Saturday, 19 November 2011

New Zealand’s spending binge

Guest post by Luke Malpass of the Center for Independent Studies

Most of New Zealand’s general election campaign is (or was) dominated by squabbling over the Crown selling a minority stake in four state-owned assets while ignoring serious issues such as the massive and unsustainable increase in government spending in the past decade.

From 2000 to 2010, government went on an unprecedented spending binge. Core Crown expenditure doubled to $70.5 billion, a real increase of 57%. Government’s core spending leapt from 29% of the economy to 35%, while its overall share of the economy jumped to 45% (actually 49.9% of GDP this year because of the Christchurch earthquake).

A lot of this extra cash went into substantially increasing the size of the big three: health, education and welfare/social security. Other costly additions included Kiwisaver, Working for Families, and a larger public sector.

But what did taxpayers get for all this massive spending?

Not much, particularly in the key indicators of health, education and welfare/social security. Overall benefit rolls have not changed greatly except for a substantial transfer of people from short- to long-term benefit rolls. Educational achievement has remained steady, and while elective surgery has improved in the past couple of years, hospital productivity remains stubbornly low and health indicators have not improved. Moreover, as a proxy for the overall health of society – the very thing that social spending is supposed to improve – crime rates have basically plateaued.

For such a massive increase, New Zealand is not a happier, wealthier or healthier place.

The Key government is facing the same problem as the Cameron government in Britain. Both followed Labour governments that had spent the proceeds of prosperity, and are facing hefty deficits into a future of far less certainty.

However, in Britain, as in New Zealand, neither government seems prepared to grasp the nettle and admit to the substantial problems, some of which have been created by massive and irresponsible increases in government spending.

It would be good to see that discussed on the campaign trail.

Instead of what was talked about over a cup of cold tea.

Luke Malpass is a Policy Analyst with the New Zealand policy unit at The Centre for Independent Studies. His new report, The Decade-long Binge: How Government Squandered Ten Years of Economic Prosperity, was released yesterday.

Friday, 18 November 2011

Temptation is always too much for cops [updated]

Former head of Scotland Yard’s Drug Squad, Eddie Ellison, used to tell new recruits at every induction to look at their colleagues either side of themselves.  "If both of them aren't corrupt in two years,” he'd say, “then you will be."   That was the expected extent of corruption in police Drug Squads, Ellison explained -- the result of a collision between low-paid law enforcement and huge amounts of illicit money. 

The money is the result of the War on Drugs. The corruption of the police is just another example of how the War destroys everything it touches

So it's no surprise to hear that two policemen were part of the group arrested yesterday for running a syndicate said to be the country’s largest supplier of the drug Ecstasy.  No surprise, because however much an erstwhile crime fighter is being paid, it's always far, far less than the amount of money washing around as the result of the War on Drugs.

That's just one reason that law enforcement officers like Ellison are now part of Law Enforcement Against Prohibition.

And ironic that while local police are crowing about this drug bust (which simply opens the market up to this group’s competitors to grab the profits from the much higher prices they can now demand) Eddie Ellison’s colleagues in London are calling for Ecstasy to be downgraded to just being a Class B drug, and the whole War on Drugs to wind down. In fact,

Metropolitan Police Commander Brian Paddick told the MPs that arresting people for possessing ecstasy was a "waste of valuable police resources."

Given his views, one wonders what Commander Paddick would think then about the recent use of New Zealand’s valuable police resources?

Here's Heaven 17.


QUOTE OF THE DAY: Perigo on the media

"Freedom" is too abstract a concept for the retards who occupy positions once held
by journalists. They think it means the right to tape conversations without the
consent of the taped, and the right to spew their inane witterings about nothing ad
Overarchingly they think it means the right to help yourself to the fruits of others'
labour.  Thus the resurgence of socialism and its endless promotion in the media. Key
is popular not because he's anti-socialist (he isn't) but because he's "cool"—i.e. he
speaks as the retard quackers speak, literally, mangling vowels and consonants—and
with the arrested inflections of a five-year-old—and doesn't frighten the morons.

                                        - Lindsay Perigo, "Freedom" and the media


How to shoot yourself in the foot [updated]

Back in April,  I said then what everyone from Chris Trotter to Lindsay Perigo are essentially saying now, i.e.,  that whoever runs in ACT’s anchor seat runs the party, that you can’t credibly present yourself as a liberal fiscally responsible party when you have a big-spending bigot running in your anchor seat, and that as a consequence Brash’s clinical take over of the ACT party

has been poisoned at birth by Don Brash’s bizarre insistence that Minister-of-Rhyming-Slang John Banks be given the post of Act’s anchor in Epsom.

That there was any way anyone thought things might be different, that somehow Banks’s involvement would turn out any other way than it has, just really beggars belief.

UPDATE: Knutz suggests the shot wasn’t through the foot …


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Thursday, 17 November 2011

DOWN TO THE DOCTOR’S: Campaign Trail Report

_McGrath001You can’t keep a good doctor down. Here’s another update from the campaign trail in Doc McGrath’s Wairarapa electorate, where he received 453 votes at the last election.

The Wairarapa election race is “hotting up' as some would say, with 3 candidate meetings on consecutive nights this week.

On Sunday, all six contenders faced off at the Masterton Community Church before a relaxed and courteous forty-strong crowd (yes, courteous!); Monday night was a Greypower-organised encounter in the Masterton Town Hall; Tuesday saw the whole electoral caravan head up to Martinborough, where being wine country we at least had plenty to slake our thirst.

Election meetings in town halls are sparsely attended these days, and I predict next time around most meetings will be held in pubs. As I can attest from the meeting last week in Featherston (and as anyone who has watched Backbenches on TV will tell you) pub meetings are raucous, relaxed (once you've had a beer or two) and a lot of fun. So no wonder they attract a decent sized mobs of spectators—and hecklers. It’s like old-style campaigning on the stump.
Monday night saw us grilled before an audience of about sixty. Former Dompost editor Karl du Fresne sat in the back row taking notes, but sadly he bolted as soon as we finished the meeting.  The Labour Party Muppet Corps were once again in attendance--with a fair share of patsy questions for their candidate—so perhaps the prospect of rubbing shoulders with the muppets during the after-match cup of tea didn't appeal to Karl.
LiberaceMcGrathTuesday night in Martinborough was more sparsely attended, and we lacked local resident Deborah Coddington reporting for the NZ Herald as she did in 2008.  Unfortunately the rather frail looking chairman introduced me as hailing from the Liberace Party! I responded by asking if anyone had a piano I could use. 

Mind you, maybe he was on to something? Liberace was enormously popular with a certain type of punter.
Casting those thoughts aside, I used my allotted time to point out that there were three categories of party on show: the Big Government parties of National, Labour and the Greens; the Wanna-Be reformers of ACT and the Conservatives; and the real reformers - Libertarianz.

To loud applause, I described Epsom candidate John Banks as a bigot, a bully and a millstone around ACT's neck. And John Key’s.

The Conservatives, I noted, seem to want to have it both ways - angling for the Christian vote while not being a Christian political party as such. I challenged local candidate (and best speaker of the evening) Brent Reid on this, and pointed out their policies were still work in progress with less than two weeks before election day.
Speaking on National’s abject inability to spend within their means, I got a promise  in front of the audience (for what it's worth)that National MP John Hayes would resign if New Zealand’s books did not return to surplus by 2015 as his party keeps promising. I reminded the audience that Phil Goff's Greek calculator really belongs to Bill English, and that Bill should cut up his Bank of Athens credit card - the one he flogs to the tune of $80 for every man, woman and child in NZ every week - the profligate spending that the Dipton Double Dipper reckons will result in rampant prosperity within four years.

I'll believe that when I see it. And I bet John Hayes retires from politics in 2014, so he won't have to resign in 2015 when BlueLabour's policies of borrow and spend have their inevitable destructive effect on the economy.
I was reacquainted with a young man in the audience at the last two meetings who I think has a future in local and national politics, with all that implies: Kieran McAnulty from the Labour Party. Still only in his mid 20s, it's only a matter of time before he is offered as a candidate for the Reds. It will be an interesting prospect if we end up crossing swords in the future, as he was a patient of mine in his younger days before he left Wairarapa for university studies.
imageAnd I have to thank Labour candidate Michael Bott for rescuing me from a Rick Perry moment, as I was relating what branches of government would survive a Libertarianz open season on bureaucrats. I had mentioned the Defence Ministry, but do you think I could remember the other two? After a second's pause, Michael chipped in with "Police." I added "Justice," and noted that at least Labour would leave all three alive (though the Clark government nearly starved the Defence Force to death).
At other meetings I've rattled off the three legitimate branches of government in a flash. But funny things can happen when you're at the podium with all eyes fixed on you. Readers should try it some time!
I will miss the final candidate meeting for the week on Thursday, at the RSA in Carterton, to attend the annual Porritt Lecture at Whanganui Hospital instead. A muppet-free evening will make a nice change.
So that’s just my news of the week, readers.  Other Libertarianz candidates are tearing new exhaust holes in the opposition candidates at evening meetings up and down the country, while carrying on their regular paying work during the day. Hopefully this will be reflected in the party vote in nine days time.

But what's more important is that our message of small government is getting out there, our rivals are listening, and they respect us for our principled views--even if they rarely agree that freedom is something to be truly valued; even if they posit (as one candidate did) the bizarre view that a bit of slavery via the income tax system, like a little bit of sewage in the town water supply, is somehow acceptable.
To the other Libz candidates out there: Keep it up guys, and as one of our stalwarts in the 'Naki would say, rev shit out of the bastards!
Once more into the breach, dear friends!
See you next week.
Doc McGrath

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QUOTE OF THE DAY: On voting National #votenz

“If you're happy and you know it, tick National.  If you don't like change and you
thoroughly approve of the
confiscation of private property and the grotesque
mismanagement of Christchurch
since the earthquake, then tick National. 
Frankly if you claim to be pro-business, pro-property rights and small government
and you vote National you're either a fucking hypocrite or a fool.”

                         - Liberty Scott reviewing the parties in the 2011 NZ election

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Wednesday, 16 November 2011

Yes, we do have a class structure in NZ…

… as demonstrated in this two-storey outhouse.


QUOTE OF THE DAY: Nobel Prize winner on minimum wage increases [updated]

_Quote4The inverse relationship between quantity demanded and price is the core
proposition in economic science, which embodies the presupposition that human
choice behavior is sufficiently rational to allow predictions to be made. Just as
no physicist would claim that "water runs uphill," no self-respecting economist
would claim that increases in the minimum wage increase employment.
Such a claim, if seriously advanced, becomes equivalent to a denial that there is
even minimal scientific content in economics, and that, in consequence, economists
can do nothing but write as advocates for ideological interests. Fortunately, only a
handful of economists are willing to throw over the teaching of two centuries; we
have not yet become a bevy of camp-following whores.”

                          - Nobel Prize winner James Buchanan

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Who knew he had integrity?

STUFF: Prime Minister John Key has refused to answer reporter’s questions about the ‘tea tapes’ and stormed out of a press conference in Wellington…

A shame he didn’t do that five days ago when this nonsense first came up.

Says Farrar:

it would be nice if the media actually [asked questions] on policies and how France is about to get downgraded due to its history of deficits and debt.

Yes, it would.

But did he say France?  What about us, David?

Enough hyperbole!

Enough hyperbole! Here’s Gene Callahan on the eviction from Wall Street’s Zuccotti Park last night of the #OccupyWallStreet mob:

Should the protesters have been evicted? I don't know. Did the police sometimes use too much force? Most likely. But is evicting the protesters a "Gestapo" tactic? Only in the most fevered of imaginations. These people were continuously breaking the law for two months. The place was filthy, the protesters were disruptive to neighbors and small businesses in the area, cabs could not pass through lower Manhattan, and so on. After two months of law-breaking, the police came and told them to leave. Only if they refused were they arrested.
That is one really restrained "Gestapo"!

To which I can only add that the protestors were complaining last night about the rights in “their” property being abused, while for the last two months their occupation has taken away the rights of the park owners.

Whatever the veracity of their ideas < cough > < cough >, their consistency is admirable.


“Best practice” = the best excuse for mediocrity

The Dilbert cartoon series is at the bottom end of mediocre. But, very occasionally, it strikes gold:


[HT Julian D]

It inspired me to repost my popular piece on the practice of so called “best practice”:

“Best practice” is bad practice

I DON’T KNOW ABOUT YOU, but I’ve grown heartily sick at the number times I've encountered wankers waffling on about "the importance" of following something called "best practice"—a practice by which everyone in a profession or industry is encouraged to copy the practices of those whom the wankers deem to be “best.”

It’s not just bad grammar, it’s bad for business.

It is, of course, simply a recipe for encouraging mediocrity and box-ticking, discouraging entrepreneurial experimentation and innovation.  For banishing competition and difference. To substitute conformity for innovation, and “conventional wisdom” for independent thought. To establish an establishment.

Until recently, wankers like this were a danger only to themselves and to know-nothings who paid for their advice and could be safely ignored. (Wankers like this always charge for their advice--and the more worthless it is, the more they charge. As Greek philosopher Thales was supposed to have observed around 2,500 years ago, the most difficult thing in the world is to know oneself; the easiest is to give advice to others. The wankers always charge the most for the least.)

But with the government increasingly trying to put every professional's head into one noose--and with the grey ooze of bureaucracy increasingly covering every part of the country, ignoring this stupidity is becoming increasingly difficult. With the onset of compulsory occupational licensing for everyone from drainlayers to financial advisers, pretty soon we will see the elevation of “conventional wisdom” into law, to be ignored only at the risk of expulsion from one’s chosen profession.

“Best practice” is a recipe for the calcification of industry, and the banishment of the very entrepreneurial experimentation that drives production and technology improvements.

JUST IMAGINE IF HENRY FORD had followed these now widespread exhortations to place the practices of others over your own independent judgement. Henry Ford found the automobile a rich man’s toy, and turned it into a possession of everyman. He didn’t do that by following “best practice.” He did it by improving the quality of automobile while improving everything about their production. And he did that by continuously introducing new improvements and reducing costs, even as his rivals began emulating his innovations.

The higher profits, naturally, went to Henry. To the innovator. And the benefits went to everyman. But at no stage could Henry sit back on his haunches and simply do what he had always done. As George Reisman outlines, what drives the new levels of achievement so essential to furthering our lives is not following “best practice” but pursuing bigger profits.

_QuoteWhat was good enough to once make a high rate of profit, ceases to be good enough as soon as enough others are able to do the same thing. In order to go on earning an above-average rate of profit,one must continue to stay ahead of the competition.  By the same token, any business that stands pat is necessarily finished in a free economy, no matter its past successes.
    For the technological advances of any given time are further and further surpassed as time goes on. Think how absurd it would be in virtually any industry to try to make money today by producing with the most advanced, most profitable techniques of 1900, 1940, or even 1980 [or 2000], and not bothering to adapt to the changes that have happened since then [and take them even further]. [Capitalism, pg. 176]

The advocates of “best practice” completely discount the importance of entrepreneurial activity as a driver of excellence—mostly because they don’t understand its importance as the primary driver of all economic activity.

So too do they underestimate the power of profits.

_QuoteIt cannot be stressed too strongly that under the freedom of competition, innovations must be adopted not only to make exceptional profits, but to be able to make any profits whatever. They must be adopted merely to remain in business at all.  This is true because sooner or later, as the result of the freedom of competition, virtually all cost cuts are translated into price cuts, and whoever does not produce with the lowest [possible] methods cannot cover his costs. [Capitalism, pg, 177]

Every producer is always looking for an edge—a means whereby to distinguish themselves from their competitors. Copying them isn’t good enough. What is needed is to beat them.

The constant rule that confronts every businessman every day, in short, is “innovate or die”—just one reason unleashing  entrepreneurs is so important.

But the advocates of “best practice” are down on innovation. They would like instead to substitute  substitute conformity.  And they’re very much down on entrepreneurs.  They would instead much prefer to deal with box-tickers—partly because the box-tickers are more likely to ask for their advice.

NOW ODDLY ENOUGH, I WAS thinking thoughts like this over the summer when I came across an astonishing article in an unlikely source. I was reading a copy of NZ Education Review when I came across an article by Professor Stephen Cummings from Victoria University of Wellington arguing that

_Quotethere’s a move away from copying best practice toward seeing each organisation as a particular and unique collection of capabilities to be developed. You can’t be a leader by following “best practice.”’

Too right.

You can read Professor Cummings’s article here: Facts and fads affect strategic management.

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Tuesday, 15 November 2011

Whangarei event

"Fed up? Can't see the point in voting? Sick of supporting peddlers of big lies and empty promises?" asked Helen Hughes, activist, sculptress, grandmother and Libertarianz candidate for Whangarei.  “Then how about joining me and the growing number of voters who feel let down by their elected representatives.”

As part of her election campaign, Hughes has arranged a meeting for that growing number of dismayed, disheartened and disgruntled voters:

5.30pm Thursday 17 November
Northland Craft Trust pottery room
21 Selwyn Avenue, Whangarei

"I am the only candidate in Whangarei who is standing up for your rights. Libertarianz is the only party in New Zealand consistently advocating freedom and individual rights." said Hughes.

Come along and chat with the the only honest politician you’ll meet in Northland this year.


“Long-term trends in normalized economic disaster losses cannot be reliably attributed to natural or anthropogenic climate change”– IPCC

Despite the fears and, (let’s be honest, in some circles there are hopes) that extreme weather events worldwide in recent years have been due to man-made climate change, the UN/IPPCC’s latest report says, um, well …

… the human and financial toll of extreme weather events has risen. But the academic consensus [on the alleged link between extreme weather events and man’s activities] is far less certain.
    There is “low confidence” [summarises
BBC science reporter Richard Black] that tropical cyclones have become more frequent, “limited-to-medium evidence available” to assess whether climatic factors have changed the frequency of floods, and “low confidence” on a global scale even on whether the frequency has risen or fallen.
In terms of attribution of trends to rising greenhouse gas concentrations, the uncertainties continue.
    While it is “likely” that anthropogenic influences are behind the changes in cold days and warm days, there is only “medium confidence” that they are behind changes in extreme rainfall events, and “low confidence” in attributing any changes in tropical cyclone activity to greenhouse gas emissions or anything else humanity has done…

So the hypothesis that man’s activities have caused recent extreme weather events has (take your pick) “low confidence,” “medium confidence,” or has only “limited-to-medium evidence available.”  And this is the draft of UN/IPCC’s next report talking, which is, says the BBC,

explicit in laying out that the rise in impacts we’ve seen from extreme weather events cannot be laid at the door of greenhouse gas emissions: “Increasing exposure of people and economic assets is the major cause of the long-term changes in economic disaster losses (high confidence).

Or to summarise, as the UN/IPCC does:

“Long-term trends in normalized economic disaster losses cannot be reliably attributed to natural or anthropogenic climate change.”

You can’t really get more explicit than that.

And for warmists seeking evidence on which to base their cries for urgent government action to ban private activities, it just gets worse:

And for the future, the draft gives even less succour to those seeking here a new mandate for urgent action on greenhouse gas emissions, declaring: “Uncertainty in the sign of projected changes in climate extremes over the coming two to three decades is relatively large because climate change signals are expected to be relatively small compared to natural climate variability.”

Which is to say that we do know the climate is always and has always been changing. But we don’t know, and likely can’t know, if it we made it happen.

[HT Andrew Bolt]


QUOTE OF THE DAY: “Embrace default”!

_QuoteWhat good do these economists expect to come out of European Central
Bank debt monetization?
Do they really believe that once the ECB has committed itself to buying hundreds
of billions worth of Italian government bonds in order to manipulate the yield on
these bonds – against market forces – down to what the political class deems
sustainable, let’s say 5 percent, that Italian politicians will then reform public
finances in the country, that they will quickly bring down deficits and the debt load
to sustainable levels, at which point Italy can borrow from the market again, the
ECB can safely sell its bonds and reduce its balance sheet, and everybody lives
happily ever after?
    Does anybody seriously suggest that this scenario is likely, probable or even
    Fact is that none of these governments can be trusted to bring their finances
under control as long as they have access to cheap credit.. .
    “Quantitative easing” in Japan, the United States, and the United Kingdom goes
hand in hand with growing debt, not debt reduction.
Providing a lender-of-last-resort and easy money and cheap credit to governments
does not lead to deleveraging but to the opposite. Only default and cutting off a
government from additional borrowing will reform the government.
    That is why I say:
Embrace default!

                - Detlev Schlicter, “Infinite Stupidity

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“Lose a Shirt, But Gain a Wardrobe”

As Silvio Berlusconi leaves office, brought down in the end not by his own petard but by his government’s penchant for spending money they don’t have, guest writer Kris Sayce from Money Morning Australia gives some perspective to the “infinite stupidity” on display as European politicians and banksters embark on what is “ultimately a sure road to complete economic destruction”: the monetisation of exploding government debt.

* * * *

“U.S. stocks slumped, driving the Standard & Poor’s 500 Index to its biggest
decline since August, amid concern that European leaders may be
unable to keep the euro zone intact as Italian yields surged to a record…”
                                – Bloomberg News

Europe’s problems shouldn’t be a surprise.

The big news now is the Italian 10-year bonds. Yields last week reached the highest level since the creation of the euro currency in 1999. The cost for Italy to issue debt hit 7.25% [the level that prompted Greece, Ireland and Portugal to seek bailouts], before falling back overnight to 6.29%.  They won’t stay there.

The chart below shows the six-month progress of the Italian 10-year bond. The red square is where the yield stood after last week’s move:

six-month progress of the Italian 10-year bondClick here to enlarge
Source: Bloomberg

But don’t panic. European leaders are still trying to come up with a plan… oh, hang on, maybe you should panic.

Let’s show you why…

Italy to Follow Greece?

So you can see why Italy’s yield action could be just the beginning of its problems. Take a look at the chart below of Greek government 10-year bonds:

Greek 10-year bondsClick here to enlarge
Source: Bloomberg

Those bond yields hit 7% in April 2010.

A few weeks later, after bond yields had soared above 10%, the market cheered. The Independent newspaper reported:

“Global markets surged in relief yesterday at the €720bn (£616bn) Eurozone stabilisation package put together to allay fears of contagion from the Greek sovereign debt crisis…
“Greek 10-year bond yields fell by 499 basis points [4.99 percentage points] and two-year yields fell by a record 1,327 basis points [13.27 percentage points] as panic about the restructuring deal receded.”

The joy didn’t last long. Nineteen months later and the Greek 10-year bond yield hit 30%… and two-year bond yields are now 107%! So much for the “Eurozone stabilisation package”.

Which brings us back to yesterday’s post at Money Morning Australia:

“The markets love the latest non-event from Italy. But the excitement will soon wear off and the market will fall. Then we’ll get another non-event… which the market will love… until that wears off too.”

We’ll repeat: the market is so volatile you can’t just pin your flag to the bullish or bearish side of the market…

You’ve got to play both sides.

Let’s get something straight. Of course Italy will need a bailout…

The only thing that’s not certain is how they’ll do it…

Stabbing Investors in the Back – Again!

Will it be a Greek-style default? Or will it be U.S.-style money printing? It’s the difference between being honest (default) or deceitful (money printing)…

Put another way, will they stab investors in the chest or in the back?

Neither is pleasant. But at least you’ve got a better chance of defending yourself if you know what’s coming.

It’s also important to remember the real criminals in this – governments, central banks, bankers and progressives – will look for a scapegoat to shift the blame.

Rather than admit the European debt problem is due to failed economic, financial and political systems, they’ll pin the blame on so-called bond vigilantes.

This is a term for investors who look to profit from falling bond prices. They’ll claim nations are being punished by bond traders who unfairly push bond yields too high by selling or short selling bonds.

(When bond prices go up, bond yields go down and vice versa.)

In reality, bond traders are just taking a position in the market. And don’t forget, for every seller, there’s a buyer.

What’s more, short-sellers provide a useful service to the market. They warn other investors of potential problems. Using Greece as an example again, in early 2010 commentators and investors pinned Greece’s debt problem on bond vigilantes.

At the time, Greek finance minister, George Papaconstantinou told a press conference:

“A number of people have been betting in certain ways [on a Greek default and debt restructuring]. All I can say is they will lose their shirts. I want to categorically restate that any notion of restructuring is off the table for the Greek government.”

He was right. Some short-term traders probably did lose their shirts.Business Insider noted at the time, “Greece’s ten year bond yield has collapsed a remarkable 47% to 6.6% from 12.4% (as bonds surged) just before Europe’s new bailout fund was announced…”

But the traders who kept short-selling Greek debt gained a whole new wardrobe. As the chart before shows it didn’t take long for yields to climb. And short sellers could have pocketed a 354% plus gain as Greek bond prices collapsed.

More Trouble Ahead

Could the same happen to Italy?

It’s possible. The consensus is Italy’s debt is too big to be bailed out… and it’s probably too big for a Greek-style restructuring.

That tells us you’re more likely to see something underhanded (a stab in the back for investors). But, as always, we’re not saying Italian bond yields will keep climbing in a straight line from here.

As with Greece, we’re sure European leaders will give investors plenty of false hope. Just make sure you don’t fall for the spin.

Because, if you only buy stocks because you think they look cheap, you’re taking a much bigger risk than investors who supplement their buying by selling and short selling stocks.

The market rallied recently because investors foolishly thought European politicians and bureaucrats could solve the problem. As we’ve said all along, the very involvement of politicians and bureaucrats is a sure sign the problem won’t be solved…

In fact, it’s only likely to get worse.


PS: Just for clarification, the interest rate or yield on a bond tends to go up as the price of the bond goes down. Which means as demand for a bond collapses, the interest rate paid by the bond issuer goes through the roof. And when the bond issuer is sitting in a sea of IOUs, that can get very unsustainable very, very quickly.

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Monday, 14 November 2011

Don't care

Am I the only one who couldn't care less what the Prime Minister and the Minister of Rhyming Slang said to each other over their well orchestrated and very public cup of tea last Friday?

It seems so.