"f you come to a fight hamstrung, you cannot call the shots. Regardless of what you want, the people of Greece were withdrawing billions from the banking system, whilst the Greek government was asking for more liquidity. And it turns out that whilst you can promise your citizens one thing, the old adage of money talks and you know what walks still holds true. These are the rules, if you do not abide by them, these are the consequences. At the end of the day it is all about the money, for Greece and for the ECB. This is not over by a long stretch and is going to take time to reach a comfortable resolution for all concerned."
To market, to market to buy a fat pig. I saw a few tweets about Greece, one was from Josh Brown who said that their entire equities market could fit in a shoe. It was the same point that I made a couple of days ago, a 0.3 percent move on the S&P 500 was as much as the entire market capitalisation of the Greek exchange. That is not the problem, rather the 300 billion Euros of debt outstanding, more than 80 percent which is owned by outsiders. I saw another tweet that suggested that the meeting between the ECB and the greek delegation did not go so well.
What, what happened? Not again! The story is a little complicated, you can read about it here in the FT: ECB raises heat on Athens with curb on cash for banks, or here in the WSJ: Greeks Meet Skepticism in Frankfurt, Brussels. It is a case of, OK, you want to throw those curveballs, make sure they are above the plate, OK? No, that is a baseball analogy, I was told to use something that apparently everyone can understand, like fashion. It is something that I struggle with, sadly.
In short, from the 11th of February, that is the middle of next week, the European Central Bank will no longer accept Greek bonds as collateral. The Bloomberg article is subscription free, the headline says it all: Greece Loses ECB Funds, Raising Pressure to Yield to Austerity. If you come to a fight hamstrung, you cannot call the shots. Regardless of what you want, the people of Greece were withdrawing billions from the banking system, whilst the Greek government was asking for more liquidity. And it turns out that whilst you can promise your citizens one thing, the old adage of money talks and you know what walks still holds true. These are the rules, if you do not abide by them, these are the consequences. At the end of the day it is all about the money, for Greece and for the ECB. This is not over by a long stretch and is going to take time to reach a comfortable resolution for all concerned. In the classics there is the old adage (or is it an idiom), you have to break a lot of eggs to make an omelette.
Another oil drop overnight after a roaring rally has underscored the skittish nature of the market for that product. Remembering that not everyone receives the eventual product at source, rather many people trade the product on emotion and data. This time it was crude inventories that rose sharply, sending the oil price reeling, equally US production continues to reach new records. One certainly gets the sense that the trigger finger is very itchy, you see this often with different markets. For now, it is the oil price. I remember it being the sugar price, or VIX, or coffee or even the BP share price in the middle of the Deepwater Horizon spill. Until the price stabilises and until the fixation is with something else, you can bet that the oil price would continue to be volatile. When folks start referring to oil volatility being the new normal, forgive me a little for being sceptical.
There was also an ADP employment report, the reporting month prior December was revised higher, whilst the month just past, January was lighter than some folks anticipated. I wonder what the outcome is likely to be for the nonfarm payrolls tomorrow in light of oil services businesses and the rest of the sector cutting back spending and costs. Phew, it must be hard work out there. The next few months from an employment perspective are going to be interesting, most commentators agree (seemingly) that a cut in energy prices for consumers is a really good thing and enables more consumer spend. More consumer spend equals more jobs in the broader economy, what the impact of the fewer energy sector jobs are, that will be revealed over the coming months.
A thought. Some assets are moveable and some are not. For instance, a services business can when their rental is up, move ship. A retail store can take their stock and go move somewhere else. A quarry cannot. A mine cannot, you cannot pick up the assets and move offshore, or to another province, no matter how close. So when you hear the Zimbabwean government (forget the President Mugabe falling meme) talk about platinum mining companies having to build a refinery in order to have a 15 percent levy on unbeneficiated materials scrapped. Earlier, the mining companies in Zimbabwe, of which Impala Platinum are one of the majors, had indicated that it is unworkable, not enough local production to justify the building of a refinery. I guess in the Zimbabwean governments collective thinking, they want the raw materials processed locally, the cost however is something that seemingly they do not want to entertain. We continue to avoid platinum miners, the outlook is too clouded, the price did not even react to a five month protracted strike, the demand side looks, well, meh.
Things that we are reading, you should too
Wow, Monopoly has been around for 80 years - Monopoly is being sold with real money inside. When I first read the headline I thought it was saying that it was cheaper to use real money than paper money in some inflation hit countries.
A feel good story but more than that it shows how incentives matter the most. Batteries were not being recycled because there was no market for the recycled product. You can also be sure that Energizer are not doing this because they want to save the world but because they want to add to their brand value and sell more batteries. - Energizer unveils its first recycled high-performance alkaline batteries
Given what he has achieved and who he is currently working with and on, when Bill Gates talks, we should listen - Bill Gates: how mobile banking can change the lives of the poor. From an investing point of view this will be good for the likes of MTN but also for the companies that operate in the countries that will grow faster due to easier transfer of money.
Home again, home again, jiggety-jog. Markets are lower, not by too much. Sasol is taking serious strain after having enjoyed a good run. Wow, too hard to be able to call in the very short term. Greek markets are tumbling, you do however know the relative size and scale of those! Load shedding is in full swing at the office here I am afraid. Our batteries are running lower and lower, good thing that humans invented batteries, there would be no possibility of working "offline" so to speak.
Sasha Naryshkine, Byron Lotter and Michael Treherne
Follow Sasha, Byron and Michael on Twitter
087 985 0939
No comments:
Post a Comment