"Hitting The Fan" - IceCap Asset Management June Presentation

From Keith Decker of IceCap Asset Management

If you are a human being, you should hold your self to certain standards, amongst which include-not lying. When you are the Prime Minister of a country, one would think, as an elected official, you should certainly adhere to the not lying principle. Now, if you are a human being, the prime minister of a country, AND the head of financial ministers for the Euro (2nd largest currency in the World), one would think and hope (keep your fingers crossed) that you would simply never ever lie. Not so for the dis-honourable Prime Minister of Luxembourg, Jean-Claude Juncker as he plainly stated that “when it becomes serious, you have to lie.” The European financial system is a “serious” mess. Greece is insolvent, Portugal and Ireland are not far behind. Spain is also clearly struggling as are certain Italian banks, meanwhile Belgium doesn’t even have a government. Mr.Juncker: here’s an idea–instead of lying, force the banks to accept losses on their bad investments in bonds from the just listed countries. Investors can use all of the information available in the World to make decisions, however when very powerful individuals resort to lying to keep things together you have to be concerned... Can Greece “grow” out of their problems? Acceleration in domestic growth is highly unlikely. The EU/ECB austerity medicine of higher taxes, lower wages and layoffs is guaranteed to reduce spending on everything. By default (pun intended), the only other option for Greece is to “export” its way to growth and prosperity. Now please excuse our ignorance, however we are not aware of (m)any Greek products or services that are of high value, needed all around the World and offered by no one else. Compounding the export challenge, is the inability of Greece to de-value their currency to make their exports cheaper. At the end of the day, it’s a “Heads Greece loses, Tails Greece still loses.” The only difference is how soon the “fan” comes back into play.

Full report (pdf)

IceCap Asset Management Limited Global Markets June 2011


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