BMPS, Banca Monte dei Paschi di Seina

Banca Monte dei Paschi di Siena S.p.A., IT_BMPS Advanced Chart - (MCI) IT_BMPS,

You have to look closely at the chart to see that this stock, here as quoted on the Milan exchange, is trading essentially at zero. It failed miserable on the most recent “stress tests” and the future looks less than promising.

    This is Italy’s third largest bank and also the Worlds oldest. As you can see from the rather stoic entrance of the headquarters, this bank’s origins lie in what is now best known as Tuscany. It received it’s “letters” back in 1472. Presumable the first 500 or so years reflected the pastoral setting and went by unremarkably. That changed in 1999 when the bank was first listed on the Italian stock exchange and became global. Just like the tower of Pisa, these guys soon could not think straight and got involved in numerous, very large, financial transactions that became almost fatal. On top of that they got carried away with derivatives costing them perhaps as much as 3/4 of a billion Euros in hidden losses. In a matter of 10 to 15 years they were able to negate the first 500.

     There is nothing all that surprising in this behaviour. It happens all over the place where financial institutions loose their anchor and go on a dangerous tangent. Even some of the credit unions here have been known to fall prey to this kind of hubris or megalomania. In that respect Tuscany and North York have a lot in common.

Istanbul, update

Istanbul july 25 2016

It took, give or take, a week to complete this triangle. If correct then we should be getting a thrust up any moment now. This should take the index up about 30000 points which would conveniently coincide with the big number 100000.

The narrative, of course, is that the very bad guys that started this coup are now in jail, perhaps for life, which is short in a Turkish jail, and the good guys are again running the country as a model democracy. Soon the added “must-have” ingredient, that is an overdose of CB intervention, will propel this index forward and upward.

A buy here – in local currency terms, that is Liras -  with a stop at 67500 and a sale at 100000. After the rise it should drop back at least to 60000.

Chart of the Day

Chart of the Day - Another record high. How does the current rally rank_

There have been 13 rallies in the past 116 years after a 30%+ drop. That is one every 8.9 years on average. The chart shows the regression line and the 13 individual plots. The latest rally, that may not yet be complete of course, is roughly at the intersection of 200% and 2000 days.

What strikes me as particularly interesting is that despite the Greenspan, Bernanke, Yellen total preoccupation with easy money and the subsequent acceptance of that policy by almost all other major economies, Japan, China, Germany , the UK etc. etc., there is very little to show for their efforts. This rally is better than six others but worse than seven others. It is very much in the left hand bottom corner of this chart, precisely where you do not want to be.

For those that love the Fed there is the very supportive thought that things would have been much and much worse without it (the mythical ceteris paribus clause in action). For those that think the Fed is very seriously misguided and barking up the wrong tree, myself included, there is clear empirical evidence that Mr. Keynes and his theories leave a lot to be desired in the present circumstances.

XU100, Istanbul index

istanbul index july 17 2016ortakoy mosk

In the UK we had Brexit. All the players, on both sides, seem to have come from Etons and were all members of an elite fraternity where they could practice posh hooliganism with impunity. From there on it is not hard to assume some sort of conspiracy or at least some form of working together. Right now the World is not even sure Brexit actually happened, or will happen. Turkey, or more precisely Istanbul, is a lot more complex. So there was a coup, we are told, but supposedly it was unsuccessful and that was good, or was it? The armed forces which have always been the real power behind the scene, were unhappy that Turkey was slipping away from secularism , the main pillar of Kemalism, and moving back towards Islamism as a state religion. Many will be surprised to learn that the hijab and other headdress for men were strictly forbidden for many years. Why this failed coup is good is unclear but is probable based on the notion that a coup is always bad. Things are more byzantine here, many more under currents.

The stock index has gone from zero 15 or so years ago to about where it is today. At the same time the Turkish Lira has been going down steadily losing about 2/3ds over the past ten years. In EW terms the past 3 years appear to be forming an, as yet unfinished, triangle. In it d may still have a little to go and then e should follow. From there we should get a thrust to a new high to a little over 10,000 in local currency terms. So again bad may be good or visa versa, time will tell.

The mosque is in Ortaköy by the way.  A village fairly close to the center of Istanbul, where one of the suspension bridges is now anchored and also where I grew up, so at least I know where it is on a map.