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Patrick L Young Newsletter The Frontier Financier - Prologue

 

Prologue

 

005

Shock and D'Oh!


"As a German citizen, I wish to apologise for the stupidity of my government...The European market is likely to become utterly dysfunctional. Just as the market showed signs of stabilisation with real money starting to buy euros, the Germans have destroyed this glimmer of hope. The BaFin ban is a desperate political move by a government battling for survival. Angela Merkel needs the support of the Left so she has given in to a witch-hunt against banks and speculators."

- Hans Redeker, BNP Paribas.


Dear <<First Name>>,

The problem with governments is that no sooner do you get rid of truly incompetent political specimens than others rapidly fill the void. In this case a cross border swap has been effected. The British have got rid of 'Stockholm syndrome' Brown's NuLab and replaced it with a coalition of currently indeterminate governing ability. Meanwhile, the Trojan horse of bad government has been Angela Merkel (various other EU leaders have ruled themselves out by dint of being purely ridiculous). In the wake of making things worse through fiddling while Athens burns, she has now awoken with a panic attack to discover recent weeks weren't in fact a bad dream. They are , however, a very real world nightmare. Jeremy Warner in the London Daily Telegraph notes:

"The German financial regulator may not understand much about financial markets, but its head, Jochen Sanio, is surely smart enough to see that there is no practical way of banning short selling. Even if you succeed in blocking the most obvious way of doing it, there are a myriad of alternatives traders have to choose from that achieve the same result."

The problem with this prescription is that actually, having met Sanio, I am really not sure that behind a wall of elegantly defined hubris, he actually understood as much about financial markets as one might expect from a man in his position. Merkel has demonstrated the absolute worst of populist stupidity. When faced with a brilliant way to please the German electorate and demonstrate fiscal responsibility, she has instead succumbed to bailing out Greece, a fiscally dysfunctional state. Now, like other political folk bereft of any form of financial understanding, she has reverted to blaming the markets when the world's financiers have quite coherently sensed her incompetence as panic.

First there was Sarkozy's table banging "Shock and Awe!" (trickily not supported by the US Senate) and then Merkel came up with a second manoeuvre that could be best described as "Shock and D'oh!"

I define it as one of those, "Am I missing something here?" moments. The EU have (understandably) trumpeted the nascent successes of MifiD, an initiative which has transformed cross-border trading. Now the German Chancellor has panicked because she has lost control of her political agenda and so she starts attacking round the edges of the Mifid her government applauds! Quite reasonably the sharks are circling as her grasp on power is tenuous.

Ultimately, the history books may record that the leaders of France and Germany did more damage to the idea of European unity through their actions driven by hell-bent Euro-philia, bereft of pragmatism, perspective or practical understanding of finance. While I suspect the EU will survive, the ridiculous issue is that poor political actions have now added up to the point where the collapse of the Euro and even the EU itself are credibly on the agenda. They may still be somewhere along the 'long tail' of risk but on the agenda they are. The tragedy is that the politicians are behaving like an angry mob and their blanket criticism of pragmatic financiers is being used to try to shore up precarious government. Meanwhile pragmatic traders are trying to protect their investors' funds against a background of dismal government and ironically the angry mob in Germany is merely requesting sensible measures of fiscal rectitude such as people taking responsibility for their own actions!

The tragedy is that the political classes have repeatedly rushed to discredit the markets' forewarning of the impending Euro-crunch that is now unravelling all around us. We are sitting on the brink of a truly major eruption, even before we get back to considering those largely forgotten Icelandic volcanoes.

Ultimately, markets do not lie. However, politicians do. Shamelessly.

Best wishes,

Patrick

Patrick L Young
patrick@derivativesvision.com


 


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It’s summer so I am at home in Monaco but thanks to a lack of political leadership in Europe, there have been ample opportunities to speak with the media. For my most recent videos from RT News channel, have a look on my newly revamped web site: www.patricklyoung.net.
 
Various projects are in the works currently with more news to come!

In the Media



Current Projects

I'm hard at work on the final edits of a book for charity with contributions from a welter of serious hedge fund maangers, analysts and pundits...more news to follow soon!

Several new start-up exchange ventures are on my desk while various publsihing ventures are also nearing fruition!


Travel Plans

Various destinations in Europe likely during September including London.

About This Newsletter

Patrick L Young is the author of several financial market books such as "Capital Market Revolution!" and

"The Exchange Manifesto" His Op Eds have been published in most of the world's leading financial media such as the Financial Times and Wall Street Journal while he has appeared frequently on BBC,CNBC, CNN and other digital media throughout the world.

My expertise is, (in no particular order!) exchanges, derivatives, market infrastructure and financial centres, as well as emerging markets. I can claim modest provenance as an early adopter on the web, having published various online magazines along with other WWW ventures since 1995. Nowadays I enjoy a varied portfolio of advisory work (most notably for investors in exchanges) but along the way I have done just about everything from multiple financial start-ups through to advising government and other stakeholders in financial centres the world over. I also indulge in some  entrepreneurial projects too. After more than 20 years in finance some folk might think I am due a spot of remission for good behaviour. I think it is clear from this bulletin, my passion for markets remains as keen as ever!

 

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