Careful Maneuvering
Pfäffikon SZ, Switzerland – That we live in remarkable times can be readily determined by reading the daily papers. A Greenpeace manager who travels to work by plane, accountants that go crazy with speculating next to their sobering controlling function and ostensibly sound Dutch housing corporations are suddenly transformed into a vulgar den of speculating thieves. In the mean time the lawyers at Nationale Nederlanden are trying to get rid of the search term ‘woekerpolis’ – a term denoting investment insurance contracts, typically for mortgages, where the supposedly guaranteed payouts are offset by hidden fees – and the interest rate can be brought down some more. The Netherlands hasn’t been able to borrow at rates this cheap since 1517.
Intermittent Progress
In the mean time, one is expected to maneuver through this mess and emerge unscathed. You are aided in this effort by the bank of all banks, the Bank for International Settlements (BIS). The BIS in the Swiss city of Basel is seen as the most powerful bank in the world. What most people don’t know is that the BIS controls the ECB, the Federal Reserve, the IMF and some 80 other central banks. Since May a new chief economist is manning the ship, namely the South Korean Hyun Song Shin. According to this cabal the relative quiet on the international markets is “treacherous”. You’re in for a “painful and very destructive reversal”. I find the timing of these comments, to say the least, unfortunate. Moreover the question is if they’re even correct in their assessment as the ever important American economy has been showing more and more positive macro signals.
Tough Pickle
In the mean time the ECB has a tough pickle on its hands and is forced to carefully operate within the flailing European Union. On one hand bank president Mario Draghi lowers interest rates aiming to effectively force commercial banks to loan out more money to mid and small businesses. However, the ECB and banking regulators are simultaneously putting banks under pressure to strengthen their balance sheets. These are goals that cannot be united. For this reason you may feel doubtful about the latest lubricating tricks on part of Mario Draghi.
Export US/Russia
Lastly a sobering graph on the trade relation with regards to the export between the US and Russia. It will not have escaped your attention that both the EU and the US are threatening Russia with more sanctions. Until now not more has been done than the blocking of a couple of credit cards. Last Friday the EU even set a deadline. But Mr. José Manuel Durão Barroso retracted this deadline – which expired last Sunday – on Tuesday. This comes across as being very amateuristic.
The Russians in the meantime are getting a bit sick of it and are warning for a warm autumn with regards to Ukrainian gas deliveries. The increasingly power hungry European leaders, despite their hefty words, will need to act carefully to bring you, as citizen, in from the cold.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above shares and has no intention of doing so in the next 72 hours.
