Today was dominated by the news that Germany planned to institute an emergency naked short-selling ban, a move that sent the euro and the stock market into a tailspin.Of course, this is not the first time German leaders have deserved finger-pointing.
It was the fault of Angela Merkel that the Greece crisis was allowed to metastasize, feeding on her no-bailout bluff.
The sharpest take comes from BTIG’s Mike O’Rourke, who sees political incompetence being taken to an art:
Over the past several months, (Finance Minister Wolfgang) Schaeuble has demonstrated an uncanny ability to send both the Euro and the Equity markets swooning. Evidently, Schaeuble is not fond of those Sunday night announcements that were commonplace here in the U.S. in the fall of 2008. You know, the ones designed to be made while all markets were still closed so investors had the opportunity to digest the news. To top it all off, nearly 3 hours after spooking the markets and sending the Euro to a new 4 year low, Schaeuble try to reassure markets that the Euro is a “stable” currency. All in a day’s work.
Whether one agrees or disagrees with the methods of Paulson, Bernanke and Geithner in late 2008, most would likely agree that they were well intentioned. When it comes to Merkel and Schauble of Germany and their perpetual fumbling through this crisis, it is hard to say the same. But there has been a lone beneficiary to their continued foibles, German exporters. Interestingly, last night we noted the biggest beneficiary of the weakened Euro is Germany, but in the same respect, they would be the biggest loser if the Euro were to be dissolved, which is why Sarkozy’s threat to pull out of the Euro (if true) would have been so impactful.
If you’re bearish on Europe, perhaps there’s a bigger opportunity than merely shorting the euro (like everyone else is).
From our perspective the fact that markets are placing so much faith in German bunds is misguided. The leadership there is either inept or malicious, and neither is good in the long run for Germany. Those bunds may be a better short than Euro. Wait – you can’t do that anymore.