Wednesday 28 April 2010

Is the UK's future a Greek tradegy?

Finally, thanks to the IFS, the media in the UK are waking up tot the fact that the current UK election is an X Factor sham. Sadly the said 'scrutiny' now being advocated will not uncover the answers that the media wants.

The reason for that is that there are none. I have no doubts that the political parties have not made any detailed plans for the real cuts to come, precisely for the reason that they can they say they are not hiding anything from the public. This is a clever Westminster Village PR game, less so a rational way to either prepare for Government or run the county. But our political system is broken after 13 years of New Labour spinning and SPAD's.

Worse yesterday saw big falls in global stock markets. We advised that you keep an eye on Greece last year. it was always going to provide the BIG FLASHING WARNING of the start of the bond market re-trace.

Now today there are direct echoes of Lehman's collapse in 2008  - Greece has banned short-selling of bank shares. Last time we saw that this is the wrong solution, bank shares fall because policy is wrong, they are a trailing indicator not a leading one.

But I am very concerned about the markets for the rest of this week. Greece collapse, UK election looking like a hung parliament, economic debate on Thursday. Lots of events to pull the markets and none of them looking like a good option. Time to increase cash and short positions.


Electro-Kevin said...

How much does a Greek urn ? We hired a builder from Athens last year and he Costos a lot.

Old BE said...

Greece also shows us how quickly the situation can turn from benign to disastrous.

There is also the huge risk of contagion from the Greek collapse. Most of their debt is held by overseas (German) banks. If Greece defaults we will have a shiny new banking collapse across Europe.


Anonymous said...

are you changing your trading position for the election or holding?

CityUnslicker said...

Changing, cashed out tow positions today, everything else on watch in case of meltdown.

Germany need to say something or else the markets are going to havea big correction!

Anonymous said...

CU, another one of my amateur questions:

The UK has a AAA rating (for now)
Portugal has an A- rating
Greece has a BBB- rating

Can I, as your resident dullard, ask what the difference is between the three? Is it as obvious as it looks?

Andrew B said...

Unfortunately the message many hear is that none of the parties are telling the truth and they are all just out for their own interests.

I expect the party who is the least like labour to win in the spirit of 'not voting for anyone like that that bunch of *****'

The other message that comes across is that it does not matter who wins, they will all do pretty much the same things - they have no choice. A difference 15bn here and there is a rounding error in context of 160bn a year over 5 years.

The likely effects (to my eyes) are:

The markets will bounce up in the short term whoever wins.

There will be more minority party MPs, including ones you wont like.

Bill Quango MP said...

I see in the German newspapers that 85% of German citizens do not want to bail out the Greeks. "They ran up the debt -why should we may for them going on a sending spree.."

I hope you're watching all this Gordon.

Electro-Kevin said...

Scan - how dare you aspire to be the resident dullard !

On a more serious note:

John Redwood makes a comparison between us and the Greeks. Is this really the case ? Aren't our prospects better in terms of our more developed economy ?

Bill Quango MP said...


CU will give you the long answer.

Short answer - about 15%

Anonymous said...

Do I smell QE by the ECB?

CityUnslicker said...

Scan, it really marks the return you will get on bonds, the lower the rating the higher the return.

Onc you go below a- into BBB then you are now a junk bond officially. This is what happened to greece yesterday.

The thing to note for the UK is that Greece was AA very recently; the end, when it comes, is swift.