Via Mark J. Grant, author of Out of the Box,
Greece---The Hoax
“Some people can read War and Peace and come away thinking it's a simple adventure story. Others can read the ingredients on a chewing gum wrapper and unlock the secrets of the universe.”
-Lex Luthor
Regardless of the officially manipulated news stories; the truth of the Greek re-financing is not what we are told. Greece only managed to get about $20.7 billion in real buybacks done. They were shooting for around $41 billion and so the program was actually a failure. They have now extended the offering period which has just one goal which is to get the Greek banks to put up the rest of their holdings which will cause a further loss for the Greek banks. This is all politically mandated of course by the Troika and so the deal will get done and perhaps Greece will get its next aid tranche but it is really just Peter robbing Paul. You see, after the deal is completed then the Greek banks will issue more bonds that will be guaranteed by the nation and then pledged at the ECB. This will not be announced of course and the Troika/Greeks will “welcome, herald and praise” the success of the program and turn around and utilize the scheme that I have explained and so increase the debt of the country one more time while making a valiant effort to fool anyone who will listen. The financial reality is that a restructuring was only done on $20.7 billion and so the goals of the Troika were not met at all but the long string of hoaxes will continue unabated. The debt of Greece then will actually increase NOT decrease but the trick is accomplished under the cover of the ECB and since it is bank debt guaranteed by the Greek government it is then a contingent liability and not counted as part of the debt to GDP ratio for Greece and so the myth of the gods residing on Mt. Olympus continues. Mr. Draghi knows the truth and Ms. Lagarde knows the truth and their credibility is whacked once again but the game continues and will continue until some monkey jumps from the cart or some monkey stops feeding the horse that pulls the cart. I also note that every politician in Europe proclaimed that the Private Sector would not be hit again after the first round and yet we were because the governments of Europe cannot deal politically with writing off their holdings of Greek debt and while investors are expendable; their jobs are not. All of the King’s horses and all of the King’s men could not put Greece back together again but if the people of Germany, the Netherlands, Austria et al want to keep tossing them coins and keep up the charade; so be it.
Italy---The Italian Cliff; The Bunga Jump
Jimmy Olsen: “What are you writing Miss Lane?”
Lois Lane: “An ode to spring. How do you spell massacre?”
Monti is going. He will try to pass the budget first, maybe yes/maybe no, but the technocrat is departing. Monti has been more than that however. He has been the official spokesman for the Troika in Italy and those days are coming to an end. All herald the return of Bunga/Bunga and the politics of spaghetti, parmesan cheese and the wines/whines of Super Tuscany. Senor Berlusconi is already hitting out at the German Masters and his language will get stronger I fear. If the tactic is to be to incite the Italians that they do not become “Germanized” then the European Union is about to get politicized in a very real manner. The division of the South and the North is going to take a dramatic turn in the months to come and the split between the haves and have nots of the European Union is going to be put to the test. Testy days lie ahead!
America: To Jump Or Not To Jump; Now That Is The Question
Superman: “I'm here to fight for truth, and justice, and the American way.”
Lois Lane: “You're gonna end up fighting every elected official in this country!”
Obama is doing the only thing he knows how to do well which is to sing the siren’s song of “tax the rich” and enchant the lower classes with the melodrama of righteous indignation. In politics it is often “them versus us” but it is quite aggravating to watch him in this performance. We cannot afford the social programs that we have now and until and unless Obama is forced to recognize this rather obvious fact then no solutions will be found. The Democrats are engaging in triviality and while it may play well in the poorer parts of the country where people do not understand that the government cannot support them forever from the backs of those that do work; the ad infinitum lethargy of “tax the rich, tax the rich” just is not a realistic answer to the problems which have been created over the years. Maybe we will have to take the “walk of shame” before someone wakes up and realizes that we are falling into a fiscal abyss.
In the meantime the Fed is printing and likely to print more. The $45 billion in mortgage purchases continues and while Operation Twist is about to end it will get extended in all probability. The Fed will create more demand than supply and you may expect lower Treasury yields, more compression in spreads and little of value will be found in Fixed Income especially after the first of the year. There has been and will be some selling now due to the probability of pending tax increases but when that is over then you may expect another massive bout of compression where both people and institutions in each and every market will overreach for yield. With equities getting some help by the printing at the margin it may be a different story as fundamentals can no longer support the price/earnings multiples. With Europe in a recession and Japan about to meet the same fate it will not be long before both America and China find themselves in the same predicament I am afraid and so a global recession is likely in the cards after the New Year.
“Faster than a speeding bullet, more powerful than a locomotive, able to leap tall buildings in a single bound. Heck, I would be happy these days if one of our political leaders could just look at a building and proclaim that it was one and not pretend that it was an Indian tepee that needed to be financially and environmentally protected!”
-The Wizard