Submitted by Mark J. Grant, author of Out of the Box,
The world is a disparate place these days. It is dislocated. Central bank money buoying all of the markets; equities, debt, commodities while the underlying economies languish or dissipate. Month after month the division widens while even a slight whisper that the monetary creation might cease or falter hits the markets hard and then the leaders of the central banks assure everyone that it will go on ad infinitum and the markets all bounce back and begin to breathe again. The markets might be characterized as “Pucker and Sigh.” “Over the Rainbow” plays on non-stop in the media and those of us with a more skeptical eye are long past “If” and on to the “When.”
I am watching the situation in Cypress with care. It is not the amount of money nor the money laundering issue which holds my attention but the recent statements that the Cypress solution might involve tagging bondholders and depositors. Now the markets have short memories and are often played as either speculators or evil-doers by the Europeans but I remember what they said. “Never again” was their mantra and if they tag these two groups then they are liars; simple as that. Then if they engage in these tactics we shall all know, with assurance, that they do not keep their word and if it can happen in Greece and then Cypress; it can happen in any country on the Continent and so the value of the bonds of the European Union must decline against American ones as a matter of trust. I watch and wait.
My other current focus is Italy. This is decidedly not politics as usual and if new elections are called then I think Mr. Grillo’s hand strengthens. Much is bandied about to try to make fun of this fellow and depreciate him but I am not in that camp. I have great respect for what he has accomplished and what he is trying to do and the buffoon image, projected by many, is not appropriate for what he actually is or is trying to do. It is not that I agree with all his positions but I do applaud a man that stands up and fights for what he believes and will not get co-opted by an Italian system and an EU that is trying their best to do just that. Beppe Grillo has earned my respect and I state that publicly.
Do not discount the discussion of Currency Wars as a minor affair. It is happening and will continue to happen because it is the easiest way out and, therefore, the way that will be taken. The central banks will lie to us, lie to each other, and lie to their own citizens but they will continue. The other way out of our current malaise would be Inflation but that game carries too much hair for the participants so it will be a game of currencies as the bright boys on the back benches try to figure out how to get them to all decline at once. You see if the Dollar was worth eighty cents and the Euro ninety cents that it would all be better. How this is accomplished, how the sleight of hand is played, will be interesting to watch because it will certainly be tried before this is all over.
I watch the “Bank Bonus” issue with some sadness. I have not commented upon it before because it seemed like a trivial pursuit but a more expansive view has changed my mind. There was a time when Wall Street was an opportunity for many, coming from little town or little country nowhere, to better their positions. These rank-and-file people were not banksters or fraudsters or all of the other words appended to people on Wall Street these days but just normal guys trying to make their way. If you could get in the door then you could get as far as you could by standing on your own two feet and fighting the good fight. Now, if things go the way that politics is demanding, Wall Street will be left with the mediocre, the also-rans and the mundane. The best and brightest are already wandering off into other pursuits and it is an unnecessary solution and a wrong solution for the problems. I am hopeful that innovation, re-invention, will emerge and change things because if not; the Days of Wine and Roses will be gone and New York and London will much the worse for it.
Mark J. Grant is Managing Director of Corporate Syndicate and Structured Products for Southwest Securities, Inc.
