A big reason for the dour mood overcast on the market this morning is the failure of G-20 to resolve latent funding issues, with the IMF demanding more money from Germany for a global firewall, and Germany demanding more money from everyone else. A way to summarize events is that in lieu of any credible collateral left (the bulk of it has and will be pledged with the ECB in its discount window, aka LTRO operations, to keep Italian bonds bid and thus perpetuate the fallacy that things are under control), the world is now running out of ideas how to even kick the can down the road. Which is not a good sign as much kicking remains with tens of trillions in debt rollover coming up in the next few years. Below is Art Cashin's summary of this weekend's disappointing G-20 weekend retreat in Cabo san Lucas, which enjoyed the scenery but did nothing to easy the confusion over who pays for what in the next few weeks.
From UBS Financial Services
The Weekend G20 Meeting - I think the best and most succinct assessment of the session may have come from UBS’s London-based sage, Paul Donovan. He simply said:
The G20 was its normal complete waste of time and airfares. The group agreed to do nothing about anything, but did offer up some nice platitudes about how well the world economy seemed to be doing. Many might believe that markets could work that out for themselves. The LTRO on Wednesday looks to get a lot of attention from markets. More tomorrow.
The wasted event, nonetheless, is seen as a potential setback to the cooperation needed to keep the bailouts moving and to keep the markets reassured. Here’s a take from David Powell over at Bloomberg:
The resistance of G-20 leaders at their summit in Mexico to increase the funds of the IMF available to assist euro-area countries reduces the feasibility of the second Greek bailout package.
Those policy makers have rebuffed European demands for additional funds. In their communiqué, they wrote, “At Cannes, our leaders asked us to review the adequacy of IMF resources...Euro area countries will reassess the strength of their support facilities in March. This will provide an essential input in our ongoing consideration to mobilize resources to the IMF.”
They signaled Europe is unlikely to receive special treatment, even if the organization musters new resources. The finance ministers and central bank governors stated, “These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.”
That sense of potentially fraying cooperation has European markets slipping a bit this morning and weighing on the U.S. futures. Wasted airfare and wasted opportunity.