Monday 7 November 2011

Circus of Paps.

G-Pap is being replaced by L-Pap or some other joker. That way Greece can get another $ 8 billion immediately.  How far this extortion will go on depends on the Germans. If a referendum is held now in Germany, about 70% would want to dump Greece or otherwise go out of Euro.  Regardless of the change of face in Greece, the Greek extortion racket continues even at a higher level.

Markets have written off Greece but the Euro- crates don’t get it yet. The one year Greek bond yields have now crossed 235%.

The focus has now shifted to Italy. The 10 year yields have reach around 6.6% and we are seeing the same kind of denials and action what we saw at the early stages of Greek drama. Remember that Ireland got bailed out at 7%. European and Asian markets are down and risk is off.  EFSF is a joke and anyone who believe in the capacity of team Merkozy to make good on the promised EFSF one trillion,  must also believe in Santa clause or tooth fairy. As of today morning gold is hanging on while silver, oil copper are down. Even CHF is down vs. USD. I expect some correction in gold as well this week, which would be my entry point. I wrote last week that selling may not be over and so it seems today morning. The world market is in red.

Sometimes it becomes boring to keep writing” I told you so”!

There is an interesting article in The Telegraph today. "The six weeks allotted to save monetary union have expired. The G20 has come and gone, yet no workable firewall is in place as the drama engulfs Italy and threatens to light the fuse on the world’s third largest edifice of debt."  


Despite all the problems in Europe, I think Europe will hold up for some more time and possibly by mid-November, we shall see bids for risk assets. This is because, I see the trade becoming too one sided. Last week MS came out with a report for its clients which virtually says that Europe is finished. While I do not disagree with that diagnosis, I doubt their timing and agenda.  Everyone is looking to short Euro and play safe while the primary dealer banks need to do window dressing for the coming year end. Just like I do opposite of what GS says, I want to take all reports from TBTF banks with liberal dose of salt. I think bunga bunga Berlusconi would be forced to resign soon and a new Government will be formed in Italy. Then the ECB will buy Italian bonds to reduce the rates and bring in some short lived cheer.

 My advice to my clients has been to get out of Equity and if one is still in equity, any strength in the market in the coming months should be used as an opportunity to exit. The best trade I see now is go long gold. I do not like silver so much and would rather avoid it if I may.

To close on a different note, do you know who or which country have been the worst drug dealers / traders in the history of mankind? If you say the Mexican drug cartels, you are probably way off the mark. The right answer should be; surprise, surprise, England. For two hundred years, when England was the colonial power, they cultivated opium systematically in India and forced sell them to China. For more info you may want to read this;  

Imagine, all the grandeur built on drug money! And then have the gall to lecture the world about democracy and human values. Pity England lost the lucrative slave trade or drug trade.

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