What's the Plan, Stan?

Tuesday, June 28, 2011

Summer half year end noise continues to deafen and kill the short-term market favorite trades. So whilst we wait for the cacophony to subside, we will have a quick look at some of the Euro plans that are beginning to appear.


The Management placation plan


RTRS-UP TO 15 OF 91 BANKS EXPECTED TO FAIL EU-WIDE STRESS TESTS - EURO ZONE SOURCES

It all seems remarkably similar to a headcount reduction edict at any company. Instructions are disseminated downwards that shareholders want to see costs being contained and "something being done". Cutting headcount is always seen as the easiest way to do this and the process is embarked upon along predictable lines.

- Mr Big says we have to cut headcount by 15%
- Headcount or staff costs?
- Headcount.
- So total cost is irrelevant? They just want heads out of the door, even if binning just one senior exec would save the same as binning 10 juniors?
- Yes, apparently so.
- Err, OK then, who shall we get rid of?
- Well, we don't want a PR issue so it's probably best to keep this below the radar, no point in shaking up confidence by letting any of the big boys go.
- So definitely juniors then ... yes?
- Yes, cheap as chips and no one will notice they are gone and if we do need to rehire we'll just call it "staff upgrading".
- Hmm, well I never liked that little sht in audit.
- OK, that's one.
- And what about that cocky arse who you think caught you with **** at the office party?
- OK .. two..
- And that Ph.D MBA CERN fellow, he's always worried me, questions everything, far too bright.
- OK, he's out, three

And so it goes on until the sacrificial lambs are led off to the HR abattoir to be "humanely" put out of everyone else's misery. Finally, a report is made back to the shareholders stating that efficiencies have been undertaken and the slate is clean (P.S.: now please get off our backs). So TMM are now wondering which banks in Europe have already had their straw shortened by dark forces to suit Euro policy, irrespective of financial reality. We feel that listening to the results of the bank stress tests will be as indicative of true talent as the Eurovision Song Contest.

The French plan

To TMM this smacks of protectionism as it will ensure that France's legions of quant structurers will never be out of a job again. They are all to be employed constructing and maintaining the world's most complicated financial product designed to contain the European debt waste. TMM suggest that if 20 years of research by the world's top scientists at the JET project to contain the plasma involved in a fusion reaction has yielded no progress, then expecting a bunch of 12yr olds to achieve Eurodebt containment is absurd. Even so the Germans appear to be happy to throw their support behind it.

Trichet's plan

Trichet's solution is no solution at all. The ECB is not going to play and he himself appears to have turned into a random statement generator that has TMM wondering if he is really the Yul Brynner character from a central bank remake of "Westworld" meets "Duel".

China's plan

JBTFD.

U.S. plan

Try not to laugh too loudly.

The Greek Plan

Applying the basic logic that if your sales volumes fall, then to make the same revenue you obviously need to increase prices, TMM have just received a call from a Greek hotel explaining that, due to an "error", the prices agreed for TMM's stay this summer would have to be increased by 50%. TMM were tempted to ask exactly which part of Greek economic history this "error" was referring to but really couldn't be bothered and are looking to rebook elsewhere.

And, finally, the TMM plan


What's the point of setting rules when the rulemakers themselves end up trying to circumvent them. So let's Keep It Simple Stupid. Take the pain, default and "man up". We know what's coming and weaving ever more complicated carpets to try and hide it under is pointless.

Posted by Polemic at 5:12 PM  

6 comments:

After a year of telling everybody (including themselves)that Greece will grow out of its debt problems, despite that pesky little detail that the Greek economy is shrinking, Euro area policy makers/regulators are so intellectually bankrupt that "oxymoron" really does not do the term "credible EU bank stress tests" any justice.

I agree. Man up. Time to pay the frickin piper.

WellRed said...
6:32 PM  

re The Management placation plan

That's what they did here with an entire economy. For every 55 year old with 30 years seniority and earning 3000 a month, which would have cost 70 grand to dump, businesses failed to renew 3 temporary 1000 euro contracts at no cost.

Planned or otherwise, the main subsidiary beneficiaries of this are Spanish banks. What with virtually no mortgage holders losing their jobs, the default rate stays under 3 percent and the lenders (mostly) pass the stress tests despite the circumstances.

Greece? Again? Are you sure flights will be allowed to land? Help is but a postcard away.

Charles Butler said...
8:52 PM  

thanks Wellred and assume you are also following the "U.S. Plan?"

Charles, No I am NOT sure. Dumbest trade of the year that one, but felt there would be resolution by the time I landed either in a deval or rescue. At the moment it looks like it will be the worst of everything, no deval, monster VAT, greek economics re pricing and an infrastructure that may well have gone "Bob Crow".

Interesting point re making sure the young don't get jobs so that the old can still afford to pay their mortgages..

Polemic said...
9:05 PM  

For me the idea that we will be any nearer to having a clue what on earth is going on and how things will pan out by the end of the week is a likely as me winning the Euro millions this evening. It seems clear that even with the best fudge machine in the world, in top gear and running as fast as Usain Bolt no one can be sure what next twist will be.

Could I suggest that the most miss priced trade out there remains democracy?

The Greek Parliament can force through any manner of reforms that they can dream up to keep Germany and the IMF happy - for now - but none of this will matter if the mechanics that allow this to happen finds itself disenfranchised because the populous vote them out. The great Euro area experiment knows no political bounds as long as the lunatics remain in charge of the asylum. If they have the political will taken away from them the whole thing falls over. We have all miss understood the extent of the political 'will' to make this game carry on - but if you take their power away no amount of old guard bullying matters. I am not just speaking of the Greek voters rioting, as we have seen on the news this evening, I also think this can apply to the German cheque writers as well.

I have mentioned on the Pavlovian, real money, liquidity junkies lack of ability to sell anything before - through all the noise of the last few weeks have a look at how much things like equities and EM have really moved (try a chart longer than six months, it's easier on the eye). This kevlar gloved, never to be hurt, Govt supported, cock sure bunch of told you so (JBTFD) drones are yet to worry what that taping noise is....
Good grief.

The real trade is still timing I fear - regardless of what your view is

db

Anonymous said...
10:36 PM  

"The real trade is still timing I fear - regardless of what your view is"

Disagree,the real trade remains being neutral and not being sucked into the risk on risk off whiplash.

Anonymous said...
7:35 AM  

Its got to monty python level of absurdity hasn't it?

BlackRaven said...
12:26 PM  

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