I was going to write a bit more about New York experiences but what went on in Euroland today was just too delicious to ignore. Talk about pissing contests! It started with the IMF admitting that they may have gotten it a bit wrong when it came to Greece but the really bad actor in the drama was the Troika who, they claimed, sacrificed Greece in favor of the German and French banks who were loaded up on Greek paper. Representatives of the Troika shot back that the view of the IMF was simply stupid. Commentators around Europe chimed in that both were to blame and while all this was going on , a prominent German politician and former finance minister suggested that the time of the Euro was over...at least for the southern tier countries including, of all countries, FRANCE! Quell Horror.
Now to readers of this blog none of this has come as a surprise because as I told you 2 years ago, "It's all about the banks," and forcing Greece to borrow even more money which they had absolutely no chance to repay was just buying time to fix the banks...a noble strategy but the damn fools had no idea how to go about it and still haven't fixed them yet, especially the French. Now let's be honest, nothing much has changed. It the four years following the debt crisis of 1982, the Latin countries were sacrificed to save the banking system of the world for that period really presented a systemic crisis, but not to the extent that Greece has suffered. I think there is enough blame to go around but what is truly insane is that there has been no effort to deal with the single most important cause of the European disaster which is of course the treatment of sovereign debt as risk assets weighted so that from a capital standpoint they carry no risk at all. This same treatment is enshrined in the dreadful Basel III draft which not only encourages but practically demands that banks lend to sovereigns and in so doing destroy their balance sheets when suddenly there comes a Greece and the realization that you can never make enough in interest to cover the loss in principal when the day or reckoning arrives. And so the banks lie and are aided and abetted by their host governments who, dependent on these institutions for financing, are prepared to trash any one and any thing to stay on the gravy train. Sorry about that my Hellenic friends but some one has to pay for all this and you are it. You really didn't expect honest treatment from the mob up north did you?
While all of this was going on, up pops Mario Draghi announcing that there would be no more talk of QEing from him. Now to be honest, the ECB never really got into it in the manner of the Fed, the Bank of England or Japan, but he made it very clear that governments should not look to his institution to pump up liquidity as a way to stimulate growth. Sr. Draghi has long talked in broad terms of structural change in Euroland but today he emphasized the point. In support, and as opposed to the views of the outgoing governor Mervyn King, the board of the Bank of England announced that it was not in favor of continued pump priming as well, a remarkable rebuke to the man widely admired across numerous time zones. The result of all of this is to put politicians on the spot for future improvements in economic conditions which they do not like one bit. Whether this attitude holds will be interesting to see as the pressures will be enormous. I can't wait to see what Little Paulie has to say about all this once he returns from vacation.
And Over Here, tomorrow's jobs number is being touted as the most important one in a long time. Without so saying, more than a few out there are praying for a real howler which in their mind would mean that the Fed wouldn't dare to begin easing AWAY from its expansionary policy. Imagine, hoping against hope that more Americans stay out of work. How sick is that, but as Max put it it's Loonie Tunes out there. 8:30 tomorrow morning and commentary for the rest of the day. I had planned nothing so I guess I will have the time to get furious at each and every talking head that shows up. What a wonderful life.
Showing posts with label Troika. Show all posts
Showing posts with label Troika. Show all posts
Thursday, June 6, 2013
Monday, November 26, 2012
THE PREMIERE LEAGUE?
Now we all know that the English Premiere League isn't English at all, I mean, hell's bells, Chelsea put a grab-bag of ten foreigners on the pitch at Stanford Bridge the other evening. But that kind of action has produced without question the finest soccer league in the world. But the Bank of England? "Mark Carney? Wha's his position, center-mid on the Bank's side?......Guv? Oh come off it. England don't do such things, know what I mean Jack?"....And so went the talk in the City this afternoon.
But it did and what an exraodinary choice for the new Governor as the Commonwealth, in the form of the governor of Canada's Central Bank, comes to the aid of the mother country. OK, that's a bit over the top but it's a hell of a surprise and a tremendous choice in the opinion of those who know him (I do not). He is apparently frightfully bright, blunt, non-beaurocratically correct and very much hands on in the running of his institution and in the oversight of the nation's banks...which to be fair, there being only seven that count, is somewhat of a less-complicated task. What this means to the UK and to Euroland remains to be seen, but what a way to close out the year.
And moving over to Euroland, the weekend brought additional difficulties as local Spanish elections showed major gains for the Catalan seperatist movement; not enough to get a vote going but probably enough to mak Sr. Rajoy think twice before taking ANY action with political overtones such as going hat in hand to the TROIKA or any one else for that matter and asking for a bail-out and the conditionality that will most certainly attach itself to such an action. Now local politics has further complicated the situation allowing the Euros to maintain their perfect record of buggering up everything they touch simply by not be able to make decisions in a timely manner and being tied to a whole host of political considerations that in a true union would not exist.
If that wasn't enough, the Brussels Eating Club still can't get their act together on Greece with the Chrissie at the IMF still demanding that the debt to GDP ratio come in at 120% by 2020 (which she knows can't happen) and every one else coming up with off-the-wall schemes as to how it seemingly be made to happen and Angie saying "Nein" to any debt forgiveness scheme that could make it happen.. I did hear some rumors of a few ministers who have gotten so sick and tired of the exercise that they are mumbling about telling the Greeks to bugger off, here's a fifty-year maturity at 3% and never come back again. A couple of wise folks on this side of the pond have suggested that very thing for years but so far, no go. Makes too much sense. For all the time and treasure being spent on not even a real country is ridiculous. Then again, Oysters are in season as is game and Cepts; why stop talking when there is so much to which one can look forward?
But it did and what an exraodinary choice for the new Governor as the Commonwealth, in the form of the governor of Canada's Central Bank, comes to the aid of the mother country. OK, that's a bit over the top but it's a hell of a surprise and a tremendous choice in the opinion of those who know him (I do not). He is apparently frightfully bright, blunt, non-beaurocratically correct and very much hands on in the running of his institution and in the oversight of the nation's banks...which to be fair, there being only seven that count, is somewhat of a less-complicated task. What this means to the UK and to Euroland remains to be seen, but what a way to close out the year.
And moving over to Euroland, the weekend brought additional difficulties as local Spanish elections showed major gains for the Catalan seperatist movement; not enough to get a vote going but probably enough to mak Sr. Rajoy think twice before taking ANY action with political overtones such as going hat in hand to the TROIKA or any one else for that matter and asking for a bail-out and the conditionality that will most certainly attach itself to such an action. Now local politics has further complicated the situation allowing the Euros to maintain their perfect record of buggering up everything they touch simply by not be able to make decisions in a timely manner and being tied to a whole host of political considerations that in a true union would not exist.
If that wasn't enough, the Brussels Eating Club still can't get their act together on Greece with the Chrissie at the IMF still demanding that the debt to GDP ratio come in at 120% by 2020 (which she knows can't happen) and every one else coming up with off-the-wall schemes as to how it seemingly be made to happen and Angie saying "Nein" to any debt forgiveness scheme that could make it happen.. I did hear some rumors of a few ministers who have gotten so sick and tired of the exercise that they are mumbling about telling the Greeks to bugger off, here's a fifty-year maturity at 3% and never come back again. A couple of wise folks on this side of the pond have suggested that very thing for years but so far, no go. Makes too much sense. For all the time and treasure being spent on not even a real country is ridiculous. Then again, Oysters are in season as is game and Cepts; why stop talking when there is so much to which one can look forward?
Monday, November 12, 2012
THE MAKINGS OF A TRAGEDY?
Or a farce? As expected, the Greek Parliament did what they were supposed to do last night while the rioting continued. This morning, their Euro buddies in Brussels managed to get into a fight among themselves and finding no resolution turned to the Greeks and said thanks very much indeed for getting a couple people killed in doing what we wanted you to do but it's not enough so you can't have your money by Friday or at least we don't think you can but we may meet again on Wednesday what for we are not sure and you may have an answer by then good-bye. To say the Greeks have their knickers in a twist would not fully or adequately describe the situation.
What happened was a failure to communicate at the highest level. In one corner we have the bureaucrats and the politicians led by Angie who desperately want to put this behind them so that they can get on with the really important business of their reelection. In the other corner is the Troika led by Christy-baby who described it's situation in her beautifully accented and perfect English as, "wanting a permanent fix, not a short-term one."
It seems that everyone had overlooked the requirement that it could be demonstrated that Greece's debt to GDP would be no more than 120% in two years except for the Troika and the only way for that to happen would be for a goodly portion of the debt to disappear between now and then. Problem is the only holders of Greek Debt at this stage is the public sector and that line in the sand was drawn a long time ago with the pols promising the voters no losses would be accepted. On top of all of this is a loan repayment of around 3 billion Euros due Friday for which the Greeks are a bit short of the ready--or so they say--by about 3 billion Euros. The Greeks are quite prepared to refinance the maturity through the sale of T-Bills but they seem to be a bit short there as well...of buyers. After all that has transpired, after all of the heartbreak and deaths, these clowns are prepared to play silly bugger with a situation that everyone knows is insoluble in the end; prepared to play chicken with a Greek default; prepared to practically invite the Greeks to bail out of the EU and explain to the entire world the IMF's complaint as to why there is too much Greek Euros in off-shore accounts. Of course there is you idiots; IF THE WORST HAPPENS NOBODY WANTS DRACHMAS...and guess in the end who is making that happen. Tragedy. For Greece perhaps but one they caused. Farce? I like that better; tragedies involve the fall of the mighty as a result of a character flaw or the role of fate. Try as I may I don't see any mighties around this one. I guess we just wait for the reviews.
What happened was a failure to communicate at the highest level. In one corner we have the bureaucrats and the politicians led by Angie who desperately want to put this behind them so that they can get on with the really important business of their reelection. In the other corner is the Troika led by Christy-baby who described it's situation in her beautifully accented and perfect English as, "wanting a permanent fix, not a short-term one."
It seems that everyone had overlooked the requirement that it could be demonstrated that Greece's debt to GDP would be no more than 120% in two years except for the Troika and the only way for that to happen would be for a goodly portion of the debt to disappear between now and then. Problem is the only holders of Greek Debt at this stage is the public sector and that line in the sand was drawn a long time ago with the pols promising the voters no losses would be accepted. On top of all of this is a loan repayment of around 3 billion Euros due Friday for which the Greeks are a bit short of the ready--or so they say--by about 3 billion Euros. The Greeks are quite prepared to refinance the maturity through the sale of T-Bills but they seem to be a bit short there as well...of buyers. After all that has transpired, after all of the heartbreak and deaths, these clowns are prepared to play silly bugger with a situation that everyone knows is insoluble in the end; prepared to play chicken with a Greek default; prepared to practically invite the Greeks to bail out of the EU and explain to the entire world the IMF's complaint as to why there is too much Greek Euros in off-shore accounts. Of course there is you idiots; IF THE WORST HAPPENS NOBODY WANTS DRACHMAS...and guess in the end who is making that happen. Tragedy. For Greece perhaps but one they caused. Farce? I like that better; tragedies involve the fall of the mighty as a result of a character flaw or the role of fate. Try as I may I don't see any mighties around this one. I guess we just wait for the reviews.
Tuesday, July 31, 2012
NOTHING NEW
We will see what the central banks have to say tomorrow although it's not a very hard guess. We might also look to news from Athens although that's not realling important any more as I have been saying. Therefore, why don't we just solve the Greek problem by taking a page from catastrophies of long ago.
Look, nothing in a conventional sense is going to help Greece: it still has too much debt and too little growth. Throwing them out of the Eurozone would be easy and relatively inexpensive. Forget about what the geniuses on tv and in the papers are telling you; the Germans have already done he numbers. What scares everyone is the threat of contagion--if Greece goes, who's next--and that is a real concern if your aim is to hold the Eurozone together. Look at Euroland and Greece as two seperate but interconnected problems. If you can isolate Greece from the far more important Euroland Inc., you have a chance...a chance mind you...of bringing the latter problem under control. Think Mexico, c.1983.
Mexico had two forms of debt, soverign and bank, the latter although nationalized, still was considered a seperate stock of debt. If interbank lending was not continued, Mexican banks would collabse and bring the soverign debt down with it. To preven this from happening a "gentleman's agreement" was reached: Mexican banks would refuse to repay interbank loans upon maturity and lenders would agree to roll over the advances outstanding and not accept repayment. It was nuts but it actually worked. Fear is a highly motivating factor. Greece is Euroland's Mexican Banks so why don't we try something like this:
Restructure all the Greek debt for something like 30 years at 1%. As part of the agreement Greece will agree not to attempt to buy back their debt at a discount for, say, five years and the obligees will agree to hold their debt until maturity. Mark to market? Nah. The accountants will agree to make it inapplicable just like in 1983 if leaned upon and certainly the banks will not object if there is no need to engage in write-downs. Will all parties be telling the truth and adhear to the agreements? Of course not, but who cares. The problem will resolve itself within the market which is as things should be. At this point, Euroland can say bye-bye to the Greeks: if you want to stay in fine with us but no more money. You are on your own. Screw it up again and you're toast. The fact that you still owe a gazillion Euros is of no consequence because any obligee with a brain in it's head will have the opportunity to reserve against insuing loss a little at a time over 30, 40, or 50 years which is no loss at all. So au revoir, Greece and have a GREAT future. We'll hold a meeting down in your parts from time to time as long as you keep Santorini available in February. I think it's a wonderful idea, but I guess we have to wait to see what comes out of the talks with the Troika.
And of course, Thursday looms. Let me reiterate; they better come up with something good otherwise there will be hell to pay. Can't wait.
Look, nothing in a conventional sense is going to help Greece: it still has too much debt and too little growth. Throwing them out of the Eurozone would be easy and relatively inexpensive. Forget about what the geniuses on tv and in the papers are telling you; the Germans have already done he numbers. What scares everyone is the threat of contagion--if Greece goes, who's next--and that is a real concern if your aim is to hold the Eurozone together. Look at Euroland and Greece as two seperate but interconnected problems. If you can isolate Greece from the far more important Euroland Inc., you have a chance...a chance mind you...of bringing the latter problem under control. Think Mexico, c.1983.
Mexico had two forms of debt, soverign and bank, the latter although nationalized, still was considered a seperate stock of debt. If interbank lending was not continued, Mexican banks would collabse and bring the soverign debt down with it. To preven this from happening a "gentleman's agreement" was reached: Mexican banks would refuse to repay interbank loans upon maturity and lenders would agree to roll over the advances outstanding and not accept repayment. It was nuts but it actually worked. Fear is a highly motivating factor. Greece is Euroland's Mexican Banks so why don't we try something like this:
Restructure all the Greek debt for something like 30 years at 1%. As part of the agreement Greece will agree not to attempt to buy back their debt at a discount for, say, five years and the obligees will agree to hold their debt until maturity. Mark to market? Nah. The accountants will agree to make it inapplicable just like in 1983 if leaned upon and certainly the banks will not object if there is no need to engage in write-downs. Will all parties be telling the truth and adhear to the agreements? Of course not, but who cares. The problem will resolve itself within the market which is as things should be. At this point, Euroland can say bye-bye to the Greeks: if you want to stay in fine with us but no more money. You are on your own. Screw it up again and you're toast. The fact that you still owe a gazillion Euros is of no consequence because any obligee with a brain in it's head will have the opportunity to reserve against insuing loss a little at a time over 30, 40, or 50 years which is no loss at all. So au revoir, Greece and have a GREAT future. We'll hold a meeting down in your parts from time to time as long as you keep Santorini available in February. I think it's a wonderful idea, but I guess we have to wait to see what comes out of the talks with the Troika.
And of course, Thursday looms. Let me reiterate; they better come up with something good otherwise there will be hell to pay. Can't wait.
Tuesday, September 20, 2011
AN UNEVENTFUL NAP
I never had a dream much less an idea. I could report that after a hours-long conference call between the Greeks and the Troika, it was announced that the Troika was to return to Greece next month, but who would care except the DOW which panicked again and gave up a plus-1% gain for the day. Fear not, the Greeks will get one more payment. The announcement will be something like, "Having determined that Greece has made substantial progress in fulfilling the requirements for continued financial support, we (the Troika) have agreed to advance..." Remember, you heard it here first.
The other thing over which I haven't lost much sleep is the rogue trader at UBS who apparently cost them around 2.3 billion euros over the past couple of years sitting at a "Delta One" desk and doing things that I can't even pretend to understand and which, apparently, the management of UBS didn't understand either. The odd part about this is that UBS has, over the past ten years, lost more money than Carter has pills so you would thinks their risk management protocols would be among the best in the business. Wrong again. A long time ago a wise old banker told me,"Charlie, if they're gonna get ya, they're gonna get ya and there's nothing you can do about it." He was right but I still like my view that nearly got me fired that "if an avaerge intelligent man can't explain the risk, you have too much risk." I'm pretty sure there's a big element of that in this case. I'd be willing to bet that whoever was supposed to be watching over this thing was doing so on a net position basis with some very substantial help from a computer and had no real understanding of what was being netted out much less with whom. Which leads me to the question of whether this sort of activity should be happening within banks, within independently capitalized subsidiaries of banks or be undertaken at all. A "Volker Rule" redoux, if you will.
I am ashamed to admit that as much as my creative side (which has taken a VERY extended nap over the past few years) is titilated by these kinds of activities, my risk management side asks the question what real good is done by any of this except to keep a large number of precocious children amused by allowing them to play with very fancy machines involving vast sums and paying them a great deal of money to see how close they can come to whatever edge there may be in this business? Ban it? No, not really but God made Hedge Funds to be freestanding: If you need the kind of funding only a bank can supply fine, go out, start small and earn it so you can become big. But to have it inside a bank? You all know I've been a huge fan of Tall Paul for a long time and in this case I think he's right again. The disappearance of "Delta One" trading desks will never be mentioned in the history books as one of the great losses of mankind. They benefit only the traders and the managers at bonus time, if they get it right, but the risks are huge either from a rogue or a bad bet. One might want to keep in mind that a rogue is a good trader who made a bad bet and doubled-down to set it right. Society could care less. Kinda like the good banker who believed, "Countries don't go broke." Good morning, Athens.
The other thing over which I haven't lost much sleep is the rogue trader at UBS who apparently cost them around 2.3 billion euros over the past couple of years sitting at a "Delta One" desk and doing things that I can't even pretend to understand and which, apparently, the management of UBS didn't understand either. The odd part about this is that UBS has, over the past ten years, lost more money than Carter has pills so you would thinks their risk management protocols would be among the best in the business. Wrong again. A long time ago a wise old banker told me,"Charlie, if they're gonna get ya, they're gonna get ya and there's nothing you can do about it." He was right but I still like my view that nearly got me fired that "if an avaerge intelligent man can't explain the risk, you have too much risk." I'm pretty sure there's a big element of that in this case. I'd be willing to bet that whoever was supposed to be watching over this thing was doing so on a net position basis with some very substantial help from a computer and had no real understanding of what was being netted out much less with whom. Which leads me to the question of whether this sort of activity should be happening within banks, within independently capitalized subsidiaries of banks or be undertaken at all. A "Volker Rule" redoux, if you will.
I am ashamed to admit that as much as my creative side (which has taken a VERY extended nap over the past few years) is titilated by these kinds of activities, my risk management side asks the question what real good is done by any of this except to keep a large number of precocious children amused by allowing them to play with very fancy machines involving vast sums and paying them a great deal of money to see how close they can come to whatever edge there may be in this business? Ban it? No, not really but God made Hedge Funds to be freestanding: If you need the kind of funding only a bank can supply fine, go out, start small and earn it so you can become big. But to have it inside a bank? You all know I've been a huge fan of Tall Paul for a long time and in this case I think he's right again. The disappearance of "Delta One" trading desks will never be mentioned in the history books as one of the great losses of mankind. They benefit only the traders and the managers at bonus time, if they get it right, but the risks are huge either from a rogue or a bad bet. One might want to keep in mind that a rogue is a good trader who made a bad bet and doubled-down to set it right. Society could care less. Kinda like the good banker who believed, "Countries don't go broke." Good morning, Athens.
Subscribe to:
Posts (Atom)