From May 22nd 2012
All eyes are currently on the June 17th election in Greece and slow but inexorable rise of Spanish bonds.
But is there anything else in the world that the markets should be reflecting upon?
What about the U.S. deficit ceiling? That $16.2 trillion limit which is supposed to last until after the U.S. presidential election, but by some calculations could be reached as early as ‘Labour Day’, September 3rd for those on this side of the pond. While this could be a pessimistic view a timeline based on a 2013 exhaustion is almost certaily optimistic. So we could be left with something in the middle; in other words just as the election rhetoric is at its zenith. What will the markets make of that?
Then there is the ‘forgotten war’, not the ones in Iraq, Afghanistan, Somalia or Sudan, but the asymmetric version being waged against Iran. The presence of two or three U.S. carrier groups in the Gulf at any one time is itself a strong message to the regime. We also have the ongoing and covert probing of infrastructure and the intermittent removal of WMD related specialists. ‘Talks’ with Iran about its weapons programme may be ongoing but could fail at any time given the lack of any track record of successes in earlier negotiations. With media attention focused on the Euro what better time could there be to prepare for a pre-emptive strike?
Could Israel be simply waiting for those negotiations to fail, formally or informally? How long will it wait for the Iranians to yield? Do they see Iran’s nuclear capability success as a 2012 event or 2013? Will they wait until the November elections to complete before taking action?
Can the U.S. and the EU maintain a hold over Israel by maintaining a ‘negotiation’ status with Iran?
How long will the Iranians be prepared to negotiate? On the one hand it may be in their interests to stretch them for as long as possible; on the other there is the question of the impact of the June/July 2012 oil sanctions.
There is also the question of China. The property bubble has burst, its export markets are faltering and many commodities have started to move into reverse. Could the ‘soft landing’ morph into the other variety over the next few months?
Japan’s economic nuclear winter rolls on. Its power reactors may have been shut down but its energy use and cost profile has moved in the opposite direction. How long will it be before the economic analysis reflects the fact that a new energy driven ‘step-up’ in costs is a permanent feature on the landscape? The often cited expected renaissance in Japanese markets now looks more like a mirage than a sanctuary for investors.
Those black swans may not yet have taken flight. Greece may be the only one in the air at the moment but it doesn’t take a major stretch of the imagination to see that single creature become an entire flock.
Indeed, by the end of the crisis we might even be talking about the appearance of ‘gold swans’ or ‘silver swans’ in the grey and gloomy economic twilight.