I was watching the news last night and the reporter on Sky used the worst word possible to show positive steps to resolve this. He Said "Diplomatic" - Diplomatic solutions to a financial problem isn't what the people need to hear. People need a clear process with definite and demonstrable actions to convince the various governments employers "The People of Europe" that there is more to this than hot air and an employment club for failed politicians and cronies of the political establishment.The German chancellor warned that Standard & Poor's decision to downgrade nine euro-zone countries on Friday evening demonstrated that politicians needed to step up their efforts to resolve the crisis, warning that it was a "longer process" that would take more than a few months. "The decision confirms my conviction that we have a long way ahead of us before investor confidence returns," she said in a radio address. Germany was not among the countries downgraded. The downgrades, after markets closed on Friday, marked a further escalation of the debt crisis, which has seen investors lose faith in euro governments' ability to service their debts. Stalled talks over "haircuts", or write-downs, of Greek government debt will further worry investors, as they pose the threat of Athens making a disorderly default. Nicolas Sarkozy, the French President, yesterday called for cool heads after his country was scalped of its prized triple-A rating, pushing up its borrowing costs The fourth quarter of 2011 was a disaster especially for hedge funds. Markets normally thrive on volatility but conditions have become so unstable that even some of the most seasoned of investors have quit the field preferring instead to conserve cash.
The doyen of hedgie's George Soros has pulled out. The old market adage was, don't bet against the Fed. Today, this should read don't bet against the ECB. The EU has vowed to do "whatever is necessary" in the markets...we can only laugh ...what a messsss!
The doyen of hedgie's George Soros has pulled out. The old market adage was, don't bet against the Fed. Today, this should read don't bet against the ECB. The EU has vowed to do "whatever is necessary" in the markets...we can only laugh ...what a messsss!
9 comments:
The crisis will end when the solution has been found or has been articulated in a credible way. The market needs to recognise that there is a mechanism to enforce fiscal discipline and there is a shared burden of fiscal responsibility and transfer. It would be naive to think that this can be solved within weeks, but my view is that it will be a reasonably short timeframe, certainly by second half.
Without bold and concerted international action], Europe could be swept into a downward spiral of collapsing confidence, stagnant growth, and fewer jobs. And in today's interconnected global economy, no country and no region would be immune from that catastrophe. This is especially true for Asia.
10.03 Goldman Sachs says that S&P’s sovereign debt downgrades will not have a dramatic effect on European insurance companies.
It sees a limited impact on insurers’ capital, market share, future borrowing costs, and therefore its valuation of these businesses.
10.01 Quick update on the markets. FTSE 100 is down 0.2pc, CAC is down 0.3pc, DAX is up 0.2pc, MIB is up 0.2pc, IBEX is down 0.2pc.
09.55 BREAKING NEWS...
Fitch has cut Russia's ratings outlook to "stable" on political uncertainty.
Just why does the DT, and other quality newspapers, keep printing the same 'shock' headlines about the demise of the Euro and Greece is getting beyond me?. A Greek default is fully priced into the markets, along with the loss of the French triple A rating. The Euro will still be here next year, although it may well be a very different beast in terms of member states and how debt is controlled, simply because Germany has said so, and because German growth is heavily reliant on the continued existance of the Euro. With the French government now in a state of limbo, with the increasing pressure on their banking system and the potential for a very acrimonious general election less than 3 months away, Germany will seize the initiative and 'force through' the measures needed to save the Euro. As I see it a Europe with two distinct, but complimentary epicentres, will emerge. Germany will remain the driving force at the centre of both the EU and the Euozone area, whilst the UK, who share many of Germanys views on the single market, will be the focus point for those countries that decide not to join the Euro, or who are deemed not suitable, by Germany, for full membership of the Eurozone itself.
Greek default priced into the market? Your having a laugh. The chaos caused by the triggering of CDS after a Greek default is incalculable. Whats priced into the market is a hope that there will be a Greek deal on voluntary PSI.
Your correct on EZ downgrades being priced in. The big picture here is Greece and its by no means priced in. That will be a massive shock to the Eurozone.
Lucas Papademos told CNBC that quitting the eurozone "is really not an option". The unelected leader also claimed that negotiations with Greece's creditors are going well:
Our objective is to complete the two processes and also to fulfill our commitments that have been made in the past … and we are confident that we're going to achieve this.
But, but... talks over the Private Sector Involvement broke up on Friday without agreement, with the banks' negotiators demanding a suspension and admitting that progress was disappointing.
Not according to Papademos, who argues that the 'little pause' in talks (they should restart on Wednesday) doesn't matter, as Greece and its creditors are still hammering out a deal.
Some further reflection is necessary on how to put all the elements together. So as you know, there is a little pause in these discussions. But I'm confident that they will continue and we will reach an agreement that is mutually acceptable in time.
Time, though, is running out. Greece has got to agree a debt reduction deal with its creditors soon, so it can get its next aid tranche by March (when it must repay €14bn of maturing debt).
Papademos may not want to go back to the drachma – but if the PSI talks go sour, he may not have a choice....
Or are ratings agencies simply taking on too much power? Should we even be worried about S&P's views?
We should be worried about them, and bitterly oppose them, as they are straight from the mindset which got us in this shit and will keep us in it.
First, they understand eff all about what is really happening, or did I miss their warnings about Northern Rock, Lehmans, Anglo-Irish, and all the other banks which we have bailed out?
Second, they are preaching the gospel that market power is the Alpha and the Omega: Jesus threw them out of the temple and he was right.
We need a global economy designed to cater for human need which does not rape and plunder the planet and its inhabitants as it churns through the resources
of nature. That means stopping the dictatorship of the market.
And anyway, what right do these agencies have to make statements which can devastate the credibility of others, based on thier own illusions.
BTW: what is this headline about the Greeks fighting default: they already have.
They are now wrangling with their creditors about how many % they will pay, and good luck to them.
We know that rating agencies face numerous perverse incentives. That is why they rated AAA something that was in fact junk. There has been no reform of the way these agencies work since 2007. The perverse incentives are still there. In these conditions, I cannot see why anyone would believe that rating agencies are today rating sovereign debt 'objectively'.
The rating agencies are not operating in a vacuum, their analysts are in constant contacts with financiers. In a rare case of transparency, Linda McQuaig interviewed in the 1990s a senior analyst in charge of sovereign debt rating, who clearly said that he was being bombarded by calls from bankers asking him to downgrade the ratings (in that case, Canada's). Nowadays there is no need to look far to guess that this is what is happening with the Eurozone. Many investors are betting high on Euro collapse. Hedge funds have built large positions in Greek bonds and are at this moment http://www.nytimes.com/2012/01/11/business/global/hedge-funds-the-winners-if-greek-bailout-arrives.html torpedoing the PSI negotiations, which could solve one of the major hurdles on the way to a recovery of the Eurozone. FT and WSJ commentators have given considerable strength to the idea that the Eurozone is doomed, still repeating unashamedly that the Eurozone has only days to live after they have been proven wrong several times already...
THIS IS POLITICS!
I'm currently in India, and it's interesting to see just how little coverage this has got, here even in the business press.
What comment there is seems to be mainly along the lines of "nothing surprising", "fully justified" and "not our issue - the Sensex has already priced down euro-exposed companies".
Distance does indeed lend perspective, it seems......
Banks are parking cash with the ECB. Looks like they have been lying about their exposure again. Otherwise why aren't they lending it to each other?
a Greek default is inevitable, if the creditors don't accept a 50% reduction more fool them. After a disorderly default they'll be lucky to get cents per Euro. These are also the people who deserve inflated bonus payouts because they are so skilled at their
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