ECB Autos, at your service!

So I've just seen that the Peugeot x Fiat merger is likely to be accepted by the EU.

Way to go.

In my view, this is the start of more consolidations across the Eurozone to give the air that there is some stability.

There is no way this doesn't get approved.

See I checked the ECB's CSPP (Corporate Sector Purchase Programme) holdings, and lo and behold, Peugeot and Fiat Chrysler are beneficiaries of ECB financing.

It's just piling shite into shite.

Fiat has traditionally been a firm which acquires other car companies.

It was founded by a group of investors in 1899 to do just this.

Last year, the car maker posted a pre-Covid loss of EUR 179m...

In Q2 of this year, the car maker made a staggering EUR 928m loss.

No bueno.

OK, wrong language.

Conversely, PSA Group were resilient through H1 of 2020 and posted a profit.

This would make sense for Fiat (FCA) to want to merge with PSA Groupe.

It's just funny to me though that I don't think this would have occurred without ECB backing them via corporate debt purchases.

A few years ago, when the soured LMVH x Tiffany acquisition was agreed, it was noted that LMVH had pretty much acquired most of the capital to finance the deal from the ECB's activity in lowering credit spreads, and from the ECB themselves via the CSPP.

From Bloomberg:

The deal soured because LMVH believes that the company they wanted to acquire in a pre-pandemic world is not the same as the company they want to acquire now.

Tiffany say they have to make good on their covenant.

I'd side with LMVH to be honest.

What I'm getting at with all of this though is that the ECB and other central banks distort the market so massively through their activities.

And they'll keep doing so as long as their balance sheets expand and people still have confidence in sitting on the bid of the assets they are buying.

The Minsky Moment will only come if yields rise with a sustained velocity and an elevated duration, but until then, expect further market distortions.

And in the case of car companies, they are just making sure that there are temporary protections for Eurozone businesses...

The banks will be next.

But for now, welcome the new ECB Automobile company!

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