Tuesday, February 28, 2012
It's time for the European equivalent of the US Non Farm Payrolls Lottery. Roll up and guess a number. Yes it's LTRO time, or the baby Eltiaro as we prefer to call it. Now rather than join in with the guessing of how big it will be, we would rather jump directly to the market impact and nearly everything we have read suggests that, whatever the number, it will be taken as good news. Which to us is a red flag signalling that the market is more likely to come off after the event than scream higher, so we are happy to sit with our call from last week that this will mark a bit of a turning point. But we have to say the US data continues to stun on the upside, even if we are wondering why the US consumer isn't worrying about gas prices. Were they THAT strong?
But back to the LTRO. With the ECB consuming all sorts of toxic waste in such huge quantities in exchange for liquidity, we are somewhat reminded of that rather unpleasant scene from Monty Python's "The Meaning of Life", only here The ECB has become Mr Creosote.
MARKET : Oh, shit! It's Mr. ECB !!
MAITRE D: Ah, good afternoon, sir, and how are we today?
MR. ECB : Better.
MAITRE D: Better?
MR. ECB : Better get a balance sheet I'm going to spew liquidity.
MAITRE D: Uh, Gaston! A balance sheet for monsieur. There you are, monsieur.. [goosh] Merci, Gaston.
MR. ECB: I haven't finished.
MAITRE D: Oh! Pardon. Gaston! A thousand pardons, monsieur.
MR. ECB: Uhh.
MAITRE D: Now, zis afternoon, we have monsieur's favourite: Ze Greek bonds. Ze Greek yield is very high, and ze coupon is very rich with olives, anchovies, Ouzo, Feta , and promises to repay. Thank you, Gaston.
MR. ECB: There's still more.
MAITRE D: Oh! Allow me. A new balance sheet for monsieur,...[goosh] ...and ze liquidity mopping up woman,... and maintenant.
Would monsieur care for an aperitif, or would he prefer to order straight away?
MR. ECB: Oh.
MAITRE D: Uh, today we have, uh, for appetizers: Excuse me. Mmm. Uh, Ze Bouni Poliennali Del Tesoro pasta, Bonos y Obligaciones del Estado paella, Obligations Assimilables du Trésor (Zat iz Oats and frogs' legs with more Oats), or Portuguese Obrigações very delicate. Very subtle.
MR. ECB: I'll have the lot.
MAITRE D: A wise choice, monsieur. And now, how would you like it served? All, uh, mixed up togezer in a special Long Term Refinancing Operation?
MR. ECB: Yeah,... with the Greek short end on top.
MAITRE D: But of course, avec les toxic-waste.
MR. ECB: Yeah, and don't skimp on the 5 year.
MAITRE D: Oh, monsieur, I assure you, just because it is mixed up wis all ze other things, we would not dream of giving you less than ze full amount. In fact, I will personally make sure you have a double helping. Maintenant quelque chose a boire. Something to drink, monsieur?
MR. ECB: Yeah, I'll have 80 yards of the Spanish auction.
MAITRE D: Eighty..
MR. ECB: ...and a double Jeroboam of the Italian 2022.
MAITRE D: Bon, and the usual French car company?
MR. ECB: Yeah. No, wait a minute. I think I can only manage sixty billion today.
MAITRE D: [tut tut tut tut] I hope monsieur was not overdoing it last month..
MR. ECB: Shut up!
MAITRE D: D'accord. Ah! Ze new balance sheet and ze liquidity mopping up woman. [goosh goosh goosh goosh] Monsieur, is there something wrong with the repayment?
HOLLAND: No, the repayment was excellent.
MAITRE D: Perhaps you're not... happy with the service?
HOLLAND: No, no. No complaints.
GERMANY: It's just that we have to go. I'm having rather a heavy PR problem.
AUSTRIA : Hmm.
HOLLAND:- And... we... have... a... domestic issue to cope with.
MAITRE D: Ah.
GERMANY: Oh, Yes. Yes, of course. We have a domestic issue to cope with and I don't want to start bleeding in the polls. Ha.
MAITRE D: Oh! Very well, monsieur and madam . Thank you so much. So nice to see you, and I hope very much we will see you again very soon. Au revoir, monsieur. [clunk] Oh, dear. I have trodden in monsieur's balace sheet.
MAITRE D: And finally, monsieur, a wafer thin piece of 10yr Greece?
MR. ECB: Nah.
MAITRE D: Oh, sir, it's only a tiny, little, thin one.
MR. ECB: No. Fuck off. I'm full.
MAITRE D: Oh, sir. Hmm?
MR. ECB: [groan]
MAITRE D: It's only wafer thin.
MR. ECB: Look. I couldn't buy another thing. I'm absolutely stuffed.
MAITRE D: Oh, sir, just-- just one.
MR. ECB: [groaning] All right. Just one.
MAITRE D: Just the one, monsieur. Voila.
MR. ECB: [groaning]
MAITRE D: Bon appetit.
MR. ECB: [groaning]
MAITRE D: Thank you, sir, and now, here's ze check.