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We're Getting Closer
I couldn’t be more delighted than to see the DAX get tagged for 2.5% today. This is a consequence of the “Successful” vote yesterday in the German Parliament to throw more good money after bad. The hit (so far) to German investors comes to $40b. That should make them happy this weekend.
It’s not just investors that a giving the raspberry. According to this WSJ article yesterday, 75% of the folks in German are fed up with more bailouts.
A poll for national German broadcaster ZDF earlier this month shows three-quarters of Germans are against the expanded European rescue fund.
How can this happen? Politicians are doing what the voters don’t want. It can only mean that new politicians are coming and the bailouts will be curtailed.
Keep in mind that the expanded EFSF is still woefully inadequate to address the debt problem in the EU. There has to be a much bigger effort. In my view, anything less than Euro $2 Trillion is not going to work. A big bazooka is required, a popgun is being offered.
This brings us to the speculation this week about a Euro SPV. There was the “Leisman Plan” (I wanna puke) and the EURECA Plan. These are confusing to most people. Let me make it easy. What is being proposed are Euro Bonds in disguise. This is just financial engineering to cosmetically create a joint and several EU debt obligation.
This won’t work. The ratings agencies and investors will see through this. If something silly like this is going to come I would anticipate that Moody’s and S&P will downgrade both France and Germany within weeks. Everything that is being offered is just a half-assed effort to deal with a very big problem.
The conclusion for me is that the Euro has to continue to suffer on the crosses as a result.
I see the dollar as the backbone for the markets in general. In a “perfect” world an orderly depreciation of the dollar (5% a year) is a “good thing”. It supports US inflation (that makes debt look smaller). A weak dollar is beneficial for tourism, and encourages foreigners to buy real assets like real estate. It gives US manufacturers of big-ticket items (planes/construction equipment) a pricing advantage. It also provides a big boost to translated earnings for the S&P multinationals.
The very worst thing that could happen to the US economy in the 4th quarter is that the dollar gains 10% against the Euro. That looks like what is coming to me. Don’t buy the dips, sell the rallies.
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BLATANT BREACHES
On the subject of the EU and the banks, an interesting speech by Hans Hoogervorst, Chair of the International Accounting Standards Board (IASB). He spoke at an investors conference in Boston (PDF) yesterday. I wasn’t there. He was quoted as saying:
European banks carried out "blatant breaches" of IFRS in valuing their holdings of Greek debt.
Mr. Hoogervorst’s comments were consistent with his letter (PDF) to the European Securities and Markets Authority. Some tidbits from that letter:
There have been indications in the market that some European companies are applying the accounting requirements for fair value measurement and impairment losses in a way that seems to differ from the objective of IAS 39 Financial Instruments: Recognition and Measurement.
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This is evident particularly in their accounting for distressed sovereign debt, including Greek government bonds.
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The bottom line from the chair of the International Standards Board is that the European banks are fudging their books. This is not the Blogs making this assertion. It’s coming from the highest authority that exists.
This conflict can’t be ignored much longer. It’s possible that the EU banks will try to wash this over one more time in their third quarter statements. I think it will be damn near impossible for them to issue annual reports for 2011 without full disclose. In other words, don’t load up on the EU banks just yet…
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Mubarak
GAME OVER
Sha'ab Misr
But you beat me! All that's left, then is:
[This Space Available for Vanity Blog Advertisement; Call-1-888-ZH-NOISE]
Thank you.
b
I did not know this, but there is actually a word which describes the state of not being able to remember the word you want to use, either in speech or in text. It’s “lethologica”.
Somehow I get the impression you might be interested in this, and it is just slightly off topic given Bruce's attached image above:
Arabic, a language in which there is much onomatopoeia, has two words for the bodily function that is the foundation of much juvenile humor. One is for times when the function causes auditory offense, the other when the assault is on the olfactories. You need not be a linguist on the level of Noam Chomsky to guess which is which. The two words, transliterated, are:
fuss
darrat
The double "r", in Arabic, represents a doubled consonant, and it is heavily rolled.
It really is a beautiful language.
That's a relief. All I could remember was Quaalude.
ahhhhhhh........heavenly love in them 714's......
I speak Greek; but I don't understand it. Opa!
Malaka Sharmoota, Monogleefti Ackhoo menukee. Greek/Arabic
Ina fuss fee al-itajaa al-alam al-khass bik.
Just kidding.
http://www.youtube.com/watch?v=etWz1F3lZlM
The bailouts will continue until morale improves.
Dow at closing
Dow 10,913.38 -240.60 -2.16%And silver below 30 and oil got hammered today also. GROWTH seems to be screetching to a grinding halt. I would guess that's why copper is also dead in the water. China is slowing down... We have an insolvent world banking system wich i think is a bit of an issue.
I suggest a super Tarp 2!!!! 10 trillion dollars with no questions asked. Or we could audit all the major banks and all the euro periphery countries. But that would would reveal the truth. And let's be honest. We don't want the truth at this point. Lie to me you mongrols. Europe will be fine. I can see this world problem leading to negative growth with money printing competing to maintain the illusion of gdp expansion. Not to forget bonds going bonkers at some point adding a perverse complication to an already unsolvable problem. Will interest rates rise? What a god damn mess. An unemployment is the cherry on top of this shit ice cream cone.
Hey. It's not perfect but it's our reality. Let's learn to enjoy it.
How 'bout Superman II as well?
http://www.youtube.com/watch?v=68hRt0Pz7HI&feature=player_detailpage
Kind of like "2008: Part Deaux" if you ask me.
METROPOLIS IS IN DANGER! SUPERMAN SAVE US!!!!
In ancient Rome, when a man testified in court he could swear on his testicles.
Thats just nuts...lol.
Oh, yeah...the TP has started a few chapters in Germany...just sayin ;-)
Ahh. It is stated that under Roman law no man was admissible as a witness unless his testicles were present as evidence or “witnesses” of one’s virility because only verified men were allowed to give witness, or to testify, in legal matters. To swear by one’s testicles was an ancient form of oath. To detest, at root, means “to bear witness against;” therefore, to curse, and implicitly, to hate to the bottom of one’s testicles.
This custom is mentioned in the Old Testament. In the King James translation, the passage reads, "And Abraham said: 'unto his eldest servant of his house... Put, I pray thee, thy hand under my thigh: And I will make thee swear...'"
Balls. They make the world go 'round.
So help me my nut-sack, your honor.
Sounds suspicious to me.....
Like I don't mean to trivialize the whole Roman jurisprudence system, but I can grasp the Coliseum, loins, tigers and bear stuff, zebras screwing christian virgins, violent men hacking each-other to death for the delight of a drunken populace, mass crucifictions for shits and grins.
But swearing on one's nuts?
Sounds a bit barbaric.
Swearing an oath on your nut sack.
Verily, an oath not lightly broken
Bruce Krasting writes above:
"... Maijoor can't ignore Hoogervorst"
Couldn't have said it better myself.
hope warren doesn't fall for it. down with HSBC. why does the public let the govts get subverted? happened in europe, now in the usa.
http://expose2.wordpress.com
This is so simple to fix it’s almost silly.
As the Greeks are now considering a "Century Bond" to push the debt into the 22nd century, all the ECB needs is a humungous “Millenium Bond” that matures sometime in 3012.
That should assure adequate funding for at least the next week or two.
http://www.reuters.com/article/2011/09/30/greece-century-bonds-idUSL3E7KU0E920110930
http://www.economicpolicyjournal.com/2011/09/nein-nein-nein-and-death-of...
Bob Wenzel at EPJ (awesome site!) has quotes from a new report by Ambrose Evans Pritchard about the dissolution of the euro that's sure to cause some headline consternation over the weekend.
great article Bruce. i have to appologize for belittling you on some distant post, but you've been dead on here on your articles lately, thanks man..........
It was Danny in the swimming pool that creeped me out. But he is spot on now.
Well said Moe you miserable bastard.