The Irish debt crisis seems to be morphing. Into a PR show.
Please see Guarantee end to throw up options on Anglo debt which I have edited for brevity and added emphasis:
The end of the State's guarantee of €2.4bn of Anglo's subordinated bonds at the end of the month raises the possibility of an Anglo default.
A default on unguaranteed Anglo bonds must not be confused with a national default.
But because we still have no legislation in place to manage a bank in default, an unexpected default today could prompt Anglo depositors to remove funds faster than the bank can cover them (a run).
It would also sharply increase the cost of borrowing for the other Irish banks -- just as their debt falls due to be refinanced and could easily spiral into a financial crisis on top of the current economic one . . .
But wait, we've got options, the article goes on to say. It won't be so bad.
This is frontrunning by the Press: trying to prep the market for a negative event while framing it as "not as bad a national default."
Note that the credit markets still do not agree. While Ireland had a successful debt auction last Tuesday, by the end of the week, their bond yields had risen even higher. Something is afoot.
We are in a world of credit and debt, not balance sheets or earnings. If you want clues, monitor debt markets.
I bolded the word unexpected because I feel it is where the article tips its hand. "It's no longer unexpected if we bring it out into the open and show there are plenty of options to deal with it," the writer seems to be saying . . .
. . . the writer who was the former debt-restructuring specialist at Thomson Reuters before joining the Irish Independent.
And then, in almost complete contradiction, there is this little Wall Of Worry:
International press says new figures fuel investor fears
THE INTERNATIONAL press was in agreement yesterday that Thursday’s economic figures were disappointing for the country, giving further fuel to investor concerns over Ireland’s financial health.
The economy contracted in the second quarter of this year, with a fall of 1.2 per cent in gross domestic product.
The development made the front page of the Wall Street Journal ’s European edition yesterday morning, with the paper saying the news of the economic contraction was “startling” for investors.
It speculated that the Government might have to introduce tougher budget measures to trim the budget deficit, and said in recent weeks investors had begun to fear a Greek-style bailout could be on the cards for Ireland.
This was partly echoed by the Daily Telegraph , which said the data could renew concerns that austerity measures risked “tipping the economy into a self-reinforcing spiral”.
The Guardian said the Irish figures were “a stark warning” to governments across Europe, including Britain, and were being used by the Labour Party in that country as a warning of “austerity overkill”.
The New York Times described yesterday’s data as a “setback” for the “ailing” economy. The markets saw the figure as a sign that the economy was heading for a “double-dip” recession, the paper said, and the figures showed how hard it would be for governments in countries such as Greece, Portugal and Spain to stimulate recovery in their economies.
The Financial Times gave less prominence to the figures, carrying them in the markets and investment pages, where it said the cost of insuring the country’s bonds against default had risen to record levels. It quoted analysts as saying there were worries that the Government had “bitten off more than it could chew” with the bailout of banks.
On the back page of the Financial Times a market report said Ireland’s credit outlook had taken a turn for the worse, with fears for the country’s financial situation compounding disappointing economic releases from the US and Europe. Analyst Natascha Gewaltig said the disappointing growth figures added to prevailing risk aversion.
German publication the Süddeutsche Zeitung said not all of Ireland’s problems were of its own making, with subsidies masking issues like the rapid growth in Dublin’s economy and slower growth in rural areas.
It said the Celtic Tiger had been “reeling with a dangerous virus” – growth at any price – for some time, and the financial crisis finished the country off.
This article is masterful in its subtlety. It's a veiled message to governments all across the EU: give us more stimulus. Now.
But note that even with all the EU stimulus, Irish GDP is still contracting.
The article also tries to point the finger at "growth at any price" when it's really a systemic problem fomented by the practice of fractional reserve lending by the world's central banks.
Credit expansion is the virus. What are they prescribing to ailing patients around the globe? More credit. But now the patients are turning their heads away one by one. They've had enough of the sugary syrup that only masks their symptoms but does nothing to cure the cause of their ailment.
Perhaps we have been climbing a Wall Of Worry. In S&P terms, we could still climb higher, possibly, if we can first mount 1150, to 1175. But we're also up against resistance and we've completed a gorgeous 5 wave sequence from the August lows. Everyone is bullish. The public is getting back in. Pundits are calling for 1200, 1250, 1300, and back to the 2007 highs. This is what I want to hear right now. I'm a structural bear until the excesses are cleansed from the system. We are a long, long way from that. Breakouts do not get me bullish.
Or let's just say I'm bullish on one thing: volatility. I may have to cut and run on my short ES position tonight or tomorrow. But I will continue to be long volatility.
No comments:
Post a Comment