“The Pimco fixed income chief, Andrew Ball, was quoted as saying in the FT that the ECB delivered at the low end of expectations. This is hilarious and getting to the point where we are pre-empting Central Banks and also being disappointed by them. What happened next, in the aftermath of the statement and during the press conference was that European markets sold off heavily, and there was a fair amount of short covering on the Euro, which spiked to the Dollar.”
To market to market to buy a fat pig. Draghi downs markets, bringing out the pom-pom gun rather than the bazooka. Or so it seems that was the case. It seemed that the efforts of the ECB was to be far greater for Mr. Market. It caught me a little off guard, it caught me a little by surprise, I have to admit. Normally the central bank meetings of the ECB and the Bank of England have been, well, steady as it goes, inflation is this and under control and not a problem, growth rates are muted, we are going to stick to our current programs. It seemed however that the market was in Oliver Twist mode, looking for more. I could not quite understand it, even after reading various commentary.
The Pimco fixed income chief, Andrew Ball, was quoted as saying in the FT that the ECB delivered at the low end of expectations. This is hilarious and getting to the point where we are pre-empting Central Banks and also being disappointed by them. What happened next, in the aftermath of the statement and during the press conference was that European markets sold off heavily, and there was a fair amount of short covering on the Euro, which spiked to the Dollar. You would have naturally expected the disappointment to side with a weaker Euro, in fact I see on my screens this morning that Goldman Sachs are looking for 1.03 Dollars to the Euro, in the near term.
I guess it is a matter of time until we see parity, at least if the ECB “disappoints” the market. Let us be clear, the ECB is not in the job of pandering to the market needs, this is not trying to beat the streets earnings expectations by a penny. Their mandate is to maintain price stability, i.e. make sure that inflation is neither too high or too low, the central bank has certainly been tested in terms of their powers and ability to flex their muscles over the fragmented political landscape in Europe. I am pretty sure that when we look back on this time of central banking in decades, we will be well impressed with the various programs and constructiveness of officials. Unlike in the Great Depression, when the Fed was new, and their hands were tied.
The “I want more brigade” sold the market off heavily, here, there and everywhere, to borrow a phrase from Dr. Seuss. It was pretty ugly after the dust had settled, the French market was off over three and a half percent, the Dax in Germany down by about the same amount, the UK markets were down two and one quarter percent. Obviously we were going to be sucking wind here too, stocks sold off as a collective down 1.43 percent. When I look at the European stocks, I think that we got off fairly lightly. Pending here today are the ratings agencies views on it all, we could be in for a tough time of it on the currency front. I suspect that the falling financials share prices and the weakening local unit over the recent days fear the worst, we are unfortunately getting closer to non-investment grade. We will have to wait for that unfortunately.
Equally, the other event that you will have to wait for is non-farm payrolls. Those are due out at 15:30 local time. I suspect that this number does not matter, the market is expecting the Fed now to raise rates come the December meeting. Janet Yellen and the others have been priming the market for a while now, the expectations have moved towards that being a certainty. Both the broader market and blue chips sold off by nearly a percent and a half in New York, the nerds of NASDAQ down by one and two-thirds of a percent.
I seriously cannot believe it. I was taken to task by a reader for being condescending towards Nigeria in my observations over the weeks. I shall publish it, once I have the permission of the person that wrote the piece back to me. My point to them was that I bat for capital and individuals, not for government, not for organisations. And capital changes lives, for the better. Are normal Chinese peoples lives better as a result of liberalisations in the economy or were they better under the communist great leaps forward? You know the answer. Here comes the part I seriously cannot believe, a day after receiving the first letter:
“Late on 3 December 2015, the day after receipt of the First Letter, the Company received a further letter from the NCC dated 3 December 2015 (the Second Letter). The Second Letter, which was stated to supersede the First Letter, informed the Company that the fine had actually been reduced by 25% to 780 Billion Naira and not by 35% to 674 Billion Naira, as was stated in the First Letter. The payment date remained 31 December 2015.”
Michael made a simple point, how would you react if this was a private company? This unfortunately proves my point, this is not really a professional process, it seems borderline like the Goon Show, or Monty Python, flopping around. And what makes it even more interesting is that the release says the following: “Neither the First Letter nor the Second Letter sets out any details on how the reduction was determined.” Amazing. I will get permission to publish the interaction, and then you can judge whether or not I am condescending. I love people, I wish them only good things, I wish everyone was rich and had access to the internet, and of course that includes all the citizens of Nigeria. I just cannot see the merit in an overhanded approach, for future capex.
Linkfest, lap it up
One of the biggest questions for economists and politicians is what to do when something is incorrectly priced. When it comes to carbon emissions, it may be cheap to get coal out of the ground and then burn it but it has further costs to society through pollution. What is the cost? What can you do to bring the price you pay inline with the ‘true social’ cost? One way is through taxes – Elon Musk: Only a Carbon Tax Will Accelerate the World’s Exit from Fossil Fuels
Thanks to the summit in Santon this week, it has been grid lock on the streets. Here are some of the fruits to come from the summit – China in Africa: President Xi Signs $6.5 Billion Deals With South Africa’s Zuma. To fund some of the deals the ICBC will issue Rand denominated bonds, which is the first time an Asian organisation has issued debt in Rands. It shows a confidence in our financial system and our currency – China’s ICBC to sell $696 mln worth of rand bonds to build S.Africa infrastructure
Capitalism is at its best when things are allowed to function freely, thus creating some very wealthy people. Part of their wealth is created by adding value to society by making things more efficient and cutting the cost of doing something. People should be encouraged to make as much money as possible and then to be generous, i think this would solve many problems that the world currently has – Capitalism Needs More Capitalists like Mark Zuckerberg
Home again, home again, jiggety-jog. It is a blood bath out there at the moment, with the All Share down around 2%. One of the biggest losers is Steinhoff, which is down 8% on news that one of their subsidiaries in Germany is under investigation of tax evasion.
Sent to you by Sasha and Michael on behalf of team Vestact.
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