ECB Does a Nick Leeson (Again)!
I’m sure that most of you are familiar with the Nick Leeson story. There was an excellent movie made about it starring Ewan McGreggor.
Basically Leeson made a few, initially small trading mistakes which got out of control and culminated in the multi-billion pound collapse of one of Britian’s oldest and most respected financial institutions. At his lowest point and with losses spiralling out of control, it was all Nick could do to try to artificially prop up a bear market by buying equities in huge quantities. “Never fight the market, Nick”, said one of his wiser colleagues in the pit.
One can only assume that the ECB’s Jean-Claude Trichet must be an avid fan of Mr Leeson’s business model. For this is precisely what the central bank is doing, albeit on a scale that makes Leeson’s losses look like lunch money.
Yes, that’s right the boys and girls at the ECB have been very busy indeed in the markets today. Buying up Spanish and French paper in great quantities (shhhhh, you’re not supposed to know) in a desperate bid to prop up the single currency. It may succeed for a few hours, but this $4T a day market is so liquid that not even JCT can shift it for any meaningful length of time. Now watch and wait, my friends. I suspect it will only be a matter of time before these cowards introduce a fixed ceiling on bond yields. That dedicated Europhile, George Soros is already calling for it. Anything to save their European dream.
Bring it on. Just more opportunities for us to short more of this junk.
Disclosure: FaholoFX has short positions in the EURUSD foreign exchange market.