30th January 2012: Sell The Summit – EU Leaders Disappoint … Again

Quote of the Day:

… if you just look at the 312 million [people] in the US with the 16.4 trillion [dollars of federal debt], that’s 52,409 dollars per man, woman and child.

 

Rick Santelli – CNBC Reporter

Check the Rick Santelli clip out here.

Macro Overview

Sell The Summit

• Another EU Summit disappoints. Soon summit meetings will be hard-coded as “Sell Commands” in programmed trading models. I mean I cannot remember a summit which did not disappoint – market rallies seem to occur between political events in Europe …funny that. Merkel poured cold water over the hopefuls who thought that we’d see something decisive come out of the core today.
• On top of it all Germany is calling for debt caps to be enforced. As if policing this in a single state monetary environment isn’t enough, imagine trying to keep debt caps for 17 very different cultures all subject to varying influence over centralized policies out of Brussels.
• I’m sorry, Germany, but it is simply too early to start talking about universal hard limits on debt. Merkel is a shrewd and talented politician, there is no question she is using Germany’s position of strength to take a hard line in negotiations to secure an optimal political EU structure her country. It is hard to see Merkel not getting what she wants… but she may want to be careful what she wishes for. Nobody benefits from a disharmonized and disenchanted Europe and I feel as though the Germans may begin to sound a little too authoritative for the comfort of many “lesser” nations in Europe. If Germany wishes to mold the new EU into a stoic, strictly regulated centralized authority they should be aware of how this could be perceived. It could come across a little authoritarian for some tastes and, dare I say it, perhaps a little too close to totalitarian for some more liberal cultures.

 

Debt Ceiling Debates

• As if to satirize Germany’s debt ceiling debate, the US (a country with its own currency and its own monetary and fiscal control) remains politically gridlocked regarding economic issues over fiscal (and monetary) discipline. As we approach the next election in November this will only crescendo. Indeed, many think that the gridlock in Washingtonis here to stay – it’s the consequence of a generational shift in attitude towards government in general – a cultural change which is here to stay for quite some time.
• The political debt ceiling debate may have cooled a little since the summer of 2011, but the economic debate will last for an entire generation – indeed it has only just begun. When we talk about numbers with so many zero’s “Trillions” for Europe and the US, “Quadrillions” (did you ever think it would be necessary to use that word?) for Japan, it’s hard for people to conceptualize the relative magnitude of America’s debt mountain. For those with a cheeky sense of humour I include a funny little film to put it into context, you gotta watch this (warning: this clip contains some extreme satire)…

Market Overview

The Old Market Trends Are Back

• Let’s focus on a few off the beat moves: US and European yield curves are flattening, Gold is rising and the Dollar is falling. This all points to business-as-usual from the Fed. Prepare for more money printing, only this time it may simultaneously come from both sides of the Atlantic. I can hardly wait!
• But this may be a little more awkward for the Fed, I cannot help noticing that even the PCE core inflation measure (inflation without all the inflationary bits) has just hit a 3 year high and rising. That shouldn’t stop them though, they’ll think of something.
• I also want to include in my Chart of the Day, what ZeroHedge think may be the one of the most worrying charts of the year. Youth unemployment in Europe… there is a rather unsavory correlation between youth unemployment and social unrest – just ask any Tottenham resident.

 

Chart of the Day

Youth Unemployment In Europe (Source: ZeroHedge)

Events

Macro Events:

Update:

• Spanish GDP in line but not good (-0.3%)

Alerts:

• Canada GDP
• Japan Industrial Production
• South Korea Industrial Production
• Taiwan GDP

 

Corporate Events:

Results:

• Amazon [AMZN], Baidu [BIDU], Banco Santander [SANB4 BZ], B Sky B [BSY LN], Eli Lilly [LLY], Enel [ENEL IM], Exxon Mobil [XOM], Fujitsu [6702 JT], Honda [7267 JT], Komatsu [6301 JT], Pfizer [PFE], Sands China [1928 HK], Toshiba [6502 JT], UPS [UPS],

Dividends:

• Nothing Significant

 

Reading, Links:

Nothing Significant