Rule Britannia

The US market ended the year just above positive, whilst all other equity markets sank. I am not going to go back over the reasons, which have been well explained here. I think.

Sovereign bond markets, of those countries thought stable, did exceptionally well, even though buyers were condemning themselves to certain long term losses. As mentioned previously, the ECB lent the thick end of 500 billion Euros to banks before Christmas, collateralised against stuff that most would consider “sub prime”. Indeed some of these banks have returned to the font for overnight money since then.

 Markets begin 2012 on the front foot

But a change in the year makes all the difference; on Tuesday, the FTSE 100 index rose 2.29%, the second best day since records began in 1984. Germany and America also saw massive relative gains. The omens are quite positive from these sort of movements, and no one would deny that equities are “cheap” on an historical basis, or that sovereign debt, (in the US, UK and Germany), is “expensive”.

But has anything actually changed?

I don’t see that any of the fundamentals that we were grappling with through the second half of last year have changed. Indeed, the economic position of the “default” countries in Europe has worsened – significantly.

Well, the Euro is weakening…

Currency movements will help; the Euro weakening considerably against both the Dollar, and Sterling, in the last few days. Not much consolation for those who have had to abandon the slopes, due to an excess of snow, but a helpful rebalancing of relative trade.

It is therefore a happier start to the year, and we would all welcome that.

 But there are new dangers looming…

For our part, we remain cautious; there are so many things that could go wrong, not least the threat by the Iranians to block the Strait of Hormuz. Last year, a third of global oil shipments passed through this 4 mile wide channel. For sure, the Americans would have this problem – and the rest of Iran – sorted in days, but markets don’t need that kind of uncertainty. The UK is to be right there also, notwithstanding that we have yet to recover the two rubber dinghies confiscated from us, by them, last time.

Anyway, we can but observe, and it will be what it will. Unless you do something about it.

Olympic wrestling in Scotland?

Thus, I was amused to see that residents of Edinburgh have, effectively, vetoed attempts by the Olympic logo committee to have the five rings mounted on Edinburgh Castle as a promotional stunt, at a mere cost of £200,000. It is not obvious where the money was coming from or why it would benefit Edinburgh at all, but the committee still maintains that the relevant authorities encouraged them to think along these lines, and they will be seeking an alternative location, nearby.

 And finally…

It is, of course, a total coincidence, but as the Royal Yacht Britannia was moved from her berth in nearby Leith this morning, for the first time in 15 years, she started taking on water and listing to Starboard.  Oddly, this exactly mirrors the rise and fall of New Labour, but I know not whether this is correlated, inversely, negatively, causal, or happenchance.

The comments are to reopen for a couple of weeks, and then we are to kick off with a new website, apparently. We do appreciate your feedback, however it is delivered.

CDO

6^th January, 2012