Things that make you go hmmm
As well as highly correlated markets (see the chart, left, courtesy of Soc Gen which dem- onstrates that correlation amongst leading eq- uity markets is at nosebleed levels), we have markets in which the various vested interests are almost completely aligned, we have a brand new Coalition of The Willing (although this one was infinitely simpler to put together than its predecessor) which involves the vast majority of investors, governments, Central Banks and regulatory bodies the world over and, amongst that coalition, we have a common willingness to turn a blind eye to the realities facing the world; namely, too much debt and too few ways to pay it off. After all, a LOT of money would be lost and
SOURCE: SOCIETE GENERALE a lot of banks would go to the wall should the reality of the situation actually be faced.
Only the ‘Evil Speculators’ and ‘Short-Sellers’ find themselves both out of alignment with the herd and unwilling to lift the telescope to a failing eye – but then they’re all just evil, right?
Turning a blind eye is one thing. Willfully ignoring the truth is another but breaking a promise is an al- together different proposition. This week, in a breathtaking example of just how deeply-ingrained the principle of contrived ignorance is, French President Nicolas Sarkozy stepped to the microphone and made a promise that had basically already been broken when he pledged that no European country will default. A polite audience declined to mention the G-word – instead choosing to offer some rather half-hearted applause. Nelsonian markets were more than willing to take him at his word though.04December2011
But then, right on cue, just as the euphoria was getting a little out of hand, Angela Merkel herself poured the now customary cold water on proceedings when she dampened the spirits of those still basking in the post-oratory glow of Sarkozy’s speech in an address that had the Reuters and Bloom- berg headline writers’ fingers cramping like Joan Benoit in 1984:
*MERKEL SAYS EURO BONDS NOT POSSIBLE WITHOUT FULL FISCAL UNION
*MERKEL SAYS EURO BONDS NOT CURRENTLY POSSIBLE IN CONSTITUTION
*GERMANY’S MERKEL SAYS EURO DEBT CRISIS CANNOT BE RESOLVED IN ONE FELL SWOOP
* RTRS-GERMANY’S MERKEL SAYS EURO CRISIS RESOLUTION WILL TAKE YEARS
* RTRS-MERKEL SAYS MUST DEFEND CREDIBILITY OF EUROPEAN COURTS AND CENTRAL BANKS
* RTRS-MERKEL SAYS TASK OF ECB IS DIFFERENT FROM THAT OF FED IN UNITED STATES
OR BANK OF ENGLAND
* RTRS-MERKEL SAYS EUROPEAN POLITICIANS HAVE LOST CREDIBILITY BY FAILING TO IMPLEMENT STABILITY PACT RULES
* RTRS-MERKEL SAYS EUROPE MUST DO WHAT IS POSSIBLE WITH THE EFSF AND NOT TALK IT DOWN
* RTRS-MERKEL SAYS EUROPEAN COMMISSION AND COURTS MUST HAVE BIGGER ROLE WITHOUT
*GERMAN PARLIAMENT LOSING BUDGET CONTROL
So here we are. A week away from another do-or-die summit meeting, only this time it feels as though things may just be reaching the point-of-no-return. The markets certainly feel it. We can only hope that those sequestered away in Brussels next weekend feel it too.
Full Hmmm report.