Tuesday, 26 June 2012

Mission Impossible . . . Converging views on the future of Europe

Greetings from the war zone which was once my well ordered apartment in Geneva. Packing day has arrived and I'm sitting in the midst of a forest of cardboard boxes. Bloomberg TV is keeping me company as I pack and I await the latest breathless news on this weekends summit to end all summits.

Is everyone reaching the same conclusion at the same time? Is reality converging? Many of my friends are starting to think so. Of course most of the investment banking world has been in denial, you see too many people in powerful positions rely on bull markets. The shock of Lehman Brothers was that there were no buyers. That never happened before. Bear Stearns went to JPM and even when Barings went under there was a single buyer ready to step in and take the whole thing on to their books and barely touch a single headcount.

The Fed has done 3 rounds of "creative easing": QE1, QE2 and Operation Twist. Each time the bounce has been less pronounced, less effective. I just can't see Bernanke using his balance sheet again unless things are terrible, because right now a QE3 will do nothing but rally risk assets for 4 months and lead to nothing but more policy acquiescence.

Meanwhile in Greece, to paraphrase the philosopher; to lose one finance minister is unlucky, to lose multiple finance ministers seems somewhat careless.

Who takes a job and resigns within a week when that job is saving your country from disaster? Is this the shock that the euro-cracy needed? Maybe they all just want to head to the South of France or Positano Italy?

The latest Spanish auction just happened and I've been distracted from my third box of rubbish. BTW - moving is a chance to throw stuff out. I've instigated a rule here, if you have to think whether you want to keep something for more than 10seconds then you don't need it so throw it away. Spain sold €3.08bn of short-term debt, but paid the highest interest rates since last year. They sold three-month bills at an average rate of 2.362%, compared with 0.846% v. last month, and also  6month bills at an average 3.237%, up from 1.737%. That's what I call unsuccessful. Of course the market seems to think that will make the euro-cracy act . . . . yeah . . . good luck with that.

In company news I thought it was interesting that Murdoch is fast seeing the end of newspapers. If he agrees to split them out of Newscorp it will replicate the strategic decision he took back in the 90's in Australia to get out of high cost low margin glossy magazines. He loves newspapers, but he knows the situation.

Back to packing.



  1. Zer ees a deesagreememt on ze feescal side...

    1. It seems now its the French blocking things. Hollande maybe a socialist, but all Frenchmen are Gaullists when it comes to foreign policy.