I didn't like this week at all. It seems to me that nothing good happened anywhere and life is getting more and more dangerous. A couple of thoughts.
The Middle East has broken out into a cauldron of regional slaughter and a brutal continuation of the 1000+ year battle between Sunnis and Shias with M1A1 Tanks replacing chariots and horses. The Saudis appear to be all in given the Shia threat from Iran and its allies in Yemen with Egypt lending a hand. Collateral Damage is not a phrase found in Arabic, and these guys have some serious weaponry to throw about so we can expect the newsreels from the region to be horrific in the coming weeks. Inasmuch as Il Duce and his band of Merry Morons are about to capitulate to Iran, the influence of the United States is about to go from low to non-existent. This could get really ugly and in case anyone has missed it, half of the world's oil supply goes through a choke point right in the region. If somebody pops a tanker...being long XON might not be a bad trade.
The Russians continue to act ugly both in the Ukraine and all about the periphery of NATO. They are probably well-enough trained that they will not stumble into something serious but with armed aircraft buzzing one another at supersonic speed, accidents can happen.
Leaving the Geo-political, revised Economic numbers for the forth quarter in the U.S. came out today and they stunk. The projections of the N.Y. Fed stink as well. The fear is job numbers on Friday will stink. As a matter of fact, most everything stinks but our Girl, Janet, said today that there might well be a rate rise this year if events warrant the same. Which of course means that there will not be unless everything that stinks turns around which right now doesn't look as though that will occur. Funny, with the world awash in liquidity, everything stinks. Is there a downside to this unworking state of affairs? I wonder.
A piece of happy news: rumor has it that the Greek Finance Minister will resign. He says he will not, but where there is smoke...A welcome event to be sure but perhaps too late in the game. But another good piece of news for the Greeks is that next week is Holy Week and nothing will be decided. Now if the Greeks are smart (?) they will present their "plan" this weekend and have open a back door discussion portal to see what has to be changed in order to get an acceptance from the EZ. They will have over a week to work on it. That's the way to work this thing P.M. Tsapris. Hope you are listening.
Finally, the entire world has signed on to the Chinese-sponsored infrastructure bank save for Japan and the U.S. In fact Il Duce has been lobbying hard against the idea. No one has listened. Wonder what the currency in play is going to be?
It is a nasty state of affairs out there, but on we go seemingly without a care. Is that something to admire or simply another worry? I am just not sure.
Have a lovely Palm Sunday weekend.
Showing posts with label Ukraine. Show all posts
Showing posts with label Ukraine. Show all posts
Friday, March 27, 2015
Tuesday, August 5, 2014
THIS IS GETTING TO BE HARD
You try to be witty, informative and current, but after you've been forced to say, "Everything stinks all over the place" where do you go from there? Well, everything does stink all over the place with the Ukraine situation regaining top billing after a report out of Poland claimed the Russians were about to invade. Stocks crashed as did bond yields. There's a joke going around D.C these days. Someone runs into the Russian Ambassador and asks him when will Russia invade? "When Obama is on vacation or fund raising," he replies. I didn't think it was funny but then that's just me... Of course, the shooting has stopped for a bit in Gaza, but ISIS seems to being well on its way to expanding its power in the Tigris and Euphrates hood.
On the home front, there is louder talk about when the Fed is going to move on interest rates--before year-end--and finally…finally…we seem to be reaching consensus that if rates do move, for example 100 b.p. on the 10 years this thing--whatever thing is--is over. Having been saying that for years I fully agree but what a lot of people are overlooking is not the effect that a rate rise will have on the economy but what effect it will have on the national debt and the obligations of the states. Of course the problem is that when the cost of financing rises because of Fed actions there is a concurrent uptick in the cost of borrowing over and above what would normally be simply a reaction to monetary policy. Rate rises beget rate rises which sports fans is not a good thing especially when The Leader keeps believing that it's not his policies that depress American growth but the greed of CEOs. It's been a hell of a ride on this highway but I have the feeling that around the next curve there stands a toll booth. Nothing is for free.
I was trying to write something yesterday of Espirito Sancto but what is there to say? If there were something different about this situation from that which we have seen year after year it might be interesting but alas, la meme chose. And getting French into it, the Credit Agricole who just wrote off about a billion dollars as a result of dealings stemming from a 17% interest in the bank (they wrote that off as well), declared today that they were "defrauded" by the management. Now how the hell you can have two representatives on the Board of Directors with the full knowledge that the books were being audited by something called Eurofin which also structured investments for the bank and claim to have been defrauded is beyond me, but there you go. I mean, who cares anyway as the government of Portugal announced over the weekend that they are going to pump about 5 billion Euros of tax payer money into this pig and all will work out. In case anyone is interested, Eurofin hangs its shingle in Lausanne with an office in St. Jim's in London and has as its head guys two fellow who apparently received a degree in hotel management from some joint in France. Bloody good lunches I bet. Never hold that against anyone I say. But FIVE BILLION!? Haven't these guys ever heard of Dodd/Frank? More if there is more.
On the home front, there is louder talk about when the Fed is going to move on interest rates--before year-end--and finally…finally…we seem to be reaching consensus that if rates do move, for example 100 b.p. on the 10 years this thing--whatever thing is--is over. Having been saying that for years I fully agree but what a lot of people are overlooking is not the effect that a rate rise will have on the economy but what effect it will have on the national debt and the obligations of the states. Of course the problem is that when the cost of financing rises because of Fed actions there is a concurrent uptick in the cost of borrowing over and above what would normally be simply a reaction to monetary policy. Rate rises beget rate rises which sports fans is not a good thing especially when The Leader keeps believing that it's not his policies that depress American growth but the greed of CEOs. It's been a hell of a ride on this highway but I have the feeling that around the next curve there stands a toll booth. Nothing is for free.
I was trying to write something yesterday of Espirito Sancto but what is there to say? If there were something different about this situation from that which we have seen year after year it might be interesting but alas, la meme chose. And getting French into it, the Credit Agricole who just wrote off about a billion dollars as a result of dealings stemming from a 17% interest in the bank (they wrote that off as well), declared today that they were "defrauded" by the management. Now how the hell you can have two representatives on the Board of Directors with the full knowledge that the books were being audited by something called Eurofin which also structured investments for the bank and claim to have been defrauded is beyond me, but there you go. I mean, who cares anyway as the government of Portugal announced over the weekend that they are going to pump about 5 billion Euros of tax payer money into this pig and all will work out. In case anyone is interested, Eurofin hangs its shingle in Lausanne with an office in St. Jim's in London and has as its head guys two fellow who apparently received a degree in hotel management from some joint in France. Bloody good lunches I bet. Never hold that against anyone I say. But FIVE BILLION!? Haven't these guys ever heard of Dodd/Frank? More if there is more.
Thursday, July 31, 2014
NOT A GOOD DAY
If you were searching for a bit of good news today it was hard to find. Over There, aside from the killing fields of the Ukraine, the news was unsettling and the mood somber. There was no economic growth, none. On top of that came the report from Portuguese officials that, as predicted in this space, the loss at Banco Espirito Sancto was far greater than estimated and arrest warrants are being issued as I write. Quite frankly, with the exception of the United States, I cannot remember any bank calamity anywhere that didn't involve lending to another entity in the financial group. It's the first place one looks, and this is proving to be the case here…as predicted yet again. We have seen this all before, only the names have been changed to protect the guilty. The suspicion is that there is to be more of this seeping out from underneath rocks in other jurisdictions that can no longer be kept hidden or inflated out of harm. I would agree.
Over Here, questions began to be raised as to the quality of the GDP figures as a whole series of economic data was released including a absolutely dismal Chicago purchasing report that questioned the real state of the economic recovery. The stock market fell over 300 points, the 10 year thumped back down to it's range of around 2.55% and like Europe, the mood turned somber. In addition, people are beginning to wake up to the fact that western relations with Russia--even Angies--are in the toilet and what does that foretell may I ask.
And then of course there are the Argie Bargies.
When is a default not a default? It seems that occurs when the judicial system of the United States tells you that you are in breach of contract if you don't pay ALL of your creditors what they are owed and in light of that you don't pay anybody..or so is the Argentine argument. Now just to prove that they are correct, they plan…or so they claim…to sue the United States in the International Court in the Hague in violation of their sovereign right to remain deadbeats and liars which they have been since 1823 or so. Wrapped up in that will be some really progressive arguments which would essentially reverse 500 years of practice relating to bond issues and God knows how many years of Anglo-American law in regard to contracts. There is a meeting tomorrow at the District Court to see where we go from here which could actually turn into good fun as Judge Griesa may ask for an explanation of the Argentine claim that he was in cahoots with the plaintiffs. Probably wont happen, but people have been thrown in jail for contempt for less. I mean, would that be a kick? Some Argie Minister thrown in the clink for about 100 days? Well, one can dream.
I make light of this but what is occurring is that every horse's ass on the left to include no lesser a horse's ass on these matters than Prof. Stieglitz of Columbia University have chimed in as to how this affair, if allowed to continue, will spell doom to international finance as we know it. Rubbish. What it will hopefully do is reestablish the rule of law and contract as should have been understood by all parties and undoubtedly WAS as Argentina, throughout this affair has been represented by Cleary Gottleib Steen & Hamilton and as I have said on a number of occasions, there is none better. I KNOW they were advised as to what could happen if things got ugly and they chose the path they have walked in the face of that advice. They are now choosing to establish their position in the arena of public dialog and finding ample aid in the Stieglitzs of the world who know nothing of this business but a lot of the politics of the left. It's not going to work, but rather than the non-event that many have predicted of this affair, the course they have taken could make it a very big event indeed. Don't get me wrong, there is a settlement out there and I hope it can be reached quickly. But if Argentina chooses to take the course of arrogance and stupidity so familiar to them as a nation I hope for once the proper decision can be imposed and imposed hard. It begins tomorrow.
Over Here, questions began to be raised as to the quality of the GDP figures as a whole series of economic data was released including a absolutely dismal Chicago purchasing report that questioned the real state of the economic recovery. The stock market fell over 300 points, the 10 year thumped back down to it's range of around 2.55% and like Europe, the mood turned somber. In addition, people are beginning to wake up to the fact that western relations with Russia--even Angies--are in the toilet and what does that foretell may I ask.
And then of course there are the Argie Bargies.
When is a default not a default? It seems that occurs when the judicial system of the United States tells you that you are in breach of contract if you don't pay ALL of your creditors what they are owed and in light of that you don't pay anybody..or so is the Argentine argument. Now just to prove that they are correct, they plan…or so they claim…to sue the United States in the International Court in the Hague in violation of their sovereign right to remain deadbeats and liars which they have been since 1823 or so. Wrapped up in that will be some really progressive arguments which would essentially reverse 500 years of practice relating to bond issues and God knows how many years of Anglo-American law in regard to contracts. There is a meeting tomorrow at the District Court to see where we go from here which could actually turn into good fun as Judge Griesa may ask for an explanation of the Argentine claim that he was in cahoots with the plaintiffs. Probably wont happen, but people have been thrown in jail for contempt for less. I mean, would that be a kick? Some Argie Minister thrown in the clink for about 100 days? Well, one can dream.
I make light of this but what is occurring is that every horse's ass on the left to include no lesser a horse's ass on these matters than Prof. Stieglitz of Columbia University have chimed in as to how this affair, if allowed to continue, will spell doom to international finance as we know it. Rubbish. What it will hopefully do is reestablish the rule of law and contract as should have been understood by all parties and undoubtedly WAS as Argentina, throughout this affair has been represented by Cleary Gottleib Steen & Hamilton and as I have said on a number of occasions, there is none better. I KNOW they were advised as to what could happen if things got ugly and they chose the path they have walked in the face of that advice. They are now choosing to establish their position in the arena of public dialog and finding ample aid in the Stieglitzs of the world who know nothing of this business but a lot of the politics of the left. It's not going to work, but rather than the non-event that many have predicted of this affair, the course they have taken could make it a very big event indeed. Don't get me wrong, there is a settlement out there and I hope it can be reached quickly. But if Argentina chooses to take the course of arrogance and stupidity so familiar to them as a nation I hope for once the proper decision can be imposed and imposed hard. It begins tomorrow.
Monday, July 21, 2014
THE ROAD TO…WHERE?
The Leader spoke on the Ukraine crisis early this afternoon, some say in response to the criticism of what he said…or did not say…over the weekend. It received even harsher criticism as a result. He said nothing which was interpreted only by the American far-left wags as being a brilliant ploy of holding his cards close to his chest. To be honest, he has few cards to play without the Euros who can't stand the guy and worst yet, don't trust him. Nevertheless, there seems to be a growing thought that doing nothing can't be done and therefore one has to ask where this thing is going and what will be the repercussions to the increasingly integrated financial world in which we live.
From the standpoint of what this means Over Here, the announced plans of the Administration to essentially fund its domestic policy program through tax increases and cuts in the military is, I think, dead. Congress simply will not agree to the former or support the latter in an increasingly (or so it seems) more dangerous global environment. The U.S. response to Russia or the lack of the same will probably become a larger election issue which is now but four months away and could help to shape the congress for the next two years. Should the Republicans achieve their goal of recapturing the Senate their will undoubtedly be legislative stalemate on all levels which some view as a good thing on issues such as financial regulation and of course health care--which I shall never mention again--leading to a possible roll-back on some of the legislative mistakes that have been made in the rush to punish that group of pariahs in the society formally know as bankers. Then again, perhaps not. I'm fairly confident of one thing, however. The relationship between the U.S. and the Euros had better come out of this thing intact and hopefully improved or there is going to be some really tough sledding ahead in the near term.
Over there, individual domestic difficulties seem to be preventing a convergence vis-a-vis Russia--an understandable situation given what is going on. The French, par example, announced today that the state of the economy was "un catasthophe" to the extent that Frankie's beloved 75% top tax rate was to be scrapped along with the 35 hour work week (bet that doesn't happen) in order to get the country moving again. Perhaps scrapping Frankie might work even better but that's none of my business.
Over the weekend more information was released concerning the Banco Espirito Sancto. Luxembourg holding companies, multiple and interlocking loans, commercial paper putchases…and proposed payments thereof…and whether anybody in hell can explain what was going on. It's not Portugal you see, but the issue being if here, where else in the continent that is one big Disney Land is this going on? Of course the masters of obfuscation are the Italians…they have been the best at it for 700 years…so it shouldn't be long before questions start getting asked--again--about who owes what to whom and oh my goodness does this mean that the entire system is probably insolvent? Well, yes, but hopefully the Italians will do what they have always done, keep their mouths shut and act like nothing has happened. And you thought Omerta was just a Sicilian thing? My son, you haven't seen a thing until you visit some of the little shops in Milano, Turino and oh, let us not forget Vienna. It's a good thing August is close at hand, otherwise we would have a lot to worry about. But not until September. In 10 days all of Europe will be on the road…to somewhere.
From the standpoint of what this means Over Here, the announced plans of the Administration to essentially fund its domestic policy program through tax increases and cuts in the military is, I think, dead. Congress simply will not agree to the former or support the latter in an increasingly (or so it seems) more dangerous global environment. The U.S. response to Russia or the lack of the same will probably become a larger election issue which is now but four months away and could help to shape the congress for the next two years. Should the Republicans achieve their goal of recapturing the Senate their will undoubtedly be legislative stalemate on all levels which some view as a good thing on issues such as financial regulation and of course health care--which I shall never mention again--leading to a possible roll-back on some of the legislative mistakes that have been made in the rush to punish that group of pariahs in the society formally know as bankers. Then again, perhaps not. I'm fairly confident of one thing, however. The relationship between the U.S. and the Euros had better come out of this thing intact and hopefully improved or there is going to be some really tough sledding ahead in the near term.
Over there, individual domestic difficulties seem to be preventing a convergence vis-a-vis Russia--an understandable situation given what is going on. The French, par example, announced today that the state of the economy was "un catasthophe" to the extent that Frankie's beloved 75% top tax rate was to be scrapped along with the 35 hour work week (bet that doesn't happen) in order to get the country moving again. Perhaps scrapping Frankie might work even better but that's none of my business.
Over the weekend more information was released concerning the Banco Espirito Sancto. Luxembourg holding companies, multiple and interlocking loans, commercial paper putchases…and proposed payments thereof…and whether anybody in hell can explain what was going on. It's not Portugal you see, but the issue being if here, where else in the continent that is one big Disney Land is this going on? Of course the masters of obfuscation are the Italians…they have been the best at it for 700 years…so it shouldn't be long before questions start getting asked--again--about who owes what to whom and oh my goodness does this mean that the entire system is probably insolvent? Well, yes, but hopefully the Italians will do what they have always done, keep their mouths shut and act like nothing has happened. And you thought Omerta was just a Sicilian thing? My son, you haven't seen a thing until you visit some of the little shops in Milano, Turino and oh, let us not forget Vienna. It's a good thing August is close at hand, otherwise we would have a lot to worry about. But not until September. In 10 days all of Europe will be on the road…to somewhere.
Thursday, July 17, 2014
NOT A GOOD DAY
Some lunatic ordered the murder of 300 souls in an airplane flying at 33,000 feet. The best that can come out of this is that it was a Ukrainian nationalist of Russian origin; the worst that the missile was fired from Russia itself. Either way, there is going to be hell to pay as a good number of EU nationals were killed today by the imperial ambitions of Vlad Putin even if the boys under his direct control didn't pull the trigger. A have to believe that is the case as he is certainly not that stupid But even if that proves to be the true, if there were U.S. nationals on that plane…
While that was going on, Israel decided it had endured enough and crossed the border into the Gaza Strip with perhaps as many as 48,000 troops. This time I suspect they will not be content with blowing up a few houses. Meanwhile, The Leader is headed for New York for not one but two fund raisers. I find it difficult to conceive how he can yuk it up while this is going on. Forgive me, but tone deaf doesn't adequately describe the guy. Joe Biden has the conn. Huh?
Anyway, that took care of the markets today and the rush for safety was on. Equities got killed and the ten year traded to a 2.47% yield. I don't know what happened to the Bund. The Euros are now in a hell of a bind as their natural aversion on doing anything to displease Russia may be overtaken by nationalistic outrage which could affect markets either in a positive or negative sense, that is to say if the outrage reaches the point of really serious sanctions, the economies could face a serious negative fall-out which could outweigh an otherwise flight to safety. One thing for certain; none of this can be good for the southern tier. A collapse of economic activity at the present time would have a devastating effect and this is precisely what is on offer. I suspect that everyone is on high alert for increased terrorist activity if history is any guide. Bye, bye the summer tourist season when the first bomb goes off. No, not a good day at all.
While that was going on, Israel decided it had endured enough and crossed the border into the Gaza Strip with perhaps as many as 48,000 troops. This time I suspect they will not be content with blowing up a few houses. Meanwhile, The Leader is headed for New York for not one but two fund raisers. I find it difficult to conceive how he can yuk it up while this is going on. Forgive me, but tone deaf doesn't adequately describe the guy. Joe Biden has the conn. Huh?
Anyway, that took care of the markets today and the rush for safety was on. Equities got killed and the ten year traded to a 2.47% yield. I don't know what happened to the Bund. The Euros are now in a hell of a bind as their natural aversion on doing anything to displease Russia may be overtaken by nationalistic outrage which could affect markets either in a positive or negative sense, that is to say if the outrage reaches the point of really serious sanctions, the economies could face a serious negative fall-out which could outweigh an otherwise flight to safety. One thing for certain; none of this can be good for the southern tier. A collapse of economic activity at the present time would have a devastating effect and this is precisely what is on offer. I suspect that everyone is on high alert for increased terrorist activity if history is any guide. Bye, bye the summer tourist season when the first bomb goes off. No, not a good day at all.
Friday, April 25, 2014
THE END OF THE END?
It was last week I guess when the Head of the Banque de France announced that the crisis of the Euro and of Euroland was at an end. I think at the time I expressed some skepticism.
I have been watching the close of the stock market and the commentary of the talking heads. It hasn't been a good week, that's for sure made worse by the deepening morass that the standoff between the Ukraine and Russia is becoming. It seems that after weeks of attempting to downplay the global nature of these goings-on--especially by the Euros who absolutely do not want to know--people suddenly took notice today when the Ukraines began to fight back and killed a few people. Russia of course reacted and started flying jets and moving tanks all over the place but what really got people's attention was VISA's announcement that its quarterly earnings were going to be hurt because of a sharp down turn in Russian revenue. My reaction was you have got to be kidding me.
About 10 years ago I got into a discussion with a very, very smart guy with whom my son worked. Despite the fact that he holds a Ph.D in Political Science from one of the world's great universities, I ventured to warn him that Russia needed watching. Nah, said he, a has-been power, never to be a real threat. In every aspect he was correct and I acknowledged such except that I suggested that they were armed to the teeth with strategic weapons and their leader was a nut. Putin is still a nut, but a corrupt, criminal nut as well. It is always about the people, never the metrics in whatever business or political clime one finds oneself.
I bring this up only to point out that risk is where one finds it but you have to look for it for it to be found. The risk of Putin has been ignored simply because it was convenient and profitable to ignore it and only now when the threat has become apparent to a five-year old, has the world become concerned. Make no mistake, if this thing escalates, there is going to be dramatic economic repercussions as yet unidentified. Oh, I'm not talking about theater hostilities because if that happens, the point of discussion is over, but economic sanctions in which even the Euros will have to participate leading to a huge global recession. I mean, VISA? Who would have thunk it.
No doubt, Russia is the risk de jour but, keeping in mind the session I attended in New York, what else is out there that for which we are not really not looking?
On a global political front, The Leader is wandering around Asia seeking to define what his "pivot" means and getting the Chinese God-awful pissed off when he clearly backed Japan's play over a bunch of rocks in the middle of no where. We are bound by treaty you understand which is a bit more than drawing a red line but one must ask if we had an administration that had any foreign policy in place for six years, would it have come to this. Had we understood that the trade-off in China was the ability to consolidate power which meant an even more powerful positioning of the PLA now with highly sophisticated toys with which the heads of this mob are just dying to play, maybe the present and the future of that part of the world might be different. Let's hope this turns out for the better.
To the seeming mundane, people who know about these things keep telling me that the hedge fund guys are in a bit of a panic because everybody is under water and nobody can get out of the pool. Of course, one can simply sit still and not do anything, but then questions start getting asked about why am I paying you 2 1/2% a year to underperform and the meal ticket heads south. Unfortunately, the solution in times like this is to take the exact opposite tack and increase the risk to increase the returns. We create "bubbles" in things like real estate…can one say, "London"…or high-yielding assets like Greek bonds (is 5% really high-yielding given past history?), or mortgages. The geniuses at Wells Fargo (hey! that's what the Street thinks they are) announced the other day that they are back in the sub-prime market which is just fine I guess as the FHA seems to be willing to guarantee everything in sight. Now here's how this thing goes: somebody looks up and says, "Hey, look what Wells is doing and everybody knows they are the smartest guys in the room. Shouldn't we be doing some of that?" If the guy asking the question is sufficiently senior, the answer will invariably be yes, but as the returns are good the "some" will become "a lot." How do I know this? It's an old movie. I've seen it once or twice.
Of course, all of this is greatly enhanced with free money and there appears to be no end to that phenomenon. Janet & Co. are all in with the belief that the Fed can really manage this economy to the upside and oh, if you can supply the same to a government that appears to be absolutely in no way inhibited in spending more money on stuff that hasn't worked yet, that's fine too. Problem is, when one side of the equation written by the hedgies hits a wall and the rich aren't getting richer, problems emerge. Same thing is the nuts of the world begin to be found out as being nuts. When happens then is all the Risk management guys discover risks about which they had no clue and decide that they must be mitigated. They all decide this at once, you see, and they all head for the door at once. It is a narrow door.
Have a great weekend.
I have been watching the close of the stock market and the commentary of the talking heads. It hasn't been a good week, that's for sure made worse by the deepening morass that the standoff between the Ukraine and Russia is becoming. It seems that after weeks of attempting to downplay the global nature of these goings-on--especially by the Euros who absolutely do not want to know--people suddenly took notice today when the Ukraines began to fight back and killed a few people. Russia of course reacted and started flying jets and moving tanks all over the place but what really got people's attention was VISA's announcement that its quarterly earnings were going to be hurt because of a sharp down turn in Russian revenue. My reaction was you have got to be kidding me.
About 10 years ago I got into a discussion with a very, very smart guy with whom my son worked. Despite the fact that he holds a Ph.D in Political Science from one of the world's great universities, I ventured to warn him that Russia needed watching. Nah, said he, a has-been power, never to be a real threat. In every aspect he was correct and I acknowledged such except that I suggested that they were armed to the teeth with strategic weapons and their leader was a nut. Putin is still a nut, but a corrupt, criminal nut as well. It is always about the people, never the metrics in whatever business or political clime one finds oneself.
I bring this up only to point out that risk is where one finds it but you have to look for it for it to be found. The risk of Putin has been ignored simply because it was convenient and profitable to ignore it and only now when the threat has become apparent to a five-year old, has the world become concerned. Make no mistake, if this thing escalates, there is going to be dramatic economic repercussions as yet unidentified. Oh, I'm not talking about theater hostilities because if that happens, the point of discussion is over, but economic sanctions in which even the Euros will have to participate leading to a huge global recession. I mean, VISA? Who would have thunk it.
No doubt, Russia is the risk de jour but, keeping in mind the session I attended in New York, what else is out there that for which we are not really not looking?
On a global political front, The Leader is wandering around Asia seeking to define what his "pivot" means and getting the Chinese God-awful pissed off when he clearly backed Japan's play over a bunch of rocks in the middle of no where. We are bound by treaty you understand which is a bit more than drawing a red line but one must ask if we had an administration that had any foreign policy in place for six years, would it have come to this. Had we understood that the trade-off in China was the ability to consolidate power which meant an even more powerful positioning of the PLA now with highly sophisticated toys with which the heads of this mob are just dying to play, maybe the present and the future of that part of the world might be different. Let's hope this turns out for the better.
To the seeming mundane, people who know about these things keep telling me that the hedge fund guys are in a bit of a panic because everybody is under water and nobody can get out of the pool. Of course, one can simply sit still and not do anything, but then questions start getting asked about why am I paying you 2 1/2% a year to underperform and the meal ticket heads south. Unfortunately, the solution in times like this is to take the exact opposite tack and increase the risk to increase the returns. We create "bubbles" in things like real estate…can one say, "London"…or high-yielding assets like Greek bonds (is 5% really high-yielding given past history?), or mortgages. The geniuses at Wells Fargo (hey! that's what the Street thinks they are) announced the other day that they are back in the sub-prime market which is just fine I guess as the FHA seems to be willing to guarantee everything in sight. Now here's how this thing goes: somebody looks up and says, "Hey, look what Wells is doing and everybody knows they are the smartest guys in the room. Shouldn't we be doing some of that?" If the guy asking the question is sufficiently senior, the answer will invariably be yes, but as the returns are good the "some" will become "a lot." How do I know this? It's an old movie. I've seen it once or twice.
Of course, all of this is greatly enhanced with free money and there appears to be no end to that phenomenon. Janet & Co. are all in with the belief that the Fed can really manage this economy to the upside and oh, if you can supply the same to a government that appears to be absolutely in no way inhibited in spending more money on stuff that hasn't worked yet, that's fine too. Problem is, when one side of the equation written by the hedgies hits a wall and the rich aren't getting richer, problems emerge. Same thing is the nuts of the world begin to be found out as being nuts. When happens then is all the Risk management guys discover risks about which they had no clue and decide that they must be mitigated. They all decide this at once, you see, and they all head for the door at once. It is a narrow door.
Have a great weekend.
Monday, April 14, 2014
I DID IT AGAIN
I was cruising down I-80 when it came to me that the last time I had seen the lap top was atop the kitchen island not resting comfortably in the back seat. Just like last year it had been left at home. Turning to Trouble and Strife I never even got the first word out when a curt, "Don't even TRY to go there," hit me. I know that tone; it was my fault anyway so I didn't even try to lay off some of the blame. It could have gotten ugly at 75MPH.
Shame is I missed a pretty good week of stories. The big news on the banking front was the agreement among the regulators to establish new primary capital rules for the larger banking institutions at 5%, putting the U.S. banks at a higher level than their European counterparts as well as being somewhat at a disadvantage as to the assignment of risk as to assets. The Euros continue to regard sovereign risk in the Euro zone as having a risk weighting of 0 whereas U.S. banks only enjoy that concept in regard to full faith and credit U.S. debt. Somehow, I seem to think there is a difference in value between Greece and Germany but our Euro brothers and sisters do not.
Now most of the larger institutions can already point to acceptable capital levels or plans that will get them there in a relatively short period of time, but what troubles me, as I continue to point out over and over, is that capital in the sense of which the regulators are speaking, can be important when the Second National Bank of Boot Hill's loan to Farmer Brown goes in the gurgle tube because it didn't rain this year, but doesn't mean a damn thing to J.P. Morgan if all the liquidity in the system dries up: banks get sick on the asset side but die on the liability side…those that count, that is. With all respect to Boot Hill, it doesn't count. So, we have all these fine people in D.C. and Billy the Dud patting themselves on the back when in fact they have done absolutely nothing to improve the system in any way that counts for those among their charges who do count. A round of applause and let us move on.
Citicorp got another piece bad news last week as it was announced that the Federal A.G. in Massachusetts was opening an investigation of money laundering involving their affiliate--once removed--BANAMEX of California. Hummmm. Tarullo deciding that his boys' algorithms work better than all those which had mutually been agreed and now another Massachusetts-based entity jumping up ugly at the Pinata that is/will become Citicorp? Why, you ask? Could it be political cover? Could it be Crazy Lizzy organizing this entire thing? Get good odds from me that it is. I don't believe in coincidences. It is so transparent it is ridiculous, but of course the deaf and dumb media just will not pick it up. As a repost, Citicorp today reported far better than expected operating results and a great improvement in their balance sheet which had the effect of giving a big boost to the stock market at least in the short term. Good on ya, mates.
Finally, Greece announced an immensely sucessful 5 year bond issue of over 3 Billion Euros yielding just under 5%. Coverage was nearly 4X. Remarkable. This morning, the Governor of the Banque de France announced that the Euro Crisis is mostly behind us. Oh good, I was waiting for that. I am also waiting to be told that the Russians have not invaded the Eastern portion of the Ukraine and the Ukrainians will not fight as a proud people will do from time to time. Just a few more events that alter and illuminate our time…and my lap top was in the kitchen. Think I'm getting old?
Shame is I missed a pretty good week of stories. The big news on the banking front was the agreement among the regulators to establish new primary capital rules for the larger banking institutions at 5%, putting the U.S. banks at a higher level than their European counterparts as well as being somewhat at a disadvantage as to the assignment of risk as to assets. The Euros continue to regard sovereign risk in the Euro zone as having a risk weighting of 0 whereas U.S. banks only enjoy that concept in regard to full faith and credit U.S. debt. Somehow, I seem to think there is a difference in value between Greece and Germany but our Euro brothers and sisters do not.
Now most of the larger institutions can already point to acceptable capital levels or plans that will get them there in a relatively short period of time, but what troubles me, as I continue to point out over and over, is that capital in the sense of which the regulators are speaking, can be important when the Second National Bank of Boot Hill's loan to Farmer Brown goes in the gurgle tube because it didn't rain this year, but doesn't mean a damn thing to J.P. Morgan if all the liquidity in the system dries up: banks get sick on the asset side but die on the liability side…those that count, that is. With all respect to Boot Hill, it doesn't count. So, we have all these fine people in D.C. and Billy the Dud patting themselves on the back when in fact they have done absolutely nothing to improve the system in any way that counts for those among their charges who do count. A round of applause and let us move on.
Citicorp got another piece bad news last week as it was announced that the Federal A.G. in Massachusetts was opening an investigation of money laundering involving their affiliate--once removed--BANAMEX of California. Hummmm. Tarullo deciding that his boys' algorithms work better than all those which had mutually been agreed and now another Massachusetts-based entity jumping up ugly at the Pinata that is/will become Citicorp? Why, you ask? Could it be political cover? Could it be Crazy Lizzy organizing this entire thing? Get good odds from me that it is. I don't believe in coincidences. It is so transparent it is ridiculous, but of course the deaf and dumb media just will not pick it up. As a repost, Citicorp today reported far better than expected operating results and a great improvement in their balance sheet which had the effect of giving a big boost to the stock market at least in the short term. Good on ya, mates.
Finally, Greece announced an immensely sucessful 5 year bond issue of over 3 Billion Euros yielding just under 5%. Coverage was nearly 4X. Remarkable. This morning, the Governor of the Banque de France announced that the Euro Crisis is mostly behind us. Oh good, I was waiting for that. I am also waiting to be told that the Russians have not invaded the Eastern portion of the Ukraine and the Ukrainians will not fight as a proud people will do from time to time. Just a few more events that alter and illuminate our time…and my lap top was in the kitchen. Think I'm getting old?
Monday, March 17, 2014
OH, WHAT A LOVELY WAR
The DOW was up 186 points at the close and Europeans equities were way up earlier as well. Thug Putin had just finished annexing Crimea without a shot so I guess everybody decided that if you are going to invade somebody else's country and take over territory--which used to be referred to as a warlike event--this was about as good as it gets. Of course no one has a clue as to what this nut-job has in mind for his next act and forget about the fact that he sent out one of his little puppets on Russian TV to remind everyone that Russia could turn the United States into an ash heap with no one seeming to have the mind to say something like, "Oh yeah, Boris, and what do you think will be going on with you if you try that?" Nope, it's risk on boys and girls, buy 'em up.
For a small digression, one might look at a map of Russia. The immediate reaction is, "Wow, big country." When I was very young and playing big boy games, I had the same view. Not so, a far senior colleague said to me, "big land mass, no people. They all live in an area that's pretty compressed, and there's only 150,000,000. They wouldn't last long and they know it." And that's what kept us alive throughout the Cold War.
Putin probably wouldn't mind another Cold War if he could fight it on his terms. Problem for me is time is against him and he knows it. The Leader and the EU started talking sanctions today; Putin could deal with those. They are weak and he preys on weak; what he cannot accept is a serious set-back for that would probably mark the end internally. The west has about a week or two to convince themselves that they are serious, but once again there is a depressing lack of leadership. I'm not comfortable, not comfortable at all.
Back to basics tomorrow.
For a small digression, one might look at a map of Russia. The immediate reaction is, "Wow, big country." When I was very young and playing big boy games, I had the same view. Not so, a far senior colleague said to me, "big land mass, no people. They all live in an area that's pretty compressed, and there's only 150,000,000. They wouldn't last long and they know it." And that's what kept us alive throughout the Cold War.
Putin probably wouldn't mind another Cold War if he could fight it on his terms. Problem for me is time is against him and he knows it. The Leader and the EU started talking sanctions today; Putin could deal with those. They are weak and he preys on weak; what he cannot accept is a serious set-back for that would probably mark the end internally. The west has about a week or two to convince themselves that they are serious, but once again there is a depressing lack of leadership. I'm not comfortable, not comfortable at all.
Back to basics tomorrow.
Thursday, March 6, 2014
HITHER AND YON
First, the financial news from Over There. Sr. Draghi allowed the discount rate at the ECB to remain at 1/% whilst announcing the rock solid stability and strength of the Euro. Huh. He also suggested that Over There's inflation rate of 1% was dangerously low. Huh. Now I am generally a fan of Sr. Draghi but like all other central bankers he is beginning to fall into the trap of making grand announcements which, while often contradictory, are almost all unintelligible or self-evident; nothing in between. The fact is the Euro economy across the board stinks and isn't going to be helped by the little dust-up in the Crimea which takes us to our next subject, the international politics Over There.
A couple of days ago, our friends, particularly Angie, issued a stunning rebuke to The Leader in his call for sanctions against the Russians. Now, why The Leader would be dumb enough to ask for such concerted action without knowing before hand that it would be forthcoming is a different story, but there one had it and to clear up the confusion, The Leader went on some political speaking tour Somewhere in America.
The Euros consulted. It would appear that someone had the bright idea that dissing POTUS might not have been the smartest thing to do despite the fact that he has a disability factor which is off the charts and furthermore, as the Poles and no doubt the Baltic states pointed out, many of the same factors which existed in the Ukraine exist in their own countries and Putin might get other ideas given how good this is working out, in which case Angie, schatzi, let's not forget that we are in NATO with the U.S. and there is this Article 5 thingie. Next thing you know, the U.S. announces a set of sanctions against Russia that don't amount to very much but at least it is not pure blabber Then so does the EU. But they are a different set of sanctions! And they are even more meaningless! And finally,they announce the intention of granting relief to the extent of 15 billion Euros, desperately needed by the Ukraine, which for all practical purposes could be best delivered thru a cheque to the order of Gazprom as suggested in a dark, viciously funny piece in the FT today by a guy named Shramsley. Read it.
While all this was going on, this new phony parliament in the Crimea announced its intention to join Russia and scheduled March 15 as a referendum date to decide the issue. So there we have it; Vlad wants the Crimea and will get it. There's no pulling back, no graceful exit, no negotiated compromise. The Leader spoke again with him today and apparently got stiffed. There is no way of denying that this development is a grave one and one which will have not only immediate impact but repercussions for many years. The scary part is everyone seems to be winging it with no strategy in place due to a complete lack of game-planning on the chance of this occurring. I find that hard to believe and impossible to accept but there we are. We'll be back tomorrow, with a few prayers thrown in between now and then.
While all this was going on, this new phony parliament in the Crimea announced its intention to join Russia and scheduled March 15 as a referendum date to decide the issue. So there we have it; Vlad wants the Crimea and will get it. There's no pulling back, no graceful exit, no negotiated compromise. The Leader spoke again with him today and apparently got stiffed. There is no way of denying that this development is a grave one and one which will have not only immediate impact but repercussions for many years. The scary part is everyone seems to be winging it with no strategy in place due to a complete lack of game-planning on the chance of this occurring. I find that hard to believe and impossible to accept but there we are. We'll be back tomorrow, with a few prayers thrown in between now and then.
Wednesday, March 5, 2014
OH, BOTHER
I think I'll go out and play with Tigger in the 100 acre wood…oh wait, I can't do that it's too damn cold. Fact is I have no idea what to write about which is almost unheard of, but this Ukraine situation overhangs everything. It's kind of surreal out there with nobody really talking about it and yet is is on everyone's mind. The other thing is you can't really get a handle on what it is that people are thinking. For example, today the equity markets were weak but so were bonds with the 10 year well-above 2.70% for most of the day only to slide back to the figure at the end. I think what this is telling us is that no one is sure as to how to read the situation and especially the maker of the feast, Mr. Putin.
Angie thinks he's nuts; maybe she's right. Then again, I think he knows exactly what he is doing and is probably delighted that we are discussing his mental state. The Leader also appears to be clueless while the politicos rant and rave as to how much fault to assign to the Administration. even in left-leaning circles there seems to be the willingness to assign quite a bit in the running of our foreign policy which might indicate the first break in the grid lock that has been Washington. What a country. The thing that gets me, however, is how the hell did this come as such a surprise. Like, Hello? I kinda thought the spooks were supposed to be all over something like this but from where I sit in the fly-over zone, Putin's actions indeed look as though they came as a surprise. Perhaps we might start thinking about the reset button being shipped over to Langley or into the office of the NSA 'cause we are on the back end of the news cycle.
In the middle of all this The Leader's budget was brought front and center with….barely a murmur. Everyone in town knows it is not serious, designed to make political points and one which neither side expects it to be debated much less passed which is just fine with them. After all, it is the most important by-election in years. We are in more disarray than I have ever seen in an increasingly long life and the middle of it all, this morning comes the news that Leon Black of Apollo took home $565 million last year. Now as far as I am concerned, Mr Black can take home a billion but can it be possible that this administration can talk about income inequality and job creation in the terms of a rise in the minimum wage and higher taxes in the face of a number like this which, to any sane person, seems to scream out that something is seriously wrong structurally? To top it off, one of Mr. Black's contemporaries was quite openly talking about thanking Ben Bernanke publicly. Think maybe we got something wrong? They all are big contributors to the party of The Leader by the way, and they did it all with leverage i.e. somebody else's money I guess in accordance with the Fed's dual mandate. …I must stop. Ah, hell. This is what happens when I don't have anything to write about.
Angie thinks he's nuts; maybe she's right. Then again, I think he knows exactly what he is doing and is probably delighted that we are discussing his mental state. The Leader also appears to be clueless while the politicos rant and rave as to how much fault to assign to the Administration. even in left-leaning circles there seems to be the willingness to assign quite a bit in the running of our foreign policy which might indicate the first break in the grid lock that has been Washington. What a country. The thing that gets me, however, is how the hell did this come as such a surprise. Like, Hello? I kinda thought the spooks were supposed to be all over something like this but from where I sit in the fly-over zone, Putin's actions indeed look as though they came as a surprise. Perhaps we might start thinking about the reset button being shipped over to Langley or into the office of the NSA 'cause we are on the back end of the news cycle.
In the middle of all this The Leader's budget was brought front and center with….barely a murmur. Everyone in town knows it is not serious, designed to make political points and one which neither side expects it to be debated much less passed which is just fine with them. After all, it is the most important by-election in years. We are in more disarray than I have ever seen in an increasingly long life and the middle of it all, this morning comes the news that Leon Black of Apollo took home $565 million last year. Now as far as I am concerned, Mr Black can take home a billion but can it be possible that this administration can talk about income inequality and job creation in the terms of a rise in the minimum wage and higher taxes in the face of a number like this which, to any sane person, seems to scream out that something is seriously wrong structurally? To top it off, one of Mr. Black's contemporaries was quite openly talking about thanking Ben Bernanke publicly. Think maybe we got something wrong? They all are big contributors to the party of The Leader by the way, and they did it all with leverage i.e. somebody else's money I guess in accordance with the Fed's dual mandate. …I must stop. Ah, hell. This is what happens when I don't have anything to write about.
Monday, March 3, 2014
CHINA
Given what's going on in Europe, there is a tendency I suppose simply to say, "who cares," and move on to the deteriorating situation which seems to be playing out just as predicted. But in the long run, how China turns out in both the near and short term will be more important, unless Putin, about whom Angie today questioned his sanity, blows up the whole world.
China looms larger today than even a few weeks ago because the Ukraine situation is going to put even a further damper on European growth which has not been looking good since the start of the year. China is clearly going to slow but probably not come anywhere near stopping. What is happening there, in my opinion, is more political and economic with Xi recognizing the need to consolidate power as a means by which he can tackle the two biggest problems facing the economy which are a monstrous culture of corruption at every level and a serious and growing problem with the financial sector which is overextended to a remarkable degree and undercapitalized to the extent that many institutions are de facto bankrupt and must be wound down. The massive real estate bubble is the magnification of this which will create a rationing of credit in the manufacturing and retail sectors which, too, are undercapitalized.
What has been a surprise, however, is the unbridled policy of currency devaluation which we have witnessed, far different than the subversive approach which has always marked Chinese practice as if they are saying, "we're devaluing, what are you going to do about it?" Apparently not much if the last month is any indication. Xi's consolidation and it's consequences are to be balanced by export earnings which is about the last thing the Western countries wanted to hear.
The approach is, of course, another confirmation of the most unfortunate refrain heard in the foreign policy halls of power that Xi is just another chief executive who has absolutely no respect for The Leader and considers him easily ignored. It also relaxes his dealings with the PLA who will be hurt by Xi's reforms in their domestic holdings by allowing them to play fast and loose with their newly acquired toys in thoughts of expansion in Asia. I find it simply remarkable that the "pivot towards Asia" which clearly provoked the Chinese leadership was followed just last week by the announcement of plans for a large cut in military spending just as China ramps up the same. This administration's view of the world of foreign policy and indeed of the world itself, is self-created, colliding only occasionally with the reality that by that time has eclipsed The Leader's view of the world. China is of course watching the developments in Europe and her future actions may…and I say may…be influenced by their outcome. Risk is there but as opposed to just a few short weeks ago, it may be more political than financial as advantage is taken to fill the vacuum which the U.S. is apparently creating. It's not a pretty sight; let's hope it can be improved upon.
China looms larger today than even a few weeks ago because the Ukraine situation is going to put even a further damper on European growth which has not been looking good since the start of the year. China is clearly going to slow but probably not come anywhere near stopping. What is happening there, in my opinion, is more political and economic with Xi recognizing the need to consolidate power as a means by which he can tackle the two biggest problems facing the economy which are a monstrous culture of corruption at every level and a serious and growing problem with the financial sector which is overextended to a remarkable degree and undercapitalized to the extent that many institutions are de facto bankrupt and must be wound down. The massive real estate bubble is the magnification of this which will create a rationing of credit in the manufacturing and retail sectors which, too, are undercapitalized.
What has been a surprise, however, is the unbridled policy of currency devaluation which we have witnessed, far different than the subversive approach which has always marked Chinese practice as if they are saying, "we're devaluing, what are you going to do about it?" Apparently not much if the last month is any indication. Xi's consolidation and it's consequences are to be balanced by export earnings which is about the last thing the Western countries wanted to hear.
The approach is, of course, another confirmation of the most unfortunate refrain heard in the foreign policy halls of power that Xi is just another chief executive who has absolutely no respect for The Leader and considers him easily ignored. It also relaxes his dealings with the PLA who will be hurt by Xi's reforms in their domestic holdings by allowing them to play fast and loose with their newly acquired toys in thoughts of expansion in Asia. I find it simply remarkable that the "pivot towards Asia" which clearly provoked the Chinese leadership was followed just last week by the announcement of plans for a large cut in military spending just as China ramps up the same. This administration's view of the world of foreign policy and indeed of the world itself, is self-created, colliding only occasionally with the reality that by that time has eclipsed The Leader's view of the world. China is of course watching the developments in Europe and her future actions may…and I say may…be influenced by their outcome. Risk is there but as opposed to just a few short weeks ago, it may be more political than financial as advantage is taken to fill the vacuum which the U.S. is apparently creating. It's not a pretty sight; let's hope it can be improved upon.
Thursday, February 27, 2014
ABSENCE
Sorry for the same. A totally unanticipated event bubbled up a couple of days ago. Nothing critical but it had to be dealt with.
The week is becoming eventful, picking up where we left off. The Ukraine, once a political problem is rapidly turning into a quasi ethnic mess as was feared with Ukrainians, Russians, Muslims of all breeds drawing lines in the sands while the Moscow Center Hood has put what in the old days would have been referred to as a "Shock Army" right on the border of the Crimea which is Ukrainian territory but inhabited by ethnic Russians. Now, if the game plan is to be followed, the next step in the process will be some sort of an incident involving the Russian faction in the east, a warning from Putin that Russia will not tolerate anyone messin' with their folks, John Kerry warning Putin, Putin asking who the hell is John Kerry and talks scheduled at the U.N. to end this confrontation which has been totally manufactured by Putin. Or not. The market seems to be long the second option as the S & P reached an all-time, ALL-TIME high.
Meanwhile, everybody is scrambling to find Kiev some money. The Euros are making happy sounds and doing not much of anything. The U.S. is talking $1 billion: they need about 15. The IMF (oh no!) has lept into action and is preparing to send a team to explore how much Kiev needs and whether the Ukraine is eligible to receive funds. Memo to the IMF: about $15 billion and, no they are not. You can come home now and not waste any more money. Listen to Uncle Charlie would you? This is not about finance about which you don't know much anyway and have proven that over the years but pure power politics played on a grand scale. The decision is in Washington and Brussels as far as the West in concerned, assuming of course that there is someone around to make a decision. Not knowing how this is going to work out, the 10 year traded to 3.54% in not exactly a flight but certainly a meander to safety, as opposed to the S & P rise on…confidence in the future..? Give me a moment to figure this out…OK, I can't.
This week was going to be devoted to Italy and China--not necessarily in that order but for the moment the above is more important. I thought I was getting a pretty good handle on China when all of a sudden the currency intervention stories started hitting the front pages and that set me back for reasons I will explain tomorrow. Italy…well, I finally got to Massimo who has been involved with the Olympics--or at least with someone involving the Olympics. He has a wonderful take on what's going on which I will try to get to as well. I think we have a bit of time on the Ukraine but not too much which if that sound a bit scary it is because it is a scary situation. Putin has no respect whatsoever for The Leader which makes it the EU's game to win or lose. Told you it was scary.
Monday, February 24, 2014
A WEEK FULL OF PROMISE
Consider what happened this weekend. The Olympics ended with nary an incident occurring in the 17-day time span. Good on the Russian security forces. The Ukraine overthrew its government, stopped the killing and actually appeared to be moving forward on a Parliamentary basis, Italy has a new government which looks very much like the old government but with a new guy running it and the G-20 ended its meeting Down Under with some non-sensical statement about working together to create $2 trillion in new wealth over some period of time to which no one paid any attention. Wow.
The case of the Ukraine is quite remarkable made even more so by what appears to be the fact that it caught every one somewhat flat-footed, especially the Russians who were slow to react or even recognize that events were rapidly turning against them as the medal production turned rapidly in their favor in Sochi. The Europeans were bumbling about and we, as has become the norm, were clueless. Aside from the political situation--which is no where near being settled--what has arisen is one hell of a financial problem with the country virtually on the verge of default across the board now that Russia, as a first response, has withdrawn all offers of financial aide which of course was the Big Bribe for the turn-about from the EU.
First up to deal with that was the IMF, which, if anyone has any brains in their head will be kept well out of shouting distance. More than anything else, this is a political issue not a financial one. It is not an exaggeration to say that a good deal of the future of Europe, and of Eastern Europe as well, may depend upon the solution of this gnarly problem. The amounts of money involved are huge but it is not about money. At one time the U.S. might well have jumped into the leadership role but such actions from this administration are, for better or worse, not to be expected. As things stand right now…and for all I know they may be changing as I write…this is the EU's moment. If the Union is to prosper it must move rapidly and decisively to stabilize the financial aspects of this situation so that the political solution can be found. Whether the EU can accomplish that is, indeed, a very open question, but upon its success very possibly rests the success of the Union itself.
As for Russia, the political stakes are enormous. Mr. Putin's dream in re-establishing Russia's spread of influence in a reconstituted U.S.S.R.-like relationship with the former vassal states ends if the Ukraine ops for full partnership with the West. By the same token, Mr. Putin must realize that if begins to break things he owns them and the Ukraine without western support and capital becomes a very expensive thing to own indeed. He is of course a Moscow Center Hood whose first thoughts must have been the ethnic Russian community in the East and South and what leverage that gives him. Years ago there was a place called the Sudetenland and another little thug and that turned out badly for the entire world. Scary thought, but having been successful in Georgia…then again, this is waaaaay bigger and more important. Surely he knows that.
Anyway, the markets woke up today and barely shrugged. The Euro moved marginally higher, equities sought new highs and interest rates barely budged. I guess everything must be OK. The whole week is before us. We shall see.
The case of the Ukraine is quite remarkable made even more so by what appears to be the fact that it caught every one somewhat flat-footed, especially the Russians who were slow to react or even recognize that events were rapidly turning against them as the medal production turned rapidly in their favor in Sochi. The Europeans were bumbling about and we, as has become the norm, were clueless. Aside from the political situation--which is no where near being settled--what has arisen is one hell of a financial problem with the country virtually on the verge of default across the board now that Russia, as a first response, has withdrawn all offers of financial aide which of course was the Big Bribe for the turn-about from the EU.
First up to deal with that was the IMF, which, if anyone has any brains in their head will be kept well out of shouting distance. More than anything else, this is a political issue not a financial one. It is not an exaggeration to say that a good deal of the future of Europe, and of Eastern Europe as well, may depend upon the solution of this gnarly problem. The amounts of money involved are huge but it is not about money. At one time the U.S. might well have jumped into the leadership role but such actions from this administration are, for better or worse, not to be expected. As things stand right now…and for all I know they may be changing as I write…this is the EU's moment. If the Union is to prosper it must move rapidly and decisively to stabilize the financial aspects of this situation so that the political solution can be found. Whether the EU can accomplish that is, indeed, a very open question, but upon its success very possibly rests the success of the Union itself.
As for Russia, the political stakes are enormous. Mr. Putin's dream in re-establishing Russia's spread of influence in a reconstituted U.S.S.R.-like relationship with the former vassal states ends if the Ukraine ops for full partnership with the West. By the same token, Mr. Putin must realize that if begins to break things he owns them and the Ukraine without western support and capital becomes a very expensive thing to own indeed. He is of course a Moscow Center Hood whose first thoughts must have been the ethnic Russian community in the East and South and what leverage that gives him. Years ago there was a place called the Sudetenland and another little thug and that turned out badly for the entire world. Scary thought, but having been successful in Georgia…then again, this is waaaaay bigger and more important. Surely he knows that.
Anyway, the markets woke up today and barely shrugged. The Euro moved marginally higher, equities sought new highs and interest rates barely budged. I guess everything must be OK. The whole week is before us. We shall see.
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