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Posts Tagged ‘Berlusconi’

2013/10/03: Commentary: Got that old ‘2011’ feeling back… and not just us!!

October 3, 2013 Leave a comment

© 2013 ROHR International, Inc. All International rights reserved.

COMMENTARY: Thursday, October 3, 2013.

 CNBC-OBAMAharwoodINTVW-131002Crisis? What US government funding crisis?

Uh-Oh… even the Prez is allowing this one ain’t good!! We don’t agree with a lot of what the President has put in place (in fact we disagree with most of it.) Yet he was right to caution that markets are likely being too sanguine in the face of these unyielding positions on both sides.

You’d think from the way the markets are behaving there is no crisis looming in the US. This could be a major bit of cognitive dissonance brewing for the investor class (including more than a few ostensibly well-informed fund managers.) What we are witnessing is a short term disconnect that most folks expect will be readily corrected, yet which might carry more dire implications even across the short term.

While not wanting to play Cassandra, this all feels a lot more like July 2011 Redux than anything seen in any of the mini-crises since then.

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2011/11/09: Quick Post: Opera Berlusconi Continues… With Equities in Thrall, Yet Not Necessarily Bad

November 9, 2011 Leave a comment

© 2011 ROHR International, Inc. All international rights reserved.

Opera Berlusconi has finally seen the fall of the ebullient Prime Minister. If not for his policies and management of the state, he will at least be remembered for the excitement he provided. Of course, that includes the degree to which his shenanigans pointed out the ineffectiveness of leadership in the profligate southern European sisters, and even Europe as a whole.

It was the sort of demonstration of narrow partisan domestic focus that ultimately belied the myth of there being a cohesive Euro-zone even more so than the riots in the streets in Greece. Italy is just that much larger, ostensibly competitive on an industrial basis, and potentially capable of the right sort of fiscal balance if only the political will were effectively exerted. And yet, the other aspect which is clear even from Italian domestic politics is that it also suffers from its own North/South divide. In that sense, it is the fractal miniature example of why Europe cannot really be a monetary union without becoming a fiscal and political one as well; and that’s not happening.

As just a brief early word on two primary asset classes’ price activity, on current form it seems the government bond markets had it right by rallying on the weak economic news and disturbing developments in Europe. That was in spite of the strength of equities, which can be an anticipatory bid during earnings season and then weaken once things revert to normal. However, in this case they seem to have also been defying the crushing logic of the fact that Europeans who had been so adept at kicking the can down the road, well, finally seem to be running out of road.

Italian 10-year government bond yields shooting up above 7.00% in spite of Mr. Berlusconi’s resignation (at least seemingly so for now) came as somewhat of a surprise to casual observers. We are not sure why they would be so shocked by that, as an spite of his obvious weaknesses and problems Mr. Berlusconi was at least a strong leader up until the recent extreme loss of confidence in him. What we do know is that the market is exhibiting a rational reaction to the fact that no one else in Italy is considered much better, or much more likely to generate support for the necessary budget adjustments.

This would seem to be a classic example of “be careful what you wish for.”

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2011/11/03: Candy Coated Equities Spooked by Halloween Goblins… As Expected. Now What?

November 3, 2011 2 comments

‘As expected’ might sound a bit presumptuous. Yet, it was not just our assessment that the broad success statements out of the European Sovereign Debt Crisis were a bit overblown. The record of these attempts by Europe to “declare victory and go home” since last Spring is that the full details of what’s been agreed is often “much less than meets the eye”. And so it is proving in this case on several fronts. Not the least of which are the dislocations to the entire process by the seemingly misguided Greek Prime Minister’s desire to hold a referendum on things that were already ostensibly decided. It seems that Papandreou can Mr. Berlusconi in Italy are playing to their domestic political base in ways that might be very troubling for not just Europe, but the global economy.

That is not to say there is not any good news out there. In fact, the only reason the European rescue compromises could possibly have propelled the US equities to a significant new near term rally high is that some other news was also (at least temporarily) improved. That includes the preliminary US Q3 Gross Domestic Product pushing back up to 2.5% after the very weak Q2 figures. There is also this morning’s unexpected European Central Bank 25 basis point rate cut to 1.25%. That provides about as constructive an influences as anyone can imagine, pending the credibility of Mr. Draghi’s performance in a little while at his first press conference as President of the ECB. With the equities already benefitting from economic data reversing from the dismal US ‘double dip’ risk on the previous economic releases, the December S&P 500 future push back up to key 1,246-50 resistance (with a buffer to 1,260-65) appears fairly critical.

And it may well be the case that the improved US economic activity will buffer what is becoming a weaker picture for Europe. And if not, the Fed is putting out hints once again that it is ready to engage in another liquidity injection operation; even if it can specifically designate it as clear quantitative easing (QE3.) However, in general the economic news has been weaker than expected this week once again, and that’s not good. Everything from Australian housing figures through to most of the Purchasing Managers Indices have been weaker than expected.

So, even beyond the additional problems with the Euro-zone Debt Crisis rescue package specifics and the Greek Prime Minister’s stubborn adherence to the idea there should be a referendum on Greek agreement with the deal, there is plenty else for the equities (and other markets) to be concerned about. It goes back to the basic question we have been posing for months now, does crisis mitigation amount to restoration of robust global growth? We remain very skeptical of that on broader cyclical considerations.

All of which raises the question of why the equities took the European Debt Crisis rescue package so constructively in the first place? It seems to have been a happy coincidence that the rest of the background was temporarily so positive at the same time. Yet, in addition to all of the obvious issues on bank recapitalizations, leveraging EFSF (European Financial Stability Facility) up to the desired €1.0 trillion ($1.4 billion), and the nature of the new collateral provided Greek bondholders accepting a 50% loss on their current bonds, there is another pernicious aspect going forward from a victory the European powers-that-be will ultimately find very Pyrrhic. Another part of the bitter filling beneath the alleged headline success’ candy coating.

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