ECB + LTRO = Mr. Creosote?

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.



HOLLAND:- And... we... have... a... domestic issue to cope with.


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]

[Creeek ...... Kaaa............Booooommm]

MAITRE D: Thank you, sir, and now, here's ze check.
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Click here for comments
February 29, 2012 at 12:33 AM ×

Good grief I thought I was seeing double only the other night at a seven course dinner in aid of local rugby club tour funds, when I had to squeeeeze past the bloke who was supervising the 15 year-old cooks in the kitchen.

Finally, a scrum half served us with more waffer thin mints than you could throw a pineapple at.

Ta for a good giggle Pol ;)

February 29, 2012 at 12:56 AM ×

That was completely effing hilarious, Mr P. Especially as I had just laid my L-TRO bets. Is volatility going to remain in the teens for ever and ever - in the best of all possible worlds? We think not.

Hope I am not dropping El Trou tomorrow....

February 29, 2012 at 7:33 AM ×

Gasoline prices tend to act negatively on consumer confidence with a 1 month lag, while the stock market is coincidental. Unless gasoline prices ease / stock markets climb further we should see a downward move next month.


February 29, 2012 at 12:12 PM ×

The ECB can't explode like Mr. Creosote. The power of the Sovereign to print money is infinite. The better analogy is the ECB as embalmer. They take those toxicly priced and dead assets, put them into embalming fluid, and entomb them forever.

February 29, 2012 at 1:25 PM ×

"print money is infinite"

In theory only. In practice the upper limits are bound as we have seen before by the ability of the wider society to absorb the inflationary implications. Hence, it depends on scale and the formation of the society ,or shall we say how it's economy is put together and where the weaknesses are and where the stress will impact.

February 29, 2012 at 3:51 PM ×

Gold and silver Selling the News. Thin markets always respond to less liquidity first....

Bloody hell, full scale meltdown for the bugs.... just dropped another $15 while I was typing!

Did Bernanke say "we believe in a strong dollar" or something? ROTFLMAO.

Complacency seems to be retreating. Volatility may have been under-priced.....

abee crombie
March 1, 2012 at 3:04 PM ×

isnt this how the sell off started last year... chicago ism record high, Non manufacturing missing, ECRI ringing the bell and oil at 125..

maybe I am just looking for arguments on the short side..