China to buy Italian debt: So what?
Italy. I’ve never been there but after seeing a gazillion of their talk shows, I know I’ll love the place.
It’s the birthplace of Ferrari, Lamborghini, and Monica Bellucci. They have beautiful towns all the way from Anacapri to Zugliano. They have women in the latest slutwear
(link slightly NSFW), and they arguably have the only Prime Minister you’ll think of hanging out with.They also have one of the shittiest economies in the world, so why did stocks rally when they opened up talks with the Chinese?
It amazes me sometimes how the bulls on hopium operate. If you’ve followed the PIIGS at any level, you’ll know that a couple things are pretty clear: their economy isn’t far off from where Greece is today (their total debt is greater than the rest of the PIIGS combined), they’re too big to bail, and a Greek default would exacerbate those two exponentially.
Granted, Italy’s exposure to Greece isn’t that terrifying compared to the others, but the country itself is in near crisis – they can barely even auction off their bonds, and if Greece does default, it’ll send a signal to the market that, among other things, the EU might be cool with letting the others default as well. Equities could get hammered, credit will definitely go crazy, banks will get raped, panic will hit the streets, and God forbid, Buona Domenica would get cancelled.
A debt purchase by China will do little to change that if you ask me, it’ll barely even kick the can. I’ve been wrong before though, so what do you think monkeys?
Do the bulls have reason this time? Is this China deal really good news for the EU?
Or will they just get crushed once again?
Happy Monday monkeys.
I believe market reading was that it showed some sign of confidence from a big player in a distressed economy/bond. The market took a while to rally even after that news piece went out - and buying volume/pressure after that was not that intense.
Well, people are just itching their fingers to buy some cheap risky assets and any sign of better winds may trigger a small rally like we saw today.
The Chinese are just sitting in a big lump of money and they need to put elsewhere than those shitty low yield treasuries (not that Italian bonds seem a wise choice). Although let's not just forget that in the midst of 2008 crisis, the Chinese also were called as potential buyer of failing banks and they never did it.
China is playing a 30 yr chess game which the west is losing - badly. However, to answer your question, stocks may rally, but no, such a rally would not be justified.
^^^^ winner. China thinks in terms of GENERATIONS. The West's advantage is innovation, but Italy seems to content itself with neglecting the public and private sectors in favor of a constant exploitation of its youth and sinking enormous amounts of time into indolent entertainment. Europe is shitting itself to think they can maintain control when China decides to leverage this later on down the road: Europe does not have our military power or resource bargaining chips and they are coming to the cardshark table without a throwing knife or an ace up the sleeve.
Western Europe is currently content to fuck itself, and China is building its advantage now. I'm not particularly concerned with a stock rally or some other short term trend. We're going to have to bail their sorry asses out AGAIN within a few years.
I pity the fools.
China has no reason to bail out Italy right now. Why would they if they can buy those assets at a far lower price once Greece starts to default (which is virtually a certainty). The rally just shows how broken the markets are these days.
The Chinese own a lot of bonds already. By letting/waiting for Greece to default, their bond holdings will get marked down. They are throwing semi-good money after bad. Paul Tudor Jones always said "losers average losers" and the same concept applies to EGBs.
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