Party like it’s 1999!
A recent article at CNBC showed how the Italian government is rewarding its Olympics athletes with the world’s highest payout in case they win medals. The question is why a country that is struggling to cut its spending would be so generous.
Here is more about the Italians’ non-sense:
“Raising eyebrows, Italy is paying $182,400 to any Italian who wins a gold medal. That’s the highest payout in the world.
In second place is Russia, paying nearly $135,000. Third is France paying $ 65,200.
… China reportedly offers $31,400 to gold medal winners, while Japan rewards them with $35,900, Canada gives $20,000, and Germany, just less than that, at $19,500 for a gold.
In the U.S., gold medal winners get $25,000, $15,000 for silver and $10,000 for bronze. This is not government money, it’s paid by the U.S. Olympic Committee.”
Is it just crazy or what? It just contrasts with the “sobriety” of other countries, like the US. For instance, amateur American swimmer Missy Franklin, who is still in high school, will owe $14,000 in taxes for her gold and silver medals.
Isn’t that absolutely FANTASTIC!
Italy and France, two of the most fragile economies within the Eurozone, Crying for HELP – yes with capital letters-, going on a kind of SHOPPING SPREE! No wonder Germans and Dutch get very upset when one even mention the topic Euro Bail out!
Let me make a very clear statement; I love Europe! I really do! I spent considerable part of my life in Europe. I love and respect the diversity in cultures and opinions. That is what makes Europe attractive and unique. Until recently I not only believed - but to an extent was convinced - that the Europeans, the European Central Bank and European Parliament, being so diverse, could make balanced and reasonable decisions. I must conceive defeat here: I was very wrong!
The Italians are FINALLY announcing cuts! Makes things look a bit better, isn’t it? Now, We shoud not get ahead of ourselves and celebrate too early. WHY? The reason why is simple: I think that there is more than enough empirical evidence out there to lead us to adopt a defensive stance – WAIT and SEE – concerning future developments. Announcing doesn’t mean Implementing, does it?
We shouldn’t forget that announcements, promises and passing bills DOESN’T – and I stress DOESN’T – mean implementing. Policy makers can change their mind very quick. When I see the kind of long term planning being introduced such as the one the Italians were presenting today being considered ROBUST when elections are not far on the horizon, I remain skeptical, I think we should all take a couple of steps back.
Let’s face it: Last week, Mr. Mario Dragui, announced that the European Central Bank will once again do WHATEVER IT TAKES TO PROTECT the EURO! OK! Great! and... The immediate response from financial markets left no doubt that they heard what they wanted: The Euro and the Equities markets Rallied!
…. Them, along came the following question: How they will do it? What is the Plan? Well…There wasn’t a clear answer, in other words No Clear Plan! And... So went the Euro and the equities markets sharply down!
Mr. Dragui was fast to add that currency traders should not short the Euro because they were risking themselves. Now, that is really nice of him! However, all I could possibly say to Mr. Dragui is that traders solely relying upon his words to establish positions in capital markets should not be trading! Should they all pay attention to the ECB?. No Doubts! but...Bet on this Horse?.. No,no way. At least, I would’t! Simply due to the fact that, as far as performance is concerned, it is a very unreliable one!
Speculators that are waiting or relying upon his words, advice or announcements as sole guidance for their decisions, should rethink their strategy.The markets react in very strange ways to news. It is far from being an exact science. It isn't clear what the ECB will do to save the Euro, so how could he possibly give investors advice. The markets move in response to activities undertaken by speculators. They are not the most reasonable bunch either, being completely unreasonable in many occasions.
I completely agree that his words have an impact on the market; however, there are few economic announcements that produce long term, economically significant and are measurably persistent impact on capital markets. There are moments when good News aren’t good enough and bad news aren't so Bad.
Event Driven fund managers, traders or investors, without any doubt should study the probabilities of outcomes of such announcements. Again, Event Trading ahead of events should be a well Hedged speculative endeavor…and a decent amount of due diligence should be in place before hand…But hey, who am I to argue with Mr. Dragui?
Fact of the matter: What the ECB will do, remains unclear? Remains a mystery. Everyone says that they have to save the Euro; so far, they haven’t done a great job protecting their currency, have they?
The GAPS between what is promised and what is delivered is often Substantial. So we should all not get ahead of ourselves expecting good news. Again, very often the market have a strange mechanism to build in or discount the impact of news releases on Asset Prices. Markets are far from being perfect and more often than not work in strange/unreasonable ways.
All that has happened last week is that the ECB said they will take actions. Now,we must wait until they will decide what they will do to support their statement. However, we should account for the possibility that whatever they decide to do may end up being far from what is hoped or expected. After all, isn't that exactly what has been happening for the last year or so?
Just for the record, opposition parties in Germany and The Netherlands are SCREAMING OUT LOUD their discontent in regards to the actions undertaken by current policy makers. Honestly, if I were German or Dutch, I would be screaming on the top of my lungs too!!! Current majority holders will do everything in their power to get re-elected. Even if that would mean damage a bit more their economy (I.E. Germany) on the short run, to try to repair it later. Don’t be surprised if they take a 180 degree turn and change their mind out of nowhere.
In any case, to add some fire to the article regarding the PIIGS, here are the bonuses the Dutch, Germans & Austrians are paying to their Gold Medalists through their Olympic Comities:
Dutch 30K for Gold, 22.5k Silver and 15k Bronze
Germany 15K for gold, 10K for Silver and 7K for gold, plus a 1.5k cost assistance.
Austria 27k for gold
It makes one really wonder, doesn’t it? The countries helping to hold things together, the supporters spend less, while those being helped, spend plenty! what a difference!
Let’s put things into perspective first; Forget about the Bonuses for Gold, Silver or Bronze. Most athletes that will receive medals, in today’s environment, will be able to capitalize from their efforts, in most cases. Some sports will capitalize far better than others. It is all relative in life.
Some athletes – due to the nature of sports, the degree of every sport’s popularity and their own charisma – will benefit more than others. However, the principle of the Olympics used to be that competing for one’s country was an honor; that principle has been forgotten in many ways.
We should not blame athletes; it has been a natural development. Today, to a great degree, Sports achievements are about prestige.
Every country should have the freedom to decide how much to give to their citizens for excelling while representing their nation. With that said, when countries are facing some really difficult times, they should apply some common sense and principles while giving bonuses of any kind. They should be frugal.
The greatest problem in Europe are the differences that exist among nations. They are HUGE! They are not only cultural, but also regulatory, legal and Monetary… and… the list goes on without end.
I like to call the Eurozone, The Tower of Babel. Actually, the metaphor is far closer to reality than we think. I stress here: I am not religious and even if I were, I would never mix religious beliefs with economics. However,I don't seem to find a single metaphor that fits the picture as well as the Biblical episode!
For those who think that I am crazy, they should try to spend one day watching the occasional broadcasts from the European Parliament! It is Challenging, putting it mildly for representatives. Every representative speaks in its own language when presenting their argument and have translators ready to translate every single argument made by foreign representatives. Now, don't forget: there are 17 Members countries... Can you do the math? How many translators are required? Let alone, the rest: decisions and documenting it all in every single language! Quite honestly, the Biblical episode was BORING, compared to the European Parliament.
It is AMAZING! Simply Amazing!
Last but not least, I must admit: I thought that the Federal Reserve Bank was the most irresponsible Central Bank in the world. WRONG! I was wrong; dead wrong. The latest performances of the ECB, let the Federal Reserve Officials smelling like roses! Honestly, it makes the Federal Reserve look like a very concise and well organized enterprise.
And, to make things a bit more flamboyant, we have the kind of entertaining News being published such as the article above to spice the dish a little more.
Where are we heading? One could answer: Only God Knows, right?
Well, let’s spare him the burden…Because right now, nobody knows, not even him!
Well, let’s spare him the burden…Because right now, nobody knows, not even him!
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