ESM PARTICIPATION: China protest too much, speak forked tongue

To shake hands, you need to be empty-handed

Europe’s Three Big Days get off to a damp start

Wen Jaibao last night more or less blew a raspberry at Angela Merkel’s personal plea for help with the eurozone debt crisis, but this morning the State’s chief bollocks transmitter The People’s Daily went out of its way to say that China doesn’t have ‘designs on’ Europe of an asset or infrastructural nature. In fact, the paper said this so many times, one has to smell a rat. Here’s an extract:

‘China has no intention of “buying up” Europe and any help Beijing offers will be for purely economic reasons.  China’s interests lie in selflessly helping Europe. China has no appetite or ability to ‘buy up Europe’ or ‘control Europe’ as some European commentators have said. China will not to link helping Europe in the debt crisis with issues such as the EU recognising China as a market economy or the EU’s arms embargo on China.’

Hmm. Of course – when given the chance – China didn’t buy Greek bonds; instead, it bought Paraeus Harbour. Watch what the buggers do, and ignore what they say.

But even what they say this time seems to be coming out differently depending on who you talk to.

Lou Jiwei, the head of China’s $410 billion sovereign wealth fund, China Investment Corp (CIC), said that European government bonds were not ideal for long-term investors such as the fund. Instead, he said, the CIC would look at infrastructure and real industrial projects that could help a recovery. Sounds a bit like buying up Europe to me, but what do I know? Mr Lou is on the fringes of the politburo, but he also works in the real world.

I admire the Chinese culture, and I always have: the Chinese are thrifty, bright, hardworking and justly proud of what they’ve achieved. But this is Beijing we’re talking to here: a bunch of ageing Communists who regard even the weather as a relative Truth. The Useful Idiots will believe the Chinese People’s Daily. Not many others will.

But as luck would have it, two Useless Idiots will be in Beijing for a ‘summit’ tomorrow. This ‘key meeting’ will bring together Premier Wen and President Hu Jintao with European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy. I have little doubt that the meeting will be spun by Brussels into a roaring success and a guarantee of funding, but it will turn out to be completely airy tosh – again.

You can see the timing on this one coming. The next day, the EU FinMinCom* decides whether it will graciously bestow its approval of a Greek austerity package that is rapidly destroying the country’s economy, as well as saving on street lighting by using burning buildings as a dual warmth/light alternative energy form.

It’ll be interesting to see where we are by Wednesday evening, but until then (unless something genuinely newsworthy happens) I’m going to ignore the Greek necrophilia fest. It’s a waste of time and money, and a fundamentally unfair attempt by scared eurotwerps to bully a sovereign State into starving its citizens. The Greeks are not of the driven snow either, but the folks doing this to them are mad, cynical and ruthless – depending on what particular things they’re dealing with on any given day.

*Fin Min Com is the EU finance ministers’ forum, not an obscure Chinese official.

At the End of the Day

Mario smiles through gritted teeth

Everyone’s gagging to investigate. But the truth of life is clear

There was a terrific literal on the Telegraph’s website this morning: the DT said that certain bankers in the US would be ‘investigagged’. If the current econo-fiscal balls-up does indeed change the commercial culture of the West, then one would expect it to start at the linguistic level. Saying or writing time after time that such and such a villain has been ‘investigated and gagged’ becomes tiresome, and thus a new word emerges: investigagged.

Chris Huhne is a slightly different case, in that he was investigated, but his former wife has been gagged. Big, big mistake for him to then start nesting somewhere else, because as all we chaps know, Hell hath no fury. The CPS is going to tell us tomorrow whether they have decided that Huhne has been punished enough, or whether they think he should be banged up. I’m in the latter camp myself, but anyway at 10.00am we’re going to know. I have no inside track to offer on this, but I do recall  Slick Nick on the telly some months back saying that “Chris was absolutely clear with me, and gave me his word, that there was no truth to the allegations”. I severely doubt if Clegg accepts that tosh, and for myself I truly do not believe that even an insanely jealous ex-wife would make all this up: her story rings true. That said, if the CPS agrees and formally charges this slippery MP, then the Deputy PM will be put into a very small, hard corner full of jagged flintstones. I can’t see it myself, but we must all cross things and hope.

One woman who has been investigated and should be gagged is Chancellor Angela Merkel. As The Slog suggested last Monday, there are at the very least lingering doubts about how she has airbrushed the nastier side of her careerism out of history. The point of that expose was not salacious anti-Germanism, but rather to try and encourage people – especially the Germans themselves – to ask exactly who this woman really is. Little Geli is, after all, the EU’s all-purpose leader and representative: she likes treading on other people’s sovereignty, belittling Sarkozy, lecturing latins, and brushing British opinion aside.

For a German leader to behave like this could be put down to sheer coincidence, were it not for the fact that her history does suggest she is one of life’s sociopathic shafters. But whatever history does or doesn’t decide about the Good Frau Doktor, she is currently doing her bit to try and flog the EFSF to the Chinese. As I write, the Fuhrerine is in Beijing rather than Berlin, licking Wen Jaibao all over because the completely ineffectual Klaus Regling has failed to get anyone to sign up for bazooka ammo.

I quite like Mr Wen; I’m sure he’s been a ruthless old fascist in his day, but he does enjoy winding up the ever-pompous fangwoi. He has told the West over and over again that he will pile in with all hands to the eurozone problem if – and only if – the other EU members take the lead in this. Such a promise remains safe for all conceivable time (as Wen knows) because most of the 27 EU States are broke. Their joining together to survive doesn’t change the simple equation of 27 x 0 = 0. Equally important, Wen Jaibao has problems of his own: China is bang on target for a “hard landing” this year. A Chinese Government report yesterday showed that export orders fell last month. Although output expanded, orders are futures and output is now. The Slog’s 201o prediction about China may be up to a year behind schedule, bit it’s still sound. So in that context, Merkel’s first class ticket may well represent the biggest waste of money since euromeltdown began.

A chap happy to gag himself (although he may well need investigating) is Mario Draghi. A former Goldman insider told me last year, “Mario is more discreet than a stone, and sharper than a knife”. He’s needed both qualities to work his way through the minefield of EU disintegration thus far – Berlin v Paris v Greeks v Bondholders v ECB – but there is a degree of dissembling going on right now that disturbs me. The ECB is “not party” to ongoing discussions between the Greek government and the private sector, Draghi said on January 19th. That clearly isn’t true. In turn, Mario has insisted that the ECB “will not take a haircut” on Greek debt, which directly contradicts what a senior bondholding negotiator told me on several occasions over the last three weeks. The idea that Mario Draghi values his ECB breaking even on the Greek junk it holds above eurozone survival is nonsense. Like all smart people, he must play the long game, and weigh losses in battle against the objective of winning the war. Sorry to sound like a broken record-groove here, but ‘Listen not to what they say, but rather watch what they do’.

This say/do mismatch is what most good journalism is about. It is the duty of all commentators to point out, in an amenable way, how the words our leaders spout often bear little resemblance to what they really believe. Belief turns into action. Cheap talk turns into nothing substantive. Such is the problem of our media-dominated culture.

Anyway, it’s time to switch off for the day. It has been -3 degrees down here today, but stunningly clear:

We took the dogs for a long walk. We yelled instructions at them. They obeyed or otherwise. We met other people, we smiled, we talked about the views, the weather, and the dogs. It was all very, very clear. Real life is, I find.

SKETCH: Ultimately, the markets must decide

The Slog ponders about what happens if the markets don’t know.

So anyway, Fred came in, looked at his Reuters screen, and saw that the metal commodities sector was bearish on the news from Athens. He sold some General Mining and went off for a coffee. Bert passed his desk, saw the same screen, and went to his own pod. Bloomberg told him that the markets had now steadied on the news from Athens airport, as Papandreou left for Cannes, talking about a more solid EU. He went to his commodities folder, bought General Mining, and then popped downstairs to pick up a croissant.

In the lift, he met Sarah from sovereigns, and she asked if he’d seen the transcript of Sarkozy’s statement as he left Paris. No, he replied. OhmyGawwd, you must she said, exiting the lift. In the breakfast shop across the road, Demetriou the Cypriot owner had BBCNews on, and Bert heard a snatch from Sarkozy’s soundbite, in which the French President said “….should now definitely get out of the European Union…or be forced out”. Blimey: Sarko was talking about using force against Greece. He forgot about his breakfast, and legged it back into the Omnivore headquarters.

Fred was at this moment on his way back from the coffee machine, where he’d met his Section Head Phil. Phil was glum at the news about all the Greek military being fired. ‘All’ was a lot, right – what might it mean? Phil thought it might mean the Greek armed forces being cut. That meant fewers tanks and guns and stuff. Back at his desk space, Fred went back to General Mining’s page, and sold some more. After clicking on ‘finish’, he nodded as a distracted Bert walked briskly past. Safely back in his pod, Bert went into General Mining, and trebled his purchase of five minutes previously. There was going to be a war, and he was ahead of the curve. Result!

In his bigger-than-anyone-else’s glass space with the corner window overlooking Threadbare Street, section head Phil continued to look into this Greek army shit. It looked like he might have it wrong: the colonels had been purged, not fired. They’d been replaced with guys loyal to Papandreou. Did this mean the Greek leader was getting ready to put down a revolution? That would mean more weapons and more tanks.

Looking to advertise just how far ahead of the curve he was, Bert tapped at Phil’s open glass door, and said how the Greek situation was looking good for metals. You bet said Phil, we should get into bull mode about it. Bert added that he was on the case, then returned to his pod and doubled the General Mining Fund purchase.

By the time Bert had increased his General Mining position, Phil had taken the lift to the Director’s floor, and – having loitered for five minutes – tried to look casual as he at last saw Equities Director Marcus heading towards him. Marcus asked him how it was going with the air of a man who couldn’t care less and, encouraged by this, Phil said he was instructing his key traders to take solid positions in metals shares and futures.

Had he seen the Sarkozy remarks at De Gaulle airport, Marcus asked. Not as yet, Phil replied, but he was in the loop about the Greek army gearing up for revolution. Revolution in Greece? said Marcus, wow, no, I was talking about Sarko saying the UK should f**k off out of the EU for good. He said that? asked Phil….it could mean war and shit, wow…then all the more reason to be in General Mining and metals right? Right said Marcus, especially as there’s gonna be a revolution in Greece, Jeeesuzz. Phil took the stairs two at a time back to his floor and, passing Bert’s space, asked him what positions he had with General Mining, Krupp and British Aerospace.

I’m good on those Bert replied, and then doubled all his holdings in them the second Phil left. Four floors further up, Marcus was  in the Chairman’s office suggesting a major redirectionalisation in the iron ore mining sector, and arms manufacturer stocks. We’re ahead of the wave on this one Jasper, he assured the Omnivore boss.

Back at his desk, Fred was Googling ‘Athens crisis latest’ and clicking into a Daily Telegraph piece explaining how Papandreou had both the Greek armed forces and the EU surrounded. Just as I thought, Fred thought: his original thought had been right, as he’d thought it would be. It was only a thought, but surely a lack of military action plus an EU debt meltdown meant the last place to be was in mining and arms. He went back to the relevant pages, and sold his entire holdings in every relevant position. He’d ducked, evaded the curved ball, and was now free to reinvest in bear funds. Bert ambled up to Fred’s pod.

Looks like the EU’s turning nasty, he said. You bet, replied Fred. The meltdown looks pretty bad. Bert nodded, adding that – if nothing else – it was now pretty clear what positions to take. Absolutely, agreed Fred. Both men left the brief chat more confident than ever that they were on the right track.

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Over at Consolidated Miners in Johannesburg, Corporate Finance Director Hal Owen at last got in to see Ty Phoo, the Chinese CEO imposed on the Board in a Beijing coup the previous year. Hal said he had grave news. Glave news? asked Ty. No grave news, Hal corrected: I think Omnivore knows that Amalgamated Diggers are working to undermine our position. Ty was unhappy at the thought of his mines being undermined, especially by his Austlarian enemies, but before he could think further about it, Hal Owen explained that Omnivore were taking two entirely opposing positions in Consolidated’s shares. This was obviously being done as a hedge against whichever way the takeover might go. Mr Ty thanked his finance guru, and nodded to signal that Owen should now exit meekly from the room.

Alone again, Phoo rang Bo Sun, the metals & mining commissar in Beijing. Amalgamated are planning a takeover, he told Bo: get Wen on the case fast. Tell him to remind the roundeyes who pays their export wages. Sun sucked his teeth and said Wen was tied up with all this Greek shit, but he’d do what he could.

Wen Jaibao had suffered an appalling night into the small hours in Beijing listening to this Regling idiot from the EFSF explaining how the Greeks would be crushed into submission, so when Bo Sun told him what the Aussies were up to, he got on the phone to Austlarian foreign secretary Wayne Belcher at the double. It being already 10.00 am in Canberra, Wayne was a few tinnies to the good, and didn’t take kindly to Mr Wen’s interpreter yelling insults at him. At the Cabinet meeting half an hour later, Belcher gave an exaggerated and jingoistic account of the Chinese position, at which point Prime Minister Julia Gillard, whose poll figures were in need of a boost, fired off a stiff note back to Beijing. Wikileaks picked up the missive, splashing it across the Western media within minutes. The Russians also blagged into the diplomatic exchange, and fed the story to bewildered eurocrats as the death-knell for any EFSF deal….given that Beijing would now be fully engaged in knocking seven bells of shit out of the Aussies, as opposed to dealing with all this Greek shit.

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By 6 pm in London, Fred found himself completely distracted by the news that China and Australia has broken off diplomatic relations and were rattling sabres at each other. This was big, he figured: mega big. No longer able to get Aussie metals for the war effort, China would pile more investment into African mining. Whereas Amalgamated Diggers would go through the roof supplying metals for all those guns and tanks and stuff the Aussies would need for their war effort. Cuts in Europe were chickenfeed compared to this. Working frantically across five files and nine windows, Fred sold all his bear funds and poured his entire annual investment budget into metal mining and futures. His bull position was way ahead of the game. He’d be a hero on this floor by tomorrow lunchtime.

Bert yawned and was about to quit his pod for a large Jamesons in the Default & Liquidity Pool, when his Associated Press window flashed that the Greek deal had collapsed following firm signs from Beijing that they wouldn’t be helping with EU bazookas, on account of needing seven new aircraft carriers. This changes everything, he mused: the EU economy will dive, the euro will collapse, and the French banks will fall over after the now inevitable Greek default. He dashed into Phil’s glass case and broke the news. Don’t worry, he told the section head: it’s hot off the wires…we’re way ahead of the curve here.

So it was that all three traders, the equities director, and the Omnivore Chairman Jasper Trillion worked through the night, such that by 6 am everyone had reversed their positions…..and thus, the firm’s net exposure to bull and bear scenarios was precisely what it had been fifteen hours earlier. The only things that had changed were first, the debt crisis was now global, and Australia had declared war on China. But in the cab home at first light, Marcus figured what the hell: a bloody great war had gotten us out of the mire last time after ’33, and it probably would this time. The markets always balanced things out. The markets must always decide.

In Johannesburg, an exhausted Hal Owen watched as both his share price and that of Amalgamated Diggers zoomed up and down until the printout graph looked like the weft on a spinning machine. In the seat opposite, Ty Phoo was draining some fine Japanese brandy, still clueless as to why somebody (even him maybe?) appeared to have caused a full-on Asian war. He was also struggling to understand why, since 4 am that morning, he had been able to buy Amalgamated or be bought by them on seventeen different occasions over five hours.

Maybe Wen had gone mad. Maybe that Juria Girrard was mad. For sure, Papandreou was mad: the BBC said so, so it must be true. And even more for double-dog sure, these f**king fang woi stock markets were mad. He poured himself another large one, and began to doze off, reminiscing as he did so how much easier things had been under Mao: peasants doing brain operations, and neurosurgeons getting trench foot in the paddy fields. You always knew where you were with Mao: tits up and snafu, 24/7. He drifted into dreams of tanks running over dissidents. Life had been so much easier then. If only we could all go back to that nice, cosy Cold War.