Smartarses vs. nincompoops
by Peter Switzer
What happens when smartarses meet nincompoops? The former takes the latter to the cleaners and that’s what’s happening right now on global stock markets.
Who are the nincompoops? The EU group of politicians, the European Central Bank and for that matter anyone in Europe who thinks this debt rescue problem is just about protecting the status quo, and in particular the banks.
Who are the smartarses? Hedge funds, short-sellers and bond vigilantes, but in reality these are just emotive names for financial institutions who can see the opportunity of making money out of the dopes who have been running the Euro-debt rescue screw up.
Excuse my language but I’m getting pissed off at the ineptitude, the lack of resolve and the failure to understand how bad this could get if the debt contagion goes from Italy to Spain and then France. Already, looking at bond yields for these countries, it’s not shaping up well for financial markets if we don’t see some good old, US-style shock and awe.
The Greeks and the Italians have proved that we’re witnessing fiddling while both Rome and Athens burn but if the current calibre of management continues it will be Madrid and Paris next!
At 5am when I woke up, Wall Street was up a bit, however the Dow ended down 190.57 points to 11,905.59 and the trigger was a Fitch report on how exposed US banks were to Europe. Did I not imply we’re all in a big boat with Europe?
By the way this bad European-related news offset any positives from the latest industrial production numbers in the US, which were promising.
Another worry has been the ECB’s work in bond markets supporting Italy, Spain and Portugal but it hasn’t helped hold down yields.
Private lenders only want German bonds, the Wall Street Journal reported this morning, and this has been the making of the EU and the ECB, which have procrastinated and failed to make investors believe that they can trust the bonds of the governments of Europe.
In many ways, dramas like this can be good if it inspires European leaders to pull their proverbial fingers out.
The following sums it up nicely: "This is a market that is dying," said Harvinder Sian, chief European rates strategist at the Royal Bank of Scotland in London. "And the ECB can play around at the edges, but it will really take something much more decisive from the politicians and the ECB to really bring back stability." (Wall Street Journal)
I’m sweating on some really big European news to be a game changer but I suspect the nincompoops will make it easy for the smartarses to make a lot of money at our expense!
Published on: Thursday, November 17, 2011
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