Tonight we congratulate Mr.Yanukovich for his apparent victory over Prime Minister Tymoshenko. The international observers stated that the election results should be honored as the election seems to have been relatively clean. Interestingly, Moscow has been silently waiting for the definitive results and do not wish to appear meddlesome.
A reader of ours took us to task for not dealing with Russia’s recent silence. Our friend raised a more than interesting point about the Russians and we think it has merit. The Russians have been caught off guard by the European debt crisis as they by their own admittance moved many of their assets out of DOLLARS and into EUROS, so any interest in rocking the boat at this time would be self defeating. It is one thing to meddle when the EURO is 1.50, quite another when it is 1.36 and teetering under uncertainty. The Ukraine needs the IMF loan to help it through its current problems and that will ensure payments for Russian energy.
Also, we wish to recall Henry Paulson’s comments about Moscow trying to prod the Chinese to act in concert in the dumping of GSE paper. It is probably a coincidence that the real flare up in the current Greek drama was ignited when the Chinese disclosed that they had no interest in buying 25 billion euros of Greek debt. The lack of Chinese interest prompted a 150 basis increase in Greek 10-years and a 5% drop in the EURO.
Tuesday’s Financial Times has a story about CFTC reportings that open interest in the IMM EURO contract has increased $8 billion. This is a significant rise in bearish sentiment, but the mere mention of this in a headline makes us nervous. The Europeans are not fond of speculators making money off their travails and have more than once gone out of their way to cause great discomfort and huge losses for those who deem to upset their well-laid plans. The French Central Bank, under Trichet, caused specultors great losses with their le FORT FRANC policy even as it hurt the French economy.
Let us remind our readers that prior to Britain exiting the EMU, she raised interest rates to horrific levels to strangle the speculators. The U.K. was not alone as Italy and Spain also applied similar tactics. If the Europeans truly believe that hedge funds and other “locusts” are creating instability and making profits off their pain and suffering, this will bring them to action. If you would like to torture Jean Claude Trichet you wouldn’t need to waterboard him but simply whisper these three little words: SOROS, SOROS, SOROS. Do your technical work and see if the present levels have come into support on all the risk on trades. Contemplating the world of 2+2=5.