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Deutsche On Draghi: "In Short It Doesn’t Look Like We Will Get Any Explicit Action Today"
With everyone confused over why Draghi has put himself in a position from which he can't deliver and satisfy the market one hour ahead of the ECB announcement, and everyone placing their last bets on the EUR and the SPGBs before the ECB press release hits without really having any clue what the Italian has in store that will make both the EuroStoxx and the Bundesbank happy, here are some additional last minute "insights" from Deutsche Bank that promise not to clarify the situation all that much. Because while "We'll be honest and say we've been totally confused about what to expect from the ECB ever since Draghi's speech last Thursday" DB does say: "In short it doesn’t look like we will get any explicit action today." Clear as mud.
From DB's Jim Reid:
We'll be honest and say we've been totally confused about what to expect from the ECB ever since Draghi's speech last Thursday. Prior to the speech, we did think the market would start to price action in the week leading up to the meeting but when we first considered Draghi's comments we didn't actually think it changed much. However on reflection it’s likely that the speech marked a change in Draghi and was perhaps his way of highlighting his desire to build a consensus across the ECB and Governments towards more aggressive action. The problem is that his strategy is high risk enough that if he doesn't deliver something today then he will have credibility issues going forward.
Anyway as the issue has been wrong-footing us over the past 7 days we'll review what our European Economists think we can expect from the ECB. They think there could be just an outline of a conditional framework for assisting Spain and/or Italy. Immediate ECB secondary market purchases are probably not on the agenda as the ECB are unlikely to intervene until the countries have applied to the EFSF and signed an MoU. An ESM banking license is also a non-starter, as it would be renouncing ECB's implicit seniority. New vLTROs do not appear to be on the menu either as the most recent Bank Lending Survey wasn’t bad enough to warrant a liquidity response. Our economists are also not expecting a rate cut. So it looks like at best what we may get is some kind of collateral easing targeted at Spain just to ensure that the domestic banks have the collateral to get the sovereign through the next several weeks. In short it doesn’t look like we will get any explicit action today.
A Reuters article overnight (citing a local German paper), said that Draghi will unveil a two-pronged approach today (ie having the ESM and ECB involved in sovereign bond purchases) but that it’s unlikely we get an official decision today on these proposals. Indeed it looks like Draghi will just elaborate in more concrete terms on what he said last week but a final decision is not expected until after the German Constitutional Court rules on the ESM after 12 September.
So we're back to our thoughts from two weeks ago that the market would start to get excited ahead of today but that there would be scope for disappointment after. However anything can happen today and its therefore best to keep an open mind and be nimble. The most likely outcome is that Draghi dangles a tempting carrot in front of the market but doesn't actually feed us all. A framework for how the ECB intervenes once countries request ESM involvement is probably a realistic thing to watch for.
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Alot of press about nothing, at least the algos can whipsaw everyone, Brilliant !
It's much easier for algos to make money if they don't have to gin up their own volitility.
Exactly, because we should all follow what DB (read-LIBORtards) says.
Draghi doesn't need to satisfy the markets...only Goldman Sachs.
The carrot is anticipated, but the size of that carrot still remains unknown.
Nobody speaks about the whip used to drive you toward the carrot.
Cc
If he does nothing but dangle a carrot I can see the market not liking it.
DavidC
Simon says Draghi Prints.
Is he able to without Germany's agreement, this is something that's confusing me?
DavidC
Draghi has printed before see http://www.zerohedge.com/news/mario-draghi-becoming-germanys-most-hated-man
I believe he will print again.
Germans and Draghi are not necessarily real 'opponents' here ... just two sides of the ongoing euro-farce ... maybe fake 'opponents' like Obama and Romney in USA ...
Yes, Draghi will print ... when the time comes ... perhaps after a more gigantic euro-zone 'crisis' than now is in front of us ... when German banks and insurers and pension funds need to be saved, as well as Spain and Italy
Euro-Game scenario:
Short-term sink the euro value, help Germans to export, via Germanic - Latin 'conflict' stories, along with fostering 'crisis' needed for next stage
Longer-term save the European (including German!) banks and insurance companies and pension funds by printing, Germany 'reluctantly forced to do so' in order 'to confront grave crisis' ...
As Jim Sinclair has long said:
« QE is coming. About that there is no doubt. ... it is the ONLY tool that gives the ... treasury discretionary funds without limit ... whatever is required will be provided ... QE is coming ... QE to infinity ... but not on anyone's schedule ... »
Green.
But don't these Eurocrats get erect about the big crises that will be so huge that it will force/forge total union on everyone ?
Thoughts please
Draghis's only move is to print, which no longer excites traders. Rate cuts will no longer excite traders. He has exposed himself as 20 lbs of sh!t is a 15 lb sack, Him and his kindred spirit Barnacle Bill Bernacke can only blow smoke. They have served their masters well. There is not much left to steal. They have fleeced us sheeple unto death.
johnnyyuma,
Same question as above - is this something he can do without Germany's agreement?
DavidC
David I have been hearing that the ECB and Bundesbank have been disagreeing about the ECB's mandate. So maybe he can announce something. But if Germany does not go along with it Draghi is dead in the water. That being said, the markets will more likely than not, continue to be strung along like a crackead mule with a crack carrot in front of it.
Time to see which Country is bluffing.
There will be tears today.
Walking back expectations about Mario's Nuclear Doomsday machine to fix Euroland, are we?
"uh, I have a two of hearts, a four and six of spades and a nine of diamonds. did I win?
He'll say whatever it takes.
What about me?
-Luigi
Someone seems to love to buy junk
http://www.bloomberg.com/quote/GBTPGR10:IND
http://www.bloomberg.com/quote/GSPG10YR:IND/chart
Is today the day all those muppets that believed GS will get fleeced?
Draghi is so good that he is capable of pressing ctr+p without touching the keybord
He's actually already done what he wanted to achieve...take the pressure off the Spain and Italian bond yields. So now, with breathing space, there are a couple of weeks over which the ECB can natter over all the (limited) options. So nothing today other than ...mark my words we are prepared to do whatever it takes...blah blah....
Yep, Draghqueen has played a blinder as to confusing the shit out of people. And amid all this confusion, self-inflicted by the market reading into things tenfold (and admittedly as a direct result of the current state of affairs), he might see it as the perfect opportunity to strike...with what, is another matter. He has tried to bullshit before, but last time he left himself with wiggle room; this time he has went all in with emotional intent, he was fierce in uttering those words and if he disappoints there’ll be hell to pay (...so they say).
But as the saying goes..."dont shoot untill you see the whites of his eyes".
This chart I came up with has been working out well for me this past month.
Max Keiser – Gives 9 months to major worldwide economic collapse
http://www.youtube.com/watch?feature=player_embedded&v=LHtLy3AfpMI
The stock markets are totally irrelevant if you're not running for president.
But the gold market is really not liking the lack of interventions by central bankers which is ironic. Gold would benefit from what it hates.