Pater Tenebrarum's Contributions

Sometimes we regret that the day only has 24 hours. Whose idea was that? Perhaps we should blame Einstein (evil inventor of the spacetime , gravity and other ills afflicting mankind). So many things are happening these days and usually at such startling speed that it is not easy to keep abreast of it all.

In recent weeks we have frequently cast our wary eye in Italy's general direction, as we sensed that the crisis may be about to migrate there (see, 'Et Tu, Italy?', 'Out Of Control' and 'Mamma Mia' for details).

When discussing the US dollar in the past, we have pointed out that one must keep a close eye on certain indicators that tend to give early warning of an impending rally – more on this follows further below.

Not surprisingly, yesterday's 'pro austerity' vote in Greece's parliament, which paves the way for more good money being thrown after bad (or, as one of our readers perceptively remarked recently, 'more of other people's money') has led to a sharp pullback in bond yields and CDS prices across the European periphery, while the bonds of 'safe haven' debtors were concurrently sold (ironically, we find among those the US, the UK, Germany and even Austria).

We have mentioned the risks Italy poses to the euro area in the past, but the markets proceeded to ignore both Italy and Spain for quite some time, by compartmentalizing them into the 'not as risky as the GIP trio' drawer (GIP=Greece, Ireland and Portugal).

Yesterday's FOMC statement can be read in its entirety. Just as we noted yesterday, it contained no surprises. Essentially it was a carbon copy of its predecessors, although it adopted – not unexpectedly – a somewhat more cautious tone regarding the state of the 'recovery'.