11th January 2012: Show Must Go On: Fiscal Whores Squeeze Into Their Shortest Skirts And Highest Heels

 

Tempted?

Quote of the Day:

Across Europe just now men who thought their title was “minister of finance” have woken up to the idea that their job is actually government bond salesman.

Michael Lewis

Macro Overview

Show Must Go On: Fiscal Whores Squeeze Into Their Shortest Skirts And Highest Heels

• Selling a government bond is no longer a foregone conclusion. Investors walk a treacherous alleyway: hissing vixens and pouting prostitutes on one side and blood thirsty Vampire Vigilantes on the other, both bitter, aggressive, frustrated and wanting the one thing the other doesn’t have. Only you have what they both want, dear reader: a vote, a brain and a small pocket of hard-earned savings. It is any wonder everybody from the OWS protester to even the most predatory investors these days is beginning to feel like prey to forces beyond their control?
• But the show must go on. Fresh from a holiday break the treasury whores crawling curbs around Europe are donning their most seductive attire to lure investors around the World from their comfortable US Treasury Bond cars. Heaving their impossibly fabricated cleavages towards passenger windows, insisting in sultry tones that that their flesh is firm, their health is impeccable and, of course, their love is pure.
• Wait a minute… I’m sounding like too much of an expert on this analogy… I assure you I just have a vivid imagination! But what we have witnessed over the last few years is that, as this crisis has morphed from Sub Prime to Financial to Sovereign/Eurosclerosis, the credibility of indebted governments has slumped from economic royalty to financial slavery. As Michael Lewis mentioned (see my Quote of the Day Above) in his excellent piece in Vanity Fair: treasury officials are now little more than government bond salesmen.
• Remember those calendar charts I produced at the beginning of the week: “All You Need To Know About Sovereign Debt Auctions In Two Simple Charts”? Time to get it out, tomorrow is the first of many important auctions coming due in the coming weeks and months with Spain of particular interest (auctioning 3 bonds: 4% 2015, 3.25% 2016 and 4.25% 2016)… Well, that’s what they hope for at least. But it’s not a huge auction, though.Italy needs to place a larger deal the day after.
• As we’re on the topic of sovereign eebt I thought I’d introduce Neel Kashkari’s interesting little piece looking at the various policy work-out scenarios for indebted governments: they are

1. Austerity and Deflation (more disinflation than deflation but pretty muchGreecetoday)
2. Explicit Default (Greece tomorrow?)
3. Mild Inflation (UK today)
4. Runaway Inflation (UK tomorrow?)
5. Miraculous Growth (ermmm…Ghana? Sorry – that’s the only country I can think of with the slim capabilty of reaching this category)
• Interesting Reuters Poll out on the Eurozone Crisis… check out the article here.

Market Overview

What To Do About Commodities?

• Really nothing going on with Oil or Gold, which I find strange given the monetarily inflationary tactics coming out of the West and the politically inflationary tactics out of the Middle East. I see the Baltic Capesize Index plummeting, which I never normally pay much attention to, but this is a sharp drop (-35% since beginning of the year – see Chart of the Day).
• I know we’ve had an exceptionally mild winter in many parts of the Northern Hemisphere but have you checked out the Nat Gas price? Quite a move… downward!. See Chart of the Day. Central Appalachian Coal Futures are down too… hmmm. Worth keeping an eye on energy prices and miners/refiners/retailers of fossil fuels.

Chart of the Day

Baltic Capesize (Source: Bloomberg)

Natural Gas (Source: Bloomberg)

Events

Macro Events:

Update:

• German GDP 3.0% slower than previous but pretty much in line with expectations

Alerts:

• Germany CPI (will be interesting to see how this moves over the next few months)
• India Industrial Production
• Sweden CPI
• BoE Rates
• US Jobs

 

Corporate Events:

Results:

• Infosys [INFO IN]

Dividends:

• Nothing Significant

Reading, Links:

Nothing Significant