It has been a recurrent joke that in addition to Germany (see chart), the only winners out of the slow-motion trainwreck that is the Eurozone, are the Belgian caterers who in 2010, 2011 and 2012 had an absolute record profit year following what was a weekly summit after summit in which we learned, without fail, that Europe is fine, couldn't be finer, and to "believe" Draghi that he would crush and mangle anyone who dared to short the EURUSD (ironic when every other central bank is literally paying FX traders to short their currency). But while caterers were literally swimming in money in the past three years, charging European taxpayers hundreds of thousands of euros per hour for either sturgeon eggs and pâté, or boxed lunches depending on the amount of austerity imposed, so far 2013 has been rather dry. All that of course is about to change, following the epic fiasco with the Cyprus "bail-in", which courtesy of Diesel-BOOM's subsequent clarification, is a unique template that will never be repeated... until the next PIIG finds itself in the same trough, which now that the dominoes are dropping once more, shouldn't be too long. Which is why the best levered derivative trade on the European "positive contagion" mutating back into its "negative" wilde-type is to go long European caterers.
However, to offset as much non-catering risk as possible, it would be ideal to have a pair trade opportunity, whereby to go short an offsetting catering exposure. Luckily, we have found just that. Luckily we have just the trade.
Courtesy of the Goldman chart below, we now know that while European caterers are about to go stratospheric, their Chinese brethren just got the proverbial smackdown.
A sharp sequential decline in growth and consumption during Jan-Feb from 4Q12, likely owing to an anti-corruption campaign that is weighing heavily on large sectors, such as catering, as well as liquidity tightening in February after a loose January.
Who would have thought that a business as simple as catering was a proxy for corruption? Of course, that this happens to be the case merely reinforces our conviction in the long leg: if there is one thing Europe will never have a shortage of, it's corruption.
So to all those sick of the manipulated stock market, the ridiculous bond bubble, the "close banged" precious metals space, and every other asset and risk class micromanaged by Bernanke & Co, we suggest the following trade:
- go long European caterers, short Chinese caterers, delta-hedged and duration neutral
How do you go about procuring such exposure? Don't ask us: we are merely the analysts. For execution speak to your friendly Sigma-X, REDI or Goldman Sachs a la carte securitized, structured deal designated contact (or just leave a Voice Mail for Fabrice Tourre).