closed at 1.45% today. Flat yield curves are just great.
---------------------------------------
On Monday we are going to take a look at the remarkable internal report from the IMF regarding it's actions in Greece which has received absolutely no review Over Here and practically none anywhere else except for the Telegraph in London. It is devestating. In the mean time, we here in the Fly Over are trying to dry out. We got two inches in an hour yesterday afternoon and more expected today.
And That Was The Week That Was.
Have a great weekend.
Tuesday, December 1, 2015
GRANDCHILDREN WARS: THE PATHOGENS AWAKEN
Made it back having undergone assault from indubitably multiple armies of pathogens, merged and mixed in three third grade classrooms by the triplets. Modern medicine has no answer to this: you either survive or....anyway, here I am.
Our landscaper, Ted, stopped in today.
"Yuan, " he said, "and the IMF. Big deal? Can you invest in it?" Ted is obviously far richer than I had imagined. I'll have to start looking at his bills more closely.
"Well," said I, here's what I think, " having just lost $.25 to My Really Smart Friend, Larry, with the news of the IMF allowing the Yuan to join in the currency basket of the IMF before year's end.
"Chrissie Lagarde just declared the Yuan, 'freely usable,' and if you are going to bank on that there's a bridge...somewhere...any bridge...that I would like to sell you cheap. In fact, most of the conditions for the establishment of a reserve currency have not yet been met--not to mention the inability to engage in domestic equity investment in the Chinese equity market. What has occurred is at this stage a recognition of the economic power of China and a near-capitulation by the IMF to China's rather unique way of doing business as a result of the Fund desperately needing a friend at this stage, having run out of really any role and yet still having a lot of very expensive mouths to feed. Chrissie also wants her next title to be Madame Le President and this 'breakthrough' fills in some rather empty space on her resume.
In order to further bolster the complete unhinging of IMF rules the argument is being made all of the place that this will help liberalize China and diminish the power of the Communist Party as China will now be forced to play 'by the rules' and liberalize not only their economic and monetary policies but, by extension, their political policies as well. Bollocks. The CCP will do damn what it pleases unless and until a failure in their economic policies causes a rather compliant population, now seeing a rise in living standards so desperately needed, to experience a set-back and being asking, 'Hey, what am I getting out of this?' It is a vanity gift to the Chinese people giving their government extra time but accomplishing little.
It is also being argued that this move is good for the world's financial system as it breaks the hold that the dollar has exerted over all facets of international financial and for that matter, ALL business dealings and by extension, the influence of the United States. Fair comments except that there are far more many reasons for the existence of this influence beginning with the Rule of Law which far surpass the mere existence of the dollar and I would argue even the vast infrastructure and liquidity which supports it, although in reason years, under this---allow me to be political---incompetent administration and increasingly politicized central bank, these advantages are being eroded. With a weighting of nearly 11% in the SDR basket let's see how many central banks switch 10% of their reserve holdings into dollars? Aside from those tightly wedded to China in other areas, very few I would bet. I'll take on all comers; I'm down $.25 to Larry.
The other thing in which I will be most interested is to see just how much of the approximately $18 trillion in Yuan sitting in deposit accounts will remain. Under the agreement, the Chinese are supposed to be allowed to invest up to 50% of their assets in foreign assets. Does money flow in, out, or simply sit tight. If the trend is out, given how much Chinese money is already in such places as New York, San Francisco, Miami, London and points around the Globe with all sorts of restrictions in place, with restrictions relaxed if we have a vast outpouring, how long will Xi's mob allow that to continue as the result will almost certainly be the collapse of the Yuan? Not long I would argue. And the Fund's reaction? Not much I would argue making it even a bigger joke than the ECB in dealing with budget deficits.
Finally, I would once again bring up the effect this ill have on one of the U..S's greatest strategic tools, financial sanctions. If all the other reserve currencies are always on your side politically, they can work quite well. When one reserve currency issuer is not on-side they don't work at all. The U.S.'s strategic bag of tricks has just lost a big component."
"So, Ted," said I, "There you have my views. Your call. Have any more questions?"
"Charlie, that was great and I thank you so much. Actually I have just one more. Do you have Larry's number?"
Our landscaper, Ted, stopped in today.
"Yuan, " he said, "and the IMF. Big deal? Can you invest in it?" Ted is obviously far richer than I had imagined. I'll have to start looking at his bills more closely.
"Well," said I, here's what I think, " having just lost $.25 to My Really Smart Friend, Larry, with the news of the IMF allowing the Yuan to join in the currency basket of the IMF before year's end.
"Chrissie Lagarde just declared the Yuan, 'freely usable,' and if you are going to bank on that there's a bridge...somewhere...any bridge...that I would like to sell you cheap. In fact, most of the conditions for the establishment of a reserve currency have not yet been met--not to mention the inability to engage in domestic equity investment in the Chinese equity market. What has occurred is at this stage a recognition of the economic power of China and a near-capitulation by the IMF to China's rather unique way of doing business as a result of the Fund desperately needing a friend at this stage, having run out of really any role and yet still having a lot of very expensive mouths to feed. Chrissie also wants her next title to be Madame Le President and this 'breakthrough' fills in some rather empty space on her resume.
In order to further bolster the complete unhinging of IMF rules the argument is being made all of the place that this will help liberalize China and diminish the power of the Communist Party as China will now be forced to play 'by the rules' and liberalize not only their economic and monetary policies but, by extension, their political policies as well. Bollocks. The CCP will do damn what it pleases unless and until a failure in their economic policies causes a rather compliant population, now seeing a rise in living standards so desperately needed, to experience a set-back and being asking, 'Hey, what am I getting out of this?' It is a vanity gift to the Chinese people giving their government extra time but accomplishing little.
It is also being argued that this move is good for the world's financial system as it breaks the hold that the dollar has exerted over all facets of international financial and for that matter, ALL business dealings and by extension, the influence of the United States. Fair comments except that there are far more many reasons for the existence of this influence beginning with the Rule of Law which far surpass the mere existence of the dollar and I would argue even the vast infrastructure and liquidity which supports it, although in reason years, under this---allow me to be political---incompetent administration and increasingly politicized central bank, these advantages are being eroded. With a weighting of nearly 11% in the SDR basket let's see how many central banks switch 10% of their reserve holdings into dollars? Aside from those tightly wedded to China in other areas, very few I would bet. I'll take on all comers; I'm down $.25 to Larry.
The other thing in which I will be most interested is to see just how much of the approximately $18 trillion in Yuan sitting in deposit accounts will remain. Under the agreement, the Chinese are supposed to be allowed to invest up to 50% of their assets in foreign assets. Does money flow in, out, or simply sit tight. If the trend is out, given how much Chinese money is already in such places as New York, San Francisco, Miami, London and points around the Globe with all sorts of restrictions in place, with restrictions relaxed if we have a vast outpouring, how long will Xi's mob allow that to continue as the result will almost certainly be the collapse of the Yuan? Not long I would argue. And the Fund's reaction? Not much I would argue making it even a bigger joke than the ECB in dealing with budget deficits.
Finally, I would once again bring up the effect this ill have on one of the U..S's greatest strategic tools, financial sanctions. If all the other reserve currencies are always on your side politically, they can work quite well. When one reserve currency issuer is not on-side they don't work at all. The U.S.'s strategic bag of tricks has just lost a big component."
"So, Ted," said I, "There you have my views. Your call. Have any more questions?"
"Charlie, that was great and I thank you so much. Actually I have just one more. Do you have Larry's number?"
Tuesday, November 3, 2015
IS THAT ALL THERE IS?
With apologies to Miss Peggy Lee, writing about the Yuan's entry into the SDR world of the IMF is about as exciting as the jump in 10 year yield to 2.21% at the close today signaling a "repricing of the bond market" which reflects a resurgence of belief in the Fed going for 0-25b.p. to 25 b.p. in December based on the rise of the equities markets which is based on nothing at all. But that's all I got, Peggy, so we go with it.
Fortunately, My Really Smart Friend, Larry, came out with a great piece on the Yuan just the other day, which can be found only if you are a subscriber to his publication. (I never asked him if I could name it but I will). As you know he and I differ as to whether the Fund is going to let the Yuan in as a result of its year-end review and while I still have my doubts, he has added a very persuasive argument that I had mentioned but to which I had given little weight. Added to every other thing on the world stage that Il Duce and his mob continue to ignore is the Fund; this is not good for the thousands employed by the palace on 19th Street (tax free for many) known lovingly as, "Headquarters 1" by its adoring staff...especially when most people are beginning to realize that its functionality is somewhat in question. The Fund needs a friend and China needs acceptance; a match made in heaven the implications of which are yet to be fully understood. MRSF,L, does point out one thing that most of the watchers and commentators have not. A good part of the implications have a great deal to do with China alone--or at least for the time being. The move towards SDR status for the Yuan may have little practical effect for the world at large but will indubitably have a great deal of effect domestically, for in order for China to reach the point of acceptance of it currency, certain bridges had to be crossed which were navigated by what one might refer to as the reformist element in the economic leadership of the country. The political leadership moved grudgingly to comply but make no mistake, the "market driven considerations" have never been welcomed, and if the IMF grants Yuan SDR status we may well have seen the high water mark of the reformists for some time. Nothing more of value from the standpoint of President Xi can be gained and a consolidation of power on all fronts will resume. The implications stemming from that reality are yet to be considered.
We might also ponder another effect mentioned in this space not too long ago. Il Duce loves to speak about "smart power" in regard to foreign affairs...like sanctions. With the loss of influence within global organizations such as the IMF and the emergence of new "reserve currencies," bye bye "smart power." The dollar and its friends, the Euro, the Yen and Sterling held sway. We are about to enter a new era with new realities and, surprisingly...or not..less options. Leading from behind. It's kinda like the two dog on a dog team; the view never changes. Anyway, my two-bit bet is looking a bit more problematic.
As for bonds, I find more amusement in George Soros pulling half a billion that he put in just a year ago out of Janus, his buddy Bill Gross' new amusement since his departure from PIMCO. Gee, it's harder and harder to make an honest buck these days although as some would tell it, Georgie never cared what kind of buck it was as long as it was made. If things go on like this Billy is going to be left with managing just his own money, $700 million of which was supposedly the seed money for Janus. Oh, the humanity! Having said that, a decision if there is to be one will be more important for it having simply been made than for any economic effect it will have. Further, if the discount rate is increased it's is going to be interesting to see the rationalization presented vis-s-vis the opposite direction in which the Euros are heading. Thought there was this cooperation among central banks thingy. It will certainly provide copy which is desperately needed in these times. I will also be interested on the discussion of with China slowing, the Euros going nowhere and Asia more or less dead how the United States is making it happen all alone. We can call it the John Donne Rejection; you know, "No man is an island..." Or maybe you don't know.
Fortunately, My Really Smart Friend, Larry, came out with a great piece on the Yuan just the other day, which can be found only if you are a subscriber to his publication. (I never asked him if I could name it but I will). As you know he and I differ as to whether the Fund is going to let the Yuan in as a result of its year-end review and while I still have my doubts, he has added a very persuasive argument that I had mentioned but to which I had given little weight. Added to every other thing on the world stage that Il Duce and his mob continue to ignore is the Fund; this is not good for the thousands employed by the palace on 19th Street (tax free for many) known lovingly as, "Headquarters 1" by its adoring staff...especially when most people are beginning to realize that its functionality is somewhat in question. The Fund needs a friend and China needs acceptance; a match made in heaven the implications of which are yet to be fully understood. MRSF,L, does point out one thing that most of the watchers and commentators have not. A good part of the implications have a great deal to do with China alone--or at least for the time being. The move towards SDR status for the Yuan may have little practical effect for the world at large but will indubitably have a great deal of effect domestically, for in order for China to reach the point of acceptance of it currency, certain bridges had to be crossed which were navigated by what one might refer to as the reformist element in the economic leadership of the country. The political leadership moved grudgingly to comply but make no mistake, the "market driven considerations" have never been welcomed, and if the IMF grants Yuan SDR status we may well have seen the high water mark of the reformists for some time. Nothing more of value from the standpoint of President Xi can be gained and a consolidation of power on all fronts will resume. The implications stemming from that reality are yet to be considered.
We might also ponder another effect mentioned in this space not too long ago. Il Duce loves to speak about "smart power" in regard to foreign affairs...like sanctions. With the loss of influence within global organizations such as the IMF and the emergence of new "reserve currencies," bye bye "smart power." The dollar and its friends, the Euro, the Yen and Sterling held sway. We are about to enter a new era with new realities and, surprisingly...or not..less options. Leading from behind. It's kinda like the two dog on a dog team; the view never changes. Anyway, my two-bit bet is looking a bit more problematic.
As for bonds, I find more amusement in George Soros pulling half a billion that he put in just a year ago out of Janus, his buddy Bill Gross' new amusement since his departure from PIMCO. Gee, it's harder and harder to make an honest buck these days although as some would tell it, Georgie never cared what kind of buck it was as long as it was made. If things go on like this Billy is going to be left with managing just his own money, $700 million of which was supposedly the seed money for Janus. Oh, the humanity! Having said that, a decision if there is to be one will be more important for it having simply been made than for any economic effect it will have. Further, if the discount rate is increased it's is going to be interesting to see the rationalization presented vis-s-vis the opposite direction in which the Euros are heading. Thought there was this cooperation among central banks thingy. It will certainly provide copy which is desperately needed in these times. I will also be interested on the discussion of with China slowing, the Euros going nowhere and Asia more or less dead how the United States is making it happen all alone. We can call it the John Donne Rejection; you know, "No man is an island..." Or maybe you don't know.
Thursday, August 20, 2015
CAPITULATION?
The DOW was down 358 at the close. The ten year yield was 2.06% Some dare not call it capitulation; some dare not call it anything else. For the chartists, the 200 day moving average was crushed and the overall performance for the year turned negative. I guess this is a big deal; I've never understood that it meant anything more than a measure of how much people don't like the market at a point in time rather than any galactic predictor of the future, but as I have said, I know nothing about stocks. I do know markets, however, and at this point in time everyone of them out there stinks.
There is a massive risk off trade going on in all markets for all instruments beginning with the emerging markets and anything relating to international business influence no doubt by the turmoil in China over the past couple of months. In such an environment, silly stuff gets passed around. One genius had the mess of today directly attributable to the markets' reaction to China's anger at the Yuan SDR being delayed which means the Chinese, in a hissy-fit will not reform their economy. My son, any dope could have told you last week the IMF's plan for the Yuan was finis and as for Chinese reform, it will come when the Chinese believe that it will cause more good than harm. Right now is not the time for the politicians who still have about a billion people to feed and for whom they must find jobs (it is a centrally-planned economy you know), especially after one of the nation's most favored "capitalists" almost blew up half a city of 11,000,000 as a result of trying to save on safety measures which is certain to earn him a bullet in the near future, to care whether or not Chrissie goes rogue on them. It is the least of their worries. But worries they have; they also have around $3 billion in foreign reserves which will certainly help them smooth out a few rough patches so all is not bleak. What I expect we will see is a toning down of a good deal of the political rhetoric to which the past few years have given witness. If you are going to act like Superman you had better be able to leap tall buildings at a single bound from time to time. Lately, the third floor has gotten in the way. This isn't a bad thing. Keeping a clamp on that little fat lunatic in North Korea wouldn't be a bad idea either. But make no mistake, we could be in for a really rough go for a while with issues of credit and liquidity arising across markets. A big bust in one of the Asian markets could set the thing in motion. As they used to say on a cop show years back: "Let's be real careful out there."
On a lighter note, the St. Louis Fed just released a study that, in their opinion, pointed out that "Quantitative Easing" really didn't have the effect intended and as a matter of fact had really very little effect at all. But, sayth St. Loo, the Fed HAD to do SOMETHING which explains, I guess, why there is $4 trillion dollars sitting on the balance sheet, markets have been disjointed for the past six years and in the belief that the Fed had things under control, the politicians did NOTHING that was in any way useful save for a few hits here and there. Get out of the "fix the economy business" you ninnies and restore some of the credibility that none...NONE of you world wide have any more. Lose another 358 off the indexes tomorrow and you are going to need all you can get.
Oh, Tsipras resigned today and called snap elections in Greece for September 20. If we didn't have the Greeks around for a laugh now and then, someone would have to invent them.
There is a massive risk off trade going on in all markets for all instruments beginning with the emerging markets and anything relating to international business influence no doubt by the turmoil in China over the past couple of months. In such an environment, silly stuff gets passed around. One genius had the mess of today directly attributable to the markets' reaction to China's anger at the Yuan SDR being delayed which means the Chinese, in a hissy-fit will not reform their economy. My son, any dope could have told you last week the IMF's plan for the Yuan was finis and as for Chinese reform, it will come when the Chinese believe that it will cause more good than harm. Right now is not the time for the politicians who still have about a billion people to feed and for whom they must find jobs (it is a centrally-planned economy you know), especially after one of the nation's most favored "capitalists" almost blew up half a city of 11,000,000 as a result of trying to save on safety measures which is certain to earn him a bullet in the near future, to care whether or not Chrissie goes rogue on them. It is the least of their worries. But worries they have; they also have around $3 billion in foreign reserves which will certainly help them smooth out a few rough patches so all is not bleak. What I expect we will see is a toning down of a good deal of the political rhetoric to which the past few years have given witness. If you are going to act like Superman you had better be able to leap tall buildings at a single bound from time to time. Lately, the third floor has gotten in the way. This isn't a bad thing. Keeping a clamp on that little fat lunatic in North Korea wouldn't be a bad idea either. But make no mistake, we could be in for a really rough go for a while with issues of credit and liquidity arising across markets. A big bust in one of the Asian markets could set the thing in motion. As they used to say on a cop show years back: "Let's be real careful out there."
On a lighter note, the St. Louis Fed just released a study that, in their opinion, pointed out that "Quantitative Easing" really didn't have the effect intended and as a matter of fact had really very little effect at all. But, sayth St. Loo, the Fed HAD to do SOMETHING which explains, I guess, why there is $4 trillion dollars sitting on the balance sheet, markets have been disjointed for the past six years and in the belief that the Fed had things under control, the politicians did NOTHING that was in any way useful save for a few hits here and there. Get out of the "fix the economy business" you ninnies and restore some of the credibility that none...NONE of you world wide have any more. Lose another 358 off the indexes tomorrow and you are going to need all you can get.
Oh, Tsipras resigned today and called snap elections in Greece for September 20. If we didn't have the Greeks around for a laugh now and then, someone would have to invent them.
Wednesday, August 19, 2015
FIRST YOU SAY YOU DO AND THEN YOU DON'T...
...Then you say you will and then you wont...
You're undecided now so what are you going to do?
Great song. Could have been written with this Federal Reserve Board in mind. The minutes of the July meeting came out today and revealed a Fed that really didn't know what it was that they would do. Oh, I think they want to "begin to normalize" (raise rates) although no one seems to have a clue just what normal means, but while they liked some things about the economy, they were unsure about others and decided to...well maybe...perhaps...think about...waiting. Raising rates is hard, I don't deny that but with this bunch it's really hard as it goes against their political leanings and pays on fears of the damage any move could have on the events surrounding an election year. There's a good deal of paralysis by analysis to be sure, but in the end it is hard and I give them that.
The problem, however, is being spoken of in another light. The "hawks" are beginning to say that the Fed must move in order to provide itself with future ammunition in the future if the economy falters. Say what!? A 1/4% isn't ammunition; it's less than a single cap for a cap pistol if they make those things any more, what we as kids used whilst playing Cowboys and Native Americans. Nah, come to think of it there's no way they are still making those things. Now if you were to boost the discount rate by 2-3% you would have some ammunition but you would also have one hell of a recession overnight, so what is the point behind that point? In any case I'm pretty sure the issue was decided last week by the Chinese and what increasingly looks like a bad set of economic numbers that may be coming out of China, which, by the by, are being discounted by the star gazers as being relatively unimportant to us because we don't sell that much to China. That China's economic situation may be quite important to the rest of the developed world and vitally important to the emerging economies--whose markets have lost over a trillion dollars in investment in the past 12 months--seems to have been missed. And speaking of China, Chrissie, from some choice vacation spot I suspect, let it be known that the Fund will not be adding to the list of currencies available for Special Drawing Rights this year (as predicted right here two weeks ago) which means bye, bye Yuan for a time or at least until Chrissie can get the hell out of there and run for President of France. In short, The Inner Kingdom is going through a rough patch as of late.
A funny thing happened right after the release of the Fed Minutes. Equities, which had be in the dumpster all day suddenly shot up into positive territory, I guess on the belief that free money was still going to around for a while. The 10 year yield crashed to as low of 2.11% which was to be expected and wandered around for a bit. Then, quite suddenly, the DOW reversed and crumbled again finishing well down for the day. It was although the street couldn't figure out this news which was quite unexpected, but originally thought it to be good until it realized that what was going on East of Suez wasn't very good at all for anybody and moved accordingly. If there is one good thing in all of this is that perhaps the markets are taking a closer look at fundamentals rather than spending all their time Fed Gazing. If that is so, wouldn't it be a good time for the Fed to begin to figure out that what they had ain't working no more and that it may be time for an attitude that encourages the fiscal side and the politicians to start doing the job for which they are being paid. Probably far more for which one can hope.
It's still August and there are a lot of players away from the ball park, but things are getting a little tense. There hasn't been much by way of good news as of late and now we are running out of places to look for the same. One good piece came yesterday from Martha's Vineyard where Pres. Clinton and Il Duce were playing golf. Apparently, no one as killed or seriously injured. Maybe there is hope.
I hope this prints. I still have no idea of what went on.
You're undecided now so what are you going to do?
Great song. Could have been written with this Federal Reserve Board in mind. The minutes of the July meeting came out today and revealed a Fed that really didn't know what it was that they would do. Oh, I think they want to "begin to normalize" (raise rates) although no one seems to have a clue just what normal means, but while they liked some things about the economy, they were unsure about others and decided to...well maybe...perhaps...think about...waiting. Raising rates is hard, I don't deny that but with this bunch it's really hard as it goes against their political leanings and pays on fears of the damage any move could have on the events surrounding an election year. There's a good deal of paralysis by analysis to be sure, but in the end it is hard and I give them that.
The problem, however, is being spoken of in another light. The "hawks" are beginning to say that the Fed must move in order to provide itself with future ammunition in the future if the economy falters. Say what!? A 1/4% isn't ammunition; it's less than a single cap for a cap pistol if they make those things any more, what we as kids used whilst playing Cowboys and Native Americans. Nah, come to think of it there's no way they are still making those things. Now if you were to boost the discount rate by 2-3% you would have some ammunition but you would also have one hell of a recession overnight, so what is the point behind that point? In any case I'm pretty sure the issue was decided last week by the Chinese and what increasingly looks like a bad set of economic numbers that may be coming out of China, which, by the by, are being discounted by the star gazers as being relatively unimportant to us because we don't sell that much to China. That China's economic situation may be quite important to the rest of the developed world and vitally important to the emerging economies--whose markets have lost over a trillion dollars in investment in the past 12 months--seems to have been missed. And speaking of China, Chrissie, from some choice vacation spot I suspect, let it be known that the Fund will not be adding to the list of currencies available for Special Drawing Rights this year (as predicted right here two weeks ago) which means bye, bye Yuan for a time or at least until Chrissie can get the hell out of there and run for President of France. In short, The Inner Kingdom is going through a rough patch as of late.
A funny thing happened right after the release of the Fed Minutes. Equities, which had be in the dumpster all day suddenly shot up into positive territory, I guess on the belief that free money was still going to around for a while. The 10 year yield crashed to as low of 2.11% which was to be expected and wandered around for a bit. Then, quite suddenly, the DOW reversed and crumbled again finishing well down for the day. It was although the street couldn't figure out this news which was quite unexpected, but originally thought it to be good until it realized that what was going on East of Suez wasn't very good at all for anybody and moved accordingly. If there is one good thing in all of this is that perhaps the markets are taking a closer look at fundamentals rather than spending all their time Fed Gazing. If that is so, wouldn't it be a good time for the Fed to begin to figure out that what they had ain't working no more and that it may be time for an attitude that encourages the fiscal side and the politicians to start doing the job for which they are being paid. Probably far more for which one can hope.
It's still August and there are a lot of players away from the ball park, but things are getting a little tense. There hasn't been much by way of good news as of late and now we are running out of places to look for the same. One good piece came yesterday from Martha's Vineyard where Pres. Clinton and Il Duce were playing golf. Apparently, no one as killed or seriously injured. Maybe there is hope.
I hope this prints. I still have no idea of what went on.
Friday, July 31, 2015
A MODEST PROPOSAL
The International Monetary Fund and the European Union are at loggerheads...in public. It is the latter point that makes this so interesting. There have been a number of times when parties have not seen eye to eye with the Fund but never can I remember a political body, separate or in concert who was not a debtor to the Fund, be in this position. As of today, the Fund has flat refused to be involved in the Greek negotiations (they have already been paid a good chunk of what was owed) unless the Euros agree to include in the negotiations some form of up-front debt relief. Now if I were a European politician who would have to explain this Kow-Tow to this Washington mob, I would be uncomfortable. As Swift suggested some years back, feeding the whole lot to a food bank or an African game preserve in memory of Cecil the Lion might seem to be a viable alternative. It would also clear the decks in the future from this jumped-up, ahead-of-itself primarily useless bunch of data compilers and save the world a few billion a year in the process. But that's just me. As Il Duce's boys put it, "Never let a crisis go to waste."
Now that is not to say that the Fund is incorrect in its assessment of events. It is to say who the hell needs it to tell us what everyone knows already and what will occur in the passage of time in a politically acceptable and economically useful manner. But, that result is going to require a couple of big items.
On the Greek side, forget about creating the new Hellenic Socialist Republic. Not on guys, at least not now. If you can get this thing back working, you can take another shot at it in ten years when nobody will care, but today there is a bit too much at stake. Or to put it another way, do you wish to be Greeks or little members of the Comintern?
The second thing is get some folks in there who have dealt with this sort of thing before, both from the standpoints of economic realities, the financial requirements and the regulatory aspects and who understand and have faced the crucial political concerns in past experiences. You would be surprised as to how many of people of that description are about. Do not look for them in any official or quasi-official organization: those types will always have an agenda. Also keep in mind that for legal, financial or specialized skills, you are not hiring a firm: you are hiring A MEMBER of that firm with whom you will work. It is not the same thing. It would appear that as of late in some instances you have not been well-served.
Finally, accept the fact that things will be put into place that will create great change and in some cases, irreversible change. The Glory that was Greece is for another day...hey, catchy line that...which is easy to say but so, so difficult to comprehend when speaking of a way of life.
I'm having a bit of a bad day gang, and this is tough to write. It will be better on Monday when I'll get after the Euros. I have a lot to say about them. Sorry
Now that is not to say that the Fund is incorrect in its assessment of events. It is to say who the hell needs it to tell us what everyone knows already and what will occur in the passage of time in a politically acceptable and economically useful manner. But, that result is going to require a couple of big items.
On the Greek side, forget about creating the new Hellenic Socialist Republic. Not on guys, at least not now. If you can get this thing back working, you can take another shot at it in ten years when nobody will care, but today there is a bit too much at stake. Or to put it another way, do you wish to be Greeks or little members of the Comintern?
The second thing is get some folks in there who have dealt with this sort of thing before, both from the standpoints of economic realities, the financial requirements and the regulatory aspects and who understand and have faced the crucial political concerns in past experiences. You would be surprised as to how many of people of that description are about. Do not look for them in any official or quasi-official organization: those types will always have an agenda. Also keep in mind that for legal, financial or specialized skills, you are not hiring a firm: you are hiring A MEMBER of that firm with whom you will work. It is not the same thing. It would appear that as of late in some instances you have not been well-served.
Finally, accept the fact that things will be put into place that will create great change and in some cases, irreversible change. The Glory that was Greece is for another day...hey, catchy line that...which is easy to say but so, so difficult to comprehend when speaking of a way of life.
I'm having a bit of a bad day gang, and this is tough to write. It will be better on Monday when I'll get after the Euros. I have a lot to say about them. Sorry
Monday, July 27, 2015
A FUNNY THING HAPPENED ON THE WAY TO A RESERVE CURRENCY
In the great scheme of things the collapse of the Shanghai stock market which resumed its downward course today with a damn near limit down close may not mean much. Then again, it may mean everything. China has always been a funny place. A former friend of mine (former as in deceased) once said that the Chinese people are like a school of fish; they all move in exactly the same direction at exactly the same time, seemingly without guidance or control and despite language differences, geographic distances and communication impossibilities. Much of that is no longer the case today but the result is the same; they seem to be either all in or all out--there is no middle road or, in a financial sense, longs and shorts.
The other thing that has been occurring, primarily because they have been told that it is truth, is the complete confidence in the belief that the government will make it right even if it goes very wrong and as a result the enormous stock boom was fueled to a great extent by margin buying. Sure, the intellectual realization that one could lose some money is there but no one expects to lose a lot of money. Losses are now in the neighborhood of $3 trillion and counting.
That is a lot of money but it weighs no where nearly as heavily as the collective loss of confidence in their government on the part of the Chinese people and hence the dilemma: can the government do what it should be doing and let markets find their own levels or continue to try to stem the tide with the continued purchase of shares through government controlled entities? So far they have done neither with any real conviction and the immediate fear is that the government genuinely does not know what course it should take.
Now it is bad enough to lose the confidence of the people one governs--indeed, it is very bad--but coupled with that is loss of confidence within the global financial community which is beginning to view the government's policies which helped create this financial bubble as hardly the responsible actions of a nation that strives for global leadership in all matters but particularly in things financial. For me, of course, it is doubly amusing as once again our friend Chrissey at the Fund has managed to get another important item badly wrong as she wanders through the financial landscape without, seemingly, her GPS. Reserve currency, indeed.
Meanwhile in all of the world's bourses, the continued Chinese retreat and not particularly favorable corporate news resulted in dramatic reversals whilst a penchant for safety drove the 10 year yield down to 2.21%. Signs are that this is going to continue which makes it more and more likely the Fed will not move until next year. September it seems has finally been written off by all but...it is reliably reported...Stanley Fisher, who whilst still being the smartest guy in the room will not have the support of the politicos. This is probably as confusing a moment as we have seen (meaning I guess that I have no idea where we are going), and with no clear leadership anywhere around the globe. Fortunately, he tomato season begins this week in the fly-over zone and things look terrific in these parts. Tomatoes should be a reserve currency. Maybe I can get Chrissey to promote that idea.
N.B. Take a look at Ken Griffin's op ed piece in the WSJ today. More on that tomorrow
The other thing that has been occurring, primarily because they have been told that it is truth, is the complete confidence in the belief that the government will make it right even if it goes very wrong and as a result the enormous stock boom was fueled to a great extent by margin buying. Sure, the intellectual realization that one could lose some money is there but no one expects to lose a lot of money. Losses are now in the neighborhood of $3 trillion and counting.
That is a lot of money but it weighs no where nearly as heavily as the collective loss of confidence in their government on the part of the Chinese people and hence the dilemma: can the government do what it should be doing and let markets find their own levels or continue to try to stem the tide with the continued purchase of shares through government controlled entities? So far they have done neither with any real conviction and the immediate fear is that the government genuinely does not know what course it should take.
Now it is bad enough to lose the confidence of the people one governs--indeed, it is very bad--but coupled with that is loss of confidence within the global financial community which is beginning to view the government's policies which helped create this financial bubble as hardly the responsible actions of a nation that strives for global leadership in all matters but particularly in things financial. For me, of course, it is doubly amusing as once again our friend Chrissey at the Fund has managed to get another important item badly wrong as she wanders through the financial landscape without, seemingly, her GPS. Reserve currency, indeed.
Meanwhile in all of the world's bourses, the continued Chinese retreat and not particularly favorable corporate news resulted in dramatic reversals whilst a penchant for safety drove the 10 year yield down to 2.21%. Signs are that this is going to continue which makes it more and more likely the Fed will not move until next year. September it seems has finally been written off by all but...it is reliably reported...Stanley Fisher, who whilst still being the smartest guy in the room will not have the support of the politicos. This is probably as confusing a moment as we have seen (meaning I guess that I have no idea where we are going), and with no clear leadership anywhere around the globe. Fortunately, he tomato season begins this week in the fly-over zone and things look terrific in these parts. Tomatoes should be a reserve currency. Maybe I can get Chrissey to promote that idea.
N.B. Take a look at Ken Griffin's op ed piece in the WSJ today. More on that tomorrow
Tuesday, July 21, 2015
HAPPY BIRTHDAY
Dodd/Frank is five years old today. Infanticide was called for but like so many truisms of the past six years I suppose that this creature is going to remain around in some perverse form until the next crisis which will prove it to be totally useless very much like the IMF...which brings me to friend Carter.
Carter asks "why is the IMF useless," pointing to the fact that it outed the BS quotient in the Greek drama as to the impossibility of the paying of Greece's debts. Hell, Carter, I told everybody that 3 years ago and nobody listened then either, so if that is the value of this clown show why not pay me 10% of the billions that it takes to run that place and let's get on with it. I'm funnier than Mme. Legarde as well. Anyway, let's get serious.
The international Monetary Fund was founded at the Bretton Woods conference in 1946, just after the close of the Big One. The first thing one should ask is, "where in the hell is Bretton Woods." and one will find that paradoxically no one knows. So, for the record, Bretton Woods is in the state of New Hampshire, USA, the state motto of which is, "Live free or die," and is noted primarily for, in the summertime, the densest concentration of viciously-biting black flies and mosquitoes of any place on earth save for the Alaskan tundra. Moose have been known to commit suicide to stop the torment. Moose. SUICIDE! Anyway, that's is where the economic leaders of the world gathered back then to create an organization that would insure the monetary stability of the world's currencies and to avoid the killing devaluations that accompanied the Great Depression. I kid you not. As an American politician said a few years back, "How's that working out for ya?" I mean like, can you say, "Quantitative Easing?"No? Well, how about, "Screw your neighbor or trading partner." Funny, it is pronounced the same way in English, German, Japanese, Chinese and any other country's national language that comes to mind. Hell it's more understood and recognized than Coke Cola.
It's not that it wasn't a good idea, it's just that no one cares anymore and the organization is focused on that most natural of all animal endeavors, self preservation. Part of doing that is making yourself look as though you are needed, hence the brilliant expose of the real state of Greece's financial condition. Problem is it was never about Greece, it was about the EZ, the Euro, the reputations of a couple of hundred politicians, the stability of the banking system and when all of these things are what really count, don't screw things up at the last minute by pointing out what everybody already knows except for the Great Unwashed who may, somehow, queer the entire deal in a fit of pique from having been conned all along. This mob is also known as "voters." Dumb, truly dumb. For whether one agrees or not, this exercise was really about some important things
Now why would the IMF do something like that you might ask? I did and I led you wrong last week. Chrissie was up to her wonderful Gaelic nose in this one. Chrissie wants out and the next job is Madame Le President. And Chrissie wants to be able to say that she always spoke the truth. And so from its storied and bug-infested beginnings, the Fund is now the launching pad for a run at the Elysee Palace. Maybe this one works. I am sure Chrissie will not succumb to base instincts like her predecessor. Alons enfants!
And finally, thanks to Carter, who of course knew all of this but made damn sure he was going to keep me honest...and give me a topic. We need more like him. I need more like him. I'm pretty sure of that.
Carter asks "why is the IMF useless," pointing to the fact that it outed the BS quotient in the Greek drama as to the impossibility of the paying of Greece's debts. Hell, Carter, I told everybody that 3 years ago and nobody listened then either, so if that is the value of this clown show why not pay me 10% of the billions that it takes to run that place and let's get on with it. I'm funnier than Mme. Legarde as well. Anyway, let's get serious.
The international Monetary Fund was founded at the Bretton Woods conference in 1946, just after the close of the Big One. The first thing one should ask is, "where in the hell is Bretton Woods." and one will find that paradoxically no one knows. So, for the record, Bretton Woods is in the state of New Hampshire, USA, the state motto of which is, "Live free or die," and is noted primarily for, in the summertime, the densest concentration of viciously-biting black flies and mosquitoes of any place on earth save for the Alaskan tundra. Moose have been known to commit suicide to stop the torment. Moose. SUICIDE! Anyway, that's is where the economic leaders of the world gathered back then to create an organization that would insure the monetary stability of the world's currencies and to avoid the killing devaluations that accompanied the Great Depression. I kid you not. As an American politician said a few years back, "How's that working out for ya?" I mean like, can you say, "Quantitative Easing?"No? Well, how about, "Screw your neighbor or trading partner." Funny, it is pronounced the same way in English, German, Japanese, Chinese and any other country's national language that comes to mind. Hell it's more understood and recognized than Coke Cola.
It's not that it wasn't a good idea, it's just that no one cares anymore and the organization is focused on that most natural of all animal endeavors, self preservation. Part of doing that is making yourself look as though you are needed, hence the brilliant expose of the real state of Greece's financial condition. Problem is it was never about Greece, it was about the EZ, the Euro, the reputations of a couple of hundred politicians, the stability of the banking system and when all of these things are what really count, don't screw things up at the last minute by pointing out what everybody already knows except for the Great Unwashed who may, somehow, queer the entire deal in a fit of pique from having been conned all along. This mob is also known as "voters." Dumb, truly dumb. For whether one agrees or not, this exercise was really about some important things
Now why would the IMF do something like that you might ask? I did and I led you wrong last week. Chrissie was up to her wonderful Gaelic nose in this one. Chrissie wants out and the next job is Madame Le President. And Chrissie wants to be able to say that she always spoke the truth. And so from its storied and bug-infested beginnings, the Fund is now the launching pad for a run at the Elysee Palace. Maybe this one works. I am sure Chrissie will not succumb to base instincts like her predecessor. Alons enfants!
And finally, thanks to Carter, who of course knew all of this but made damn sure he was going to keep me honest...and give me a topic. We need more like him. I need more like him. I'm pretty sure of that.
Tuesday, July 14, 2015
GRANDCHILD ARMY RETREATS
We survived. I would rather pay Greece's bills than feed and care for that mob for a year. But they're wonderful kids and a joy to have around.
Speaking of Greece, the IMF simply can't keep its mouth shut. Today, somehow, their confidential report got "leaked" which suggests that for anything to work, payment obligations will have to be extended for at least 30 years and a healthy dollop of forgiveness slathered around on top. Now they are probably right in general but this doesn't make life easier for anyone. It has been gospel seemingly forever that for any debt arrangement to be finalized, the IMF must be involved as a monitoring factor of the debtor's performance if for no other reason. In this situation, Germany has made it a condition of the finalization of any agreement. So, riddle me this one Batman; if the IMF is screaming "debt forgiveness and maturity extension" whilst Germany is dead set against either, how does this get off square one? The other beaut of a spanner in these works is the suggestion openly being made that the U.S., upset at its rebuff in the negotiations, was the force behind the leak. The Duce's gang is not real bright but they can't be that stupid. Then again, it would fit in with the history of petulance always on display over the past few years so the suggestion is bound to find some traction. If there is anything to it, look out.
The good thing is that the entire affair once again gives support to the issue as to why we need the IMF at all which has been a point of mine for quite some time as loyal readers know. For certain, Chrissy is not involved in this ploy, she is far too bright, which means she is clearly being sandbagged. Now in the real world, the sandbagger would be identified and be out the door in a New York minute, but things don't work that way at the Fund. So, in the midst of a situation that could end the organization of Europe as we know it, we find the Fund, a pain in the bum under the best of conditions, suffering from internal revolt which massively complicates everything. Let's just chew on that one for a day or so and see what tomorrow brings in response to poor ol' Tsipras' report to the Parliament and his party which is taking place as we write. I'd rather fight the 8 year old Army from Central Illinois than face that.
Oh, in case you missed it, all 28 are over in Brussels trying to figure out who does what to whom. The Brits, always helpful, said not only "NO" to financial support, but "HELL, NO." Lovely, that.
Speaking of Greece, the IMF simply can't keep its mouth shut. Today, somehow, their confidential report got "leaked" which suggests that for anything to work, payment obligations will have to be extended for at least 30 years and a healthy dollop of forgiveness slathered around on top. Now they are probably right in general but this doesn't make life easier for anyone. It has been gospel seemingly forever that for any debt arrangement to be finalized, the IMF must be involved as a monitoring factor of the debtor's performance if for no other reason. In this situation, Germany has made it a condition of the finalization of any agreement. So, riddle me this one Batman; if the IMF is screaming "debt forgiveness and maturity extension" whilst Germany is dead set against either, how does this get off square one? The other beaut of a spanner in these works is the suggestion openly being made that the U.S., upset at its rebuff in the negotiations, was the force behind the leak. The Duce's gang is not real bright but they can't be that stupid. Then again, it would fit in with the history of petulance always on display over the past few years so the suggestion is bound to find some traction. If there is anything to it, look out.
The good thing is that the entire affair once again gives support to the issue as to why we need the IMF at all which has been a point of mine for quite some time as loyal readers know. For certain, Chrissy is not involved in this ploy, she is far too bright, which means she is clearly being sandbagged. Now in the real world, the sandbagger would be identified and be out the door in a New York minute, but things don't work that way at the Fund. So, in the midst of a situation that could end the organization of Europe as we know it, we find the Fund, a pain in the bum under the best of conditions, suffering from internal revolt which massively complicates everything. Let's just chew on that one for a day or so and see what tomorrow brings in response to poor ol' Tsipras' report to the Parliament and his party which is taking place as we write. I'd rather fight the 8 year old Army from Central Illinois than face that.
Oh, in case you missed it, all 28 are over in Brussels trying to figure out who does what to whom. The Brits, always helpful, said not only "NO" to financial support, but "HELL, NO." Lovely, that.
Thursday, July 2, 2015
GENIUS ON DISPLAY
The IMF said today the Greece will probably need not only debt restructuring but debt reduction in order for it to get back on it's feet. WELL, you could have knocked me over with a feather! Imagine being able to figure that out and reach that conclusion! I wonder what gave them the first clue: a debt to GDP ratio of 180%? Or might it have been that Greece produces very little of what anyone else wants? Or that there are only 11,000,000 people in the whole damn country, many of whom don't like to work and none of whom like to pay taxes. Or maybe in the end it was just the fact that they elected an idiot to lead them in their time of economic peril. Anyway, that was the word of the day.
Why this organization is allowed to continue in it's existence is beyond me other than the fact that it provides work to scores--nay, hundreds--of otherwise unemployable Ph.D economists. And, I suppose, it is useful to have somebody around who can elucidate the obvious from time to time. Of course, whilst they were proclaiming this Delphonic revelation no one seemed to inquire of them that if this was the case, how 'bout starting with YOU as the first debt reducer? Even seen a scalded cat? I never have either thank goodness but if one conjures up the image one would see the reaction if such a question were to be asked.
In the world of the living, both sides continued to fire broadsides at one another while the rest of the world was trying to piece together what the results of the referendum would mean without much success. While that was going on, there were reports that the banks were down to less than 500 million Euros in cash and withdrawals were now limited to 50 Euros from 60 Euros because of a shortage on 20 Euro bills. We are truly in Faerie-Coo-Coo land. It is a sick joke that the Greeks invented the word "Chaos" but there you are...and there we have it. To complete the farce, the most harsh opinion against the Greeks coming from any European leader came from the Prime Minister of Italy. ITALY! I kid you not. When the Italians announce that they are sick and tired of your fiscal irresponsibility, you are done my son.
Tomorrow marks the start of our great national holiday, the Fourth of July. The country shuts down and the smell of barbecue waffs from coast to coast for three days. I'm going to shut down as well. Sunday will come soon enough and we'll have a clearer idea of where this is all going by Monday...or not. Anyway, that's when I'm back. The Document starts with, "In Congress, July 4th, 1776..." and finishes with, "...we mutually pledge to each other, our Lives, our Fortunes and our Sacred Honor."
They meant it, too. Don't see much of that any more.
Why this organization is allowed to continue in it's existence is beyond me other than the fact that it provides work to scores--nay, hundreds--of otherwise unemployable Ph.D economists. And, I suppose, it is useful to have somebody around who can elucidate the obvious from time to time. Of course, whilst they were proclaiming this Delphonic revelation no one seemed to inquire of them that if this was the case, how 'bout starting with YOU as the first debt reducer? Even seen a scalded cat? I never have either thank goodness but if one conjures up the image one would see the reaction if such a question were to be asked.
In the world of the living, both sides continued to fire broadsides at one another while the rest of the world was trying to piece together what the results of the referendum would mean without much success. While that was going on, there were reports that the banks were down to less than 500 million Euros in cash and withdrawals were now limited to 50 Euros from 60 Euros because of a shortage on 20 Euro bills. We are truly in Faerie-Coo-Coo land. It is a sick joke that the Greeks invented the word "Chaos" but there you are...and there we have it. To complete the farce, the most harsh opinion against the Greeks coming from any European leader came from the Prime Minister of Italy. ITALY! I kid you not. When the Italians announce that they are sick and tired of your fiscal irresponsibility, you are done my son.
Tomorrow marks the start of our great national holiday, the Fourth of July. The country shuts down and the smell of barbecue waffs from coast to coast for three days. I'm going to shut down as well. Sunday will come soon enough and we'll have a clearer idea of where this is all going by Monday...or not. Anyway, that's when I'm back. The Document starts with, "In Congress, July 4th, 1776..." and finishes with, "...we mutually pledge to each other, our Lives, our Fortunes and our Sacred Honor."
They meant it, too. Don't see much of that any more.
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, June 2, 2015
I MEAN, THEY GET PAID FOR THIS?
Now I know it's a little strange out there sometimes, but there must be a full moon or something going on because with just two days gone in this week, things are nuts all around the world.
Yesterday, Stan Fisher made a speech up in Canada. Stan makes Alan Greenspan look like a writer of children's books..."See Spot run...run, run, run." No one understood what he was saying. Now I knew what he wanted to say (I think). He wanted to say that things weren't looking so bad so it was time to get on with the business of normalizing rates but he couldn't. He wanted to say that Dodd/Frank was a pain in the ass but he couldn't. He wanted to say that the less-than-sterling economic recovery was perhaps more of a structural problem than a financial one, but he couldn't. In fact what he supposedly did say was the opposite of all the things that I think he wanted to say...or so it was reported...but he didn't. One thing he was serious about was the almost off-hand remark that financial crises are not a thing of the past and the Fed doesn't have all the answers to prevent the next on, so let's stay on guard.
One would think that a speech like this by the Vice Chairman of the Board would be widely reported in today's press...but it wasn't. The press figured out that they didn't know what he said either.
So today we get Lael Brainard of the Fed telling us that the dollar and weather was the cause of the lousy first quarter numbers but not to expect a strong rebound in the second quarter. Huh? The weather's fine and the dollar has weakened so why not? Well I guess that means no rate hikes, eh? Not so fast says she, we may have to move after carefully considering all the data. Translation: don't hold your breath. Now Ms. Brainard is a serious political player and if she believes (which she does) that to get anywhere near the Administration's touted 3% growth rate coming into an election year with a middling second quarter after a -0.7% first quarter, we gotta keep pumpin' it out, baby, we have a real split on this Board. Stanley Fisher against probably everyone else. In matters of intelligence and economics, Stanley wins but not politics.
Were the openly contrasting views widely noted in today's press? I guess I missed it.
Finally, Over There, the Euros presented the Greeks with a series to requirements (none dare call them demands) and the Greeks presented the Euros with a plan of their own. A real love story: two ships that pass in the night. It reminds me of the battle between two cities in New Jersey many years ago over water rights. Jersey City sued Hoboken and won and promptly sent Hoboken a bill for somewhere in the neighborhood of $2,000,000. Hoboken had a checking balance at the time of about $16.53. A very good friend of mine, then the assistant corporation counsel for the then-blighted city was asked what he was going to do with the bill. His response? "I'm going to mark it, 'Deceased, return to sender.'"
The Euros had better decide whether they want the Greeks in or out. The Greeks have to decide the same thing. "Deceased, return to sender," seems to me to be an elegant solution for either side.
Oh, one more piece of craziness. Whilst Chrissy was trying to figure out how to get 1.8 billion Euros back from the Greeks, the geniuses in her wholly-owned economic think tank published a study (they are very good at studies) proving without a doubt that nations should simply forget about paying back their debts and just keep pumping it up to stimulate growth. Hell, who needed a study! The Greeks have been saying this all along! Once again, you can't make this stuff up. Look for Little Paulie Krugman to be all over this one in the Times ASAP proclaiming vindication and agreement with the mighty IMF! I just wonder how Angie is going to explain this one to Das Volk...especially as you can bet your boots in any plan the IMF gets paid first.
Its gotta be more than a full moon.
Yesterday, Stan Fisher made a speech up in Canada. Stan makes Alan Greenspan look like a writer of children's books..."See Spot run...run, run, run." No one understood what he was saying. Now I knew what he wanted to say (I think). He wanted to say that things weren't looking so bad so it was time to get on with the business of normalizing rates but he couldn't. He wanted to say that Dodd/Frank was a pain in the ass but he couldn't. He wanted to say that the less-than-sterling economic recovery was perhaps more of a structural problem than a financial one, but he couldn't. In fact what he supposedly did say was the opposite of all the things that I think he wanted to say...or so it was reported...but he didn't. One thing he was serious about was the almost off-hand remark that financial crises are not a thing of the past and the Fed doesn't have all the answers to prevent the next on, so let's stay on guard.
One would think that a speech like this by the Vice Chairman of the Board would be widely reported in today's press...but it wasn't. The press figured out that they didn't know what he said either.
So today we get Lael Brainard of the Fed telling us that the dollar and weather was the cause of the lousy first quarter numbers but not to expect a strong rebound in the second quarter. Huh? The weather's fine and the dollar has weakened so why not? Well I guess that means no rate hikes, eh? Not so fast says she, we may have to move after carefully considering all the data. Translation: don't hold your breath. Now Ms. Brainard is a serious political player and if she believes (which she does) that to get anywhere near the Administration's touted 3% growth rate coming into an election year with a middling second quarter after a -0.7% first quarter, we gotta keep pumpin' it out, baby, we have a real split on this Board. Stanley Fisher against probably everyone else. In matters of intelligence and economics, Stanley wins but not politics.
Were the openly contrasting views widely noted in today's press? I guess I missed it.
Finally, Over There, the Euros presented the Greeks with a series to requirements (none dare call them demands) and the Greeks presented the Euros with a plan of their own. A real love story: two ships that pass in the night. It reminds me of the battle between two cities in New Jersey many years ago over water rights. Jersey City sued Hoboken and won and promptly sent Hoboken a bill for somewhere in the neighborhood of $2,000,000. Hoboken had a checking balance at the time of about $16.53. A very good friend of mine, then the assistant corporation counsel for the then-blighted city was asked what he was going to do with the bill. His response? "I'm going to mark it, 'Deceased, return to sender.'"
The Euros had better decide whether they want the Greeks in or out. The Greeks have to decide the same thing. "Deceased, return to sender," seems to me to be an elegant solution for either side.
Oh, one more piece of craziness. Whilst Chrissy was trying to figure out how to get 1.8 billion Euros back from the Greeks, the geniuses in her wholly-owned economic think tank published a study (they are very good at studies) proving without a doubt that nations should simply forget about paying back their debts and just keep pumping it up to stimulate growth. Hell, who needed a study! The Greeks have been saying this all along! Once again, you can't make this stuff up. Look for Little Paulie Krugman to be all over this one in the Times ASAP proclaiming vindication and agreement with the mighty IMF! I just wonder how Angie is going to explain this one to Das Volk...especially as you can bet your boots in any plan the IMF gets paid first.
Its gotta be more than a full moon.
Thursday, May 28, 2015
HARD CHOICES
I really want to write about the growing problem of unfunded pension plans which threaten the financial stability of a number of our states and municipalities but to be honest I don't understand it. One idea that manages to gain traction day by day is the scheme to cover pension shortfalls by issuing debt...despite the fact that in most cases there is no way to pay back the debt except by issuing replacement debt somewhere down the road in the midst of unknowable market conditions or by raising taxes which, if politically possible right now would obviate the necessity to issue debt in the first place. Problem is I can't write about that either because that's another thing I don't understand. Then there's the apparent huge demand for this sort of thing from investors...which I don't understand at all. Oh yeah, I know that if the state of, say, Illinois or any municipality therein issues debt, the interest payments are tax free to residents of that state which is a very good deal indeed if you are of the opinion that you always collect more in interest than you lose in principal--a thought to which I have never subscribed. Recent experience of the bond holders of Detroit might make some think twice (they got back about 13% in bankruptcy), but nope, the bond gurus keep saying they can sell it.
Which brings me back thinking about how all that stuff back 10 years ago got sold and makes me wonder why no politician is interested in who was buying that stuff and why? I mean if there's someone who wants to buy debt of Chicago rated junk by one major rating house, why get mad at me if I create some and sell it to that fo...er...investor who can read Moody's as well as the next guy when Chi-town goes belly-up? I guess there's a reason but I don't understand it.
Which brings me to Greece which I don't want to write about but it's something that I think I understand.
Anyway, the Greeks just a couple of days ago said they were just this far away from a deal. The Euros waited a bit before saying not so fast, the Greeks then said they were making more progress, Jacob/Jack urged both sides to reach a deal and avert the catastrophe of a Grexit (no one was listening to him this time either) and today Chrissy popped up with the opinion that there probably wouldn't be a deal and that a default was "probable." JUST to top things off, the Rock Star announced that he "would be back"--from where was the obvious question coupled with the prayer that if the dumb bugger has really been away that he not return from wherever that was.
So this I understand. Everyone involved is mostly out of their mind which is certainly a valid excuse for things having gotten this far unlike the pension crisis which is overrun by the most cynical, greedy, race of self-centered humans on the planet at this time save for the management of FIFA who may, just may, pay a steep price in which case there is cause for hope. Now it is purely hope you understand, because I don't understand that either.
Which brings me back thinking about how all that stuff back 10 years ago got sold and makes me wonder why no politician is interested in who was buying that stuff and why? I mean if there's someone who wants to buy debt of Chicago rated junk by one major rating house, why get mad at me if I create some and sell it to that fo...er...investor who can read Moody's as well as the next guy when Chi-town goes belly-up? I guess there's a reason but I don't understand it.
Which brings me to Greece which I don't want to write about but it's something that I think I understand.
Anyway, the Greeks just a couple of days ago said they were just this far away from a deal. The Euros waited a bit before saying not so fast, the Greeks then said they were making more progress, Jacob/Jack urged both sides to reach a deal and avert the catastrophe of a Grexit (no one was listening to him this time either) and today Chrissy popped up with the opinion that there probably wouldn't be a deal and that a default was "probable." JUST to top things off, the Rock Star announced that he "would be back"--from where was the obvious question coupled with the prayer that if the dumb bugger has really been away that he not return from wherever that was.
So this I understand. Everyone involved is mostly out of their mind which is certainly a valid excuse for things having gotten this far unlike the pension crisis which is overrun by the most cynical, greedy, race of self-centered humans on the planet at this time save for the management of FIFA who may, just may, pay a steep price in which case there is cause for hope. Now it is purely hope you understand, because I don't understand that either.
Thursday, April 16, 2015
RIEN DE LA PLUS
William Hill called "no more" yesterday. The betting has ended in so far as the famous British bookmaker is concerned. Greece will default.
Now that is not yet a certainty, but Willie Hill has been around for a long time and is damn good at what they do which is handicapping practically anything. If it came done to them against, say, Little Paulie Krugman, I would take them hands down. I think what they are looking at is the growing sense of not perhaps the inevitable but the increasing realization that no one gives a damn. There are signs of panic as well. Two days ago the idea was floated that the way for the Greeks to get out of their liquidity bind was to raid the nation's pension funds. The geniuses in Argentina tried that one but of course having their own currency, the Argies could always print Pesos to "return" what had been sto...ah...borrowed. Finding new Euros is a bit beyond Greece's capabilities today. If this does occur, we could very easily see blood in the streets. Nothing is worth that.
Today, Chrissie made it very clear that the Fund would not accept any delay in repayment. OK, that was expected but that doesn't mean the Euros will go in the same direction. However, before we reach that point there must be some movement on Greek restructuring called for by the Euros and the Greeks appear to be paralyzed. Admittedly, an attempt to satisfy the demands placed upon them might well cause the fall of the government and certainly a fracture of Tsipras's party...a possible violent fracture at that. No European leader has stepped forward to take ownership of this thing except for Frau Merkel who has a few other things on her mind. Varoufakis is off romancing Il Duce as I write as thought that is going to accomplish anything. Earlier in the day he gave a press conference in D.C. to all the gang at the IBRD/IMF meetings. I've spoken with a couple of friends who were there and the general reaction seems to be that he did himself no good at all by being vague and indecisive. I'm not surprised. As I have said before, his exit from the proceedings would be the most positive event of the past month. He could qualify as the finance minister of Atlantis being so for in over his head. Well, perhaps William Hill is not the only game in town. Perhaps. Fait vos gageur, gents. The wheel is spinning.
Now that is not yet a certainty, but Willie Hill has been around for a long time and is damn good at what they do which is handicapping practically anything. If it came done to them against, say, Little Paulie Krugman, I would take them hands down. I think what they are looking at is the growing sense of not perhaps the inevitable but the increasing realization that no one gives a damn. There are signs of panic as well. Two days ago the idea was floated that the way for the Greeks to get out of their liquidity bind was to raid the nation's pension funds. The geniuses in Argentina tried that one but of course having their own currency, the Argies could always print Pesos to "return" what had been sto...ah...borrowed. Finding new Euros is a bit beyond Greece's capabilities today. If this does occur, we could very easily see blood in the streets. Nothing is worth that.
Today, Chrissie made it very clear that the Fund would not accept any delay in repayment. OK, that was expected but that doesn't mean the Euros will go in the same direction. However, before we reach that point there must be some movement on Greek restructuring called for by the Euros and the Greeks appear to be paralyzed. Admittedly, an attempt to satisfy the demands placed upon them might well cause the fall of the government and certainly a fracture of Tsipras's party...a possible violent fracture at that. No European leader has stepped forward to take ownership of this thing except for Frau Merkel who has a few other things on her mind. Varoufakis is off romancing Il Duce as I write as thought that is going to accomplish anything. Earlier in the day he gave a press conference in D.C. to all the gang at the IBRD/IMF meetings. I've spoken with a couple of friends who were there and the general reaction seems to be that he did himself no good at all by being vague and indecisive. I'm not surprised. As I have said before, his exit from the proceedings would be the most positive event of the past month. He could qualify as the finance minister of Atlantis being so for in over his head. Well, perhaps William Hill is not the only game in town. Perhaps. Fait vos gageur, gents. The wheel is spinning.
Thursday, April 9, 2015
APRIL IN MOSCOW
This was in the midst of being written yesterday when the first thunder storms of the year came rolling in. KA-BOOM! And all electronic appliances stopped but the lights didn't go out. Back on this morning so I thought I would wait and close out yesterday's thoughts. The break is easy to spot.
Well, the papers were full of pictures of Alexis and his new best friend, Val, who was positively dripping with unctuous dribble and the thought of this silly little man from Greece apparently spitting in the eye of the EU over the Ukraine and expecting big numbers from Mother Russia. Putin loves it when ever there is trouble afoot.
Over the weekend, our rock star finance minister traveled to Washington to meet with Christine to promise her that the IMF would get paid and Chrissy, in return, promised to do everything she could to help Greece. Things were looking up until one stops to think that there is really nothing she can do and there is no way in hell that Greece can come up with a couple of billion next week without new loans and hence, Alexis to the Kremlin tout suite.
I think the strategy is beginning to take shape and it doesn't look good. The IMF gets paid but we now begin a series of selective defaults probably beginning, if possible, with Germany because everybody hate the Germans. Now here is where this thing gets hairy as it brings us bright back to where we were a few years ago. A couple of billion missed payments in Euros doesn't scare anyone, but the European banks are still not clean and the specter of rolling defaults or even one massive default could have repercussions throughout the entire EZ. Remember, too, the Greek banks, which are already toast de facto, will become toast de jurie and just what does that mean?
Well, for one thing they have been issuing massive amounts of T-Bills which are guaranteed by the Greek Government, which they buy themselves and sell to the Central Bank to fund their liquidity position! Right now the Central Bank can use the notes as collateral at the ECB! That ends immediately and the music stops. That is when real blood begins to spill. I asked He Who Knows All Things the other day how could there be a single Euro left on deposit in a Greek bank. Answer: "Who says there is other than day to day working capital." It was rhetorical on my part but he confirmed what I already knew.
I don't think we are going to have another banking crises ala a few years back but things are going to become very difficult over the next few months. On a grander scale, if the EZ banking system comes under new stress how can it not upset any thought of an economic resurgence which is being talked of in hushed tones as though it has really come into existence. One must keep in mind that the only real source of credit in the EZ are the banks and if one takes them out of the equation, most everything stops. The concept of such as exists Over Here of a "shadow banking system" is still merely a concept in the EZ. Over Here, the involvement of commercial banks in credit extensions--particularly what is called "C & I" (credit & industrial) lending has shrunk from somewhat over 50% of the market as little as 20 years ago to slightly under 20% today. We have discussed the risk in that on previous occasions but it is what it is. In Euroland it ain't what it ain't.
Well, Christine got her money today, Alexis flew back to Athens and the Rock Star met with Joe Steglitz who, next to his good self, is probably the last economist with whom to be seen in the middle of such a crisis. Alexis got just what he should have expected: a Greek icon stolen by the Nazis during by the occupation and retrieved by the Russians. Reports say Alexis was in tears. Of course the dumb bugger forgot to ask Putin why the Russians had held on to the thing for SEVENTY years before giving it back but, hey, he's learning. He didn't get any money as was predicted in this space but in the future he probably will. Here's how.
I think there will be rolling defaults probably beginning in the next few weeks, not in total, but to the extent that the Greeks can afford to pay out something. In exchange for Greek support on the political front, the Russian will engage in some "bridge financing" to their Orthodox brothers. keep in mind that the sanctions imposed by the Euros on Russia expire at the end of July. They can ONLY be renewed with the unanimous vote of all member states. Do not expect the Greeks to leave the Zone or the Union before that. IF they make nominal payments, they can surely talk this thing out for a couple of months and what's a billion or two to the Russians at this stage given what is at stake. Anyway, that's what I would do. Of course that might cloud the future for a decade or two but they have been around for three thousand years or so...it's only been the past 2000 that have been a problem.
Jamie Diamond's letter to shareholders today really set a cat among the pigeons. Read it and we'll try to talk about it tomorrow
Well, the papers were full of pictures of Alexis and his new best friend, Val, who was positively dripping with unctuous dribble and the thought of this silly little man from Greece apparently spitting in the eye of the EU over the Ukraine and expecting big numbers from Mother Russia. Putin loves it when ever there is trouble afoot.
Over the weekend, our rock star finance minister traveled to Washington to meet with Christine to promise her that the IMF would get paid and Chrissy, in return, promised to do everything she could to help Greece. Things were looking up until one stops to think that there is really nothing she can do and there is no way in hell that Greece can come up with a couple of billion next week without new loans and hence, Alexis to the Kremlin tout suite.
I think the strategy is beginning to take shape and it doesn't look good. The IMF gets paid but we now begin a series of selective defaults probably beginning, if possible, with Germany because everybody hate the Germans. Now here is where this thing gets hairy as it brings us bright back to where we were a few years ago. A couple of billion missed payments in Euros doesn't scare anyone, but the European banks are still not clean and the specter of rolling defaults or even one massive default could have repercussions throughout the entire EZ. Remember, too, the Greek banks, which are already toast de facto, will become toast de jurie and just what does that mean?
Well, for one thing they have been issuing massive amounts of T-Bills which are guaranteed by the Greek Government, which they buy themselves and sell to the Central Bank to fund their liquidity position! Right now the Central Bank can use the notes as collateral at the ECB! That ends immediately and the music stops. That is when real blood begins to spill. I asked He Who Knows All Things the other day how could there be a single Euro left on deposit in a Greek bank. Answer: "Who says there is other than day to day working capital." It was rhetorical on my part but he confirmed what I already knew.
I don't think we are going to have another banking crises ala a few years back but things are going to become very difficult over the next few months. On a grander scale, if the EZ banking system comes under new stress how can it not upset any thought of an economic resurgence which is being talked of in hushed tones as though it has really come into existence. One must keep in mind that the only real source of credit in the EZ are the banks and if one takes them out of the equation, most everything stops. The concept of such as exists Over Here of a "shadow banking system" is still merely a concept in the EZ. Over Here, the involvement of commercial banks in credit extensions--particularly what is called "C & I" (credit & industrial) lending has shrunk from somewhat over 50% of the market as little as 20 years ago to slightly under 20% today. We have discussed the risk in that on previous occasions but it is what it is. In Euroland it ain't what it ain't.
Well, Christine got her money today, Alexis flew back to Athens and the Rock Star met with Joe Steglitz who, next to his good self, is probably the last economist with whom to be seen in the middle of such a crisis. Alexis got just what he should have expected: a Greek icon stolen by the Nazis during by the occupation and retrieved by the Russians. Reports say Alexis was in tears. Of course the dumb bugger forgot to ask Putin why the Russians had held on to the thing for SEVENTY years before giving it back but, hey, he's learning. He didn't get any money as was predicted in this space but in the future he probably will. Here's how.
I think there will be rolling defaults probably beginning in the next few weeks, not in total, but to the extent that the Greeks can afford to pay out something. In exchange for Greek support on the political front, the Russian will engage in some "bridge financing" to their Orthodox brothers. keep in mind that the sanctions imposed by the Euros on Russia expire at the end of July. They can ONLY be renewed with the unanimous vote of all member states. Do not expect the Greeks to leave the Zone or the Union before that. IF they make nominal payments, they can surely talk this thing out for a couple of months and what's a billion or two to the Russians at this stage given what is at stake. Anyway, that's what I would do. Of course that might cloud the future for a decade or two but they have been around for three thousand years or so...it's only been the past 2000 that have been a problem.
Jamie Diamond's letter to shareholders today really set a cat among the pigeons. Read it and we'll try to talk about it tomorrow
Thursday, March 19, 2015
WE'LL MEET AGAIN...
Frankie, and Angie and Mario and a couple of others graciously accepted Tsipras' suggestion that they all get together while at the same time wondering for what purpose. That should get things going on a real warm note. I asked a guy yesterday who had been involved in this stuff since the Hebrews stiffed the Romans if he thought the Greeks really wanted out and he said he didn't think so but he couldn't really figure out why they were acting in such a manner. "Are they dumb," I suggested or just poorly advised? 'Probably both," said he. "Certainly the latter."
I think he may be right on both counts as today their rock star financed minister revealed that he could not find a copy of the bail-out agreement when he took office and had to wait 3 days before one was delivered. The reason? "Greek ministers take things with them when they leave office." Like bail-out agreements involving the Greek State? Who the hell was working there, Hilliary Clinton? Look, at the end of the day it makes little difference except that when you are asking for a heads-only meeting of a mob that can tell you what they had for breakfast 3 years ago because they saved the menu, don't go around admitting that for the first three days in office you hadn't had a clue about anything that had been agreed except for what you read in the papers but were still prepared to shoot off at the mouth...oh hell, why do I care.
And so, tomorrow Hellas owes Chrissy at the Fund around 350 million Euros and about 1.7 billion to somebody else. They will probably dredge it up from somewhere even if they have to "borrow" from the pension plan. Word to the wise: pay the Fund. If you don't, their future becomes very much in doubt and yours is really stinko as they are the source for the cheapest money around should you ever get another deal done. You can tell everyone else to go fish because they are politicians...but not for long. And then shut up, say all the things they want to hear and maybe, just maybe you get out of this hole, but for God"s sake in the meantime, DROP THE SHOVEL!
Now it must seem that I am piling on the Greeks and rightfully so I would argue because of the fact that they have acted so incompetently throughout the process that it is hard not to be. But stupid knows no nationality. Take the case of the head of the group of Euro finance ministers, Jeroen Dijsselbloem (I know, me neither) who said--musingly--yesterday, "Perhaps we need exchange controls..." Tell me genius, do you have a number for the amount of Euros that went flying out of Greece today or is "a lot" sufficient for our purposes? Is there any one in Euroland that can keep this guy locked up for a while? He'll probably be at the meeting tonght. Me? My brackets are still intact, but I wonder what will last longer. My brackets or the Greeks in the Euro Zone? I mean, I'm smarter than this bunch.
I think he may be right on both counts as today their rock star financed minister revealed that he could not find a copy of the bail-out agreement when he took office and had to wait 3 days before one was delivered. The reason? "Greek ministers take things with them when they leave office." Like bail-out agreements involving the Greek State? Who the hell was working there, Hilliary Clinton? Look, at the end of the day it makes little difference except that when you are asking for a heads-only meeting of a mob that can tell you what they had for breakfast 3 years ago because they saved the menu, don't go around admitting that for the first three days in office you hadn't had a clue about anything that had been agreed except for what you read in the papers but were still prepared to shoot off at the mouth...oh hell, why do I care.
And so, tomorrow Hellas owes Chrissy at the Fund around 350 million Euros and about 1.7 billion to somebody else. They will probably dredge it up from somewhere even if they have to "borrow" from the pension plan. Word to the wise: pay the Fund. If you don't, their future becomes very much in doubt and yours is really stinko as they are the source for the cheapest money around should you ever get another deal done. You can tell everyone else to go fish because they are politicians...but not for long. And then shut up, say all the things they want to hear and maybe, just maybe you get out of this hole, but for God"s sake in the meantime, DROP THE SHOVEL!
Now it must seem that I am piling on the Greeks and rightfully so I would argue because of the fact that they have acted so incompetently throughout the process that it is hard not to be. But stupid knows no nationality. Take the case of the head of the group of Euro finance ministers, Jeroen Dijsselbloem (I know, me neither) who said--musingly--yesterday, "Perhaps we need exchange controls..." Tell me genius, do you have a number for the amount of Euros that went flying out of Greece today or is "a lot" sufficient for our purposes? Is there any one in Euroland that can keep this guy locked up for a while? He'll probably be at the meeting tonght. Me? My brackets are still intact, but I wonder what will last longer. My brackets or the Greeks in the Euro Zone? I mean, I'm smarter than this bunch.
Wednesday, January 21, 2015
CLEVER, THESE CHINESE
Zhu Min is the Deputy Managing Director of the IMF. In an earlier life he held a number of positions at the Central Bank of China and within the Chinese banking system. American educated. Zhu Min is a very clever dude so it pays to listen when he speaks and he did just that today at Davos of all places where the presence of intelligennt speech is practically unknown.
His message was a simple one which should not come as news to readers of theses pages. The collapse of a few years ago was caused by the massive mispricing of risk and highly questionable practices in one of the most regulated financial markets in the world (I make no argument as to how good the regulators were, but God knows they were around). Many of those excesses have been cured--at enormous cost to be sure--and an entirely new regulatory framwork has been, or in in the process of, being put in place with great political oversight. Problem solved.
Well, not quite, argues Zhu Min. You see, while all of this has been going on, the playing field has shifted. While the Washington Politicos have spent billions of taxpayer money redrawing the touch lines, the game has moved from the playing fields of the regulators and the institutions which they regulate to a completely new class of financial providors, all almost entirely unregulated, offering every form of financial product that can be dreamed up by the imagination of man to all comers differentiated only by the perceived pricing of the credit. In short, it's 2007 all over again with none of the oversight previously available and in, what we liked to refer to on the dealing floor, size. Just how much size? How does $17 TRILLION sound? From whom, we are not really sure. To whom, we don't know that either. In what form? Beats the hell out of us. who's buying it in packaged form? Well, we draw a blank there too. And we worry about Dodd Frank? OooooooK.
What was not mentioned, as to not offend the audience I suspect, was that in 2007 everybody was more or less speaking to one another in cordial tones. Today, it's dog eat dog with Central Banks at each other's throats and governments barely on speaking terms. The EU is an economic mess soon to be made worse by the useless actions of the ECB, the U.S. economy in a head fake to progress, currency wars all about the globe and Russia threatening world war whilst its corporations owe goodness know how much to those pesky Euro banks that they can't pay unless Saudi Arabia goes dry. No wonder no one cares about $17 trillion of unknown credit and how it was funded. No anxiety at all except from some little Chinese guy of whom no one ever heard. All I can say is where the hell have you gone Joe Dimaggio?
His message was a simple one which should not come as news to readers of theses pages. The collapse of a few years ago was caused by the massive mispricing of risk and highly questionable practices in one of the most regulated financial markets in the world (I make no argument as to how good the regulators were, but God knows they were around). Many of those excesses have been cured--at enormous cost to be sure--and an entirely new regulatory framwork has been, or in in the process of, being put in place with great political oversight. Problem solved.
Well, not quite, argues Zhu Min. You see, while all of this has been going on, the playing field has shifted. While the Washington Politicos have spent billions of taxpayer money redrawing the touch lines, the game has moved from the playing fields of the regulators and the institutions which they regulate to a completely new class of financial providors, all almost entirely unregulated, offering every form of financial product that can be dreamed up by the imagination of man to all comers differentiated only by the perceived pricing of the credit. In short, it's 2007 all over again with none of the oversight previously available and in, what we liked to refer to on the dealing floor, size. Just how much size? How does $17 TRILLION sound? From whom, we are not really sure. To whom, we don't know that either. In what form? Beats the hell out of us. who's buying it in packaged form? Well, we draw a blank there too. And we worry about Dodd Frank? OooooooK.
What was not mentioned, as to not offend the audience I suspect, was that in 2007 everybody was more or less speaking to one another in cordial tones. Today, it's dog eat dog with Central Banks at each other's throats and governments barely on speaking terms. The EU is an economic mess soon to be made worse by the useless actions of the ECB, the U.S. economy in a head fake to progress, currency wars all about the globe and Russia threatening world war whilst its corporations owe goodness know how much to those pesky Euro banks that they can't pay unless Saudi Arabia goes dry. No wonder no one cares about $17 trillion of unknown credit and how it was funded. No anxiety at all except from some little Chinese guy of whom no one ever heard. All I can say is where the hell have you gone Joe Dimaggio?
Tuesday, October 7, 2014
WHAT IS THERE TO SAY?
Look, this is getting impossible. I am totally out of material unless i become dumb enough to jump in with a comment about the AIG trial in New York which is understood by practically no one…and that might be an overstatement. So, I'm forced to write about the only financial newsworthy event of the day which is the IMF and world growth. With the possible exception of the United States, it stinks.
Moving right along, the result was equity markets crashing all over the place and bond yields heading south. The ten year wound up at 2.34% while the Bund dropped below .90%--I don't know where it closed. The real fear is Europe and it is on two levels; political and economic. The latter is lousy with no real growth anywhere except for England and how much of that is fueled by the housing bubble is anybody's guess. The political situation might even be shaping up to be worse. There is a clear and growing divide between the Germans and damn near everyone else, especially in the southern tier, with the gauntlet being thrown down by the French who have made it crystal clear that deficit rules be damned and have opened begun an open recruiting period to enlist the support of a coalition of the willing. Things got worse today as Angie's guys stated that any thoughts of Quantitative Easing by the ECB were not on and the purchase of corporate debt was definitely verboten. Over to you Fritz. What gets this thing moving?
Now this had been hinted before but today's statement was definitive…until the next statement…which certainly puts a whole, new shine on things. Whether the last thought on the subject or not, either way we have a pretty good game of financial and political chicken going on with, again, the overhang of British elections and the threat that with the continued conflict among member states, Cameron will pledge, as a campaign ploy, to take the Brits out of the EU…full stop. It would be a winner and as I have suggested, a killer for the Union. So much for what was a pretty lousy day.
Moving right along, the result was equity markets crashing all over the place and bond yields heading south. The ten year wound up at 2.34% while the Bund dropped below .90%--I don't know where it closed. The real fear is Europe and it is on two levels; political and economic. The latter is lousy with no real growth anywhere except for England and how much of that is fueled by the housing bubble is anybody's guess. The political situation might even be shaping up to be worse. There is a clear and growing divide between the Germans and damn near everyone else, especially in the southern tier, with the gauntlet being thrown down by the French who have made it crystal clear that deficit rules be damned and have opened begun an open recruiting period to enlist the support of a coalition of the willing. Things got worse today as Angie's guys stated that any thoughts of Quantitative Easing by the ECB were not on and the purchase of corporate debt was definitely verboten. Over to you Fritz. What gets this thing moving?
Now this had been hinted before but today's statement was definitive…until the next statement…which certainly puts a whole, new shine on things. Whether the last thought on the subject or not, either way we have a pretty good game of financial and political chicken going on with, again, the overhang of British elections and the threat that with the continued conflict among member states, Cameron will pledge, as a campaign ploy, to take the Brits out of the EU…full stop. It would be a winner and as I have suggested, a killer for the Union. So much for what was a pretty lousy day.
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