Markets

At this point in the film there are still those who believe that financial markets are really markets?.

Today's session has been paradigmatic, initial increases of over 5% to close half a point in the negative zone, the premium risk down at the start to finish higher than it started.

Had not made ​​the ransom to appease the "markets"?. I fear that something had to fail.

After the big news of the rescue, all the analysts who appeared on television given by "discounting" the news. This is one of the wonders of the market, everything is discounted, no more than apply the soft efficiency hypothesis and that's it. Everything is in the market, past and present. But today we have breakfast with almost 6% rise, anything went wrong? I can say that the initial movement was due to a monumental closing shorts, especially in banks. After the massive closing, someone could to put up money to have entered the rise, but again do this late in the film are who you want to invest?.

Individual investors withdrew a long time to try something in exchange, are beaten and run any risk. Are the institutions? Mutual funds and insurance companies and money unwillingness to sign them should be an adventure like today. Who is left? The banks themselves.

I fear that the protagonists of the creepy downs in recent months to be financial institutions themselves and are playing the dangerous game to cover their losses resulting outcomes in others. The HFT and speculative portfolios of banks are the absolute protagonists of the whole problem of falling asset prices and loss of confidence in the system.

We solve give them more money, where it used? Will they give a respite to the productive economy or continue with the speculation?.

Quid prodest Bankia?

One of the main reasons that have brought this debacle in financial markets, as well as Greek and French elections, has been the involvement of Bankia.

This has been facilitated by Deloitte's refusal to sign bills. Asserts a wealth gap due to the valuation of accounts Bankia in BFA.

The paradox is that the same auditing firm validated the same accounts for just six months and also a little earlier because of the bank's IPO.

Although it is true that the price has since fallen and Bankia traded well below book value, as other banking stocks, does not seem a sufficient reason for varying the auditor's opinion to the point of refusing to sign the audited accounts.

Is responsible for the auditor to have signed a few bills on time last year were virtually equal to those who have refused to sign? What motivated this change of opinion? Is there a conflict of interest, since it also was responsible for auditing the accounts of members of the merger saving banks? Nobody will say anything, not even the CNMV also validated the IPO? Does repeated Enron?, Do not forget that the current Deloitte emerges from the ashes of Arthur Andersen and the Ibex that Deloitte audits from the current portfolio of clients from the old defunct auditing firm and disappeared but auditors reappeared on the other hand.

Rato is now known that he wanted to change the auditors, can revenge?. Costs the country dearly.

The Ibex on the Brink

The spring is not sitting at all well to Ibex, from its inception the corrections have been the main trend that has led the Spanish index to lows of 2009 and virtually the same area from which it rebounded following the dot com crisis early in the last decade. In stock terms, barring more inflation, we can speak of a lost decade.
The question is what will happen from now. The index is in zone indicators bearings and with a strong oversold, so it is likely a reaction. The situation is if you lose the supports is very negative, it seems quite obvious ABC correction, with the current wave C correction of the whole movement. The question is whether end in the area where the wave A ended or will require a lower minimum, be produced and the length of the C of the same order of A, would lead to a target in the 3,000.
Given the composition of the Dow with a heavy weight of the banking sector, this end would not be entirely unheard of, if you also add the important weighting Repsol, we have a likely scenario, compatible with punishment differed among the securities industry, with very punished and others resigned to the lateral inertia.
In the above analysis we referred to the Ides of March and bearish tradition of St. Joseph, today we could bring up the English aphorism of "sell in may and go away". Only 4 days.

Civil servants

We are waiting for a New International Order, we live in a society in transition and it may last a few years yet, and meanwhile our solution was to give power to the technocrats.
When society loses faith in its leaders turns his gaze toward the technical, ie those which are in principle free of ideological guidelines and should take only those measures that really are suitable to overcome the current crisis.
That's in theory, because the technicians are a class by itself, the bureaucracy, characterized by immobility and the low-risk decision making.
The economic measures taken by our government have not liked anything to markets, just look at the risk premium in our debt, at levels of intervention, and equity markets at year lows. They have not liked, among other things, because only with cuts does not solve the national problem now, growth.
The current managers are acting as diligent CFOs, when things go wrong act cutting costs and investments, minimizing risk, are likely to take defensive positions. I'm not saying that is not appropriate to take such measures, but like many things in life, it's all about proportions.
Companies that fall into the hands of CFOs have the danger of financial panic ahead, are dominated by visions in retrospect, that is, remake or break decisions made earlier in another context.
The companies leading the markets are those in charge but not the CFO to the CEO, that figure should take into account financial aspects, especially in the context of lack of credit, but to have the courage to take risks future growth.
Our leaders are too worried about their accounts and what they owe, when they should be concerned with how to generate the wealth of tomorrow.
Again a question of allocation of scarce resources, they have chosen to safeguard the interests of its class, the civil service, and sacrifice the public investment.
There is an undeniable fact: if it were not so well paid profession of officer graduates would not have so many that they should seek a job opportunity in this area.

The wasted years

The markets may not go down well at the recent measures taken by the spanish executive, probably because they realize that they will not be much use, at least in the short term. It will not improve employment, will not improve the consumer, will not improve growth, will not improve the deficit (which makes sense since it is based on everything else). Budgets are fears that become applicable after the summer, so it has installed a sense of "another lost year".
It wasn't 2011, not 2012, it is doubtful that the 2013 and probably the start date of light recovery is 2014 or 2015. Overall, a waste decade for everyone. Those who have no work now, nor will in the coming years, so when the economy recovers it will be unrecoverable.
Whether you are young, because then it will be another cohort willing to take his place in the pyramid, and for the seniors, if they are now in an age when companies do not look at them, within 3 years and will flesh retirement 10 years although they are active. In economic terms this is called obsolescence, although the equipment to operate, companies prefer a new one, although it makes the same function have to look again, to be "cool", we like the Ipad, we started to the labour market and, at the same time, we are history .

The graph of the Ibex-35 does not inspire any hope, only the long-term support (7700) resist, if not, the fall can be historical. Anyway we are not alarmists, the trend is most likely the laterality until they clear up doubts.
We'll always have the option, if the Ibex 35 drops too low, that we can sell the whole countrie to China, and then he would be the way to be part of the EU, without meeting the convergence criteria and solve the problem of autonomic deficits: the Tibet's way.

You're fired

Well, that's it. It has reduced the dismissal. Now, it's time to create jobs. There are no excuses.

Nor was there before. In fact, new workers covered by the guarantee of 45 days, at present, practically nonexistent. Those who are hired after the publication in the BOE is going to hurt, so far worth 45.

There is no doubt that the duality of the Spanish labor market is tightening (or was) and that this prevented the fixed and favored the hiring of temporary chain. But the measures taken today are not going to lower the unemployment rate, not even going to arrest the further deterioration. It's a long-term measure and for now, and for a long time, there will be no results.

But it's media. It was seen on camera Guindos staging his "petit committee." Please.

Unemployment decreases with growth in Spain, historically, it takes 2 points of GDP growth to reduce unemployment by one point. Do the calculations, 25% unemployment means ...... phew.

The other element is to reduce unemployment with competitiveness, and as we will not compete with emerging economies (or with the Germans if they charge at 1 € per hour) we will have to, investing in R & D, ie knowledge. But, there's always a but, if we not invest when we could invest, did we do now? No, now we cut spending and firing people. Always pro-cyclical measures. When will we learn?

Efficient markets

A long time ago that financial markets are no longer efficient markets, to be should have a number of essential elements such as the participation of a large number of buyers and sellers, information handy to everyone and equal conditions access to markets and effective regulation to prevent conflicts of interest.

Regarding the number of buyers and sellers has been watching the gradual professionalization, which means a significant reduction in the number of independent investors as compensation for its replacement by an elite of managers. Investment funds, including hedge funds, are the current major players in the market function.

With regard to information has never been easier to access it and has never been so complicated as well, clearing the dust from the chaff, we have not only better information more noise. Something similar to what happens on television, the emergence of more channels has not only improved the level has increased crying.

In relation to equal access, the ever more numerous automatic trading programs (HFT) will fit trends, creating volatility where there is none to his orders, immense in amount and speed of execution, since they are machines those who shoot, make the most possible where there is nothing. So, ordinary mortals do not have anything to do about it, it is impossible to follow a trend because they are custom made machines.

The latter would not be so simple if there is background volume, but as it has driven out the small and medium investors, the game is between the tables of the large international brokers and managers who possess the technical and financial capacity to do so.

Regarding the law, what to say?, the collapse of 2007 seemed to gain momentum in this regard, but again everything has been watered down, the industry is always ahead of the legislator, is faster in the adjustment and pays much better .

Today the Ibex have fallen by 2% for no apparent reason except that you ignore a possible new war, this time with Iran.

The year has ended and the profitability of portfolios and funds will not improve in these four days left, to waste this year.

Large hands are always taken advantage of their privileged position, but now are moving earnestly, now just play with marked cards.

Closing the books

Approaching the end of the year and is not expected to unravel the enigma about the future evolution of Ibex. We reamain within the lateral pattern with the "good" news that the media seem to be holding and we could have an upward bounce during the first weeks of January to the area of ten thousand.

Indicators, nevertheless, remain positive, so for now we continue to neutral in the short to medium term. We will have to wait for the breakdown of some of the important areas.

The only truth is that the great lateral movement that the market started in 2009 remains virtually intact, but the encouraging news is that, if sustained, we are at the bottom of it.

Discounting expectations

We are now tuck the end of this year and the markets are not likely to change his sad journey. The lack of clarity in the European policy adds uncertainty rather than reduce it.

How is it possible that only four days after closing a highly controversial summit, Merkel is dispatched with a statement contradicting the statement? What are then the Summit?

Somebody say that they were mere expectations and forward markets to discount something that was not closed yet, but we are so in need of good news or perhaps, only in news.

We were only a few days without bad omens, we might think with a little more clearly, we might even stop to think.

Moral hazard

I would like to highlight several recent article, first is an interview with Juergen Stark, ECB chief economist resign shortly to disagree with the policy of the ECB. The other is the article published by Nobel Prize Stiglitz and a statement (rather than paper) from the French president Giscard d'Estaing on the visit to Europe by U.S. Treasury Secretary Timothy Geithner.


In the first, Stark, says basically that the ECB should ask for help since this is a moral hazard. If allowed to help governments "sinners" will not have his "punishment", so in the future does not adequately correct the imbalances. You may forget that they are special circumstances which have focused on certain countries to this situation, except for Greece, other countries have a growth problem, not debt. The markets believe that they are not paid for what they believe incapable of generating income to the debtor countries, not why your debt is exorbitant.


Stglitz reminds us that debt levels have been caused by an excess of liberalism in the financial markets, taking advantage of deregulation have failed to properly quantify the risks. The states have borrowed to save the financial system from collapse result of the greed (greed is good) of some and the overconfidence of others.


Giscard makes the counterpoint of classical Europe, that of the "grandeur". Who are the Americans to teach us? We know sink alone.


At a time when we discuss the role of the ECB contradistinction precisely with the Federal Reserve and the myth that expansion policies with recession generate long-term inflation. The curve of U.S. 10 years should be through the roof in that case. Why markets continue to provide cheap money to the Americans with current account deficits have? Trust ¿?.


How can we generate in the euro zone that trust?

Standard & Poor's

S&P (Standard & Poor's) as well as Moody's and Fitch Group are risk rating agencies. Develop and regularly publish the credit rating of stocks and bonds, as well the sovereign risk debt issuers. 

S&P is owned by McGraw-Hill group.

So far nothing that is not abnormal, we have a company that helps along with two other at investors to know what the compensation to be required for the purchase of assets issued by governments and businesses. Criteria are based on macro and micro. If an economy is in recession, produce less, consume less and therefore earn less in taxes.

Economists use elasticity to explain how prices are adapted to the reality of things. The government revenues are highly elastic, lowering the activity immediately moves to the amount that is collected, however, the other side of the equation, the costs are quite inelastic, there are some items that can be cut effectively with fairly easily but the most important, require a period of accommodation. These are measures that affect many people, teachers, doctors, policemen, judges to put the best known, who nevertheless have their rights. A quick measure is to reduce payroll, but the cut, not being excessively high payroll, is relative. The savings must come from the rationalization of the use of resources more efficient and requires planning, ie time.

On the one hand, the adjustment is immediate (income) and not the other (expense). As they are also measures that affect people, leaders are reluctant to take action based on assumptions. The optimum would take action before they occur is anticipated that the event will happen. If the measurement is taken when we're in recession, the first effect is procyclical, so that, finally, just what we wanted to avoid getting worse. When revenues fall and spending increases, and want to maintain the level of activity and welfare of an economy, there is debt, and that has a cost, interest rates; and one limit, the capacity allocated by the market's to return loans (based on ratings).

The strength of S&P and other agencies is the fact that their values ​​are taken into consideration by the governments themselves, by the monetary authorities and the markets to set interest rates. A greater risk of default higher interest rates required to economies.

S&P has warned tonight in a statement that in the coming days, if possible before the summit on december 9th, it will issue a new downgrading the ratings of all countries in the euro area and most likely will be downgraded to all.

What gives us a new note which tells us that things will go wrong (we know) and just the very issuance of the note will actually cause things to go worse (and we fear)?