Monday, 8 August 2011

The EU Guns of August

Was it enough, the ECB ( an institution without the support of its member countries) has been pushed yesterday into buying Italian bonds, this will help the market.

At time of writing the FTSE futures have come in from -150 to -80. Not sure we will get a bounce after the US Downgrade, but maybe the steep falls will be halted.

For a while, because the ECB has no real ability to do anything with these bonds apart from monetise them in the long-term. I don't even know where it is supposed to pretend to get the money from to buy them. Rather like the Federal Reserve, is is somewhat opaque...

So are who is buying/selling/short/long - what is your strategy?

Update later as the day progresses....

UPDATE 11am GMT: Well that rally did not last long, the FTSE is now down 1.5% on the day having nearly made it to positive. The EU is buying Italian and Spanish debt and the Far East closed down plenty. Oil seems to be up as Goldmans issue a note saying stay long and strong.

16 comments:

Nick Drew said...

err, well, I hate to point this out but ...

John Thomas said...

The Fed unlike the ECB is under the control eventually of the US government, the ECB is not actually in any one country but administered separately by the EU which is made up of disparate countries doing their own thing (or would seem so). Not having actually worked in this sort of thing I personally would stand back and wait until the dust settles, there maybe more to come out of the woodwork even yet, things are too fluid at the moment big gains but enormous losses in store for those put their toe in the water.

Timbo614 said...

The effort from the ECB is wishy-washy once again, no hard facts, no detail. Some obviously took comfort in it for a while... confidence seems extremely low.

FTSE trading range already +/- 1% as ND points out gold is up.

It's not looking good for the rest of the day except maybe for the HFT system guys.

Sean said...

Maybe what is needed is a creditably index?

Blue Eyes said...

The ECB is clearly operating ultra vires.

The ECB is weird and the Euro is weird. Tim Worstall linked to an article about how the Euro system works in practice and basically it is only a single currency because people think it is a single currency. There isn't actually a single central bank, but 17 central banks all able to create new money from nothing and call them Euros!

The whole thing seems to be a complete sham.

Technically the new money comes from the shareholders underwritten de facto by the German taxpayer. That is the very thin blue line between what the ECB is doing and full-blown monetisation.

The end is nigh one way or another, through a nasty break-up or hyperinflation.

Richard Elliot said...

The FTSE is going to fall below 5,000. I'm just trying to decide how far below it will go? And what happens if / when a country leaves the EURO?

I am holding all my positions (probably foolishly). I don't think it's the time to buy in yet, there is further to fall.

CityUnslicker said...

Wild ups and downs so far today - clearly, no one else knows what to do either....

Re the ECB - the more I think about it the more it is monetisation - how the market reacts when the man in the street investor or foreign investors who don't understand get it is a challange!

James Higham said...

And this, CUS?

http://www.zerohedge.com/news/socgen-unicredit-bring-disaster

Blue Eyes said...

I am going to borrow lots of Euros from somewhere and convert them into pounds!

CU, it is only NOT monetisation if the German government agrees to underwrite the bond purchases. But it surely isn't allowed to.

Weeeeeeeeeeeeeeeeeeeeeeeeeeee!

Steven_L said...

Buy BMW and Daimler, sit on them, beat the bank.

andrew said...

Depends what you mean by strategy.

One strategy would be to place CHF under your bed and go to sleep.

I have been tracking FTSE / BOE Base rate since 1/12/06 and if you got BOE Base rate over that period, you will be ahead.

From 2007 my money has been largely in emerging economies (First State Units) and whilst not as good as gold, not too bad.

I think a good strategy right now would be to bet on volatility.

How do you do that?

Timbo614 said...

Whoossh! :) Wheee! :(
Vola- tili-teee!

Up and down like a whore's draws!

ken from glos said...

Looks as if they kicked the can down the road again.Can we have another competition ? I give it twenty days at the most.

Timbo614 said...

I give it another half hour :(

Earlier I was going to sugest a compo for first market to -3% - too late now.

CityUnslicker said...

Ken, law of diminishing returns these bailouts.

ken from glos said...

Dear city unslicker,
I remember that law being taught to me at school 50 years ago by a brilliant and verbose Welch teacher.

Had forgotten it !! sorry