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?
- 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 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".
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.