Goldman says down

⚡ The Spark
One chart to rule them all

This chart makes sense, considering the Muricans go and eat the weird bird and get drunk for the next few days.

Down: Goldman are suggesting the only direction for the ES is lower when looking at CTA strategies for the next week.

Which makes sense because of the holiday period.

Thanks, Goldman.

Groundbreaking.

🧠 The Big Brain
Yeah but can he predict the future though

You wanna be right or you wanna make money?

There’s an obsession with being right and/or accurately predicting the future in markets.

Two enormous problems:

• Predicting the future is HARD

• You have to predict the future AND the market reaction

That’s supposedly the name of the game though…

If being right is so hard, how are you supposed to extract money from the markets?

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💡 The Lightbulb
Sorry guys, our fault: ECB admits mistake

European banks in a terrible state, but…

Probably nothing, but the ECB came as close to admitting mistakes as a central bank ever can today.

The public don’t really know this, but EU banks have been battered by excessive regulation and bureaucracy ever since the GFC.

That was seen as a good thing initially, because banks were seen as reckless and dangerous, so needed regulating.

If there’s one thing we can always depend on, it’s the ‘generals’ fighting the last war.

And it sounds good. The people demand something be done, so something is done.

Anyway, those regulations have ensured that eurozone banks are actually far weaker than they otherwise would be, and massively uncompetitive compared to their US counterparts.

In their Financial Stability Review, the ECB tacitly acknowledged that investors aren’t keen on lending their cash to banks whose returns are (indirectly) capped by the weight of regulations…. and the omnipresent threat of extra taxation, bans on dividends/buybacks and so on

Essentially, investors don’t trust the banks to deliver shareholder returns because the ECB keeps sticking their oar in:

Poetically, they released this on the EXACT SAME DAY they’re looking to fine 20 banks for not managing their climate risks adequately.

Wish I was making it up…

It’s the EU, so we shouldn’t get too far ahead of ourselves…

But is there a vague possibility that the European banking sector might see some deregulation in coming months?

And potentially make European banks attractive investments?

Ongoing battle: The banking industry has long campaigned for easier capital rules to boost lending. This is from January:

Ten months ago, the ECB rejected calls from Europe's banks to ease capital rules to boost lending and put them on an equal footing with U.S. rivals.

Now, the central bank seems to be changing their tune…

Two takeaways: A proper regulation change could be a huge economic boost to the EU economy via increased lending.

It could also mean a huge boost to EU bank share prices.