Wednesday, 19 May 2010
Germany kills the Bull market; OBR next?
However, the panic in Germany that has allowed them to ban short selling of bonds is the act of a Country that has strong elements of the Lehman Crisis.
With hindsight the worse thing about the Lehman crisis, as with all financial panics, is that the lack of information led to a frenzy which worked itself into a stock market collapse. The European debt issue seems to have now entered the same phase, with a real panic by Governments about what to do.
What is worrying is that it is Germany that is panicking. Germany has not debt issue of its own and German government bonds are probably the safest in the developed world. That this has happened has seriously spooked markets that were looking for a reason to fall.
Hard to see the FTSE now being able to stay above 5000 in the Short term, which will equate to a 10% drop for the year so far. Long-term, a consistent fall is going to see the end of the Bull market which started in March '09. A bull market which can only last just over a year is rather depressing...
Also work has interrupted the flow from me of late, but generally I support the Tory idea of an Office for Budget responsibility. It should be able to stop any future repeat of the new Labour spending disaster...but right now, in the deep end of an economic crisis, a bunch of bad sounding figures emerging is not going to help anything. People won't see that that £2 trillion debt has a 50-year time horizon (i.e. £40billion a year) when considering pensions etc. They will only hear the bad news in the current market panic.
George Osborne should set the office up, but if it takes a year to find the right staff and get going then that will be no bad thing.