{"id":1559,"date":"2012-01-10T17:39:26","date_gmt":"2012-01-10T15:39:26","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=1559"},"modified":"2012-01-10T17:39:26","modified_gmt":"2012-01-10T15:39:26","slug":"el-eurobono-ha-venido-y-nadie-sabe-como-ha-sido-2a-parte","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/el-eurobono-ha-venido-y-nadie-sabe-como-ha-sido-2a-parte\/","title":{"rendered":"The Eurobond has arrived and nobody knows how it happened (Part 2)"},"content":{"rendered":"

\"\"We had already warned of this in the first part of this article<\/a>. It has been a masterstroke, not because it has outmanoeuvred Merkel and her reluctance to let the ECB assume the country risk of the periphery, but because it has squared the circle at a political and pseudo-economic level. It is called LTRO (Long-Term Refinancing Operations). This move is nothing other than the ECB opening the floodgates for European banks to borrow \u20ac (and $) without limit. But the secret of the potion lies in the repayment term, as the funds have been lent on demand, at a ridiculously low rate, but for a whopping three years. That is the key. And consequently, a second round has been announced for February this year, for those who were too slow off the mark to catch the first train to the paradise<\/em> of infinite and cheap liquidity.<\/p>\n

Germany refused to allow the ECB to use the \u2018bazooka\u2019 to buy sovereign debt directly, but with that door closed, liquidity has come in through the back door of the System in the form of long-term funding for the banks. Some are wondering whether European financial institutions will use these endless Long-Term Refinancing Operations to ensure that credit flows to the wider economy (businesses). But nothing could be further from their intention because, as well as causing inflation, this would once again lead to a rise in non-performing loans \u2013 which, given their current situation, is like the devil incarnate. That money will therefore be channelled mainly into the purchase of sovereign debt, as the spreads are very tempting, especially for institutions that, over the past decade, disregarded and underestimated a concept as important as risk, leaving it in the hands of corrupt and incompetent credit rating agencies.<\/p>\n

\"\"<\/p>\n

The move is perfect and ticks all the most pressing boxes: Merkel can take credit for having prevented the ECB from buying peripheral bonds directly; the banking sector is given a lifeline in terms of liquidity; furthermore, these financial institutions are injected with an easy and abundant accounting profit that will allow them, in the medium term, to shore up their balance sheets using these windfall profits; the outlook appears brighter for the banking sector to thus revive lending to businesses; a three-year reprieve is gained in one fell swoop, during which the European financial system is no longer on the brink of collapse, to try to balance the public budgets of the peripheral states; the euro\u2019s exchange rate is being rationally pushed down, given that the ECB remains in charge of offsetting, to a greater or lesser extent, this covert QE; and some other, unmentionable reasons besides.<\/p>\n

Conversely, this move naturally creates a dependency on the ECB\u2019s liquidity amongst the banks. This is because it does nothing to improve the flow of money between banks, which remains at a standstill, with no one trusting anyone else. And let us not forget that a healthy financial system cannot function in the long term without interbank money flows to grease the wheels of the system itself. We are already seeing this dependence take root in the banks\u2019 overnight deposits with the ECB, where record figures have been recorded throughout 2011. This trend has been particularly consistent and sustained since the announcement of the Long-Term Refinancing Operations (LTROs) last December.<\/p>\n

\"\"<\/p>\n

But let\u2019s look on the bright side of this political manoeuvre regarding European finances. It is possible (and this has been the case since the third week of December when the news broke) that this reduction in short-term uncertainty \u2013 or rather, this postponement of the imminent risk of financial collapse \u2013 will lead to a recovery in the markets, at least in the short term. This is because the market is oversold and deeply depressed, but above all because there are already excellent global investment opportunities available at ridiculously low prices. The easing of the imminent prospect of financial collapse is so powerful that it is likely to trigger a moderate market rally in the short term. And only time, political pettiness and the vagaries of the future will tell whether that moderate rally takes hold in the medium term or not. Because, as one of the investment gurus said, we do not know the direction of the next 500 points on the Dow Jones, but what is certain is that the next 10,000 points will be upwards.<\/p>\n

We haven\u2019t emerged from any tunnel yet, but in a way, we\u2019re passing through a stretch where there is at least some visibility. Mr Market cannot yet see the exit right in front of him, but after so many kilometres in pitch darkness, the fact that he can see where he is going beyond the tip of his nose is a good reason for optimism and celebration. And that is evident (or should be evident\u2026) in investors\u2019 portfolios. We must now take in as much oxygen as possible in the form of returns, because there may well be another period ahead where we\u2019ll have to hold our breath. In the meantime, those on the sidelines would do well to take a look at what they\u2019re sitting on.<\/p>","protected":false},"excerpt":{"rendered":"

Ya lo advert\u00edamos en la primera parte de este art\u00edculo. La jugada ha sido magistral, y no por haber enga\u00f1ado a Merkel y su reticencia a que el BCE asuma el riesgo pa\u00eds de la periferia, sino por haber realizado la cuadratura del c\u00edrculo a nivel pol\u00edtico y pseudoecon\u00f3mico. Se llama LTRO (Operaciones de Financiaci\u00f3n […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38,54,51,45,41,42,40,37],"tags":[],"class_list":["post-1559","post","type-post","status-publish","format-standard","hentry","category-actualidad","category-asesoramiento-patrimonial-deportistas-artistas","category-banca","category-asesoramiento-deportistas-artistas","category-economia-y-finanzas","category-estrategia","category-gestion-financiera","category-reflexion"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/1559","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=1559"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/1559\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=1559"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=1559"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=1559"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}