FOLLOW ON

A reader I hadn't heard from before asked this of yesterday's post:  Why would people pay for the right to lose money?"  Which is a hell of a good question having a simple answer.  People don't.  Oh, some do I suppose who are willing to pay for safety and view the 10 year Bund as a safety deposit box, but people don't buy this stuff.  Traders do, and of course the next question is why?  Well, there's an answer for that as well; they have a put to the Central Banks of the world who are buying this stuff as part of their QE programs.  In the meantime they can run it around a bit and make a pip here, two pips there or lend it out by way of repos or use it to create all sorts of wonderful, totally risk-free derivatives that can be sold to investors anxious for yield just like mortgage backed securities.  Got it now?  Not one single bit of value is created but you sure can make a lot of money which in the end is good...I guess.

Oh, by the by, Ireland just sold one billion Euros of 10 year at a yield of 0.33%.  Demand was said to be "gratifying," which means mothers and first born were for sale in exchange for a piece of the issue.    It will not be long before the Fed is being asked...Little Paulie will probably be leading the inquiry... why the 10 year Over Here is at 1.53%  and what are they going to do about it?  It's actually a good question given relative value.  Maybe it's because the U.S. already owes $20 Trillion on the balance sheet?  Could fundamentals play a role?  Just asking.

MAN BITES DOG

The geniuses in Brussels proved once again that they are in fact more incompetent than their counterparts Over Here (which is saying something) with one of the  nuttiest rulings of all time announced today.  Brussels has demanded that Apple pay 10 years worth of back taxes to the Republic of Ireland despite, in effect, admitting that Apple has complied with the law in all respects during that period.  But that isn't the story.  Ireland doesn't want the money!  Imagine, a government that doesn't want higher taxes?!!!  Man bites dog!

Aisde from the international ramifications and the remarkable fact that what Brussels has managed to do in an election year is to get Republicans and Democrats in Congress to agree in opposition to the Union's stance AND given it's highly questionable validity under all kinds of international law AND the highly questionable issue of retroactivity under ANYBODY'S law, the timing of this couldn't be dumber.  What must first be understood is that Brussels, while no doubt firing another salvo in the long war against American Internationals, is really using Apple as a pawn to once again get after Ireland for it's tax policy.

One might remember a few years ago Brussels threatened all sorts of dire reprisals against Dublin unless the Republic brought its corporate tax rates up to "European Standard"--Ireland was, and is at 12.5%--and doing very nicely thank you very much.  Then the Brits fell in line and lowered their rates to 15%; the Irish told Brussels to go pound sand and that was the end of that.  But Brussels didn't forget and here we go again with them thinking how clever we all are by using a completely unrelated piece of regulation--laws against unfair competition--to go after an American company in order to, in effect, wreck the Irish tax code.  My God, it's an annuity for lawyers on both sides of the pond but that isn't the worst of it.

To say that these fools are tone deaf would be the understatement of the past six months.  They lost the UK in July; the Dutchies have been making noises about leaving for a year; as we learned yesterday everybody running for office in France is not rejecting the thought of leaving and then of course there is the southern tier which simply have other things on their mind.  The unifying reason?  Governance by unelected bureaucrats and interference in the laws and mores of what are supposed to be sovereign nations.  If Ms. May invokes article 55  (50?) early in the year she will have been dealt  hand about which chemie players can only dream: a natural nine.  And to top the whole thing off, discussions regarding a joint trade agreement between the Union and the U.S. broke down today.  Despite the babblings of Il Duce, guess who goes to the front of the line now?  And with the "special relationship" intact.  And in regard to tax matters, on the side of the Angels.  Albion, and is that going to be a bitter pill.

If this bunch had a collective brain they would take it out and play with it.   Some years ago when hostage taking was the preferred modus opperendus of terrorists there appeared a very funny cartoon in one of the Brit magazines dealing in dark humour (is there one that didn't?):  Headline:  Terrorists take themselves prisoner.  Threaten to shoot themselves if demands not met.  Life mimics fiction.  Or perhaps the headline today should read: Dog bites himself.  As I keep saying:  You can't make this stuff up.

THE NEW NORMAL?

Big day today.  Jobs number came in at 195,000, quite a bit above estimates.  The immediate reaction was the proclamation of the end of QE III and the beginning of "tapering" in September.  But unlike past good report that were interpreted to portend the end of easy money, today's report sent the DOW at the close shooting up 147 points, the ten year showing a massive rise in yield to 2.71% and the dollar rising against anything out there including the Yen (again) which seems no longer to be a real currency.  Shock all over yet just a few years ago this was what one would have expected to happen.  Are we in a New (old) Normal?  Time will tell, but in the meantime, folks are feeling pretty good which we can take except for the nagging fact that many of the jobs were part-time and that production numbers, except for motor cars, are less than inspiring.  Then again, this could be Euroland.

Speaking of which, things are looking decidedly lousy Over There highlighted by the fact that for the first time in it's history, the Bank of England, now led by a Canadian of all things, announced that no one should expect a change in monetary policies or interest rates soon, which in the trade is known as "targeting' and heretofore was simply, "not on."  Not to be out done, Sr. Draghi announced pretty much the same thing in telling people that any form of tightening or whatever the hell they call it was a long, looonnng way away.  As opposed to uninspiring, things stink.  Portugal's government barely survived.  Italy, as predicted, is floundering.  France is...well...France.  All Germany cares about is the election and Greece appears to be on the verge of not making it--whatever that may mean.

However, the true shocker of the week comes from all places, Ireland, where the release of previously unknown recordings from the bowels of the Anglo Irish Bank present a stunning picture of outright malfeasance, fraud, lying and cynicism, the fallout from which will undoubtedly extend beyond the Republic as it plays directly into the fears of the Volk as to for what their money has been used.  I must admit that way back when we used to joke about a dicey credit situation that "it wasn't our money" (ok, doesn't sound funny now) but it was in jest.  These guys were deadly serious: they knew it wasn't their money; were prepared to take stupid risks because it wasn't; expected to be bailed out and lied to insure the bail-out was coming.  They wrecked a nation's finances and were made whole on German money.  Jail is the only place for them but what sensationalism like this does is to remove all rationality from the discussion of risk and replace in with the pure thirst for revenge which does nothing now and which will affect the argument on both sides of the Pond.  Revenge, as the Italians say, is a dish best eaten cold.  Not now.  We have a long way to go as witnessed by the catastrophe that is Dodd/Frank which is proven to be even more unfixable than originally thought.  And just to square the circle, it appears that the Affordable Care Act may be even a greater catastrophe as witnessed by the Administration's executive order in delaying it's most important part for a year...although for the life of me I cannot figure out how an implementation date mandated by Congress can be delayed by another branch of government.  I'm sure The Leader will explain.

In all, this may turn out to be a blogger's summer with wild and wonderful things occuring.  In the mean time, we are off to see the triplets who turn six on Monday.  Talk about wild and wonderful.

OH, WHAT A LOVELY WAR

...and the Brits won it!  After an all-nighter, David Cameron emerged victorious having convinced the leaders of Euroland to cut the EU budget for the first time in history.  Unlike some famous battles in the past it was the Brits and the Germans alligned on one side against the French which, if memory serves, last occurred in 1815...but then the Germans were on any side that paid them.  How much was involved?  Not very much to be sure and it is a multi-year budget running until 2022, a "forward looking" budget according to Harry Von Rompuy the EU President (as opposed to a backward looking budget, Harry?) and with that time frame a lot can change.  But it was important for two things: it was a huge political victory for Cameron both in Europe and at home and if anyone was in doubt as to who mattered more as between Frankie and Angie, that doubt was put to rest.  It just might keep the British in the Union as well...no little thing when compared to the prospects of just a few short weeks ago.  Now the European Parliament can veto the entire thing and there are quite dumb enough to do just that, but I suspect that the Cameron view will prevail even there especially with Angie firmly on board.  Quite a result indeed.

Overshadowed by all this was the decision by the assembled to move forward with the exploration of trade agreements with both Japan and the United States which IMHO is a good deal more important than the above but which, certainly in our case, is probably going to be a long time in coming if it comes at all.  If Von Rompuy though he was, from time to time,  having a bit of a bad time with Cameron wait until he starts dealing with The Leader where I suspect he will find a distinct lack of interest and an attention span some what shorter than that of my late, beloved Wheaten Terrier.  Then again, she was a very bright dog.

While that was going on we now have a wonderful little currency war shaping up all around the world.  In response to Draghi's comments the other day that the strength of the Euro might be a real drag on growth in 2013, Japan took the hint as its finance minister today suggested that the devaluation of the Yen might have gone a bit too far and we really don't want to allow this to get out of hand do we Draghi-san?  I would hate to be an FX trader today.  Euroland has clearly been hurt by an exchange rate what with all the upset still closed at 1.33+ to the dollar today.  Problem is everyone is chasing each others markets including the U.S. whose trade deficit by the way narrowed sharply last month.  Checkbooks at 20 paces!  Problem for everyone is that Mr. Bernanke has the biggest checkbook in town and a singular mindset to prove himself to be correct.  It could get ugly.
Then again, a goodly part of our Balance of Trade is Oil and we are awash in that commodity at this stage opposed to past years which may well mean that despite what people may wish to do on a currency basis, we are seeing a significant and perhaps permanent shift that may not be affected in any scenario.  Interesting stuff I think.

Finally, three cheers for the Irish who apparently have convinced the ECB that a restructuring of their obligations owed to the central bank was in the best interest of all parties.  It appears that the ECB has agreed to exchange high-yielding short term obligations for debt with far longer maturities with a greatly reduced interest rate...something I might add that they have been loath to do as Ireland is not the only member of Euroland  that are in to them for a bob or two.  In exchange, Ireland will immediately liquidate Anglo-Irish Bank (what they should have done four years ago) and promise to sin no more.  So now the precedent has been set and principal compromised.  It will be interesting to see who is first in line to cut other deals with Sr. Draghi who, incidentally, has yet to comment on this one.  It will be a lovely little...war?



Yes, Carter, it was the Times...days late as usual

LOOKING BRIGHTER

Not the international financial situation of course, but for a blogger things are really beginning to look up.  In the morning, the International Swaps and Derivatives Association, "ISDA",  announced that they were to decide whether to meet to decide as to whether the loss of 70%  on Greek bonds by investors who would be forced into the restructuring as a result of the retroactive effect of the Collective Action Clause inserted into all Greek Law bond debentures after the fact amounted to an event of default.  Honest to God.  Hours later they said they would on Thursday.  You can't make this stuff up.  Of course it's a default unless they say it isn't.  Got it?  Now if they say it isn't what does that do for CDSs in general, the market and pricing thereof and the risk assessments by managers who though they had things hedged by way of CDSs and suddenly wake up to find out that they my well be geared well above agreed-to covenants and considerably short of regulatory capital?  Please Lord, make them say no.  The blogisphere has material for months.

Oh, remember that agreement all the Euro states came up with...the gang of 17...to get and keep their fiscal house in order?  Well, this afternoon, the Taoiseach--that's Prime Minister in the Irish--told his parliament that upon the advice of counsel, the decision to ratify what had been agreed would have to be put to a referendum.  Now for the other Euros that's no big deal because only 12 states are needed to bring this thing into force...it's sort of like a collective action agreement...but if a member state ops out, the European bail out facility will not be made available if needed and that for Ireland could be a very big deal indeed  The early polling as to whether this thing passes is slightly less than 50-50.  Depending upon how much time is available to scare the populace, I think the referendum fails, so here's to you Carter, for suggesting that next up in the short the hell out of the sovereign debt game is Ireland.  And things were going so well in the sense that Ireland was making slow but steady progress flying under the radar.

On top of all this the Euroland ministers postponed a meeting that was supposed to be held today to discuss the disbursement to 130 billion to Greece until Friday for reason that were unclear to say the least.  Dissention in the group?  Most probably.  Remember, the money is supposed to go into a suspense account and dribbled out as Greece met it's targets.  It seems that there has been no agreement as to what those targets might be so we're all working on those so we can get this ball rolling.  Sure.

Anyway, things were really looking up until Massimo called around noon.

"You see the numbers from the banks today, Charlie?  I tell you so, no?"

"You tell me so, yes, Massimo. The Italian banks borrowed big time from the ECB and bought Italian Bonds."

"And whatta that do, eh?  The banks they make a fortune!  For free. No capital!.  It's what I tell you, no?"

"Yes Massimo, it's exactly what you told me."

"And we do it again for sure.  I tell you Charlie, Mario do the right thing and we take care of Italia.  Look at the yields.  I tell you, no?"

"Massimo, for the last time, YES, YOU TOLD ME!"

"Eh, Charlie.  You listen to your friend.  You learn.  How you say, we take care our own.  Ciao, Charlie."

Massimo has been a friend since I got into this business...an insufferable friend sometimes but always a friend.  I hate to admit it but he got this one right.

QUO VADIS?

Well, the deal got done and now I think it is appropriate to ask where do we go from here?  Firstly, however, I must again admit to being a bit wrong in regard to my ststement that the Greeks would never accept an in-country monitoring group because there was mention of one in the release of the terms of the deal.  It's function was considerably reduced, however.  Rather than being there to set policy as per the original demand, it will be present to monitor only, which I guess it means it will serve as an early warning system as to the certainty of when the Greeks fall out of compliance.  But we get through March; can June be far behind?

Where will we go?  There will be a cool down period probably lasting for a few months as more focus will be placed on macre economic conditions both over there and over here, in addition to the global security questions focused primarily in the Middle East.  There are very important national elections both here and there and a great shift of public interest is certain to occur especially in Euroland over the near term.  In short, the best thing that can happen is for people to have their minds on other things except that with the traders may have it come out another way if they shift pressure to either Portugal or Ireland or both.  Frankly, I can envision a scenario where politics may provoke a logical questioning in both countries along the lines of, "If the Greeks got theirs, why can we get ours?"  Awkward, that.  Remember, the Irish bailed out their banks on the backs of the Irish taxpayer (I know, me neither).  A bit of debt relief would help mightily as the program for economic growth is already in place.  Portugal amounts a speed bump.  What would you prefer?  A market/trader/speculator driven rescue or a rational appproach that pre-supposes an eventual need?

And what of Greece?  It is madness it seems to me to hope for any upturn in either this or next year.  Every cent of cash flow from whatever source is going to be transferred out of the country.  Frankly, at some point Euro governments will be forced to recognize that good money after bad is not a sustainable policy and it will end.  I would argue, therefore, in this breathing space it would be a very good idea to get proactive (I hate that word) with both Portugal and Ireland or future events will certainly overtake them.  Mind you, I'm not saying that this immediate saga is over; this agreement is fragile as can be and could still fall apart, only that the players are in place and now is the time to move forward into other obvious areas of concern.  I'm going to try to focus on other things in the coming weeks with the caveat that we'll be ready the return to the scene of this crime if events demand.  A change of pace will be fun.

THE WEARIN' OF THE GREEN AND THINGS LESS PRISTINE

I met with Pat Mc'Carrity an' he took me by the hand.
He seys, "How is ol' Ireland and how does she stand?"
'Tis the most distressful country the world has ever seen.
For they're shootin' people even now for wearing of the Green.

The true meaning of that song we hum every March 17 and its verses are not really understood by all who have done so. It is a true song of "the troubles," finishing with,

"...and if the color I must wear is England's bloody red
I'll wear it for the color of the Irish blood's been shed..."

HM Queen Elizabeth II visited the Republic today, the first British Monarch do do so in hundreds of years. She was dressed entirely in Green. It will not erase the memory of terror and hatred that has lasted so long but it was a welcome start that hopefully marks the true end of a horrible period in history. Good on ya, Mame, and kudos to the two governments that made it happen.


And now of course, DSK. One could say that what occurred in that $3000 a night broom closet in New York was the first original thought that ever came out of the IMF but if one believes the accuations out there our boy has followed this thought process before. In my experience, the NYPD doesn't get many high profile cases wrong (unlike show-trials brought on by politically ambitious prosecutors--read Eliot Spitzer) so I am sure the truth will out. Whatever the result, DSK has created more than one awkward situation for a whole bunch of people who are more that a touch out-of-sorts as we speak.

To begin, we just threw the guy who probably would have been M. Le President in the can thereby turning all of French politics on its head and convincing those Frenchmen who weren't already convinced that the Yanks have it in for France to join the chorus. Bad timing as issues of debt, currencies, trade and overall global leadership are not exactly in sync between the two countries.
Of course, He With the Hottest Wife Around is turning handsprings. Reeeelection time! Come On! And just when rumors abound that Mme. Sarkozy is preggers. It just don't get better than that. What timing. What a coincidence...?

Secondly, despite what kind of a human being DSK might prove to be, the guy had clout and a following which is sorely needed in Europe today in light of the financial condition of some of the members of Euroland about whom we have been speaking for a number of months now.

Thirdly--and I'm not at all sure this is a bad thing--it puts the entire question of the future role (assuming a future) of the IMF in the great scheme of things, and clearly opens the door to broader participation of a number of the emerging member states who for years have been complaining that the IMF operates for the sole members of the founding nations...i.e. the western states...not without some justification I might add. If the fall of DSK does lead to a changing of the guard the result could easily turn into a campaign issue in the U.S. of A as there is a large body of opinion on both the right and left that has constantly questioned the use of taxpayer's dollars for reasons that do not directly benefit this country and the new order would undoubtably result in a clamor to "spread the wealth" globally highlighting what seems to be one of The Leader's core beliefs and not at the best of time for him.

Fourthly, it's going to be important to watch who gets the nod for the new head boy. Of all things, Joe Ackermann of DeutscheBank is being pushed by persons or person unknown. Given the first thing on the agenda has to be the sovereign debt crisis and the exposure of European banks--especially, but not exclusively--Germany banks, we could be looking at a major league taxpayer rip-off that will have consequences far greater than any Hellenic implication imaginable. We shall keep watch.

Finally, do you think anybody is going to ask the question on our behalf Mr. and Mrs. Taxpayer what in the hell this scuzbucket was doing in a $3000 a night room whilst on private business in New York and booked on Premirer Classe on L'Air Chance because you know he wasn't paying for it? Somebody damn well better.

THAT CARTER!

Doggone, he's right again! I overlooked the medium term consquences of Mrs. Merkel's defeat last week while struggling to find something current to write about and hence, said nothing about it at all. I promise to be more alert in the future. Time is running out and everytime Europe winds up at the mercy of German internal politics, something bad seems to happen. And of course Anonymous is correct as we have been saying that at this stage at least, the Irish have everybody over a barrel. The thing I can't fully understand is the absolute reluctance to even mention the possibility of a restructuring of the debt unless, UNLESS the exposure of the Eurobanks is greater than we have been made to believe. Look, a bank doesn't go under unless the governing authority wants it to go under. Liquidity support and generous accounting interpretations can run a banking system forever. Of course, they, like us have gone after this thing bass-akward with the nonsense about Basel III. Might be a bit of embarassment all-around and a few folks might lose their jobs but it seems to me that the alternative could be far worse with a disorderly approach to what seems to be a certainly. Then again, it's great blog fodder.

Meanwhile, over here, Poo Bair is at it again questioning whether a full requirement without exception for financial institutions to have "skin in the game" in future securitizations is really a good idea. A valid point but she then confuses the issue by proposing that no such requirement is necessary if the securitization is simply for a block of mortgages that all have a 20% down payment.

I have consistantly said that I fail to understand why not more effort has been spent on the "buy" side of this business. To begin, the good folks who were the buyers of CMO's thought the nineties and into the last decade were neither widows and orphans nor the Little Sisters of the Poor. They were supposed to be highly sophisticated financial types who knew or should have know the risks involved. As I sat and watched "Inside Job" last month I wasn't so much appalled by some of the players on the "sell" side as I was amused in thinking what in the hell was somebody in Iceland or Norway doing buying a security involving places they had never visited or for that matter never knew existed. The answer of course was that they were seeking yield and were being compensated for attaining above-average yield on their investments on a non-risk weighted basis. I raise this again not to argue who were the REALLY bad guys but merely to point out that the entire basis of the securitizations that were conducted was to provide higher yield to investors who were demanding the same. Were there bad actors involved? Most certainly and they should suffer whatever fate awaits them, but the proposed skin in the game rule seems to me to indicate that the creators of the same never really understood what the "game" was all about. I believe the role of a financial intermediary in creating investment opportunities to fill needs across a broad spectrum of risk is a valid and important one but that there is a risk in creating the false impression that just because the seller has "skin in the game" the risk has been negated. Even in such a circumstance, some risk is not appropriate for certain investors. I don't pretend to have a perfect solution but I'm damn sure ignoring the stupidity of the past and creating even more opportunity for someone to be stupid in the future isn't the answer. Ignoring the "buy" side and it's montstrous errors is a serious mistake. Comments?

END GAME

We must be getting close because Bill Rhodes appeared on CNBC today. For those of you who don't know him, Bill is a retired Vice Chairman of Citibank who made his bones back in the eighties by running damn near every soverign debt restructuring for the better part of 15 years and then some. He was really good at what he did. Relentless. He would never give up. I not sure he understood all of what he was doing but his #1 job was to save Citibank who had a pile of crap from every dead beat country in the world and he did it. Made a fortune along the way and owned the best Roledex in the history of the western world...a Roledex is where one kept business cards, addresses...oh hell, it's an IPhone for old people. Anyhoo, there was Bill looking a bit older and considerably thinner proclaiming that this Euro thing better get fixed because it is really a banking mess and as everyone knows the banks are more important in Europe than they are here.

When Rhodes appears can a restructuring be far behind? He would love it; one last great fight before the all eternal night. And so, I'm even more in favor of doing the right thing if for no other reason to give Bill another shot at it and watch the Ghosts rise up to save the world one more time. Who says a remake can't be better than the original?

Just might happen, too. The Portugese parliament met today and came up with...NAO. Or at least I think that's what happened as it was looking like that when I wrote this. Given that every opposition party had stated that they would not be supportive of the government's plan that Jose saying he was going to resign if they did not, I suspect we will have a fallen government when we wake up tomorrow morning. The Portugese 10 year yield was moving closer to 8%..assuming a bid that is...and that of course is completely unsustainable. If the government falls it will be the better part of two months before another is formed, and down the road the can gets kicked while on the touch line the cry goes up, "Put in Rhodes, Put in Rhodes!" Delicious.

Northward, on the Emerald Isle, the lads are getting their Irish up. Being told what to do by the Germans and the Continentals has never gone down very well and time has not improved the digestion. And so tomorrow, the continuation of last week's Euro conference which should be a doozy not the least bit aided by the fact they everyone has gotten stuck in the sand box called Lybia over on the political side. Nothing like an undeclared war to liven things up but of course with The Leader desperately trying to figure out how to extract himself from the mess into which he got himself, maybe all the troubles of the world can be blamed on us Americans. God knows there is precedent for that. We shall be watching and looking for material which I am sure will be forthcoming.

Oh, my Texas buddy, Denny, wrote to mention that there is a computer somewhere up at MIT that does things like figure out CPI. I don't know if there is but Denny says this thing is now predicting inflation at the end of the year to be 8.3%. Not good for Mrs. James' little boy Charlie and his fixed (almost) income. In the mean time, more and more Fed watchers are beginning to believe that the son of QE II will be born in the not too distant future because Mr. B. and Billy the Dud are completely enamoured with the concept. I REALLY hope Rhodes gets that restructuring gig. I'm going to need a job.

EUROTHROAT CALLS

My main man called over the weekend. He resides in Brussels for his sins but gets paid a bundle from the Commission. It's a nice life and he's on the inside. I've Americanized the content to protect the guilty.

"Well, I've been calling you for two days. Where the hell have you been?"

"Charlie, Charlie, relax. This has been a tough week."

"I'm in tears. What happened?"

"Well, as you Americans like to say, it was a food-fight at dinner. The Germans were being German, the French were being superior, the English above the fray, the Spanish somewhat irate, the Greeks contrite and the Irish very Irish, spoiling for a fight."

"Yet reports have an agreement being reached."

"Oh Charlie, you know better than that. It was midnight, everyone was most tired and what was put out was a series of unconnected dots, left to be connected in two weeks time. The Greeks got a bit but not enough. Frau Merkel made encouraging noises as to what she was prepared to do IF...and it is a bigger if than one would think...all affected parties do would she wants."

"...And will they?"

"Well, that remains to be seen, but I must say the new Irish on the block simply dug in their heels."

"On the tax question?"

"Indeed, as you predicted, and of course we are now in the game...what do you call it...chicken? We want them to raise the corporate tax rate and they keep reminding us about their banks all of whom owe the continent a lot of money so why should they continue to bail the continental banks out? Is an interesting question, no?" We like our banks just as they are.

"Yes, and shall remain such. And the rest..."

"Ha! The Greeks get a little break but the Portugese yield is now 12% which of course cannot last but about that, no one is talking. But Trichet seems to be saying if you issue, we will buy. Sounds like your man although Trichet even said he may buy direct..."

"I can get it for you wholesale."

"What?"

"Never mind, an old American joke. So what happens in 10 days?"

"I don't know, but funny is it not. They are speaking, not with one voice but they actually said some things I did not expect so maybe they can find one voice in the time up to the next meeting."

"Prediction?"

"I think not. More talk, that's all. We speak as the European Union but we are seperate countries still. How you say, old habits die hard? We still don't really trust each other. It is not like a political disagreement, it is the national psyche syndrome. But the one thing they agree about is that you are no help. I tell you, you say Bernanke and people just shake their heads. No one can understand his positions and why he seems not to listen. This is bad, Charlie, it really is. It should not be so."

"I'm told a lot of people involved here feel the same way. Just don't blame us for your home grown problems. Listen, thanks for the update, I appreciate it."

"I know, Charlie, on this you are right. Spring is coming, Charlie, come visit. Brussels is good in the spring."

"Almost everywhere is good in the spring my friend, but Brussels is too expensive."

"Which is why they pay us so much, Charlie. Life is good."

OFF AND RUNNING

Whew, where to begin? I can't belive so much has happened since we left town. Florida was beautiful by the way, as it always is between Oct 15 and April 15. The other six months it's uninhabitable. Watching the grandkids at Disney World is worth the $11,000,000 it takes to get into the damn place. What a concept.

Anyway, The Leader and his party have the knickers in a twist at the goings-on in the various states and the heat their boys in the union movement are taking. Funny, I don't hear any of that, "I won, deal with it" or "elections have consequences" talk coming out of his mouth lately. In fact not much is coming out that makes any sense at all, especially in the matter of the budget or the nation's finances as we careen towards a shut down of the government. It's not going to happen but in a rather perverse way I sort of wish I could witness a missed payment on the national debt. What a kick; it would make Ali Baba square--or whatever its name is--in Cairo look like a gathering of grandma's knitting circle. One can dream, can't one?

One thing that is important that did occur was the "merger" of the New York Stock Exchange with the Deutsche Bourse. Important in the sense of what this tells us rather than the actually effect it will have in the real world of stock trading. There's very little doubt in my mind that the loss of a substantial amount of the new capital raising business that made New York the center of the financial universe to places like Frankfurt, London and Hong Kong was the result not only of the vast world-wide creation of wealth around the globe in the past 20 years but also as a result of the overregulation--IMHO--of the U.S. markets. With laws such as SOX we are simply a pain in the butt to the rest of the world--and we live in a HIGHLY competitive world. The same thing is going to happen to our hold over the capital markets as a result of the moronic Dodd/Frank debacle (more on that tomorrow). But instead of seeing the light, the only thing that wizz-bang of finance, Chuckie Schumer can respond when asked if the deal will be approved is,"New York had better come first in the new name." Last time I heard that was when Morgan Guaranty bought Chase Manhattan (J.P. MorganChase) and the chairman of Chase said, "Well, at least we saved the name." Tom was a hell of a nice guy; too bad he was an idiot. We lost, guys...WE LOST! And we're about to lose again.

This weekend there was another momentous event: Ireland's ruling party of 70 years got murdered at the polls. Oh, everyone knew they were going to lose but they were slaughtered. Why momentous, you say? Well, for those who were paying attention one of the campaign promises made by the in- coming Fine Gael was to lay on a little "burden sharing" in regard to the treatment of the Irish banking system. Regular readers will know that the previous government was extremely generous towards creditors, basically guaranteeing all of the banks' obligations; not this new bunch. They are looking for bondholders and other creditors to take a haircut and whooo-eee, The French and the Germans don't like that one bit because it's their banking systems we're talking about as well as the good burgers of Kensell Rise and High Street Ken. Needless to say, watching all of this unfolding will be the Greeks and the Spanish and the...well, you get the idea. The thought of this playing out over the next few months is simply delicious. I'll be watching along with my fellow dead-beats. Good to be back.