Sunday 21 November 2010

Smoked bear for breakfast, but for how much longer?

The Irish bailout is in the can. As always with these types of events, the final blood is extracted on a Sunday night before the markets open on a Monday. news like this is bound to be worth a percent or two on the FTSE.

For Ireland, it hopefully does provide the finality of knowing that there is not more despair to come. Indeed, the bottom has been reached with this guarantee. Not great for the Irish taxpayers, but a deal to stop the rot. No news yet as to what taxes are going to be hit other than the personal taxes.

Really though, as a bull since 2009 all this helps my  long investment portfolio. However, the day comes closer that the bailouts are not going to work anymore. I never go in for all the Gold-loving end of the world shtick, but we are where we are. Countries like Spain and Italy are not going to get bailed out by Germany and France, except though either default or inflation. The USA is in a bad place too, with a weak Government and rampant spending.

All is not going to end well, but these types of bailouts could go on for years, or if you read carefully well sourced information like this, then it won't be long.


Anonymous said...

I can't access that last link, can you give more of a clue what it says?

when you say "the day comes closer that the bailouts are not going to work anymore."

What then?
We still have idiots believing that spending is the cure, almost every mainstream programme about the economy has someone suggesting that.
Even my Uncle who is old fashion and traditionalist and very 'tight' is worried about the government spending cuts as he says so many private companies make money from government contracts.

I'd like to know what these spending idiots are going to suggest when there are no more bail-outs and no one willing to loan us the money, what do they think we are going to spend?
I guess they will be talking about taking 'rich' peoples money, as if that will be enough.

It seems to me that there is still a lot of unwinding to be done.

CityUnslicker said...

Anon - It will mean a 500ft high crisis with a very rapid transfer of wealth from debtors to producers. My guess is a sharp series of currency adjustmentss the like of which have not been seen before. Plus the swift end of low interest rates pushing us into a very sharp (alebit short) recession. mess, Messy, Messy.

That last article was about the largest hedge funds all being heavily short Spainish Sovereing Debt and seeing Q1 next year as the crisis point for Spain.

Budgie said...

ECB: "Some of us will die defending the Euro, and your sacrifice, Eire, is one we are are prepared to make".

Anonymous said...

"rapid transfer of wealth from debtors to producers."

What does that mean for countries like Britain, which yes owe lots of money but also loaned lots of money.
Will not some of these debtors wealth come to us, as well as us losing some else where?

Or isn't it more likely that there is just a massive wave of defaults, and it be the countries who are exposed to that such as Britain lose a fortune, and people who think we've been in recession so far haven't seen nothing yet?

How high can interest rates go?
19% at one point in the 80's? surely we could see that again, but higher?

Andrew B said...

Crises are like buses, you wait ages for one and then 3 turn up, all going to places you don't want to visit.

More seriously, I see the gold price rising on this news, but not the FTSE. I am wrong a lot of the time though.

Jim said...

"rapid transfer of wealth from debtors to producers."

I assume this means catastrophic falls in the currencies of the indebted nations vs the natural resource/manufacturing nations. Thus the populations of the indebted countries will be impoverished because they can no longer purchase as much stuff with their local currency - particularly food, energy and imported goods. Imagine petrol @ £2/litre, and a doubling of your grocery bill. Rather similar to what happened to Iceland after their banks collapsed.

Anonymous said...

Q: how do you get to be right and wrong at the same time?

A: believe the opposite on the FTSE, short it at 5744 on Friday, read this, lose your moral fibre, bail at 5780, see the index at 5700 right now.

CityUnslicker said...

Anon - you were right and I was wrong, the FTSE trend continues!