The Burbealls are now in the ascendancy
The world of Barmy Bourses is a greeny shade of blue tonight, which means that they’re populated by Burs and Bealls. Burs and Bealls are investors unsure of the correct species to be, and so they remain sort of hybrid hermaphrodites who can jiggle their own tits or play with their own willies while waiting for Some Kind of Sign.
As we all know, up is blue and Left is Right and you and me are all together goo-goog-a-joob, and that probably explains why Morgan Stanley managed to present their estimate-beating results yesterday as a sure sign of economic health. The slight problem with such an analysis is that they achieved the results almost entirely by cutting staff. ‘Growing by getting Smaller’ is the new Normal.
The Green = down, Red is good, debt= power and Nirp = nice stuff is especially prevalent in the Brexit debate, where you may have noticed the Remaindeers who fly Santa Claus around the world once a year have become high in blather about EU safety, but low in mentions of the Italian banking system.
I’ve been saying since mid 2012 that Italy is a far more damaging basket case than Greece could ever be, and as 2016 unravels we’re starting to see just how the basket’s ageing wickerwork is splitting under the strain of all that constipated excrement sitting in there.
Some of the banks that are being asked to stump up for the government-orchestrated ‘Atlante’ fund designed to save ailing lenders reminds me of the old eurozone EFSF in which the Italians and Spaniards were down for sizeable amounts of Wonga to keep ClubMed upright…a region of which they were an integral part.
Thus, Banca Monte dei Paschi di Siena SpA – twice bailed out and unable to find a buyer has promised €50million; Banca Carige SpA – losing deposits and itself unable to satisfy the ECB’s queries about losses – will stump up €20million. It’s all a bit like RBS being asked to rush to the aid of the Bank of England.
Do not dismiss that parallel as NVEism: PM Matteo Renzi and the Italian banking fraternity are trying to keep upright a financial system burdened by €360 billion euros of what real people must now consider bad debts. That’s close to 25% of Italy’s GDP.
But nihil desperandum chaps, because the US recovery is under way, there’s no chance of a recession, and January/February corrections can now be written off as a distant and ill-informed coup de foudre. Allegedly.
The US buck reached a 10-month low after Federal data showed new-home construction in the U.S. slipping a lot more than expected last month. Remember: no US recovery has ever been achieved without a boost in new home construction.
Oh…and, um, the topline US jobs data is signalling a loss of momentum in the American labour market: an index developed by Federal Reserve economists – and monitored by Janet Yellen – has fallen for three straight months. The last time that happened was in 2009.
But there’s still no call for hair-pulling and wrenting of clothes dear reader, because the Chinese problem is solved, everything is just fine, and that must be the Real McCoy because AEP and Jim O’Neill both say so. Or not, as the case may be.
‘The unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel’ wrote Bloomberg today. And if Boombust is worried, then trust me – now you should be worried.
A new spate of defaults at state-owned enterprises are driving up yields: mainland corporate issuers have canceled 61.9 billion yuan of bond sales in the 19 April days we’ve had so far. The Chinese corporate sector is becoming increasingly dependent on cheap credit….to a degree that has doubled to 2.34 trillion yuan over the last twelve months.
All of the above explains why where once there were Bulls and Bears, there are now only Burs and Bealls among the honest investment community.
The only ‘disconnect’ here is the massive reality gap between the world’s corporate leaders, their media and corporate lackeys on the one hand….and the rest of us.
We can see it’s a mess. We know we’ve got problems making ends meet. They don’t.
There’s very little more to it than that.