As though the entire thing was programmed, the ECB lowered it's short term borrowing rate to a 1/4% in a move that seemed to catch most economic forecasters off-guard in the face of continued concerns of European growth (or lack of the same), disparities in trade balances between members, and expected free money continuation as policy by the Federal Reserve. Will it help? Probably not as long as Germany continues its Euroland for Deutschland approach for the foreseeable future. It does reaffirm, however, Sr. Monti's commitment to do whatever it takes to hold the whole thing together which I don't think anyone doubted in the first place...well, at least I didn't. The only question was, and it still remains, is will all he can do be enough in the face of the political and structural reforms necessary beyond buying Spanish and Greek debt to keep the creditors afloat.
Over Here, the third quarter GDP figures released today showed a surprising growth of 2.8%, well- above all expectations, but when I called around to a couple of my economist buds (yes, I actually speak to economists) their view was don't get excited, most of it was due to excessive inventory restocking which was probably 0.8% of the number. You know it's really funny: every time these guys get one of their SWAGs wrong they always have an immediate answer. "We called for 2.0% GDP growth but it came in at 2.8% but that was because the inventory growth was 0.8% above what it should have been, so there." Honest to gosh I don't know how they do it. Anyway, the consensus for the fourth quarter is now 1.8% down from 2.2% because inventory growth will be cut back from the too-strong third quarter, and...I can barely wait.
But in the midst of all of this there from time to time comes something that puts a smile on one's face. On Tuesday, the good people of the City of New York elected a guy by the name of Bill DeBlasio as their mayor. The town which is fond of referring to itself as the center of the Financial Universe now has a mayor whose economic and political groundings came from his experiences in Nicaragua under the Sandinistas and Cuba under Castro. He is also married to a lady who wrote an autobiography about being a lesbian (who says you can't change!) and changed his name to his mother's maiden name because he felt closer to her than his father who was of German parentage-- making life a touch confusing for all who meet him as he looks like an officer in the Das Reich Division. Oh yeah, this is gonna work. I feel like a kid at Christmas. Can you imagine the stories that are going to come out of this juxtaposition of philosophies and beliefs? I can.
Showing posts with label Monti. Show all posts
Showing posts with label Monti. Show all posts
Thursday, November 7, 2013
Tuesday, December 11, 2012
THE PEACE PRIZE
Awarded yesterday to the European Union for refusing over the past 60 years to do what came natural to them; killing each other of course which may resume shortly if things don't shape up.
Berlusconi confirmed today everything that Massimo had stated yesterday; he's in the race and the gloves are already off. At the present time his approval rating is in the dumpster but this is a formidable guy with a ton of money and less political morality than a Chicago Alderman--not to mention his own TV and radio network--on which he today labeled Mario Monti, "too German for Italy." That plays.
Quite contrary to the common view, Italy is an enormously rich county; some have actually suggested (with a substantial amount of evidence behind them) that in so far as personal wealth, Italy is the richest country in Euroland...including Germany. It is also one of the most disorganized, dysfunctional, bureaucratic, corrupt and backward for which over the years many have made a study as to how to "game the system" and made fortunes so doing. The distribution of wealth is also immensely uneven both among regions and individuals. The north is rich, the south is not. And yet, in regard to external finances the Italians are in fine shape. Indeed, the nation is, in many ways, like Japan...a nation of savers. As more than one commentator has suggested, most recently Ambrose Evans-Prichard, who is a very good commentator indeed, Italy is an excellent country trapped in the wrong currency who would be much better off without the mill stone of the Euro around it's neck. Whether he would believe a political argument along those lines or not, do not think for a minute that Berlusconi would not use it and that it would not be effective with a goodly sized percentage of the voters. This is going to be a long, hard race and one which has just begun. As for Euroland, whilst all the focus has been on Greece from the standpoint of a possible dissolution, now comes Italy seemingly out of nowhere, and as we have said before, Italy is a real country.
And speaking of Greece, apologies for the misinformation regarding the extension period which was in fact noon today not midnight. The Greeks did get over 30 Billion in bonds put back but the price was such that it caused the seemingly magic 124% of debt to GDP figure so important to the IMF to swell to 128%. As I have said, that number is about as meaningful as a bucket of warm spit but Chrissie put herself in a bit of a box and now the deal is how does one avoid the supposed consequences. The ministers are now in session. I hope they come up with something real: like a new present value analysis based upon the certainty of lower average interest rates for the period in question based upon new, solid, and irrefutable economic analysis just made available by...oh hell, who cares by who as long as it works.
Above all this is the seemingly absolute cock-up by Deutschbank and Morgan Stanley in running this thing. I have spoken to no one who can figure it out. For their sakes I hope there is a real good explanation because if there isn't it's stupid is as stupid does. And at that we shall leave it.
Berlusconi confirmed today everything that Massimo had stated yesterday; he's in the race and the gloves are already off. At the present time his approval rating is in the dumpster but this is a formidable guy with a ton of money and less political morality than a Chicago Alderman--not to mention his own TV and radio network--on which he today labeled Mario Monti, "too German for Italy." That plays.
Quite contrary to the common view, Italy is an enormously rich county; some have actually suggested (with a substantial amount of evidence behind them) that in so far as personal wealth, Italy is the richest country in Euroland...including Germany. It is also one of the most disorganized, dysfunctional, bureaucratic, corrupt and backward for which over the years many have made a study as to how to "game the system" and made fortunes so doing. The distribution of wealth is also immensely uneven both among regions and individuals. The north is rich, the south is not. And yet, in regard to external finances the Italians are in fine shape. Indeed, the nation is, in many ways, like Japan...a nation of savers. As more than one commentator has suggested, most recently Ambrose Evans-Prichard, who is a very good commentator indeed, Italy is an excellent country trapped in the wrong currency who would be much better off without the mill stone of the Euro around it's neck. Whether he would believe a political argument along those lines or not, do not think for a minute that Berlusconi would not use it and that it would not be effective with a goodly sized percentage of the voters. This is going to be a long, hard race and one which has just begun. As for Euroland, whilst all the focus has been on Greece from the standpoint of a possible dissolution, now comes Italy seemingly out of nowhere, and as we have said before, Italy is a real country.
And speaking of Greece, apologies for the misinformation regarding the extension period which was in fact noon today not midnight. The Greeks did get over 30 Billion in bonds put back but the price was such that it caused the seemingly magic 124% of debt to GDP figure so important to the IMF to swell to 128%. As I have said, that number is about as meaningful as a bucket of warm spit but Chrissie put herself in a bit of a box and now the deal is how does one avoid the supposed consequences. The ministers are now in session. I hope they come up with something real: like a new present value analysis based upon the certainty of lower average interest rates for the period in question based upon new, solid, and irrefutable economic analysis just made available by...oh hell, who cares by who as long as it works.
Above all this is the seemingly absolute cock-up by Deutschbank and Morgan Stanley in running this thing. I have spoken to no one who can figure it out. For their sakes I hope there is a real good explanation because if there isn't it's stupid is as stupid does. And at that we shall leave it.
Wednesday, September 5, 2012
THE NIGHT BEFORE THE DAY BEFORE THE DAY
There really isn't any reason to speculate or comments on the events of today. There were none. Nevertheless, the sense of anticipation is a heavy overlay on markets both here and over there. Tomorrow is the ECB meeting which some have referred to as the encapsulated future of Euroland. Will Monti pull it off or not. Will he stand publicly for the unlimited funding for national fiscal deficits or will he once again disappoint with another series of baby steps on the way to salvation? He has hinted at a robust program at least for the short term but has also indicated that it would be heavily laden with conditionality which I suspect--given the political realities of Euroland--will not be well received. One would be wise to keep in mind that any plan could be wrecked next week by the German Constitutional Court's ruling on the two stability plans which, if found illegal, could demolish the Euro debt strategy in one swell foop. I'm betting that will not happen and so tomorrow is indeed the day.
Friday on the other hand could well be the day the American election is decided. Friday is the jobs number. Word out of Washington already has it being talked down to around 125,000 from the previous 166,000 of August. Any upside, unless it is a blow-out, will have little effect but a bad number, anything below 100,000 just might decide the election as it will undoubtedly overwhelm any positive reporting coming out of North Carolina. Either way, the number will be questioned and debated. Two really important days.
If that wasn't enough, the World Champion G-Men open at home tonight against Dallas. This is almost too much to fathom for my addled mind and possibly life-threatening from a cardiac standpoint. All this in a lifetime. I'll be back to report on it all tomorrow.
Friday on the other hand could well be the day the American election is decided. Friday is the jobs number. Word out of Washington already has it being talked down to around 125,000 from the previous 166,000 of August. Any upside, unless it is a blow-out, will have little effect but a bad number, anything below 100,000 just might decide the election as it will undoubtedly overwhelm any positive reporting coming out of North Carolina. Either way, the number will be questioned and debated. Two really important days.
If that wasn't enough, the World Champion G-Men open at home tonight against Dallas. This is almost too much to fathom for my addled mind and possibly life-threatening from a cardiac standpoint. All this in a lifetime. I'll be back to report on it all tomorrow.
Thursday, August 2, 2012
THE HEADLINER
At the Rock Concert (as suggested by Carter) the headliner, Mario Monti, came on and bombed. I don't know why he bothered as he had nothing to offer and didn't even drop the discount rate which was a no brainer. Markets reacted accordingly but quite frankly, not as badly as I had expected. It's August and nobody's home but you can push a "sell" button laying on a beach anywhere these days and that didn't happen to the extent I thought it would. Especially in currencies. The Euro closed at 1.2183 which was down .0048 and is undoubtably headed towards 1.1800 or lower IMHO but let's look on the bright side: that was the level that was predicted when the Euro made its debut so what have we lost? Ok so it did go 0.89 at one point years back but think how happy the German exporters will be if history repeats itself.
And speaking of Angie's mob, it is best to understand I think that Sr. Monti had zip a week or so ago when he talked in those "whatever it takes" terms. Why he did it I'm not sure but it looked like he was trying, by himself, to put The Boys from Berlin in a corner. Admirable, but risky and not terribly smart. They simply said, "Nein." Imagine, they didn't even listen to The Suit who was right in Monti's corner. Shocking. Unfortunately, what he is now left with is...well, niente. He tried to play a weak hand as well as he could and the Germans called his bluff. Is there a back-up plan you ask? Frankly, I don't know because in the manner and to the extent in which Monti was shot down behind the scenes indicates that the Germans have their tails up and the wind behind them. They want tribute from those that want their money in the form of control over Euroland finances; nothing less. I see very little wiggle room in which to deal with their position. Spain--as they are in the eye of the storm--may be forced to surrender which will undoubtably bring down the government and usher in a period of chaos. The next month should tell.
Monti, as smart as he is and he is very smart, occasionally says some really silly stuff. He indicated today that he was prepared to stabilize or reduce long term rates for Spain and others through secondary market purchases of the long dated bonds. That works when that is all there is but when faced with a huge supply of new issues before the year-end, one has to wonder what would be the result of an exercise such as this if undertaken. If the market knows the ECB cannot participate in the new issueance directly the "on the run" is going to yield more than the secondary market price if it can be priced at all. That suggestion didn't help the credibility of the ECB one bit.
It hasn't been a good week for anyone on either side of the pond and the jobs number comes out at 8:30 tomorrow. A stinker will really top it off so hang on for what could be a wild ride. We'll be here.
And speaking of Angie's mob, it is best to understand I think that Sr. Monti had zip a week or so ago when he talked in those "whatever it takes" terms. Why he did it I'm not sure but it looked like he was trying, by himself, to put The Boys from Berlin in a corner. Admirable, but risky and not terribly smart. They simply said, "Nein." Imagine, they didn't even listen to The Suit who was right in Monti's corner. Shocking. Unfortunately, what he is now left with is...well, niente. He tried to play a weak hand as well as he could and the Germans called his bluff. Is there a back-up plan you ask? Frankly, I don't know because in the manner and to the extent in which Monti was shot down behind the scenes indicates that the Germans have their tails up and the wind behind them. They want tribute from those that want their money in the form of control over Euroland finances; nothing less. I see very little wiggle room in which to deal with their position. Spain--as they are in the eye of the storm--may be forced to surrender which will undoubtably bring down the government and usher in a period of chaos. The next month should tell.
Monti, as smart as he is and he is very smart, occasionally says some really silly stuff. He indicated today that he was prepared to stabilize or reduce long term rates for Spain and others through secondary market purchases of the long dated bonds. That works when that is all there is but when faced with a huge supply of new issues before the year-end, one has to wonder what would be the result of an exercise such as this if undertaken. If the market knows the ECB cannot participate in the new issueance directly the "on the run" is going to yield more than the secondary market price if it can be priced at all. That suggestion didn't help the credibility of the ECB one bit.
It hasn't been a good week for anyone on either side of the pond and the jobs number comes out at 8:30 tomorrow. A stinker will really top it off so hang on for what could be a wild ride. We'll be here.
Monday, July 23, 2012
UH-OH
Houston, we have a problem. Methinks folks are beginning to figure it out. Todaywas not a good day; it was a worse day than I suspect most people realize. Economic numbers over here continue to deteriorate; ditto for Euroland. The Troika is on it's way to Greece to tell them the till is empty and the bridge loan they were looking for to get them to the next bridge loan to get them to...oh, what's the difference, as I have said no one cares any more. Then there's Sr. Monti who was doing rather well until he saw fit to tell the world that he has a real problem with La Sigilia about whom everyone has forgotten and badda-bing the ten year goes to 6.50%. Politicians really should learn to keep their mouths shut especially when the problems of the island pale in comparison to the structural issues he must solve in the entire economy in order to make this thing work, and so far, try as he might, the 60 year imbedded bureaucracy of the Italian state has fought him at every turn. No matter perhaps, as it was pointed out last week Italy, with the lowest birth rate by far of any country in Euroland and perhaps the world, Italy might run out of Italians in 100 years. Problem solved. Perhaps a tax on any Italian male who continues to live with his mother after the age of 25 might work? It sure would bring in a bunch of money. Mario should consult with The Leader; he knows a lot about taxes.
As dicey as things are beginning to look in Italy, Spain is sliding closer to the brink and unfortunately those who just a week ago were rejoycing in a deal that would save the banking system and not impinge upon Spain's debt burden took a second look and figured out the point that this space has been trying to make that at the end of the day the credit extended to the banks becomes the obligation of the State if the banks cannot repay. As the funds are guaranteed to go right out the door a nano-second after they arrive, this is a real possibility. The ninnies who write about this stuff missed all of that and what they also missed is the fact that like the relationship between the Italian State and Sicily, Spain has its own autonomous states and regions to whom the State has financial obligations and who are broke. A couple of them rose last week from where they were hiding in plain sight and Badda-boom, the price of poker in Euroland just went up...to 7.53% in the ten year. Unsustainable.
Immediately, of course, increased cries for a Eurobond rose up once again. Memo to the town criers: NO BOD EE will buy the damn thing. Forget it and go away to think of something els...or better yet just go away. Would it work? In theory of course but I keep coming back to the Yogi-man: "In theory, theory and practice are the same; in practice they aint..." which I have been informed if the correct quote. Fortunately, here come the Olympics and all of Europe will be caught up in that and especially the Spanish whose soccer team will be trying to do what no other national side has ever done: win the World Cup, the European Cup and the Olympics back to back to back. Spectacles for the masses. Ave Caesar! Morituri te salutant! Round 2 of the Bond Holders vs. the Lions. Thumbs down for everyone. Tomorrow we see what else the geniuses have figured out.
_______________________________
Just when you think it has reached the highest level of stupidity, the New York Times out does itself in it's leading article today. Libor was the subject and the Times nearly (figuratively) wet it's pants in revealing the the Justice Department is all over the banks. More importantly, however, the Times excoriated The Suit and demanded that he recuse himself from any investigation conducted by the Treasury. The Times than suggeated that in the next Obama administration The Suit be replaced by Garl Gensler.
Now Mr. Gensler is a very smart guy...the youngest partner ever made by...you guessed it...Goldman Sachs. He is also the head of the Commodities Futures Trading Commission, best buddies with John Corzine of MF Global fame (who is still walking about as a free man) and the guy who missed the shenanagans at PFG Best and about whom it can be said (and has been) that some of his greatest successes at Goldie can be found under a rock.
The Times was on a roll. On the op-ed page Little Paulie has a completely nonsensical piece on global warming, but the star of the day was Gar Alperovitz of the University of Maryland. Briefly, his deal was banks are too big to be regulated so nationalize the banks...and let the government manage them! Now you can look ol' Gar up and you will find that there are a hell of a lot of people who not only don't like him, disagree with him and in a couple of case accuse him of fradulent scholaship. Who knows, but one thing you should know is that he is highly regarded by The Leader. Take this article seriously. It is a message from the Times as to this administration's thinking in phase 2. Scary.
As dicey as things are beginning to look in Italy, Spain is sliding closer to the brink and unfortunately those who just a week ago were rejoycing in a deal that would save the banking system and not impinge upon Spain's debt burden took a second look and figured out the point that this space has been trying to make that at the end of the day the credit extended to the banks becomes the obligation of the State if the banks cannot repay. As the funds are guaranteed to go right out the door a nano-second after they arrive, this is a real possibility. The ninnies who write about this stuff missed all of that and what they also missed is the fact that like the relationship between the Italian State and Sicily, Spain has its own autonomous states and regions to whom the State has financial obligations and who are broke. A couple of them rose last week from where they were hiding in plain sight and Badda-boom, the price of poker in Euroland just went up...to 7.53% in the ten year. Unsustainable.
Immediately, of course, increased cries for a Eurobond rose up once again. Memo to the town criers: NO BOD EE will buy the damn thing. Forget it and go away to think of something els...or better yet just go away. Would it work? In theory of course but I keep coming back to the Yogi-man: "In theory, theory and practice are the same; in practice they aint..." which I have been informed if the correct quote. Fortunately, here come the Olympics and all of Europe will be caught up in that and especially the Spanish whose soccer team will be trying to do what no other national side has ever done: win the World Cup, the European Cup and the Olympics back to back to back. Spectacles for the masses. Ave Caesar! Morituri te salutant! Round 2 of the Bond Holders vs. the Lions. Thumbs down for everyone. Tomorrow we see what else the geniuses have figured out.
_______________________________
Just when you think it has reached the highest level of stupidity, the New York Times out does itself in it's leading article today. Libor was the subject and the Times nearly (figuratively) wet it's pants in revealing the the Justice Department is all over the banks. More importantly, however, the Times excoriated The Suit and demanded that he recuse himself from any investigation conducted by the Treasury. The Times than suggeated that in the next Obama administration The Suit be replaced by Garl Gensler.
Now Mr. Gensler is a very smart guy...the youngest partner ever made by...you guessed it...Goldman Sachs. He is also the head of the Commodities Futures Trading Commission, best buddies with John Corzine of MF Global fame (who is still walking about as a free man) and the guy who missed the shenanagans at PFG Best and about whom it can be said (and has been) that some of his greatest successes at Goldie can be found under a rock.
The Times was on a roll. On the op-ed page Little Paulie has a completely nonsensical piece on global warming, but the star of the day was Gar Alperovitz of the University of Maryland. Briefly, his deal was banks are too big to be regulated so nationalize the banks...and let the government manage them! Now you can look ol' Gar up and you will find that there are a hell of a lot of people who not only don't like him, disagree with him and in a couple of case accuse him of fradulent scholaship. Who knows, but one thing you should know is that he is highly regarded by The Leader. Take this article seriously. It is a message from the Times as to this administration's thinking in phase 2. Scary.
Tuesday, June 26, 2012
"NOT WHILE I'M STILL ALIVE..."
...which is German for "over my dead body" or "drop dead." I'm not sure; German is a difficult language. Anyway, rhar was Angie's response to the question as to whether she would agree with Frankie at chin wag tomorrow in Paris over the question of Euro bonds/joint guarantees/burden sharing/added growth policies and whatever else on which Frankie was trying to raise the Tri-Color. Told you he was quite full of himself.
What I didn't mention because I just found out was that The Leader and the Suit were trying to muscle Angie and her northern Europe pals into Frankie's box last week in Los Cabos. Now you have to undestand the bloom is very much off the Leader's rose and The Suit carries little weight in Europe (or anywhere else for that matter) so putting in their two cents unasked is a sure fire way to insure that Angie's gang does what they damn well please and thank you very much, go away now. Then again, Paris is lovely this time of year but don't expect much if anything coming out of this meeting. Frankie should keep the golden rule in mind: he who has the gold makes the rules. Oh, one other thing. Keep an eye on French banks. I don't like what I am hearing which is absolutely nothing and unless they have suddenly gotten smart, that's a bad thing.
And now Massimo; a very dour Massimo I might add. Things according to him have not gone well. The Italians have missed in his estimation an opportunity of a lifetime simply because they are...well, Italian. Monti was sure his plan to liberalize the entire Italian state was a winner; oh sure, compromises would occur but he was sure he had it. He got very little and occording to Massimo not because of any overwhelming disagreement on the policy or the necessity but simply because the politicians were more uncomfortable with adopting the changes proposed than with the status quo despite recognizing that in the long run was not sustainable. I am reminded of a wonderful Sophia Loren movie in which for reasons I have forgotten ahe must become pregnant as quickly as possible. The parental candidate is a young man in the town who has been madly in love with her and fills his days with fantasies. She explains the situation:
"...es tu."
"Io?"
"Si."
"Ora?"
"Si."
"Qui?"
"Si, SI!"
She is forced to chase him around the room for the result pre-ordained and desired but in his mind it should not be him, not then and not there. Bienvenuto a Italia.
So, continues Massimo, what Monti is going to do is agree with Frankie which is a non-starter but also make it clear that in exchange he is prepared to allow Angie to run the show in Euroland. That he believes will be even a worse solution for the pols than his reforms and believing as he does that with his reforms Italy can become the Germany of the South he is willing to play a monumental three-way game of chiken to get them done. If Massimo is correct, the guy has stones as they say on Mulberry Street. In the meantime, Italy sold two year notes at a stinking yield of 4.7%. Italian banks are making a lot of money buying these things and even getting the cash back as Monte di Peschi di Sienna, probably the oldest bank in the world, received 2 billion Euros from the Bank of Italy today. Time is getting short throughout Euroland. Massimo is going to Brussels. He says the food is wonderful.
What I didn't mention because I just found out was that The Leader and the Suit were trying to muscle Angie and her northern Europe pals into Frankie's box last week in Los Cabos. Now you have to undestand the bloom is very much off the Leader's rose and The Suit carries little weight in Europe (or anywhere else for that matter) so putting in their two cents unasked is a sure fire way to insure that Angie's gang does what they damn well please and thank you very much, go away now. Then again, Paris is lovely this time of year but don't expect much if anything coming out of this meeting. Frankie should keep the golden rule in mind: he who has the gold makes the rules. Oh, one other thing. Keep an eye on French banks. I don't like what I am hearing which is absolutely nothing and unless they have suddenly gotten smart, that's a bad thing.
And now Massimo; a very dour Massimo I might add. Things according to him have not gone well. The Italians have missed in his estimation an opportunity of a lifetime simply because they are...well, Italian. Monti was sure his plan to liberalize the entire Italian state was a winner; oh sure, compromises would occur but he was sure he had it. He got very little and occording to Massimo not because of any overwhelming disagreement on the policy or the necessity but simply because the politicians were more uncomfortable with adopting the changes proposed than with the status quo despite recognizing that in the long run was not sustainable. I am reminded of a wonderful Sophia Loren movie in which for reasons I have forgotten ahe must become pregnant as quickly as possible. The parental candidate is a young man in the town who has been madly in love with her and fills his days with fantasies. She explains the situation:
"...es tu."
"Io?"
"Si."
"Ora?"
"Si."
"Qui?"
"Si, SI!"
She is forced to chase him around the room for the result pre-ordained and desired but in his mind it should not be him, not then and not there. Bienvenuto a Italia.
So, continues Massimo, what Monti is going to do is agree with Frankie which is a non-starter but also make it clear that in exchange he is prepared to allow Angie to run the show in Euroland. That he believes will be even a worse solution for the pols than his reforms and believing as he does that with his reforms Italy can become the Germany of the South he is willing to play a monumental three-way game of chiken to get them done. If Massimo is correct, the guy has stones as they say on Mulberry Street. In the meantime, Italy sold two year notes at a stinking yield of 4.7%. Italian banks are making a lot of money buying these things and even getting the cash back as Monte di Peschi di Sienna, probably the oldest bank in the world, received 2 billion Euros from the Bank of Italy today. Time is getting short throughout Euroland. Massimo is going to Brussels. He says the food is wonderful.
Thursday, April 26, 2012
IL DUE MARIOS
Remember the old joke about the definition of hell being the place where the Germans were lovers, the French soldiers, the English the cooks and the Italians ran the place? Time can change a lot of things. These days the two most respected managers in Euroland are Mario Draghi the head of the ECB and Mario Monti the temporary PM of Italy. Monti, despite the fact that the legislature jumped up and bit him on the bum has done more in the last three months to rationalize the chaos that is state of employment in Italy and in pointing out the absolute folly of guaranteed employment and retirement at 50 in discussing the sustainability of the Italian state. This week, Draghi has become the darling of the near and far left who, while not listening entirely to what he said, nonetheless were totally supportive because they heard the magic word, "growth."
You see, to the left in any location, "growth" equates to the government printing as much money as possible and spending it as quickly as possible on "investments" (see; The Leader c. 2009) which project as "shovel-ready projects" that may or may not come about (see; The Leader c. 2011). The candidate, M. Hollande lept for joy at the thought of having Draghi on his side and governments toppled all over Euroland. "No more austerity," rose the cry. "Growth NOW!" "Tax the rich." "Abandon the Brussels accord..." except that's not really what Draghi meant.
Surprisingly, the two Italians who have never been known to be particularly close, were pretty much in lock-step over the past few days in their ideas concerning the economies of Italy in particular and Euroland in general. Growth by all means but what both suggest as to what was needed was a complete structural reform of the economies coupled with an intelligent monetary expansion, not a mere opening of the floodgate of the central bank and watching money pour out. In addition, Sig. Draghi spoke quite openly on the pressing need to restructure and recapitalize the banking system in order to get credit once again flowing to where any advance have been totallyabsent for half a year now with the only activity being the so-called "round tripping, " i.e, borrowings from the ECB in order to buy the bonds of the nation of incorporation of the individual bank. I spoke with Massimo this morning as to credit availabilty in Italy. His answer was one word;
"Niente."
It's worse than that. The only activity is the afor-mentioned round tripping. There is no interbank market; banks will not lend to each other. There is no external debt market. There is no external (public) purchase of sovereign debt. I have no way of confirming this but Massimo stated that 80-90% of Italian debt was being purchased by the banks. Remarkable. Europe is a credit wasteland except perhaps for Germany where activity is serious in decline as well.
The Marios are right of course but the messages are getting muddled. Why? Elections. It's simple, really. Time is running very short; indeed, I wonder if there is any time left.
You see, to the left in any location, "growth" equates to the government printing as much money as possible and spending it as quickly as possible on "investments" (see; The Leader c. 2009) which project as "shovel-ready projects" that may or may not come about (see; The Leader c. 2011). The candidate, M. Hollande lept for joy at the thought of having Draghi on his side and governments toppled all over Euroland. "No more austerity," rose the cry. "Growth NOW!" "Tax the rich." "Abandon the Brussels accord..." except that's not really what Draghi meant.
Surprisingly, the two Italians who have never been known to be particularly close, were pretty much in lock-step over the past few days in their ideas concerning the economies of Italy in particular and Euroland in general. Growth by all means but what both suggest as to what was needed was a complete structural reform of the economies coupled with an intelligent monetary expansion, not a mere opening of the floodgate of the central bank and watching money pour out. In addition, Sig. Draghi spoke quite openly on the pressing need to restructure and recapitalize the banking system in order to get credit once again flowing to where any advance have been totallyabsent for half a year now with the only activity being the so-called "round tripping, " i.e, borrowings from the ECB in order to buy the bonds of the nation of incorporation of the individual bank. I spoke with Massimo this morning as to credit availabilty in Italy. His answer was one word;
"Niente."
It's worse than that. The only activity is the afor-mentioned round tripping. There is no interbank market; banks will not lend to each other. There is no external debt market. There is no external (public) purchase of sovereign debt. I have no way of confirming this but Massimo stated that 80-90% of Italian debt was being purchased by the banks. Remarkable. Europe is a credit wasteland except perhaps for Germany where activity is serious in decline as well.
The Marios are right of course but the messages are getting muddled. Why? Elections. It's simple, really. Time is running very short; indeed, I wonder if there is any time left.
Thursday, January 19, 2012
MEDITATION
That's how yesterday was spent; in meditation. I was saying to myself, "Self, is this the way they are really going to go? Have they really all gotten together and said ok, we've run out of ideas and when you run out of ideas just throw money at it?" It really looks that way.
Now I am still having a hard time believing the conslusion to which I have come but there doesn't seem to be any other explaination. Over here it started last week with Ben and Billy the Dud seemingly ready to buy every upside down house in the country. This week the clamor...muted to be sure...was for QE III in a "meaningful" amount as one observer put it which is code of course for a trillion dollars. Over there, the ECB made it very clear that it was prepared to come up with at least as much as the wildly successful 3 year facility for the banks and yesterday the IMF announced that it was looking for an additional $500 billion and asking the EU to increase it's bail-out fund to at least a trillion Euros to contain the risk of contagion in the financing of Europe's sovereign debt...a 450 billion Euro increase at a minimum. Now let's see, close to a trillion from the ECB, a trillion from the bail-out fund, $500 million from the IMF (minimum); where is Everett Dirksen when you need him? At least the Euro side is sterilized--we know where that's going to wind up--but the dollars from QE III? Boy, I bet the rest of the world, places like Brazil for example, are just going to love that. But do these guys care? Nah. Not a thought. The battle that Brazil has to fight in taming the inflation that these actions create...well, that's their problem.
The IMF announcement is a classic. Any lawyer can tell you that the first thing that is taught to you in law school is never ask a question unless you're damn well sure what the answer is going to be, so in this case for all the denials (and they were immediate) that the U.S. was going to participate in this money-raising exercise, we are. Mme. Lagrande is a very good lawyer and with the U.S. holding 18% of the voting stock of the IMF unless she was sure the U.S. was there, she never would have said a word. This will of course cause an uproar in Congress but The Leader and The Suit don't need Congress for this one.
And there, dear readers, is the plan. There is no longer any doubt that all the money in the world will be made available just as we speculated last week but now I am sure. I'm shocked I suppose but not surprised. Even the time frame is revealed which coincides with the maturity of the ECB facility. For the next three years. Tomorrow, Mario Monti will release his restructuring plan for Italy. The early leaks point to a well-reasoned approach and a recognition that what ails Italy and by extention the EU, is not simply a financing bind but, indeed, a structural deformity in Italian society, with specific steps to be taken within a specified timetable, which I bet is three years. We shall see. In the mean time Italy and Spain both had relatively successful bond auctions with a modest reduction in yields for both but still at levels far too high to be sustainable.
Within my meditation came the realization that this was one hell of a bet. Monti I am sure is serious in what he is trying to do, but if the returns are not what are expected and the growth that is absolutely essential is not achieved--not only in Italy mind you but throughout the Union--the waste of resources and the destruction of wealth that will result will be monumental and chaotic. These guys have gone all-in and I gues I never thought that they would. I honestly thought that the plan would be to muddle along and deal with a minor default here and there but now that option appears to be gone. Now, Greece HAS to work. Now, Portugal cannot be ignored. Now, Spain CANNOT be allowed to fail despite the enormous financial burden it faces which, through the disclosure of the debt owed by the independent states, grows daily. At least that's what I came up with. I would certainly like to hear from you as to whether you think I'm correct or what it is that I have missed
Now I am still having a hard time believing the conslusion to which I have come but there doesn't seem to be any other explaination. Over here it started last week with Ben and Billy the Dud seemingly ready to buy every upside down house in the country. This week the clamor...muted to be sure...was for QE III in a "meaningful" amount as one observer put it which is code of course for a trillion dollars. Over there, the ECB made it very clear that it was prepared to come up with at least as much as the wildly successful 3 year facility for the banks and yesterday the IMF announced that it was looking for an additional $500 billion and asking the EU to increase it's bail-out fund to at least a trillion Euros to contain the risk of contagion in the financing of Europe's sovereign debt...a 450 billion Euro increase at a minimum. Now let's see, close to a trillion from the ECB, a trillion from the bail-out fund, $500 million from the IMF (minimum); where is Everett Dirksen when you need him? At least the Euro side is sterilized--we know where that's going to wind up--but the dollars from QE III? Boy, I bet the rest of the world, places like Brazil for example, are just going to love that. But do these guys care? Nah. Not a thought. The battle that Brazil has to fight in taming the inflation that these actions create...well, that's their problem.
The IMF announcement is a classic. Any lawyer can tell you that the first thing that is taught to you in law school is never ask a question unless you're damn well sure what the answer is going to be, so in this case for all the denials (and they were immediate) that the U.S. was going to participate in this money-raising exercise, we are. Mme. Lagrande is a very good lawyer and with the U.S. holding 18% of the voting stock of the IMF unless she was sure the U.S. was there, she never would have said a word. This will of course cause an uproar in Congress but The Leader and The Suit don't need Congress for this one.
And there, dear readers, is the plan. There is no longer any doubt that all the money in the world will be made available just as we speculated last week but now I am sure. I'm shocked I suppose but not surprised. Even the time frame is revealed which coincides with the maturity of the ECB facility. For the next three years. Tomorrow, Mario Monti will release his restructuring plan for Italy. The early leaks point to a well-reasoned approach and a recognition that what ails Italy and by extention the EU, is not simply a financing bind but, indeed, a structural deformity in Italian society, with specific steps to be taken within a specified timetable, which I bet is three years. We shall see. In the mean time Italy and Spain both had relatively successful bond auctions with a modest reduction in yields for both but still at levels far too high to be sustainable.
Within my meditation came the realization that this was one hell of a bet. Monti I am sure is serious in what he is trying to do, but if the returns are not what are expected and the growth that is absolutely essential is not achieved--not only in Italy mind you but throughout the Union--the waste of resources and the destruction of wealth that will result will be monumental and chaotic. These guys have gone all-in and I gues I never thought that they would. I honestly thought that the plan would be to muddle along and deal with a minor default here and there but now that option appears to be gone. Now, Greece HAS to work. Now, Portugal cannot be ignored. Now, Spain CANNOT be allowed to fail despite the enormous financial burden it faces which, through the disclosure of the debt owed by the independent states, grows daily. At least that's what I came up with. I would certainly like to hear from you as to whether you think I'm correct or what it is that I have missed
Thursday, November 10, 2011
THE 21st CENTURY
That's where I am! I'm also lost. The family gave me an IPod for my birthday (don't ask) and I have no idea how to use the damn thing. Anyway, this is my first attempt so this is going to be short and sweet as I have taken 5 minutes to
write these three lines.
The talking heads announced today that the Euros have gone off the front page and stocks are looking good. Unfortunately, so is oil which is heAding rapidly towards $100 a barrel which means...well, I don't know what it means.But just to make sure all is well, I gave Massimo a ring this morzningx and not surprisingly, he was in good form.
"Embeh, I told you we would make this ok, no?"
"What do you mean ok? Your ten year was at a 7.48 yield the other day. You call that ok? I call it stinko."
"No Charlie, you don't understand. This is a good thing. We send him a message by no buying the auction. He gets it and now ARRIVEDERCI!"
"You mean Burlesconi, right?"
"Certo. He go now for sure and you watch, good things start to happen."
"Like?"
"Like Monti come back. Mario...he very good don't you think?"
"Very good indeed, and...?"
"Well, you know Charlie Draghi no can stand this guy so when he go you watch the ECB say, "Ciao, Bella Italia" and down go the ten year yield!"
"You're that sure he's gone?"
"Charlie, Charlie, sempre Americano tu. You look at the bonds but you no look at the stocks. His stocks. We sell the hell out of them for a week. When he go, maybe we no sell them as much. Capisce?"
"Massimo, you are a joy to talk to. I just hope you're right."
"Charlie, let me tell you something. Greece? Don't worry, she's gone next year and I don't know what that means yet. Ma, if you have to worry, worry about France next year because this guy not going to be around too long and the Asino that he is the other bunch are worse. Triple A? Ha! Not with the socialists. But until then it will be 'Buon Natale'. Just listen to your friend, Massimo. Ciao, Charlie, I go."
La dolce vita. The Italians always seem to pull it out. They just love this intrigue and seem to create situations where they can have more of it. Though I shouldn't, I just have this feeling that Massimo may be right. Then again...
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