Skip to main content

Could this be it? Greece the end of the end game

Well its been a ride, the on-again off-again negotiations seem to be off for good with Germany taking a very hard and uncompromising position vis-a-vis Greece.  This coming weekend has been dubbed by some as a Lehman Weekend -- where in 2008 Lehman went from being a solvent (ish) investment bank on Friday to "get your stuff out of the office before Monday, because liquidators are at the door.

Like Paul Krugman I believe that a deal is possible -- its not likely, but its possible.  The issues are geo-political as the actions on Greece will determine how things will proceed in Spain (looking at elections soon), Portugal and to a lesser extent Italy.  It is possible that the calculations in Berlin is making is that its not a question of saving Greece but to avoid an expensive end game in Southern Europe. Greece has given plenty of ammunition to Germany from intransigence on reforms to an absolute belief in their righteousness of their cause -- the Greeks have elected a slightly delusional (its not our fault, its the other guys) that grattes in Berlin -- it grates because, in part, its true.

Some say that a Greek exit would be good for the economy, except Greece is not a big manufacturer, 80% of Greece's economy is services -- mostly tourists I would guess.  So, Greece is a country that imports everything from fuel to machinery (mostly German by the way), a devaluation of a new national currency would not help them, except it would reduce wages, which maybe a necessary pre-condition to rebuilding an economy -- the Euro makes downward wages adjustment almost impossible, without huge labor strife.

There is no doubt that a Greek exit from the Euro (and maybe from the entire Eurozone system) would be catastrophic; a calamity to Greeks and to their country.  It doesn't mean that an exit will not occur.  It is evident that the conversation has grown stale between the parties -- they grow no closer in the past few weeks, and the strident level of rhetoric is not promising.  The Americans tried to "get involved" but got smacked down for their efforts -- Berlin even when as far as to say that American foreign policy was making things harder for Europe -- that, of course, referred to sanctions imposed on Russia after they invaded the Ukraine.  Since then, the Americans have backed down, let Europe deal with its problem -- of course if Greece exits everybody will pay...

On a side note has anyone noticed fuel prices and stockpiles -- its rather strange OPEC announces "no cuts in production for the foresable future" with inventories near all time high and prices, well prices they keep rising on the spot market.  It now seems that bad new is good in the oil sector -- it was the same in the stock market a few years ago, because more bad news meant more quantitative easing, which means more liquidity, which translates into higher stock prices...

Comments

Popular posts from this blog

Trucker shortage? No a plan to allow driverless rigs

There are still articles on how America is running out of truckers -- and that its a huge problem, except its not a problem, if it was a problem salaries would rise to so that demand would clear. Trucking is one of those industry where the vast majority of participants are owner/operators and therefore free agents.

Salaries and cost are extremely well know, "industry" complains that there are not enough truckers, yet wages continue to fall... Therefore there are still too many truckers around, for if there was a shortage of supply prices would rise, and they don't.

What there is though is something different; there is a push to allow automatic rigs to "operate across the US", so to encourage the various authorities to allow self driving rigs you talk shortage and hope that politicians decided that "Well if people don't want to work, lets get robots to do the work" or words to that effect.

This has nothing to do with shortage of drivers, but every…

Every punter says oil prices are on the rise: Oil hits $48/bbl -- lowest since September 2016

What the hell?

How could this be, punters, advisors, investment bankers all agreed commodity prices  in general and oil prices in particular are on the rise...its a brave new era for producers and exporters -- finally the world is back and demand is going through the roof, except not so much!

What happened?  Well energy is complicated, the world operates in a balance -- 30 days of physical reserves is about all we've got (seriously) this is a just in time business.  So the long term trend always gets hit by short term variations.

Global production over the past 12 months has risen by somewhat less than 1.5% per annum.  As the world market changes production becomes less energy intensive (maybe), but the reality is that the world is growing more slowly -- America Q4 GDP growth was around 1.9% (annualized) Europe is going nowhere fast (the GDP growth in Germany is overshadowed by the lack of growth in France, Italy, Spain (lets say 27 Euro members generated a total GDP growth of 1.2…

Paying for research

This morning I was reading that CLSA -- since 2013 proudly owned by CITIC -- was shutting down its American equity research department -- 90 people will be affected!

Now the value of a lot of research is limited, that is not to say that all research is bad. In fact, I remember that GS's Asia Aerospace research was considered the bible for the sector.  Granted, there was little you could do with the research since the "buy" was for Chinese airlines...that were state owned.  Still it was a vey valuable tool in understanding the local dynamics.  It seems that the US has introduced new legislation that forces brokers to "sell" their research services!  Figures of $10,000 an hour have been mentioned...

Now, research can be sold many times; if GS has 5000/6000 clients they may sell the same research 300x or 400x (I exaggerate) but this is the key -- Those who buy the research are, I presume, prohibited from giving it away or selling it, at the same time the same rese…