On reality…

We hear a lot of people talk about “kicking the can” mainly in reference to political indecision and the unwillingness to make tough choices. Things have been coming to a head regarding the Eur-ocalypse and we’ve heard things like there’s “no more cans to be kicked” a few times in the last weeks/months. Some of the fringe have been saying the day of reckoning for fiat currency is upon us…and to that I say…

There are always cans to be kicked. G-pap will get thrown out of Greece, they’ll institute the agreed upon restructure, markets will go to the moon and then focus will shift to Italy. Italy will implement some watered down austerity(again), declare everything is under control and then in a month or two we’ll be writing this same thing again. Rinse and repeat. That’s how it works. volatility will continue.

being who he was, John Pierpont Morgan, was oft asked the question of what the markets would do…

 “It will fluctuate,” Morgan reportedly replied.

truer words were never spoken.

There is no fiat end game. Atleast not one that any of us will probably live to see. What is certainly possible and has obviously been occuring is the continuation of a slow protracted deterioration in wealth for most people, atleast in the US and some other developed countries. You can only fix debt problems in government a few ways. Inflate, cut spending, or increase revenues. Any of these options guarantee pain for the masses.

 -Cheers, 1689


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What a rally…

Looks like that German constitutional court ruling on the Greece bailout from LAST year really got everyone’s blood pumping(even though the outcome was already known). The realization that Germany can keep throwing money into the Euro cesspool might have erroneously made some folks bullish. But the vote today really had nothing to do with future Euro issues.

Once again this rally looks silly. Fundamentals in the US and Eurozone are unchanged. People are grasping at any shred of news. The sad thing is it will probably continue the rest of this shortened week. Obama will blow a lot of hot air tomorrow that is already getting opposition from the GOP including senate minority leader Mitch MCconnell making real bipartisan consensus and action already dead.

For our sake we hope the rally continues and volatility abates a little bit…We’d absolutely love to go deep on some cheaper S&P puts in the next two weeks prior to the fed meeting. The late September/October period could be a disaster.

Cheers- and it goes without saying but don’t get sucked into the “rally”

European Financial Stability Facility (EFSF)- two words come to mind….

No, not “financial stability” or even “bail out”….but “Loan Guarantee”, I think sums it up nicely and takes the confusion out of all the Euro acronyms being thrown around these days. I highly recommend the podcast below for a good primer…

 

NPR: the-tuesday-podcast-to-solve-debt-problem-europe-borrows-more-money

 

Cheers.

last train out of Dodge?

Lots of stuff going on over the holiday weekend and this morning., let’s re-cap…

1) The Swiss National Bank pegs the CHF to the Euro: Central bank meddling across the globe has begotten more central bank meddling as the SNB was forced to intervene. To put it simply the SNB will buy an unlimited amount of Euro’s and sell(increase supply) an unlimited amount of CHF to keep the rate at 1 Euro to 1.2 CHF. The Swiss are obviously starting to see a slowdown in exports to make a move like this, which is troubling. This should obviously benefit gold as some people looking to the CHF for safety will undoubtedly turn to gold. We’d expect a gold price over $2,000 shortly… Full Story

2) PIGS yields up – Yields on the PIGS(Portugal, Italy, Greece, Spain) were up across the board on Monday. Lots of action on the Euro front particularly with Italy. 10 yr yields are up around 5.5%, this is after the last few weeks of the ECB buying Italian bonds. As you can see the effects of these measures aren’t working. Investors are worried about the ability of Italy to enact austerity measures(there were protests at the Italian Borse yesterday-Italians aren’t happy) and the fact that Italy and the IMF are projecting ~1% growth the next year or two. On the Greece front we’ve got a ruling by the German Constitutional court on the validity of the original Greece bailout in 2010 tommorow(wed, Sept.7th). This looks like a rubber stamp so we shouldn’t see much effect.

3) The Gov’t sues the banks – “The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters. The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises”….Full Text

That’s it for now…stay nimble, stay liquid and stay safe out there it’s getting hairy