We were wondering if anyone was going to try to make a market call on the news that Pope Benedict is resigning/retiring/abdicating.And yes! We found one.
Bill Blaine, who writes a daily Blain’s Morning Porridge note for Mint Partners, argues that the Pope’s departure is bullish for Italian bonds, and Italy in general.
The argument is kind of twisted — and as he admits Dan Brownish — but it basically goes, that the Vatican still has a lot of power in Italy, and if there’s any chaos in Italy post-election, then a new young pope should have the vigor and energy to intervene and stabilise things.
We’re not endorsing the argument. But it is amusing.
And finally to the reason I think BTPs might be less vulnerable to electoral mischance than we fear. I’m thinking the new pope could be a very steadying influence…
Replacing a deeply religious and conservative pope with a more secular player who will be more properly cogent of the Vatican’s perception of its place at the heart of Italy – especially at a time of rudderless politics – solves a number of issues. And the timing could not be better. The month end Italian elections look irretrievably tied and a hopeless coalition is in prospect. And just as Italy wobbles, we’ll see the election of a popularly acclaimed younger pope in early March. Just in time to become a de-facto kingmaker. That may make the prospect of Italian coalition confusion more bearable – and less to panic about. Monti’s showing in the election may be so poor as to rule him out of a future unelected premiership, but others in his circle, like Passera, could find themselves elevated in a future “unity government” brokered by the church. Why does it matter? Should Vatican politics impinge on BTP markets, Italian Stocks or Europe more broadly? Probably a good thing the wilder excesses of Italian politics are contained.. but.. really…
Don’t discount it.. the bottom investment line may be that a messy Italian election could be swiftly corrected through the mediation of the church – buy Italy on electoral dip?