Investment Markets Overview – w/e 25 November 2011

Due to travel commitments, this “week ending” will be truncated.

It was a tough week for stocks as, predictably, the US Congressional “super committee” failed to come up with any deficit reduction plan, whilst in Euro-land, the latest “good news” of Italy’s Monty Python being replaced by Super Monty was over shadowed by the German Euro6BN failed bond auction, which only attracted 3.9BN in bids.

For anyone who finds modern finance difficult to understand, the following may lighten the load:-

It is a slow day in a little Greek Village.

The rain is beating down and the streets are deserted.

Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the tavern.

The tavern owner slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit.

The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything. However, the whole village is now out of debt and looking to the future with a lot more optimism.

And that, Ladies and Gentlemen, is how the bailout package works. Or so the Central Bankers would have us believe.


Next week sees more on housing for the US and for the UK, with the former also releasing November consumer confidence and the latter consumer credit for October plus the UK Chancellor presents his autumn statement. For Japan and the Euro-Zone we await October unemployment data, with the euro-zone also reporting the November consumer confidence situation.


 “The concept of risk free no longer exists.”  UBS CEO, Sergio Ermotti…..Did it ever? 

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