Wednesday, 2 November 2011

Let It Go!

The chart above is the 1 year yield of the Greek Government Bond.
Well the market believes it should default, or other nasty things... yet european politics seem confident they can resolve the problem.

Are the Greek issues a Lehman Brothers in the making? a predictable black swan?

12 comments:

Anonymous said...

Wow, a Trojan Horse for the Euro Zone... Who sent them?

HousingFinland said...

If I was to devise a "conspiration" type theory , I will put the following possibility:

1- A set up by European politicians to force the ECB, being an independent institution, to monetize governments debt - something that the ECB should not do as a guarantor of price stability.

2- The ECB response to the FED Lehman strategy - Black swan in the making.

3- The ECB strategy to weaken the euro zone in order to reduce investment flow due to high liquidity and uncertain environment in the US. The object if being to limit inflation in the Euro zone.

etc...

Andrew said...

I dont think we can say that the ECB is an independant institution. It is owned by the member country central banks. It would be hard to believe that France and Germany do not control their central banks. However nobody can believe that buying Italian and others bonds while Italy and co refuse to face realities can be a good idea. France too has to face realities. Even the Germans have a high debt to GDP ratio.

The only certainty in all of this is fairly solid inflation no matter what happens.

Andrew said...

The number of detached houses for sale in the Helsinki region remains higher at 160, compared to 110-125 in the previous two years for early november. This years summer peak was 181 compared to about 155-160 in previous two years. This years winter low was about 90-95. Plenty of job losses coming thru too. On the other hand mortgages just got cheaper.

HousingFinland said...

Hi Andrew,

Regarding the job losses - I think the impact will be felt next year after summer.

On top of that, let see how everything will unfold... the unresolved sovereign debt crisis keep on showing week after week alarming development. So far bandages have been put without really curing the root cause.

Regarding the stock of housing, your statistics refers to what is currently advertise in housing portals such as oikotie or etuovi i guess - not all new housing are advertised there...sometime those are only teasers where the full stock is found in the builder web site only.

All I can see, is the amount of unsold apartment or housing that keep growing and at the same time they keep on building.

In addition, In my area they have and are building so many offices you wonder what happen to the older one or maybe we are experiencing so big economical growth the companies need to expand so much :-) - i doubt. The office real estate is very bubbly - I wonder if it is a characteristics to housing bubble in general always preceded by a office building bubble.....

Andrew said...

http://www.bloomberg.com/news/2011-11-09/
sweden-prime-minister
-proving-tough-love-
of-banks-a-model
-for-debt-crisis.html

HousingFinland said...

I think it is a political argumentation more anything else. I remember at the peak of the crisis, Nordea was collapsing, its share price went to 2 Euro before having recourse to external capitalization (where Sampo stepped in...).

I think it is too early to start glossing as the real crisis has not yet deliver its ugly face. Since so far things have been patched each time a leak was found, and it continues until you can patch. I think we are not far from that moment - give 6 month to 18 month.

Then I will check the situation with Sweden and the nordics.

So far it is the South that is readjusting - when readjusted money will start flowing in those area - give it 24-48 months...

Andrew said...

The Swedish government sold a large stake in Nordea and Sampo bought about one fifth of the available shares?

Buying shares does not recapitalise a bank. Was Nordea otherwise recapitalised?

As I recall all the banks were down at that point rather than just Nordea.

Andrew said...

So it appears the ECB are actively managing bond yields and there is some kind of carrot and stick process at work where capitalists are attempting to force labour reforms. But to what extent will we also see punishment and reform of capital practices? In what way will what happens be seen as fair and therefore likely to be successful?

Europe to go into a recession? Expect lower ECB rates, more government spending and continuing ECB support.

Andrew said...

Interesting times. Hopefully not coming to a town near us.

http://www.youtube.com/watch?

v=WO4406KJQMc&feature=related

HousingFinland said...

Thanks Andrew.

Strangely and disturbingly the same thing happen in France where a peaceful demonstration (family and child participating), the police used similar spray in a very aggressive manner when the crowd did do anything...

Otherwise I have been busy and no time to answer...nevertheless lots of thing are happening and are quite worrying in term of what next will happen to the European and global economy...

Have a look in the last post I made, it highlight one aspects...

Freight Forwarders said...

We pride ourselves with humility that we contribute to the success of our customers.
Air Freight