Good morning

The headlines:

  1. France “on track”.

    Link: hmmm.

    The French minister of finance believes that the French Government is on track to reach its 0.8% growth rate for 2013. For the record, growth rates at this level of magnitude always make me think of a political party saying “we’ll have done well if we manage to keep the status quo as the status quo”.

    I personally think that this is unlikely. Higher tax rates and austerity do not a short-term growth equation make. Especially tax rates that target the super-wealthy and get tossed out by Constitutional Councils.

    Rather, the adjustment will be painful. And France will lose Virgin Megastores and, possibly, FNAC. I think that France will be lucky if she manages to not contract.

  2. US deposits.

    Link: where do I put my money?

    January was a good month for mutual funds, as American individuals placed record amounts of money into them. Analysts are using phrases like: “the biggest month on record for deposits”, and “when we got beyond the fiscal cliff it unlocked a lot of money”.

    Why this is interesting: apart from the fact that the Fiscal Cliff has only really been delayed until April, it’s interesting because we are seeing the stock market buoyant on the influx of the funds. That is: almost nothing to do with the underlying companies, and everything to do with general jubilation.

    And, of course, the policy is self-fulfilling; because as the deposits grow, there is more money chasing the same volume of stocks, which drives up stock prices, which makes everyone more jubilant, which makes for more deposit growth.

    Until someone has an accident. Possibly, in April.

    And it all begins to make Marc Faber look like a prophet.

  3. Berlusconi.

    Link: I cannot believe the levels of douchery.

    Silvio Berlusconi, that cat with 900 million lives, is on the campaign trail and narrowing margins. And this weekend’s announcement was a promise to abolish the Italian property tax implemented by the Monti government, and refund the tax collected last year.

    He is also promising economic stimulus and fighting for easing of EU budget restrictions.

    My question (and the real problem): “with what money, signore?”

    Will the investor public just lend you money to reimburse taxes? Never!*

    Monti’s response: “Berlusconi never kept a promise, Italians have a good memory.”

    The problem with relying on that premise: legitimising tax evasion is attractive-sounding for people that want a refund. And if the option is between voting for a guy who may give you a tax refund (but probably won’t), and voting for the guy that definitely won’t give you a tax refund… Well then who cares about economic reality, right? It’s the economic Dumb & Dumber version of: “What are my chances? One in a million. So you’re saying… that there’s a CHANCE!”

    *I know – never say “never!” It may come back to bite.

That’s all for now.

Have a good day.