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Tuesday, August 16

16th Aug EARLY – Eurobond fever, but not in Germany

Summary: EURUSD rallied yesterday to the top of the recent range, but range held. Stocks up for several days now on declining (normalizing) volume. Weak GDP numbers from Germany. All eyes on Merkel and Sarkozy meeting at 14:00 GMT, with news conference at 16:00 GMT.

Views: EURUSD has been falling today (yesterday’s sell 1.4440, stop 1.4520, take profit on half at 1.4350). New view: take profit on half at current 1.4380, on the remaining half lower stop to 1.4460, take profit at 1.4310.

Pakistan is the new Vietnam
I’ve previously written elsewhere on China’s move to replace U.S.’s partnership with Pakistan. Of course, the real goals are land- and sea access to Afghanistan, Iran and projecting military force over the Middle East. In the end, it is still all about the oil. Pakistan also acts like a good counterweight to India, which suits China’s geostrategic plans. In my view, Pakistan is another ‘Vietnam’ – everyone takes their turn to try their luck, but nobody seems to get ahead. Given lack of international resistance to Iran’s rise, Saudi Arabia’s warming relations with Iran (Saudis are slowly accepting that U.S. support & control in the area is more rhetorical than functional – they’ve even asked the Israelis to bomb Iran’s nuke facilities), the politics in the area are getting interesting. I would not short oil given the tensions building up. Some bull bets on oil price or companies, perhaps with out-of-the-money options, might be sensible.

Quote of the Day: “At rate of €4.4bn per day purchase of Spanish, Italian and other gov bonds, ECB would invest all its capital in sov debt in 13 days. If ECB uses balance sheet of all eurozone central banks, all their capital invested in gov bonds in 489 days.” – Robert Peston via Twitter

Debt crisis: live – The Telegraph

Long article, but worth it. If fiscal union is politically impossible, three choices: 1) More ECB bond buys & EFSF, 2) disband the union or 3) split the union in two

Saving the single currency requires a joint liability union, but there might not be political will for it.

Europe must move to greater financial and economic union or restructure its monetary and currency arrangements.”

Conditional yes: surrender or disaster

Merkel, Sarkozy won’t talk about euro bonds today - the only Europeans not talking about the financial instrument that could rescue Europe from its growing debt crisis.

John Mauldin’s weekly: EZ Fiscal union or break up. Do not underestimate the commitment of the elites to hold EZ together, or the ability of voters to change their elites.
You need this dirty word, Eurobonds – Pragmatic Capitalism

Time we called the situation a solvency problem and policymakers started getting serious with banks.

Short summary of Mauldin’s long, good article

CIO of Yale University: mutual funds are a scam that has cost investors billions

This could again worsen U.S.-Pakistan relations. See ‘Views’ above for my take.


Interactive look-around of the space shuttle’s cockpit. Large file, no mobile viewing!

Most excellent link collection to interesting stuff

Long article on a complicated and large investment fraud case