Fiscal Integration is a State of Mind…

Does the EU need to change their Treaties to achieve fiscal integration and control? Judging by the reports from the recent Summit much debate surrounded the legality and sovereignty issues. This is a sideshow. The EU does not need a slew of referenda and laws to reign in spending … all it needs is for […]

The EU’s Short Term ‘Money Grab’ … But Will they Bear the Cost in the Long Term?

The basic issue in Europe is that Governments have borrowed to consume yesterday and now they need to find someone to pay today. Why not pass the parcel to the Banks? After all, they are used to corporate debt writedowns, and a Sovereign is just the same, right? Not exactly … There are three steps […]

The EFSF Opens for Business … But Will it Make a Profit?

Come next Friday October 14, Malta, the final European state to approve the EUR 440B European Financial Stability Fund, will have given their assent. This is no mean feat – organising and winning approval from 17 separate parliaments in three months is quite an accomplishment. The EFSF will be open for business … What should […]

Beware the IMF

While the IMF speaks with the gravity of a government organisation, it must be remembered that they are essentially a commercial operation servicing governments. Beware their rhetoric… A case in point was last week when a spokesman warned the Greek debt swap would fail without 100% private sector participation (not including the IMF of course!). […]

Will the Hong Kong Dollar Peg Buckle Under Attack? Errrr, No

The high profile US Hedge Fund group Pershing LLP has recently launched an ‘attack’ (of sorts) on the HKD. Pershing has amassed significant call option positions on the HKD/USD, reasoning that the inflationary spillover from Bernanke’s ultra-loose monetary policy will not be tolerated by the monetary authorities. Pershing expects the Hong Kong Monetary Authority to […]

Bear Market Turning Points and Trading Volume

While bull markets end with a bang, bear markets end with a whimper. Investors looking for signs of a turning point might well consider trading volume as an indicator. Relatively low trading volume indicates a market is bottoming out. There is some science to this. Many years ago it was observed that volume growth was […]

How Low Can Long-Term US Interest Rates Go?

Reports that several Federal Reserve board members are contemplating ‘additional stimulus’ (whatever that means) prompts the question as to just how low the US 10yr yield can go? While the Fed can only effectively control the short rate, which is zero, long-term interest rates are mostly market determined. The 10yr yield is currently 1.78% – […]

Asian Reserves Accumulation: Yesterday’s Villians are Today’s Unwilling Saviours

After many years of criticising the build up of foreign reserves by Asian countries, who do the Europeans turn to for help bailing them out of their excessive spending and debt accumulation? The Asians of course!!! Guilt is the attack being taken by Europe (and the IMF) to try and secure cheap loans from Asian […]

Stark, the Suissie and the Yen

Today’s post has two parts: Jurgen Stark’s resignation Jurgen Stark officially resigned from the ECB for personal reasons. Stark had been a critic of ECB bond purchases from the troubled states of Greece, Ireland, Spain and Italy. His resignation on Friday prompted rumours that this could presage an imminent Greek default with financial markets falling […]

EU Market Turmoil Strengthens Peripheral Credits

Ironically, the market turmoil in the EU peripheral bond markets this week will have the effect of forcing Europe’s hand to speed up implementation of the 21 July bailout accord. While bond markets are falling to ‘crazied distressed levels’ (six month maturity Greek bonds now yield over 100% annualised), Central Bankers and Finance Ministers can […]