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Kiron Sarkar
September 12, 2011
The business sentiment diffusion index for large Japanese firms rose
by +6.6 points in the 3rs Q, fro -22.2 in the previous Q and higher
than the +4.4 forecast. sentiment is expected to increase further in
the 4th Q;
Indian industrial production rose by the slowest pace in July - output
was up +3.3% YoY, well below the +8.8% rise in June and the forecast
for a rise of +6.6%. Yet more confirmation that the global economy
(including EM's) are slowing;
The EU is likely to be given powers to negotiate a pipeline deal with
Azerbaijan and Turkmenistan today - for the 1st time. The EU has been
deeply concerned about reliance on Russian gas imports. The proposed
Nabucco pipeline has been resisted by Russia, which is building its
own South Stream pipeline;
The Greek PM has announced further austerity measures and revenue
raising plans. I wont bother summarising them. Its too little too late
and with little hope of actual compliance. Greece is fast becoming
ungovernable. It cannot survive within the Euro - neither can the
Portuguese, nor for that matter a number of other countries. Never
waste a crisis to sort things out - Obama's previous Chief of Staff
stated. Well now is the time to sort out the Euro Zone/EU. However, it
is Europe and the one thing you can rely on - they will mess it up,
rather than sort it out;
The Greeks have enough cash till October reports the Greek Deputy
Finance Minister. As you know, I believe that Greece should be allowed
to default - it will anyway. Other countries will follow. The key is
to recapitalise the European banks - they need hundred's of billion in
new capital - only Governments can provide the amounts necessary and
only after shareholders/bondholders take the first hit, given the much
weaker state of public finances. You want to buy insurance companies -
no I thought not;
Mr Junker, head of the EcoFin (remember him - he stated that he has to
lie when necessary) states today that the EuroZone will do everything
to defend the Euro, including increasing the size of the EFSF. Oh yeah
- ask the Germans, the Finns, the Dutch etc that, Mr Junker;
For once I agree with Stark (raving mad). He states that Ireland
should reduce public sector wages, introduce more flexibility in Irish
employment contracts and adjust the social security system. The Irish
private sector has introduced the necessary adjustments - the public
sector has not. For a long time now, people have always preferred a
job in the pubic sector in Ireland - tells you everything;
The UK's Independent Banking Commission ("IBC") has released its
report. It recommends that UK retail banking (including for
individuals and small business) is ring fenced, but not separated -
to be enacted by 2019. Corporate deposits and ending to large (non
financial) companies can be within the ring fence. Retail and other
activities should be capitalised so that they can bear a loss of 17% -
20%. UK banking competition would be enhanced by creating an
additional player, by means of the break up of Lloyds. The annual pre
tax cost would be in the region of £4 - £7bn. Given the current
crisis, this report will be put on the back burner;
Summary
Asian markets closed sharply lower and European markets are down
materially. Gold is off - surprisingly and Brent (spot) trading at
US$110.87. Safe Government bond yields are lower. US futures sharply
lower. Same old, same old.
Interestingly, the Euro is holding its own and actually rising from an
initial sell off - Chinese/SNB buying?
Just picking up more Randgold (ticker RRS), Fresnillo (ticker FRES)
and Tullow Oil (ticker TLW).
I believe it will be pretty soon that I send that email to my friend,
the German politician. I don't expect a reply though.
Best
Kiron
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