Thursday, July 28, 2011

The USA is Lehman 2.0 times a thousand

Gold © fintag

News comments:
The Gold Rolex.

It is a hideous beast. Bling and Hasselhoff mostly. But a great investment.

The Russian currency of choice, the Rolex is on par with a 500 Euro note (stored in suitcases and passed around like a pre 2011 T-Bill). The Rolex brand is enough to give these timepieces currency status but with the US debt debacle, the Gold element is starting to overtake the Rolex value.

In the Westfield shopping mall, West London, you can buy grams of Gold. They come out of an ATM. And popular it is too. Gold is the new risk free investment and walking around with a few nuggets in your pants makes you feel good. The governor of the Bank of England may promise to pay the bearer of a crispy 5 pound note but that is hollow if the Governor is bust. The UK used to have lots of gold as collateral to back up its promise but Gordon "fck the rich" Brown sold it off for peanuts years ago.

So that gram of gold has value. It can be felt, smelt and seen and has been used for thousands of years as a currency. I am not so convinced that the green inky piece of paper in my wallet is worth anything but as long as people accept it in shops and amongst themselves then the game of charades can continue. But it seems this game is coming to an end.

Economics is about assumptions and theories. One key assumption is that US debt (10 yr T-Bills) is risk free. There is a yield and you will get this paid and your capital back on maturity. It has always been this way. Today this assumption is being challenged. The attack on the banks after Lehmans and the implicit guarantees by near bankrupt sovereign states is why we are here today. Banks should have gone bust. Capitalism should have had its way. It didn't. The liberal socialists interferred and this is where we are now.

Take Nokia. It used to be the only cell phone to be seen with. Now it isn't and has been downgraded. Whereas companies can come and go, most countries have been with us a long time.

Greece and Italy and Spain and Ireland have all contributed to the way we live now. Each had its time and like Cyrpus, their time isn't today. Empires are brutal. They never last.

In our lifetimes the US has reigned supreme. Like the collapse of Rome, it elected ineffectual liberal leaders who wanted the people to love them and gave them things he thought they wanted. Just like Obama.

August 2 is a milestone. It will be remembered like 9/11. The day America had to look at itself and work out what had gone wrong.

Of course nothing much will happen on this date but the damage is already done. The sort of debt the US has will take decades to erradicate. Noone really knows how much it is anyway. So tax revenues only cover 60% of all government expenditure?

There is only one option. The USA must nationalise the S&P 500. As a socialist I am sure Obama has thought about this. Before this happens I expect to see the FBI in the offices of Moodys and Poor forcing them to downgrade anything in Europe in an attempt to destroy the USD's main rival the EUR. It is happening but not fast enough. America will start taxing imports and closing itself off from the rest of the world. Global capitalism only works if there is a Big Daddy. That Big Daddy is dead.

In the meantime, all that collateral held as US T-Bills, all that insurance against US defaulting, ooof, the unwind would be painful. Think credit post Lehman credit freeze multiplied by a thousand. Starvation. Riots. Dirty finger nails.

As much as I hate to say but the new collateral will be prime residential and commercial property. Manhattan, London, Berlin, et al will just become investors playgrounds. It is happening in London and will continue. GBP5m plus properties. Like the art world where USD100m paintings are becoming the norm, real estate will become the new art. Gold will and is becoming the new currency which is not good as taxing physically held assets is difficult. Don't forget this is what happened to Germany post World War 1.

All sounds grim. The good news is this grimness is nothing to the grimness in 2 years time. So go out there and party in that London condo stashed with gold bars and a life time supply of water and vitamin pills.

Today's shorts:
USA - the new sick man of the world (telegraph)

Today's longs:
More interns needed at Credit Suisse (bloomberg)

Goldfinger to be remade for USD 2 trillion.

Tuesday, July 26, 2011

What would Ronnie Reagan have done?

Sugar © fintag

News comments:
The news used to be full of sugar. Sweet and comforting. Today it is full of salt.

Take Obama. We loved his frothy style. Sugar was the order of the day. Now he is a cup of liquidized chillies. He is being berated for wanting to extend his credit card limit. Ronald Reagan used to uplift his every year so why can't he?. (cnn)

Growth and debt are closely correlated. Polititians like growth because it protects their jobs. Debt can be paid off by future generations. Polititians are short termist. Except in China. Like BP they plan years ahead. Years. Generations.

Not that Ronnie Regan was a long termist. He presided over some decent inflation and the massive growth of the Financial sector. He did us all well. Unlike Obama. He is the the wrong man in the wrong time. He would have enjoyed the 1980s.

Today's shorts:
China starts WW3 just to spite the Americans (cnn)

Today's longs:
Goldman intern bored shitless (hitc)

UK: the sick man of Europe (but not that sick) (daily mail)

Obama sells his kidneys to get the ceiling lifted.

Monday, July 25, 2011

China to the rescue of Obama and Merkel

China © fintag

News comments:
In 2001, if someone had said within 10 years the Euro would be on its way out AND the USA would have its credit rating slashed, you would probably have laughed. In 2001 it was clear the USD / EUR fight would prove once and for all who had the mightiest currency and there would be either one winner or stalemate.

Alas, both currencies are in serious trouble because the backers and balance sheets are not there. History says the mighty USD will win but with its debt now on par with Greece (at least the Greeks can force its people to pay tax whereas in the USA most people already pay) and a political fight by the Republicans who want to see Obama fail at the next election as the man who lost the USA its Triple A isn't causing much of a ripple in the markets.

The reason is because denial is the new black. It won't happen. It cannot happen. The Credit Rating Agencies are wrong. AIG is safe. Lehman will be saved.

The EUR on the other hand is sicker. The bankrupt ECB is hoovering up PIG debt in the hope that in the long run it will get its money back. Unlikely. Banks are only providing short term debt to the ECB because the ECB is Lehmans in the making.

And on the sidelines the Chinese just watch. And wait.

Today's shorts:
USD (telegraph)

EURO (e-exrate)

Today's longs:
Israel to bail out the USA (bloomberg)

Obama to start wearing a tie again.

Wednesday, July 20, 2011

Fed and ECB cannot prevent a double dip

2008 © fintag

News comments:
It is pretty hot in southern Italy right now. My villa is tucked away and as much as I try and live the life of a tourist and ignore what is going on around me, it is pretty clear Italy is in a bad way.

The locals want to crash into my hire car for the insurance; I have to take my trash to the local municipal facility; there are no tourists except me; my villa has security to keep the Libyan looking beggars away. I kid you not.

Italy is in trouble. It feels unsafe. It is suffering the post 2008 crash blues. Despite efforts by those with printing presses and the business as usual crowd (Investment Banks mostly) pretending everything is all ok, it certainly isn't.

Crashes happen in October and there is going to be a biggy this year. Can't you feel it? Gold is way too high. The USA has way too much debt. Europe is way too arrogant. Bond yields don't make sense. Equities are way over valued. Interest rates are way too low.

As some of you know the banks have been firing a lot of people recently. Volumes are down. M&A activity is non existent. Tier 1 capital is tied up in safe as houses sovereign debt. Stress tests were fixed. Investors are scraping the bio tech barrel.

Of course the UK is also in trouble. It looks like a general election will be called later this year following David Cameron's friendly friends.

More fun and games. In my swimming pool that is.

Today's shorts:
History repeating itself (wikipedia)

Lady protects old man (nymag)

Today's longs:
Printing press solution the Obama way (bloomberg)

James Murdoch to join the Liberal Democrats.

Thursday, July 14, 2011

I was hacked by News International

Fintag toothpaste © fintag

News comments:
You are a nobody unless you have been hacked by Rupert Murdoch.

So on record I can inform the world I was hacked. My voicemails were deleted, viruses pumped into my emails and I was followed continuously by mysterious men in white coats.

The old media is eating itself. Paper newspapers, along with books, are declining fast. They will never disappear, just become a another distribution channel for information and opinion, but the days of press barons controlling the news and political agenda has passed.

Murdoch et al have had their time. His MySpace deal showed us he is out of touch. He has lost his touch. The contagion is rather amusing though as anyone seen reading anything published by Murdoch is akin to watching child porn. Poor Wall Street Journal. I hope you are reading yours with your back to the wall.

Today's shorts:
Wall Street Journal to publish new section called Trading Totty (guardian)

Bloggers confirm they were hacked and get publicity (daily - cockahoop - mail)

Gordon Brown seeks to gain the moral high ground (geek)

Today's longs:
Gold is the new bling (reuters)

Press, Politicians, Police, Privacy, Panic

Wednesday, July 13, 2011

I won the euro millions GBP161 million

I know its not the Euro Millions © fintag

News comments:
For one moment I thought I had won the euromillions. Of course the probability of me winning was tiny. But imagine if I had won the GBP161 million. What would I have invested in?

Let's say I give GBP11million to charity and used the a million as my vice pot, I would need to find a safe haven for the other GBP150million.

The risk free investment used to be G20 sovereign debt. Anything in the EURO zone was risk free because it was guaranteed by the ECB. There was no need to do any due diligence on the finances of these countries because they could always print more and had millions of taxpayers able to feed the debt interest payments and my income.

If only that were still the case. The West is out of the equation.

China looks interesting but I don't believe their numbers. If the West cannot get their numbers right, then there is no reason why I should trust the Chinese.

But like all blind sided investors, I am prepared to assume China is no Madoff. In the interests of diversity I am plumping for India, Australia, China, South Korea and Singapore.

FinTag has been predicted gloom and doom since 2006 and a return to hair shirts and sandals. So what are the next predictions?

France to be junk (along with Belgium and Italy)
Santander (of Spain) to collapse.
ECB to go bankrupt.
America to be downgraded by end of the year.
London luxury property boom to go phut as the UK government starts taxing foreign owned companies.
David Cameron to seek independence for Oxfordshire.

Today's shorts:
Euro Millions (a non murdoch newspaper)

Today's longs:
Ireland is up for sale - again (another non murdoch newspaper)

FinTag really did win the euro millions.

Thursday, July 7, 2011

France versus the USA

ECB © investors-europe

News comments:
The fight is on.

The war between the US Credit Rating Agencies who are trying to destroy the Euro with their junk ratings on countries propped up by French banks, the Americans are winning.

However, the French driven ECB has its middle fingers pointing over the Atlantic as it raises interest rates to make the EURO stronger than the USD. Hot money is pouring into the EURO and the USD backed by a bankrupt Country gets weaker and weaker.

The losers will not be the USA. The losers will be the French whose people via their banks will have to give the ECB even more money to help it bail out the PIGS.

Still at least the French have a Frenchie running the IMF ...

What a mess.

And it will be getting worse.

Today's shorts:
Europe. (bloomberg)

Today's longs:
Europe (telegraph)

UK to be closed down like the News of the World.