Morning Brief – Germany

Humphrey Percy
Chairman and Founder
Mon 13 Nov 2023


In the past 20 years, Germany’s leaders have made two big bets: first depend on China for trade and second, depend on Russia for energy. Both look disastrous at the moment end of 2023. Although Germany is predicted to be a particularly poor performer economically in the next 12-24 months, together with its aging population and unconvincing political leadership, no sage observer would rule out the likelihood of Germany making a resurgence given its size, market leading industries and geographic location with ready access to the largest single market on Earth. That’s certainly what the rest of the EU is counting on.

EUR/USD 1.0730.

US Banks

As we get to the end of a year that has seen 5 US banks fail, it is timely to ask two questions: 1. Are there other US banks sitting on huge fixed income losses having been caught out as interest rates rose 11 times in a row? 2. What are the remedies open to those banks? Let’s get Q1 out of the way: Yes is the unequivocal answer and the amount while imprecise is estimated at USD 650 billion of losses with Bank of America leading the field with USD 132 billion on its own. Now for Q2: there are 3 remedies: 1. The letting it work itself out over time-that is broadly the BoA solution-because due to its gargantuan size, it can. 2. The take all or part of the losses on the assumption that re-investing the proceeds at a higher level of return will more than compensate for the losses. 3. The ostrich approach: bury the corporate head in the sand and hope that interest rates reverse quickly and therefore no losses nor running losses need be taken. 

It does of course help if a bank is as large as BoA, but a combination of 1 and 2 is more sensible a strategy than the Hail Mary option of 3. Why?

Both 2 Year and 30 Year US Treasury Bonds are yielding 5.01%. 

Loch Ness

Yesterday marked the 90th anniversary of the publication of the photo that set the search for the Loch Ness Monster in motion. It is generally accepted that the discovery of the Loch Ness Monster is no closer to fruition than when Hugh Gray snapped his blurry picture 90 years ago in 1933. Cynics who believe it to have been merely a Scottish Tourist Board ploy to lure tourists to an otherwise unremarkable area of the Highlands of Scotland could have a valid point.

GBP/USD 1.2225.


Interesting to see the value estimated for a First Class Restaurant menu on the ill fated maiden/final voyage of the Titanic at an upcoming auction: GBP84,000. the menu does bear signs of water damage. Something for everyone on the menu although had they known of their imminent proximity to marine life later that night, they might have opted for Lamb or Beef rather than Whitebait or Salmon.

Business as Usual

Men at Work at the top of their game this day in 1982 with this album which stuck like glue at the top of the charts for weeks:

Who can it be knocking at my door?
Go ‘way, don’t come ’round here no more
Can’t you see that it’s late at night?
I’m very tired and I’m not feeling right
All I wish is to be alone
Stay away, don’t you invade my home
Best off if you hang outside
Don’t come in, I’ll only run and hide

Who can it be now?
Who can it be now?
Who can it be now?
Who can it be now?

Who can it be knocking at my door?
Make no sound, tip-toe across the floor
If he hears, he’ll knock all day
I’ll be trapped and here I’ll have to stay
I’ve done no harm, I keep to myself
There’s nothing wrong with my state of mental health
I like it here with my childhood friend
Here they come, those feelings again!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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