Our favoured description for European Banks is that they are like “sausages”.
No-one knows exactly what’s in them and it’s certainly not all good stuff.
So this blog equally qualifies as a sausage.
George
A lovely client (JR) asked recently if George was actually called Ladds or was it a nom de plume.
We can reveal that his real name is George Mole and it was changed so we did not have a second woodland creature writing for the website.
The Ladds moniker came from his attempts to sneak away early:
“Howay the Ladds”
His other nickname is “Crime”, if anyone has been out of an evening with George they will know:
“Crime doesn’t pay”
The Greek Electoral Stand-off
The Greek election yielded an inconclusive result.
The good news was that the “No To Europe” party didn’t win, but the bad news was that nobody else won either.
If you are wondering about a Greek stand-off, it’s similar to a Mexican stand-off, no big hats or refried beans but same national attitude to hard work and paying tax (as alleged by Jeremy Clarkson and not a view necessarily held by this blog).
So the Greek tragedy rolls on, Spain have been given a pass on some of its previous austerity promises, Greeks will undoubtedly want the same and it’s hard to see how they will be denied.
Germany
There have been various comments by German politicians recently hinting at a softening of attitudes to their participation in collective debt agreements.
The belief has always been that ultimately if all European countries blow up if they don’t act in unison then this will be the outcome after much brinkmanship and political posturing.
QE and twisting
Markets are increasingly convinced that the US Fed, the ECB and the BofE will do more stimulating (sounds more fun when put like that).
Many have questioned how effective such actions have been. Our view is that whilst it is not the answer it has helped prevent a deeper slide (it’s harder to be grateful for stuff that didn’t happen).
The central banks are managing the debt deflation using QE as a painkiller. The patients (economies) are in pain and it helps but only to a point.
The US Presidential Election
The election is going to be about jobs.
When an election is fought on the subject of a weak US economy the chances of the challenger prevailing increases significantly.
We are huge Obama fans, great man, great story, great that America has a black president (the only political legacy of worth from “W”).
It is at least 50 / 50 if he is re-elected.
Romney may have the charisma of a plank of wood but he can win.
To Zero & beyond
We write periodically about the historic bubble fads and mania of asset classes and markets.
It’s easy in retrospect to lampoon these as nonsensical but each (at the time) were believed in by the majority.
It struck us when Germany recently sold multi year Bunds at ZERO interest rates that this could be such a bubble moment.
If inflation is running at 3%, and the debt is for 5 years the loss (baked in) will be 15% plus.
So investors are sufficiently scared of other sovereign bonds and banks that they are prepared to pay a 15% insurance premium in the belief that only Germany is good for the money.
Mania moment?
And finally
Our thanks to everyone for returning the rebalance forms, the changes will be made to portfolio holdings on the 2nd July.
p.s. George is really called Ladds
NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.