Sunday 7 December 2014

ABS From Me to the ECB

Well I read the events of last Thursday very wrong. By the end of the day there was nothing to make me think that Europe was a better place to be than when the sun had risen that morning, so I trimmed my European equity holdings and saw them frustratingly rally. I still can't see the attraction but it hasn’t taken long for the market curve of QE expectation to steepen out of sight. The chances of immediate QE may have fallen to zero but the expectations of QE in January or February had gone stratospheric. This compression of all hopes into a single day payoff has Draghi’s next meeting much like the final visit from the Kray Twin’s or Corleone's debt collectors. No more excuses. If he doesn’t pay up there's going to be blood not only on the streets but up the walls and on the ceiling. However, for now, European assets have gone QEtatsic. 

I'm beginning to feel very sorry for the ECB. The EU has kitchen sinked them with having to solve all the problems that the structure and fiscal impositions of member states are creating. The poor ECB is expected to administer aspirin to the obese smoker EU patient without the EU giving up any of their vices. The only effort the EU are contributing towards their own recovery is homeopathic. My original concern that the €21bio they are putting up as loan guarantees is not enough has been heightened further by this article by Frances Coppola that drills down further  to identify that in fact NO new money is being allocated with the €21bio just being redirect from other stimulatory measures. So as with other homeopathic remedies, the active ingredient is being diluted beyond detectability and the remedy only contains the memory of stimulus.

But back to the poor old ECB. They have said that all assets have been up for consideration as QEable, except gold, which had me thinking just how far they could go and rather than dithering along the credit path to buying junk they should they just get on and buy it. But not just financial junk as that is soooo discriminatory towards those who don't own it. With this egalitarian ethos in mind I have drawn up a list of things the ECB could consider for QE that puts money straight into the pockets of the average public end-user without it being first syphoned off by banks, large corporates or asset rich grandees. 

So lets see what we have here, ah here we go -

- The gordian knot of tanged wires associated with chargers of long lost electrical devices in the plastic bag in the study, 

- The pile of housekeeping and cookery magazines that a member of the family resolutely refuses to throw away. 

- The special peculiar shaped bits of metal in a box in the garage belonging to power tools from bygone eras. 

- The half rusting and nearly broken gardening tools in a cobwebby mess in the garden shed together with broken hose attachments. 

- The old suitcase of CDs, DVDs and VHS tapes. 

- The shelf of bottles of multicoloured fluids associated with cleaning and maintaining various vehicles, past and present. 

- Shelf upon shelf of half used pots, tubs and tins of semi-set or leaking paints and decorating materials in the garage.

- All the miniature sized equivalents in the bathroom branded as ‘makeup'.

- The collection of all things bicycle. Yards of rubber tubing, bits of plastic that no longer clip on things, pumps that don’t fit current valves, Lights that batteries no longer fit and digital displays that long ago forgot what they were meant to display. 

- The massive box of clanky crockery stuff, old plates and china ornaments that is certainly not displayable but may come in handy for the kids one day or a charity shop. 

- The crate of plastic things that the kids used to play with for 3 minutes after Christmas before discarding for new bits of plastic.

- And finally the man drawer contents of batteries, bits of string, bloomberg fingerprint readers, radiator keys, solid superglue, broken torches, lighters, airgun pellets, micro-screwdriver kits missing the fittings most often needed and ticket stubs to matches and concerts once considered life changing.

Of course should all of the above not be considered of good enough credit they could be repackaged into a large skip as Asset Backed Securities and delivered to the ECB in exchange for cash under their current program

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