Twenty Riddles of the Sphinx

TMM are finding themselves scratching their heads and suddenly bereft of ideas. It's been a turbulent week or so if you've been a North African dictator, a Scottish Tennis player or a Short Sterling Long or Short. So while we collect our thoughts, we thought it was time for Twenty Riddles of the Sphinx.

  1. Which trades first in SPX? 1350 or 1250?
  2. Will contagion from Tunisia and Egypt spread to Saudi Arabia or Iran?
  3. Will Brent Crude stay about $100 for long?
  4. Is the Gold correction over?
  5. Will EM central banks' reluctance to hike rates result in an EM panic?
  6. Will the Bank of England hike in February, or has Q4's GDP shocker scared them off?
  7. Were the shenanigans in Euro money markets a "one off", and will normal operations resume in the next reserve period?
  8. Is the European peripheral bond market capable of standing on its own two feet now that the ECB isn't buying anymore?
  9. Who will hike first? The ECB or the BoE?
  10. How long will it be before Goldman Sachs get the blame for the North African & Middle Eastern social unrest as a result of its financial entanglement with Facebook?
  11. Will Uncle Axel get the job?
  12. Which trades first in EURUSD? 1.43 or 1.33?
  13. Will Merv re-base his pension to CPI when the RPI-CPI basis goes negative?
  14. Will the Fed complete QE2?
  15. Will the AUD parity party last more than a few days this time?
  16. When will S&P downgrade Moody's?
  17. Is Spain's Caja plan enough?
  18. Will anything ever happen in the Swiss front end?
  19. When will risk assets have a more meaningful correction?
  20. What particular variety of constitutional crisis awaits the new Irish government?
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February 1, 2011 at 1:33 PM ×

1. 1350
2. to Algeria - long natural gas
3. yes
4. almost
5. not yet
6. no hike, the captain will sink with the boat
7. yes
8. no
9. ECB
10.roughly 3 days
11. no, Draghi will
12. 1.43
13. nice idea
14. yes but no QE3
15. no
16. no clue
17. no way, nothing can save the cajas without sinking spain
18. no, waste of time
19. in march
20. don't know

February 1, 2011 at 2:40 PM ×

17 (what else?)...

Classifying it as 'caja problem' is so 2010. Between only CaixaBank and BFA, 50% of the savings banks' business is on the verge of being transferred to the banking sector. Almost all the rest are following suit.

CaixaBank's solution is to leave the bad assets with its principal shareholder, the now-foundation La Caixa. The model was to trade a large investment portfolio and junk assets for pure financial stuff.

How BFA, with 330 billion of assets goes about cleansing itself is yet to be determined. For reasons of internal politics, expect that process to be a little more lumpy, but Rato will manage to structure it in a way that will draw private capital.

As for the rest of them - some already comply with Basel III, some have no hope whatsoever and will be swallowed up by someone. Most, if they're willing to see their parent charitable foundations transform themselves into cheapskates for a while can work this out.

An indication of general sentiment might be Banco Sabadell's 10% dilution. Placed yesterday at 6% below market, it is currently trading at 3% above placement price.

Core capital for Spanish banks/cajas can be seen at

Interesting to see the outcome of Friday's Germany Spain summit. The Merkel will be schlepping no less than six ministers with her.

February 1, 2011 at 3:21 PM ×

A Scottish tennis player?

Angus Podgorny?

February 1, 2011 at 4:56 PM ×

1. 1250
2. Algeria, perhaps Libya?
3. No
4. No
5. No, China will continue to tighten.
6. No hike, just jawboning.
7. Not sure.
8. No peripheral bond market is a disaster
9. ECB and BoE - no hike this year
10. GS will wear a Fez to work.
11. No Darth Weber.
12. 1.33. DGDF is becoming a danger.
13. Swerve will get a cush directorship.
14. Yes. Loadsamoney...
15. No
16. They will continue to blow each other.
17. Spain is a disaster that must be acknowledged*
18. Nothing will happen in many front ends
19. March, but perhaps even sooner
20. Ireland will eventually reject the Bad Bank solution in which taxpayers bail out bankers and developers and some kind of restructuring will occur. Don't rule out exit from the Euro.

* Charles, I know you think that Spain is going to be OK, but it seems to me that they are taking the Irish Bad Bank route and are simply less far along the road toward the same outcome.

If Spain had their own currency they could follow the same route as the US, Japan, UK, but like Ireland they are locked in, and the cost to taxpayers is crushing. 20-30% long-term unemployment is unsustainable and will strain social order in a country that is not that long removed from the era of fascist dictatorship.

February 1, 2011 at 6:49 PM ×

* I guess you didn't jump on TMM's Ibex/Dax bandwagon then?

I'd love to discuss it, but a different forum would be in order.

February 1, 2011 at 7:53 PM ×

1.Dow 12200
7.three a trend , wait & see
10.Don't care
11.Yeah thats hard, had dow 12200,eu 4000, gu 6500 wti 93-4 same horse different jockey when when were in the home straight,
13.Don't care
14.Did the sun rise this morning?
15.A handful
16.Don't care
18.FAT Chance
19.Techs Dow 12200, teh bonds are the key.
20.Shergar is warming up in the mounting yard.

Now I haven't got any path dependent bias have I?

February 2, 2011 at 1:54 PM ×

Hey Charles,

17....too early to say! Didn't Zapatero want the banks to disclose all their real estate related loan level data to the market place by end of Jan?? No sign of it...

Residental mortgage book of the cajas might be okay due to the strict lending standards but the corpse stinking the place up is at the corporate loan book ie. developer or land backed deals. Sure, they are all in the banking book as you can't reval this properly but you can fool some people sometimes but not the market - hence the cajas haven't been able to fund themselves outside BoS / ECB. That is the key to the problem and until there is a resolution (combination of disclosure, recognition of losses and more capital) nothing will change.

Good news is that although the problem is big (my guess EUR 60bn) it is small enough for the sovereign to fund it.

February 2, 2011 at 2:04 PM ×

predictions are hard, especially about the future as Yogi Berra said. Despite that here goes nothing :

1. 1350
2. No
3. Yes
4. No
5. No
6. No
7. Pass
8. ECB is not buying anymore???
9. BoE!
10. Not long but Goldman is always guilty
11. No, Draghi will
12. 1.33
13. nope
14. Yep. QE3 will be back on cards but in 2012.
15. No
16. Moody is rated???
17. No - see above.
18. no
19. late in Q3 of 2011
20. Huh??

February 2, 2011 at 7:34 PM ×

Tradebot - They all have, except for one small laggard.

Construction NPL's + risky loans about 8% of loan book system wide with the expected big variation from place to place. Provisions around 31%. No comment as to whether it's enough.

Equity-for-debt properties (which are less relevant than you might think) total 68 bn and are 32% provisioned for. Generous, imho.

Here's a table - Tread lightly, though. It's got its faults.

Unnim and Catalunya Caixa will not survive. Caja Duero-EspaƱa is doubtful. And I'd suggest that NovacaixaGalicia's figures be taken with a lump of salt. BBVA has announced they'll be fishing for these types, btw.

February 3, 2011 at 1:41 AM ×

1. 1350
2. Not Saudi, unca sam has given approval for any shit to be stirred there
3. Yes
4. No
5. Yes, especially when Q2 inflation figures are disbelived by the market, starting with China and Jakarta, then Singapore, all these 3 are foot-dragging due to politics; all 3 markets are ready to fall sharp
6. No hike, King is talking the market to believe he is concern abt inflation, that is all he will do in 2011
7. No
8. No
9. ECB, but that will be in 2012
10.Not this time, unca sam first
11. Yes
12. 1.43
13. Huh?
14. hedgies keep forgetting why the Fed and Congress would need QE3 and QE4. How will the US fund its US$1.5tr deficit without monetizing ?
15.Yes, many more days until S&P1350 at least
16. No clue
17. No clue
18. No
19. When China announces Q2 2011 inflation numbers and market is shocked Asian governments from China to Singapore are all still trying to massage their numbers
20. Huh!