“To avoid some things from leaking, I don’t even let them cross my mind,” Mariano Rajoy tells his closest aides from time to time. This phrase captures the essence of a man who lives by the political principle of “wait and see” – a man who likes to let things sort themselves out.
Rajoy’s great problem is that he is no longer leader of the opposition — that is to say, someone who can make any speech he likes, or none at all, with hardly any consequences. Since December 21, 2011 Rajoy has been Spain’s prime minister, and his audience is global. He is no longer just talking to his constituency – now, Barack Obama is listening.
Ever since Rodrigo Rato’s “resignation” as chief of Bankia, the recently nationalized bank, the government has been accumulating political errors and communication mistakes, all of which have undermined Rajoy’s image as a capable, efficient leader.
Guest post by Peter Tchir of TF Market Advisors.
The image of Nero playing a fiddle while Rome burns is just too clear in my mind today.
- Spanish Bank Bailout 10 days old and no details
- No Greek Government and no clear sign of how EU will deal with Greece
- Spanish Bank Audit Delayed
- EFSF available but no new programs have been launched
- ESM, talked about as though it is real, but not yet finalized and not indication of hurry
- Spanish T-bills yield about the same as Greek T-bills but 10 year bonds about 70 points difference (for now)
- Austerity is important, but not to the 7,000 G-20 attendees
- EC President Barroso is talking up a storm and lecturing others – rarely a good sign
Why do the Greeks want to stay in the Euro? It doesn’t make sense, but on the other hand, by staying in the Euro, they will receive money, they won’t be able to pay back. By Biderman.
I remain long term bearish on European stocks and as well as the big US banks. Why?
Greek public opinion is that they want to stay in the Euro but they want easier terms. At first blush it does not make sense to me why they would want to stay in the Euro? The Greek economy is a disaster and getting worse, so why would they not want to go in another direction? The only answer I can come up with is they like being able to borrow money to pay their bills and, even better, never having to pay the loans back. That makes sense.
If Germany is willing to keep lending to Greece even if most goes to repay older loans, Greece keeps getting some new cash. If Greece left the Euro, even that modest amount of fresh cash would disappear. How horrible! Greeks would actually have to go out and do stuff. They might have to work for a living and pay some taxes for government services. Video below.
Some reflections on the Greek elections and the market going forward after this “long” weekend, as we await Benny to take on the show tomorrow. Don’t be surprised when they start hitting metals tomorrow, as this has been the trend lately. By Hussman of Hussman Funds.
With Greek elections resulting in a fairly benign outcome that promises to hold the euro together in the near-term, the market may enjoy some amount of relief. The extent and duration of that relief will be informative. Based on broader factors, we don’t expect that relief to survive very long, but we are willing to respond more constructively if our own return/risk measures become more favorable.
Our estimate of the prospective return/risk tradeoff in the stock market remains in the most negative 0.5% of historical instances. That said – and this is important – if market internals improve meaningfully over the next few weeks (measured across individual stocks, industries, sectors and security types), our estimate of the market’s prospective return/risk profile would improve, despite what we view as rich valuations and a new recession. Very roughly speaking, this would require a solid rebound in market internals over a period of 2 or 3 weeks. That sort of outcome might accompany a Fed easing or other event, but our focus is on the measurable condition of market internals, not on Fed policy or other news per se. A positive shift in our measures of market action would likely be enough to ease back from our tightly hedged investment stance to a slightly constructive position. For now, we don’t have the evidence to take anything but a very defensive stance, but we’ll take changes in the evidence as they arrive.
It’s fair to say that we don’t foresee any development that would encourage us to remove a major portion of our hedges at present, and my personal expectation is that conditions are likely to deteriorate sharply rather than improve, but as always, I want shareholders to know where my attention is focused. Our measures of market action – and any meaningful improvement over the next few weeks – will be important in determining the whether we maintain a tightly defensive stance or shift to a slightly constructive one.
The election victory for pro-austerity parties in Greece failed to assuage fears over the eurozone’s future, as investors ratcheted up the pressure on policymakers by sending Spain’s benchmark borrowing costs to a new euro-era high. Markets initially rallied on news that New Democracy and Pasok, two mainstream parties that support the austerity conditions of the eurozone’s bailout, gained enough seats to form a parliamentary majority in Athens. But the optimism was swiftly deflated by dismal bad bank loan figures in Spain that underlined the country’s woes. http://www.ft.com/intl/cms/s/0/440d6138-b964-11e1-b4d6-00144feabdc0.html#axzz1yD9nH3Nh
Russia is setting aside up to $40bn for this year and next to shore up the economy in case the crisis in the eurozone escalates and spreads, and is dusting off a plan that would allow the government to recapitalise the country’s banking system. In his first interview with a foreign newspaper since his appointment as finance minister last year, Anton Siluanov said the government had agreed to create a reserve mechanism worth Rbs500bn ($15.4bn) for next year “for the direct financing of anti-crisis measures”. http://www.ft.com/intl/cms/s/0/1eea8e10-b94d-11e1-9bfd-00144feabdc0.html#axzz1yD9nH3Nh
The Brics nations announced late on Monday that they would begin a process to build a financial safety net, creating a joint pool of reserves to be used if any country faces sudden capital flight. Based on the Chiang Mai initiative between Asian countries, the proposal between Brazil, Russia, India, China and South Africa, would go far beyond existing agreements between the five emerging economies. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. Work on the initiative has already begun with the aim of an agreement at the 2013 Brics summit and demonstrates the concern among strong emerging economies that they will feel the cold winds of contagion from a deepening eurozone crisis. The size of the proposed safety net is expected to be announced on Tuesday. Guido Mantega, Brazil’s finance minister, said the Brics nations were strengthening their financial integration to underscore the faith investors should have in their economies and the move should also improve global confidence. “By creating financial solidarity among us, we will be even safer and stronger than we already are,” Mr Mantega said.http://www.ft.com/intl/cms/s/0/bfd6adfe-b9bb-11e1-a470-00144feabdc0.html#axzz1yD9nH3Nh