Forget charts, chicken entrails and other passe means of trying to predict economic downturns; instead look towards the sky, and the skyscrapers being built.
That at least is the conclusion drawn by Barclays Capital, which has concluded that the construction of skyscrapers heralds financial collapse.
To justify their theory, Barclays note that New York's Equitable Life building, was finished in 1873 during a 5 year recession and that the Empire State Building coincided with the Great Depression.
Chicago's Willis Tower built in 1974, heralded the oil shock. Malaysia's Petronas Towers were completed in 1997 at the time of the Asian financial crisis, whilst the Burj Khalifa in Dubai was finished at the time the Dubai property market fell over.
Barclays now warn that China, currently building 53% of the world's skyscrapers, may face economic problems as could India (currently building 14).
Closer to home, we have The Shard in London!
It may well be that skyscrapers herald economic problems. However, it is not the skyscraper itself that causes the problems but the hubris and egos that cause them to be built.
Wednesday, January 11, 2012
Rehn Loses Patience With Greece
Olli Rehn, the vice-president of the European Commission, has started to lose patience with Greece and has given the country a public kicking:
"Greece was accepted to the eurozone in 2001 partly based on false statistical information, but that is past.
Greece did not reveal the truth of its economic and fiscal situation."
Whether this is designed to prod Greece to sort out its finances, or is simply a way of covering the Eurozone's backside when Greece leaves the Euro is not clear as yet.
"Greece was accepted to the eurozone in 2001 partly based on false statistical information, but that is past.
Greece did not reveal the truth of its economic and fiscal situation."
Whether this is designed to prod Greece to sort out its finances, or is simply a way of covering the Eurozone's backside when Greece leaves the Euro is not clear as yet.
Tuesday, January 10, 2012
The Fate of The Euro To Be Decided At The Gates of Rome
The ratings agency Fitch has decreed that the fate of the Euro will be decided at the gates of Rome, and has put Italy on notice that it faces a downgrade at the end of this month.
For good measure, Fitch's head of rating has stated that if Italian debt is restructured it will mark the end of the Euro as a reserve currency.
Given that a downgrade of Italy will increase the likelihood of a debt restructuring, Fitch has placed itself in the role of judge, jury and executioner.
In other news, the French are determined to push through a financial transactions tax; despite the fact that this tax has split the German coalition.
As European dictators learned in the past, a war on two fronts (in this case three fronts, Greece, Italy and France/Germany) is unwinnable. The European political "elite" need to focus their minds, and determine exactly what it is they really need to do, can do and want to do in the short term.
For good measure, Fitch's head of rating has stated that if Italian debt is restructured it will mark the end of the Euro as a reserve currency.
Given that a downgrade of Italy will increase the likelihood of a debt restructuring, Fitch has placed itself in the role of judge, jury and executioner.
In other news, the French are determined to push through a financial transactions tax; despite the fact that this tax has split the German coalition.
As European dictators learned in the past, a war on two fronts (in this case three fronts, Greece, Italy and France/Germany) is unwinnable. The European political "elite" need to focus their minds, and determine exactly what it is they really need to do, can do and want to do in the short term.
Monday, January 09, 2012
Greece Sells Its Soul To The Devil
Greece is attempting to force its bondholders to accept a 60% haircut.
As I noted in September last year:
"..the Greek haircut of 50% that everyone is talking about is of course nonsense."
In order to achieve this haircut, and to ensure that bondholders "accept" it, Greece is to introduce retroactive collection action clauses to bonds.
These will permit some high level of bondholders to agree on an alteration of terms of principal, interest rate or maturity date
This means that debt that is easy to restructure (ie what Greece currently has on its books) is being exchanged for debt that will be impossible to restructure (ie Greece has sold its soul to the devil - the Troika).
As I noted in September last year:
"..the Greek haircut of 50% that everyone is talking about is of course nonsense."
In order to achieve this haircut, and to ensure that bondholders "accept" it, Greece is to introduce retroactive collection action clauses to bonds.
These will permit some high level of bondholders to agree on an alteration of terms of principal, interest rate or maturity date
This means that debt that is easy to restructure (ie what Greece currently has on its books) is being exchanged for debt that will be impossible to restructure (ie Greece has sold its soul to the devil - the Troika).
The Death March of The Euro
Another week has begun in the long drawn out death march of the Euro.
This morning Germany held an auction of Euro4BN in six-month bills, and managed to receive an average yield of MINUS 0.0122%.
This is a first!
It means that investors are desperately looking for a safe haven.
Good luck to them, given that Der Spiegl is reporting (not for the first time) that Greece is heading for a disorderly default and that Czech central bank Governor Miroslav Singer has said
"If there is not the will to give Greece a massive amount of money from European structural funds, I do not see any other solution than its departure from the euro zone and a massive devaluation of the new Greek currency."
Given this crisis what should investors place their hopes and dreams on?
Art seems to be a safe haven, at least that seems to be the conclusion drawn by thieves who have stolen two pictures (one of them being a Picasso) from the National Art Gallery in Athens this morning.
This morning Germany held an auction of Euro4BN in six-month bills, and managed to receive an average yield of MINUS 0.0122%.
This is a first!
It means that investors are desperately looking for a safe haven.
Good luck to them, given that Der Spiegl is reporting (not for the first time) that Greece is heading for a disorderly default and that Czech central bank Governor Miroslav Singer has said
"If there is not the will to give Greece a massive amount of money from European structural funds, I do not see any other solution than its departure from the euro zone and a massive devaluation of the new Greek currency."
Given this crisis what should investors place their hopes and dreams on?
Art seems to be a safe haven, at least that seems to be the conclusion drawn by thieves who have stolen two pictures (one of them being a Picasso) from the National Art Gallery in Athens this morning.
Question For RBS
Why does it take up to six weeks for a Euro cheque drawn on the Ulster Bank (one of your brands) to clear into a sterling account of the NatWest (another one of your brands)?
The postal system between the UK and Dublin (where the relevant branch of the Ulster Bank is based) is not that slow.
The postal system between the UK and Dublin (where the relevant branch of the Ulster Bank is based) is not that slow.
Sunday, January 08, 2012
Friday, January 06, 2012
EU Ban on Iranian Oil
There has been much hype and sanctimonious puffing of chests from the EU about its agreement "in principle" to ban imports of oil from Iran.
However, as Paul Stevens economist and emeritus professor at Dundee University in Scotland notes, Greece currently imports 30% of its domestic oil from Iran on favourable terms.
Were Iranian oil imports to be banned, where would Greece get its oil from?
Saudi Arabia?
Maybe, but at an economy busting $150+ per barrel.
As with all EU "plans" this one has not been thought through.
Hence the EU is now talking about sanctions coming into force within a year (rather than immediately).
The sanctions will never happen.
Now repeat after me:
-There was no plan!
-There is no plan!
-There never will be a plan!
However, as Paul Stevens economist and emeritus professor at Dundee University in Scotland notes, Greece currently imports 30% of its domestic oil from Iran on favourable terms.
Were Iranian oil imports to be banned, where would Greece get its oil from?
Saudi Arabia?
Maybe, but at an economy busting $150+ per barrel.
As with all EU "plans" this one has not been thought through.
Hence the EU is now talking about sanctions coming into force within a year (rather than immediately).
The sanctions will never happen.
Now repeat after me:
-There was no plan!
-There is no plan!
-There never will be a plan!
To Be Or Not To Be? That is The Question Facing The Euro
Christine Lagarde, the CEO of the IMF, has spoken in South Africa about 2012 and the travails that face the global economy (ie the Euro).
"Will 2012 be the end of the euro currency?
I seriously don't think so. Its a young currency, its a solid one as well.
You have within the zone, not in relation to the currency, serious pressure and issues concerning the sovereign debt, concerning the strength of the banking system which are being addressed.
But the currency itself is not one that would vanish or disappear in 2012, not at all."
When addressing the question as to whether Greece will remain in the Euro, she was decidedly "measured" in her response:
"The euro partners have affirmed, reaffirmed their determination..."
Little confidence then of Greece remaining in the Euro!
"Will 2012 be the end of the euro currency?
I seriously don't think so. Its a young currency, its a solid one as well.
You have within the zone, not in relation to the currency, serious pressure and issues concerning the sovereign debt, concerning the strength of the banking system which are being addressed.
But the currency itself is not one that would vanish or disappear in 2012, not at all."
When addressing the question as to whether Greece will remain in the Euro, she was decidedly "measured" in her response:
"The euro partners have affirmed, reaffirmed their determination..."
Little confidence then of Greece remaining in the Euro!
Thursday, January 05, 2012
Hungary and Greece Race To Default II
It seems that Greece has judged edged forward in the race with Hungary to be the first to default.
Greece's entire schedule of emergency loans from the European Union and International Monetary Fund is being pushed back by three months because of a delay in the payout of a tranche in 2011, the European Commission said today.
Greece's entire schedule of emergency loans from the European Union and International Monetary Fund is being pushed back by three months because of a delay in the payout of a tranche in 2011, the European Commission said today.
Hungary and Greece Race To Default
It looks as though Hungary is set to beat Greece to being the first to default on its debts, and claiming the dubious "honour" of being the first EU country to default (note Hungary is not in the Eurozone).
Yesterday Hungary was forced to withdraw from a bond auction, as it struggles to roll over Euro5BN of debt, because the costs were too high.
It is due in February to start repaying a loan to the International Monetary Fund (IMF) that saved the country from financial collapse in 2008. Officials from the IMF and the EU are scheduled to resume talks about a financing agreement with Hungary on January 11. However, no one seriously believes that these talks will achieve anything.
Meanwhile Greece, keen not to be written off in the race to default first, has warned that it may suffer an uncontrolled default in March if labour costs are not further reduced.
Maybe, instead of just pushing for reduced labour costs, the Greek government should more proactively push to recoup the taxes evaded by the wealthy corrupt "oligarchs" in Greece?
Yesterday Hungary was forced to withdraw from a bond auction, as it struggles to roll over Euro5BN of debt, because the costs were too high.
It is due in February to start repaying a loan to the International Monetary Fund (IMF) that saved the country from financial collapse in 2008. Officials from the IMF and the EU are scheduled to resume talks about a financing agreement with Hungary on January 11. However, no one seriously believes that these talks will achieve anything.
Meanwhile Greece, keen not to be written off in the race to default first, has warned that it may suffer an uncontrolled default in March if labour costs are not further reduced.
Maybe, instead of just pushing for reduced labour costs, the Greek government should more proactively push to recoup the taxes evaded by the wealthy corrupt "oligarchs" in Greece?
Wednesday, January 04, 2012
Spain in Denial
According to Spanish newspaper Expansion, the Spanish government is considering applying for loans from the EU's rescue fund and from the IMF, in order to bailout Spain's beleaguered finance industry.
Unsurprisingly the Spanish government have denied this.
Even more unsurprisingly the markets don't believe the denial, and are pushing Spanish yields up.
Unsurprisingly the Spanish government have denied this.
Even more unsurprisingly the markets don't believe the denial, and are pushing Spanish yields up.
Juncker Goes Back To The Future
Eurogroup Chairman, and prime minister of Luxembourg, Jean-Claude Juncker has stated that Greece is not contemplating a return to the Drachma.
However, he is always saying things like that:
"We have not been discussing the exit of Greece from the euro area, this is a stupid idea, it is in no way, it is an avenue we would never take."
Unfortunately for him, Greece and the EU no one believes him!
However, he is always saying things like that:
"We have not been discussing the exit of Greece from the euro area, this is a stupid idea, it is in no way, it is an avenue we would never take."
Unfortunately for him, Greece and the EU no one believes him!
Tuesday, January 03, 2012
Greece Applies Pressure
Greece, very aware that its likely departure from the Euro would cause political havoc in Europe, has issued a thinly veiled threat to its creditors that if an agreement is not reached with them wrt the second Euro130BN bailout, then it will leave the Euro.
A Greek spokesman Pantelis Kapsis told Skai TV:
"The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro.
The situation will be much worse."
A Greek spokesman Pantelis Kapsis told Skai TV:
"The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro.
The situation will be much worse."
Details of the rescue plan need to be agreed and finalised before a major bond redemption
in March this year.
To my view both Europe and Greece would be better off if Greece did leave the Euro.
To my view both Europe and Greece would be better off if Greece did leave the Euro.
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