From Margaret Thatcher's original (now extremely prescient) warning of the European Union's structure creating "insecurity, unemployment, national resentment, and ethnic conflict" to Nigel Farage's recent clarifications on the agonizing direction in which the unelected leadership of the Union are pulling Europe, this brief 3 minute clip draws some significantly eery similarities between the former Soviet Union and the current European Union. Every now and again, a step back to look for context in history is important - as while the Soviet Union was created by armed force, the European Union is being forced by political coercion and economic bullying. Perhaps Churchill summed up best how it should be, "We are with Europe, but not of it; we are linked but not combined; we are interested and associated but not absorbed."
When Europe's politicians boldly said a few weeks ago what they have been repeatedly saying every year for the past three, namely that "Europe is fixed" usually just before it breaks all over again, what they meant was that the various stock markets were up. Because if they were actually referring to the European economies, Europe just broke (no pun intended) once more, with the Greek economy once again back to its "new normal" baseline state: a near complete halt as the cold of winter dissipates, and protests and strikes return. In this case, the biggest losers are the thousands of people living on various Greek islands who have now been cut off from the mainland for the 6th consecutive day. And everyone else, of course, reliant on the Greek economy actually posting an uptick one of these centuries.
Events are rapidly unfolding in Europe which may bring something more than the “blink, wink and nod” of the famous children’s poem to the forefront of everyone’s thinking. There is great wisdom in Pinocchio actually beyond what is generally known. At one point the puppet heads into the “Field of Miracles” where he plants his gold and waits for it to grow. Pinocchio then heads off to “Catch-fools” which is a place where everyone has done something exceedingly foolish and suffers as a result. The world presently believes that there is no “event risk” and upon this foothold and the money poured into the streets by the central banks the markets rest in peace. Roads do not go on forever, the day eventually fades into the night and the peace of the morning is often shattered by the shrill cry of the dove being attacked by the falcon. The Great Game is not “Toyland” and great care is now called for before we awaken to find that we have turned into donkeys, or worse, ourselves.
- 'London Whale' Sounded an Alarm on Risky Bets (WSJ)
- Deadly Blast Strikes U.S. Embassy in Turkey (WSJ)
- Abe Shortens List for BOJ Chief as Japan Faces Monetary Overhaul (BBG)
- Endowment Returns Fail to Keep Pace with College Spending (BBG) - More student loans
- Mexico rescue workers search for survivors after Pemex blast kills 25 (Reuters)
- Lingering Bad Debts Stifle Europe Recovery (WSJ)
- Peregrine Founder Hit With 50 Years (WSJ) - there is hope Corzine will get pardoned yet
- Deutsche Bank to Limit Immediate Bonuses to 300,000 Euros
- France's Hollande to visit Mali Saturday (Reuters)
- France, Africa face tough Sahara phase of Mali war (Reuters)
- Barclays CEO refuses bonus (Barclays)
- Edward Koch, Brash New York Mayor During 1980s Boom, Dies at 88 (BBG)
- Samsung Doubles Tablet PC Market Share Amid Apple’s Lead (BBG)
In yet another victory for not bowing to the great-and-good of modern orthodoxy, Iceland has won a court ruling that enables it to repay billions of Euros (in failed bank deposits to the UK and Holland) on its own terms. Icesave collapsed in 2008 and left thousands of depositors, who had chased higher yielding deposits, with losses. The Dutch and British governments demanded prompt payment; Iceland denied, preferring (rationally) to repay what they could from the then-bankrupt entity. As RTE notes, Icelanders in referenda twice voted against repayment schemes drawn up by their government to satisfy the British and Dutch claims, leaving the estate of Landsbanki to pay back the funds, which it has steadily done, instead of the taxpayers of Iceland being force per se to fund this shortfall. The implication being: Bank deposit insurance schemes in the European Economic Area are NOT backed by government liability, neither explicitly nor implicitly - which could well reignite concerns of the much-hoped-for Europe-wide deposit-guarantees.
- CAT beats ex-Chinese fraud: $1.91, Exp. $1.70; Warns 2013 could be a "tough year"; sees 2013 EPS in $7.00-$9.00 range, Exp. $8.54, sees Q1 sales well below Q1, 2012
- Yi Warns on Currency Wars as Yuan Close to ‘Equilibrium’ (BBG)
- Monte Paschi seeks new investor as scandal deepens (Reuters)
- Assault Weapons Ban Lacks Democratic Votes to Pass Senate (BBG)
- Toyota Again World's Largest Auto Maker (WSJ)
- Curious why all those Geneva Libor manipulators moved to Singapore? Bank probes find manipulation in Singapore's offshore FX market (Reuters)
- Japan eased safety standards ahead of Boeing 787 rollout (Reuters) - so like Fukushima?
- Goldman is about to be un charge: Osborne cools on changing inflation target (Telegraph)
- Abe Predicts Bump in Revenue as Japan Emerges From Recession (BBG) - actually, "hopes" is the correct verb here
- Toxic Smog in Beijing Fueling Auto Sales for GM, VW (BBG)
- Fed waits for job market to perk up (Reuters) ... any minute now that S&P to BLS trickle down will hit, promise
- BofA shifts derivatives to UK (FT)
How many European Union officials does it take to change a light bulb?
None. There is nothing wrong with the light bulb; its condition is improving every day. Any reports of its lack of incandescence are an illusional spin from the American media. Illuminating European rooms is hard work. That light bulb has served honorably, and any commentary not approved by the EU undermines the lighting effort. From the 'obvious 'encouragement' given to Europe's banks to pay back exceptionally cheap LTRO loans early to the world's addiction for freshly printed money and propaganda.The world seems devoid of politicians that sensibly lead though they have been quite adept at spending past what can be afforded. The worlds’ central banks have been left to pick up the bills.
This objective report concisely summarizes important macro events over the past week. It is not geared to push an agenda. Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.
- When the cash runs out: Nokia to Omit Dividend for First Time in 143 Years (BBG)
- Passing Debt Bill, GOP Pledges End to Deficits (WSJ)
- Japan logs record trade gap in 2012 as exports struggle (Reuters)
- so naturally... Yen at 100 Per Dollar Endorsed by Japan Government’s Nishimura (BBG)
- Japan rejects currency war fears (FT)
- In Amenas attack brings global jihad home to Algeria (Reuters)
- Investors grow cagey as Italy election nears (Reuters)
- Mafia Victim’s Son Holds Key to Bersani Winning Key Region (BBG)
- Bernanke Seen Pressing On With Stimulus Amid Debate on QE (BBG)
- U.S. to lift ban on women in front-line combat jobs (Reuters)
- Red flags revealed in filings of firm linked to Caterpillar fraud (Reuters)
- Apple Sales Gain Slowest Since ’09 as Competition Climbs (BBG)
- Spanish Jobless Rate Hits Record After Rajoy’s First Year (BBG)
- North Korea Threatens Nuclear Test to Derail U.S. Policies (BBG)
- Doubt Greets Bank of Japan's Easing Shift (WSJ)
- Japan hits back at currency critics (FT)
- Japan upgrades economic view for first time in eight months (Australian) - only to lower them in a few months again
- GOP critics get opportunity to grill Secretary Clinton on Benghazi (Hill)
- Global economy set for ‘slow recovery’ (FT)
- Obama to back short debt limit extension (FT)
- Unfinished Luxury Tower Is Stark Reminder of Las Vegas’s Economic Reversal (NYT)
- Draghi Says ‘Darkest Clouds’ Over Europe Have Subsided (BBG)
- High-Speed Dustup Hits a Clubby Corner (WSJ)
- U.S. Budget Discord Is Top Threat to Global Economy in Poll (BBG)
- Sir Mervyn King says abandoning inflation target would be 'irresponsible' (Telegraph)
- Spain Says It May Cover 13% of 2013 Funding in January (BBG)
In a move that may cause some consternation in Europe due to its adverse implications for trade paterns in the continent, tomorrow British PM David Cameron will announce that he will propose a referendum on whether or not to stay in the European Union, a move that as the WSJ qualifies it "threatens to inhibit trade and cast a new shadow over the troubled bloc." That may be a slight exageration: the referendum would take place, if at all, before the end of the first half of the next Parliament, roughly by late 2017, after an election. Which means that if Cameron loses the election, it is a non-issue, just as it would be a non-issue of course if the UK public voted to stay: according to a survey of the British public late last week by pollsters YouGov showed 34% indicated they would vote to leave in a referendum, while 40% said they would vote to stay. A week earlier, 42% said they would opt out, compared with 36% preferring to remain. Obviously a volatile topic for the population.
- "My adversary is the world of finance."
- "I don't like indecent, unearned wealth."
- "We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few."
- "We cannot succeed when a shrinking few do very well and a growing many barely make it."
- "People from all backgrounds and political positions are willing to contribute for services and protection of society as a whole - but on the condition that money is being spent effectively and that everyone is paying their part."
- "We find ourselves in a difficult situation... There's a crisis, weak growth, unemployment... my duty is to ensure that by the end of my mandate (the country) is in a better state than it was at the beginning."
For the first time this year, Brussels is awash with the opulent optimists of Europe as the finance ministers meet to decide how much of the EUR500bn ESM funds can be funneled direct to their banks and bypass the greedy governments. However, at the core is an uncomfortable reality that all is not well, one Brussels-based think-tank noted: "It’s really about signaling, the only thing that really has an impact on markets is when the word unlimited is uttered by somebody in charge, so in the end it’s not a question of how high the big number should be." The dilemma is Draghi's 'unlimited' promise, which has now been adopted by the Fed and the BoJ, has been hailed as the "breakthrough in tackling the causes of the euro-zone crises" but has instead unraveled into a combination of "complacency and political resistance" from creditor countries.
- Foreign Hostages Die in Algeria’s Battle With Terrorists (Bloomberg)
- The latest bank to soon join the currency wars: McCafferty Says BOE Must Keep Open Mind on New Policy Tools (Bloomberg)
- US debt talks complicated by timing (FT)
- BOJ eyes open-ended asset buying, agrees new inflation goal (Reuters)
- AmEx Says U.S. Card Income Fell 42% as Loss Provisions Increased (BBG)
- Call to raise age for US’s Medicare (FT)
- Obama Promise to Raise Middle Class Living Already Seen in Peril (BBG)
- China Exits Slowdown as Quarterly Growth Tops Forecasts (BBG) - actually, as new Politburo says to make it appear that way
- Britain to drift out of European Union without reforms (Reuters)
- Republicans weigh interim debt-limit hike (FT)
- Abe's aide says Japan shouldn't fret if yen falls to 100 vs dlr (Reuters) ... and it was 90 just a few days ago
- PBOC May Seek More Liquidity Operations (Dow Jones)
It is neither pessimism nor optimism but a squaring up with the facts and, when done, it is the inescapable conclusion that we have backed ourselves into a corner of our own making and that to escape this dark and dangerous place will be a painful experience. The scheme rests upon various feet; Central Banks acting in collusion to lower yields and provide capital as an off-set to the government in America and the governments on the Continent who cannot bear, for political reasons, to do what should be done and that is to cut expenditures. The entire world’s financial system encased in a bubble and nowhere to go, nowhere to hide and nowhere to be safe. The worry then is how does it all end, what do you do in the meantime and how and what do you do when the bubble is pricked.