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Kiron Sarkar
February 6, 2012
Hi there,
The Japanese have adopted a policy of stealth intervention. The MoF
reported that Japanese authorities had sold the Yen 5 times in the
last Q of 2011. I'm sure that my friends from BBH will opine, but
stealth intervention does not appear a great policy to me - OK, it
will keep the market on its toes, but......;
China, as is the case with US airlines, are refusing to pay a carbon
emissions tax for airlines landing in the 27 country EU. However, the
EU has refused to back down. This ones going to be interesting;
Spain's economy minister, Mr Guindos has announced a sharp reduction
in expected 2012 GDP, from the +2.3% forecast by the previous
administration to a recessionary -1.5%. The current administration has
inherited a can of worms from the former government and has a
particularly tough task ahead. However, they are taking the action
necessary, though with over 20% overall unemployment (over 50% for
under 25's), their task is unenviable.
In addition, the Spanish Central Government announced that it would
provide E10bn - E15bn in credit lines to regional authorities, to
settle their bills - the previous administration did not press the
regions to pay their bills (or pay them themselves) to keep their
deficit within target !!!!. In exchange, Central authorities are
demanding that the regional authorities submit viable spending plans -
going to be difficult;
German December(seasonally adjusted) factory orders rose by +1.7% MoM,
well above forecasts of a rise of +1.0%. Apart from declining demand
from the Euro Zone (down -6.8%%), demand elsewhere (up +12.3%) is
holding up. Those Germans are simply irrepressible. However, Siemens,
generally considered a bellwether German company, has been cautious to
negative of late.
Read a report that China will become Germany's largest trading
partner, taking over from France - interesting ;
The German newspaper, Bild Zeitung, reports that the Troika's analysis
of Greece concludes that the Greek economy is suffering "catastrophic
conditions" - and yet their politicians continue to play their games,
blaming everyone, but themselves. An interview of a Greek politician
on Bloomberg yesterday was simply extraordinary. The Greek people have
been lead by corrupt, irresponsible and totally useless politicians -
one can only feel extremely sorry for them;
Greek politicians were supposed to respond to the Troika's ultimatum
by 9.00am London time today. I now understand its been extended to
noon tomorrow. Presumably, the Greeks will have to respond prior to
the Euro Zone meeting on Wednesday - if the Greeks act as normal,
their response will be delayed until the last possible moment.
However, it has finally sunk in - they need to do act - no more empty
words and useless promises. However, I for one will not be holding my
breadth. However, it (logically - if you can ever use that word re
Greece) is likely that the Greek politicians will cave in. However, I
still believe that a trigger event for CDS's is likely - participation
rate in respect of the PSI may well fall short. A number of analysts
(Credit Suisse included) believe that.
Germany is raising the pressure on Greece. Merkozy announced yesterday
that part of any future bail out funds would be withheld to pay off
creditors (avoiding a messy default) and that any further financing
would be subject to Greece complying with its commitments. One
important issue - as Greek politicians fail to get their grubby little
mitts on funds in the future, their power and the importance of
political patronage diminishes - will come as a shock to Greek
politicians, but great news;
Here comes another fudge by the European Banking Authority ("EBA"). It
is to "review" the amount of capital that banks need to set aside in
respect of their holdings of Sovereign debt - review, come on, what
they mean is RELAX !!!!! The EBA has proven incapable of standing up
to political pressure, likely from the Germans, French, Italians and
Spanish - a typical EU institution, which is yet another reason why
the EU is a complete waste of time;
A couple of interesting issues re the US.
The continued increase in manufacturing suggests that US businesses
are relocating back to the US from places such as China - supply chain
issues, higher wages in China, quality and intellectual rights
problems, etc, etc.
The other is that Bloomberg reports that the massive increase in gas
production may mean that the US shortly becomes self sufficient in
energy terms for the 1st time in 20 years - and yet Brent is above
US%115 !!!! Apparently the US produced 81% of its energy requirements
in the 1st 10 months of 2011. Indeed, the US may become the largest
energy provider by 2020 - very, very interesting, not just for the
economy but also in respect of geo politics;
Whilst Chinese markets are over -1.5% lower, other Asian markets have
held up - just reinforces my view that the market is (increasingly)
ignoring Greece - looks like I may have been a bit wimpy in partially
taking profits on Friday.
Brent has crept up to US$115.50 - complete nonsense, but that's the
market - my friend Burt was totally right, though I still don't get
it.
Gold, is drifting off - currently US$1722.
A bit early, but European futures look as if markets will open higher today.
Best
Kiron
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