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A Peek At The Week That Was – September 14, 2013

Click on the link below to see what caught out attention last week.

Enjoy.

A Peek At The Week That Was – Sep. 14, 2013

 

A Peek At The Week That Was – September 7, 2013

Click on the link below to see what caught out attention last week.

We continue to take a cheeky peek at the Fed and tried to get a sense of how well they had done at removing the boom and bust cycle from the market.

We also take a look at another war….this time the ongoing and escalating international currency war…where the ultimate goal is to kill yourself.  Crazy, huh.

Finally we looked at America’s increasing crude oil production.  Things are looking good in the black gold department.

Enjoy.

A Peek At The Week That Was – Sep. 7, 2013

 

 

A Peek At The Week That Was – August 31, 2013

Click on the link below to see what caught out attention last week.

We continue to take a cheeky peek at the Fed and posed the question about who owns that creature from Jekyll Island.

We also take a look at an unfortunate inevitability of both the ancient and the modern state….WAR.  The nature of war is changing as it moves from the real world to the cyber world.  We look at the potential impact on the markets when it does.

Finally we look at a couple of interesting charts that should be ringing alarm bells at Mr. Market’s Club S&P.

Enjoy.

 

A Peek At The Week That Was – Aug. 31, 2013

A Peek At The Week That Was – 5/4/13

A Peek At The Week That Was – May 4, 1913

Click above for our market and related economic commentary on the week just passed.

A Peek At The Week That Was – April 20, 2013

e2-ma

Click above for our market and related economic commentary on the week just passed

A Summer to Remember…in Spain!

What could possibly go wrong in Spain?

Perhaps we should ask what could go right?

Super Mario Draghi is trying to stuff money down that other not so super Mariano’s throat but that Mariano (Rajoy), the Spanish Prime Minister is having trouble digesting the significant loss of sovereignty that comes with Super Mario’s freshly printed paper.

You see…the deal goes like this.   We’ll bail you out with our funny money but you have to let us tell you how to spend it….both now and in the foreseeable future.  Basically Spain will be “under new management”.

Because of Super Mario’s recent “whatever it takes” pronouncement, Spanish 10 year bonds are currently around 5.7% but could quickly spike back up to their recent highs above the dangerous 7% mark, especially if the markets see Mariano choking and spitting out Super Mario’s offer.

Meanwhile, the auditors Deloitte, KPMG, PwC and Ernst & Young are due to present their full reports on the capital needs of Spain’s financial sector in September. The findings of this report will be used to determine the exact amount the Spanish banking sector will need to borrow from the EZ’s bailout fund, the European Financial Stability Facility (EFSF).

What a fun job that must be?  Why, they were having so much fun they needed a few extra months to get it done.  It was originally due in June.  There must be much to see in those lovely banks.

What will they say?  Or more appropriately…how much will they say…the banks need?

They hope it will be less, rather than more, after they quarantine the worst of the distressed assets into the much reviewed and revered “Bad Bank”.

http://zeenews.india.com/business/news/international/spanish-government-approves-bad-bank-for-toxic-assets_59320.html

Hey…wait a minute…didn’t we already go down this road with that recently constructed Spanish monstrosity known as Bankia.

At Bankia, the financial geniuses took 7 regional savings banks (known as Cajas) and consolidated them into what was then effectively a “Bad Bank”…although they tried to pass 7 ugly sisters off as one beautiful damsel in just a touch of distress.

Initially they said that they would make over 320 million in profit from transforming these ugly country sisters into a national beauty.

Apparently they needed more plastic surgery than the bankocrats originally planned because the 320 mill in profit soon turned into a 4.3 billion loss (we’re talking euros here).  Since then they have continued to apply financial makeup like no one’s business but Bankia is unfortunately still very ugly.

Woops….there goes another 6 billion, just announced yesterday.  Pig lipstick must be very expensive these days.

http://in.reuters.com/article/2012/09/10/spain-frob-idINL5E8KAIY920120910

In June this year, the Eurocrats said that the first bad bank (aka Princess Bankia) was not bad enough and in addition to another badder bank, the whole banking system might need an injection.

30 billion was mentioned as a useful number.  Within no time at all…a week or so…that number had ballooned to 100 billion.  By September, we are talking more like 300 billion.  A simple question…when does this madness stop?

So, back to our sparring partners, Mario and Mariano.

Maybe not so super Mariano Rajoy does not want to lift the Spanish veil for Super Mario to see the faded beauty that was once Spain’s economy.

Perhaps he is scared of what really lies beneath.  After all, his first beauty, Bankia, was not so pretty after all.  Perhaps the whole system, from Andalucia to Catalona, is rotten beyond salvation. Rotten beyond even the best facelift and the tightest tummy tuck.

And with Spanish unemployment now looking to rival that of Greece, it is only a matter of time until the Molotov cocktails start to be shaken.

If all of that is not bad enough, the truly scary part is the tremendous flight of capital from Spain, despite what basically amounts to recently imposed capital controls.  Capital goes where it is treated best and fairest.  Spanish capital is scared, very scared.  It is making a run for the border!

Spain is in deep doggy dodo and will need more than bad banks and plastic surgery.

It will need a full scale bailout.  Fortunately, Super Mario is up to the job…as long as Senor Rajoy is prepared to fully lift the veil.  Ultimately, not so super Mariano will have no choice and the full ugliness that is Spain will be revealed.

As they say, the pain of Spain will soon be plain.

But it will be poor little Greece who inadvertently suffers the consequences of a Spanish bailout, as they get thrown out of the EZ limo and under the default bus…an example of what happens to those who won’t play ball.

That is why they need a Troika.  One drives the limo, one opens the door and the third does the pushing.  Remember, they are driving around Greece this September, too.

A September to Remember (Cont.)….Portugal.

What a surprise?

Portugal is starting to slip on its fiscal targets.  Who could ever have thought that this might happen?

So….should we expect Portugal to begin negotiations on a second bailout package?

We expect so.

Portugal is meant to return to the markets in 2013 but, with 10 year bond yields pushing 9.5%, who are they kidding?  Isn’t 7% supposed to be the point of no return?

At least it’s nice to know that the P in PIIGS will be there for a while longer yet

A September to Remember (cont.)…the Netherlands

The Dutch go to the polls on September 12.

Recent opinion polls suggest the ruling right-of-center VVD (you know…the People’s Party for Freedom and Democracy) will be unable to form a right-of-center majority government. So….down the road of extended negotiations and horse trading we will probably go.

The Netherlands has a population of 16,700,000 (give or take a few pairs of clogs) yet they manage to field 12 political parties.  Clearly they take their politics seriously.

What if the left-wing, euro-skeptic SP (Socialist Party) wins enough votes to be the second-biggest party?  And then teams up with the PVV (Party for Freedom).  We’re not saying that would ever happen because they are political poles apart but they are intellectually aligned when it comes to their views on EU integration.  And it’s a strange world in which we live.

The Dutch as a whole are increasingly vocal in their anti-bailout rhetoric and it’s not without a realistic possibility that the SP will make a very good showing.  If this happens, it would make it more difficult for any new Dutch coalition to secure sufficient parliamentary support for continued / additional financial support for their profligate neighbors to the south.

In any case, expect more uncertainty as we get closer to the date…just as we did with Greece.

Unlike Greece, however, the Netherlands does count.  While their GDP may be only 3 times larger than that of the Greeks, they are an important cog in the wheel of the northern alliance because they are seen as being prudent and practical…even if some of them like to inhale from time to time.

And, along with Germany, Finland and Luxembourg, they still hold the coveted AAA rating, although Moodys have hinted that it might be in jeopardy.  Presumably the Dutch would not be happy losing that rating, especially as they would see it being mostly Greece’s fault.

Losing Dutch support would be a big chink in Angela’s armor…that’s Angela Merkel, of course.  Not Angela Landsbury…the actor…although I’m sure that Angela, the former, would like to swap places with Angela, the latter from time to time.

Vocal Dutch may inspire vocal Germans.

Angela needs docile not vocal.  Especially as “vocal” is not that many vowels and consonants away from “volatile”.  Angela definitely does not need volatile!

So…the coming Dutch elections could be far more important than most pundits predict.

Continuing our sweep through a European September, we’ll saunter on over to Portugal next.

 

A September to Remember…in Italy!

Nothing to see here folks….move along.

Wait!  The Italian general election campaign will begin to heat up in September, even though the parliamentary elections aren’t till 2013.

Remember, that other not-so-super Mario…as in Mario Monti, the Italian Prime Minister…was anointed and appointed…not elected.  Maybe the man he succeeded, Silvio Berlusconi, will run again.  We hope so.  He is such a knave but so, so interesting.  His dalliances and gaffes alone are worth the price of admission.

Although polls point toward a center-left-led coalition, Italian politics is at its most fluid state since the early 1990s and, with so many voters still undecided, it’s near impossible to call the election.  But if Silvio does throw his hat into the ring, expect more than the usual Latin fireworks in the meantime.

All we know is that elections are now important all over Euroland.

Speaking of which…let’s take a look at the Netherlands next, where a general election is scheduled for September 12…the same day as the German Constitutional Court ruling.

Chaos may reign in two neighboring nations that day.

A September to Remember…Greece!

Let’s look at the cradle of democracy, shall we?

The Greeks have been basking in the reflected glory of those halcyon days of early Athens when the Aegean sun shone brightly for them.  The problem is that they have been basking for far too long and now it’s time to pay the piper…or the troika…as the case may be.

As you probably know, the “troika” is comprised of those bothersome bureaucrats from the IMF, the ECB  and the EC…also known respectively as the International Monetary Fund, the European Central Bank and the European Commission.

The troika is due to return to Athens in September to make a ruling on whether to release additional funny money to Greece.

To make matters more complicated still, during September, the Greek parliament will have to pass a number of measures to generate €11.5 billion in savings for 2013-14. With a high degree of austerity fatigue in Greece, we can expect social unrest.  It’s been a quite summer but there is nothing that flares tempers more around the Mediterranean and Aegean seas than a hard dose of austerity.

If the troika decides not to play ball, then Greece would default and exit the EZ. The Greek government aims to renegotiate the second bailout program when the troika returns to town so that they can kick the austerity (and riot) can down the road.

Basically, they will say

”Listen guys (and Angela), things have been tough but we’ll get there. We always do.  We’re Greeks.  We’re the founders of democracy.  You can count on us.  We just need a couple years’ more than we first thought.  But if you can give us an extra 2 years, we’ll get the deficit down to 3% of GDP for sure.  We just need more time”.  

Doesn’t it remind you of that guy being shaken down by the mobsters who are threatening to break a leg or two.

The problem with Greece is that despite their protestations, they have a dubious history when it comes to paying their debts.

They were bailing on their bills as far back as the 4th century BC. In fact, they’ve defaulted at least 5 times in the past 200 years or so.  And it’s not just Greece.  Plenty of governments have defaulted over the centuries. It’s what they do.

But if the troika plays hardball and does not grant the Greek government any concessions, then the governing coalition will probably collapse and it will be “Sayonara Eurozone”.

So it’s probably reasonable to expect some more fireworks from the birthplace of democracy / bastion of bailouts over the coming month.

Next stop…Italy.  O mama mia!