As the sellers of snake oil and the creators of the corporate cult of personality take their “bows” for breaking the story about the European bailout that roiled the global equity markets, I had to step back and realize that the European Polity is not the U.S. While Geithner and others are held captive to the vagaries of the DOW JONES and S&P, it seems that the Europeans, and, especially the Germans, are not enthralled by markets going up and how many days of a winning streak exist. There are actually decision makers who are not captured by the price of Deutsche Bank or Siemens. In the U.S. it is only the stock market reactions that seem to dictate the decisions made in Washington. Some in Europe seem to want to effect policy for the longer term regardless the cost to certain financial entities. If forcing the issue on how large a hit private bondholders are to take means that markets dive … so be it.
The longer term is much more important. It was interesting to listen to the CNBC crowd congratulating Liesman for breaking the BAILOUT STORY–the story was actually out Sunday morning in the European papers. What was not reported today was the piece by Ambrose Evans-Pritchard, in which Germany’s highest ranking judge “issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum.” The chief of the German Constitutional Court is most concerned about NO TAXATION WITHOUT REPRESENTATION. This is a major issue for the Bavarian Burghers have never been directly asked if they wanted the EURO or if they wish to TRANSFER their hard-earned EUROS to the more profligate citizens in the PIIGS.
The U.S. financial media is solely concerned with equity prices and if democracy is a stumbling block to higher equity prices, then the will of the people be damned. As the economic engine of growth shifts from the Western world to Asia and Latin America, it is important to understand that input from the new wealth is going to be heard. The U.S. model of dominance is shifting just as it did as the sun set on the British Empire.
Quick Hitter#1: Thanks to Ellen Galluccio of Natixis for providing a list of the coming important political dates:
Sept. 28 Finnish Parliament votes on new powers for EFSF
Sept.29 German parliament due to ratify the EFSF
Oct.3 Eurozone finance ministers meet in Luxembourg
Oct.11 Slovak parliament votes on the EFSF, last European Parliament to do so
Oct.13 Eurozone ministers meet to sign off on Greek aid
Oct.14 G-20 finance ministers meet in Paris
Nov.3-4 G-20 summit in Cannes
Quick Hitter#2: An important trade to look at is the PLATINUM-GOLD spread. This precious metals spread is trying to tell us something about the state of the world economy or else is providing a great opportunity to purchase a precious/industrial metal at a very attractive price. If the European BAILOUT is truly as significant as the equity rally this week has shown then that PLATINUM should outperform GOLD as platinum plays a role as a store of value and in the global economy in its role in automobile production.
Last year at this time platinum was trading at a $300 premium to GOLD while at present it is an $85 discount. Is this spread telling us how slow the global economy is projected to be as auto production slows? Is there somebody dumping stockpiled Platinum to raise cash? Has the dramatic weakening in the South African rand led to platinum miners selling production as the DOLLARS rise against the RAND means increased profits in terms of RAND and thus pushing stockpiles onto the world market? Not sure of the reason but it is certainly worth watching.