Cameron said no because he felt the new treaty did not have enough safeguards for the city of London. He was right to do this. Why?

First the city of London is one of our few centres of excellence we have and generates enormous tax revenues for the treasury. To let France in particular run riot and pass legislation that would have certainly made London less competitive than New York, Hong Kong, or Singapore would have been political suicide as well as guaranteed London lose even more of its status as the finance centre of the world.

Second I guess Cameron has made a tactical gambit here that he believes the eurocrisis has much further to run. He may well have come to the conclusion that in 6-12 months there will be no large core euro group and any idea that its 26 against 1 will have been long gone. Yes if this comes to pass we may not all care as employment, the economy and the markets would have tanked long before the conclusion is reached but Cameron can rightly stand proud and say “nothing to do with me – I saw it and didn’t get Britain involved”. I think he is totally correct in this assessment incidentally.

Finally I suspect he said no because he knew that even if he said yes he would be unable to come back to the UK and ratify it in parliament without a referendum – which surely would have said “hell no”. This would have been the worst outcome for everyone. He would be humiliated, the summit resolutions would be made instantly irrelevant and it would have taken even more time.

So what of the summit itself? Success? Failure? Well predictably neither. For all the talk of a “few days to save the euro” precious little was decided upon that can make a serious impact on this crisis. The most important news came not from the summit but rather the ECB which has made it clear now that it will do whatever it takes to save the banks but won’t (or can’t) do anything to help sovereigns. This message has now been delivered so many times I really do get the feeling that the big bazooka the market is hoping for will never ever happen. Germany simply isn’t ready to do it. I think the other most striking thing about the summit was that it is doing almost nothing to deal with the huge debts that are currently out there. Ok so you have budgetary discipline (which won’t work btw) and you restrict future debt growth but what about the trillions of euros due next year? Whats to be done about that? And if you really are capping budgets to deficits of 0.5% per year then where is the growth coming from? Austerity will _never_ provide growth.

All in all I’m quite pessimistic now this is going to end remotely well and I think Cameron will be shown to have, in Boris’ words, played a blinder here. Banks are clearly already on the edge and all it will take is a mass ratings downgrade (threatened by S&P last week), and a few more weeks or months of no credit then a major bank will fail – probably German by the way – and at that point the system will crumble. The outcome? Well money printing by BoE, Fed and, perversely, the ECB, mass unemployment combines with business failures and a return to protectionist trade measures. While the UK will suffer from this I suspect being out of the core eurozone that it will suffer orders of magnitude better than Germany itself.

Its going to be an interesting two weeks up to Christmas and then in the new year – well… happy new year.

First up super Mario talking today to 25, yes 25, members of the european parliament. The fact only 25 MP’s bothered to turn up is truly extraordinary it itself. Do EU MP’s truely have that lack of respect for the one person who can seriously affect this crisis? Once again I say the politicians must do better. Not for me, not for them but for the millions of people who will be catestrophically affected by a true euro collapse. Mario did offer the vaguest hints however that the lady is indeed for turning and the ECB could be pursaded to bolder action in return for tighter fiscal union. I still think fiscal union is a great idea but the idea 17 member states can get around a table and agree to sign away their budgetary controls to a central body is so absurd it almost makes me laugh. It will never ever happen. Ever. Can you imagine? Germans imposing austerity on the French? We are back to world war territory for sure.

So what was next. Ah yes Merkel saying no yet again to eurobonds and insisting, as per above, the answer is fiscal union. It is not amazing that she said it, its truely amazing the lack of respect she has for anything beyond Germanys borders. By showing absolutely no flexibility she is giving two fingers up to the central banks who attempted to show willing yesterday, two fingers up to just about every world leader and is missing the most blatant point which is either Germany pays through the bailout of its insolvent cousins or it pays ever more when they default taking the worlds banking systems with it. Germany will pay. Mark my words.

Finally we have the BOE saying banks should “preserve capital by not paying bonus’ or dividends” at the same time as saying “the priority must be to keep up lending to businesses” and finally they should be looking to raise capital buffers. These are totally contradictory statements. You can’t on the one hand ask a person for a loan at the same time as telling a person to save more. You do one or the other. Besides the idea there will be any bank bonus’ anywhere this year is, in my opinion, highly dubious. Banks know most won’t be paying much if anything so by default none are worried that by paying very little they are risking key employees leaving. In my experience most bank workers are more happy they still have jobs than worrying about what they’ll be paid at end of year. And all this is before the absolute fury they will invoke with the public at large if they pay a cent amidst global austerity . No bank is that stupid. Surely. Well GS probably is but the less I say about them probably the better.

Things all in all were not looking good.

And to be fair they still aren’t. However what we have had today is the first sign of a global response to this crisis with the 50bp cut by the ECB, Fed, BOE and BOJ. It seems the situation was so bad, money markets so frozen and close to massive systemic collapse that only a coordinated liquidity injection by every major central bank was enough to kick start the system back into life. If this doesn’t scare you into considering how bad things have got then well.. nothing will.

So will this work? Well the exact analogy to what has happened today is that you’ve had a man who has had a heart attack and the doctor is now administering CPR. The first shock he is given (austerity) didn’t work. A second shot (EFSF) didn’t result in any meaningful improvement so a final massive shock is applied – and the patient shows sign of life. But the key question is will this final shock revive the patient onto a path of recovery or is the final death throw before he finally expires. On the basis of the markets reaction today the patient is at least still alive. What I suspect markets will want to see now though is a meaningful follow through from the major eurozone countries and the ECB to back it up. Apart from anything else if the leaders once again try to muddle through, ignoring the obvious signs they are leading the world into a second great depression, then Obama, China and the rest of the world would be perfectly in their right to throw up their hands and say “you know what – you can just default and to hell with it – we’ve tried everything else”.

What do I think will happen? Well I am quietly optimistic this might be the first sign people have at last understood what is at stake here. I expect the ECB to start lending to the IMF, and then the IMF lend directly to countries in trouble (Spain, Italy etc). Its a bit of fudge as the ECB might as well just give the money direct to the countries but if it gets around the German “nein” issue then as the route of least resistance I expect it will be taken. I next expect some serious further steps will be taken to create a true fiscal union (what Germany really wants) to be announced at the next EZ leaders meeting. Finally I expect even more austerity to be imposed in just about every major western economy combined with massive QE by central banks in the new year.

The one thing I would say though is that if what I say above comes to pass and this is the genuine start for the recovery for the eurozone then what today has done is shown very clearly that governments will adopt ultra loose monetary policies well into next year to try to , effectively, print their way out of the situation. And what does liquidity and more money mean people? Liquidity means inflation and inflation if you’re not careful will _kill_ savings and create massive social unrest (you didn’t think more money would mean higher wages did you?).  So what to do? Well the best traditional hedges against this are gold, commodities in general, and physical assets such as property or art. Why? Well if there are only a finite number of resources and the money supply has massively increased (i.e. people have more of it) then each will be able to bid higher and higher sums to acquire said resource. I’m just saying….

We live in interesting financial times.

• Spains borrowing costs rose yet again to just shy of 7%. New prime minister refused to detail spending plans until full cabinet formed. Me thinks his hand will be forced well before then.
• IMF revealed new credit line available for countries in distress. A small step in the right direction but way too limited to have any real effect on the crisis.
• Stability bonds were officially floated and almost as quickly received the Germany verdict – “NEIN”  - while reiterating its call for treaty changes to stem the crisis – details of which we are now expecting on the 9th December.

Treaty changes probably are part of the solution but Germany is making a serious mistake in thinking it has the time for a new treaty to be finalised with all 17 countries. Recession would have long taken hold before it was agreed, killing growth and any chance for material improvement in the debt to GDP ratios in every western economy. As I’ve said before it needs someone to sit down with Merkel, Schauble et all and example calmly what their actions are doing. With the “super” committees debacle yesterday though the one person who maybe could have forced Germanys hand, Obama, frankly lost his hand in the game as if I was Merkel I’d simply ignore him and tell him to get his own house in order before lecturing anyone else on the state of their countries finances.

Frankly still a shambles.

On a related but other note read first few chapters of “Endgame – the  end of the debt supercycle and how it changes everything“. A very interesting read. It makes the case for two likely scenarios in every western country – one option is years of deflation and depression – the alternative high (or hyper) inflation the choice of which we end up in depends largely on if governments decide to print their debts away. Cameron may take particular note as the author reserves a special place for the UK as “the most indebted country in the world” and being the one most likely to suffer from hyperinflation as the government prints. The hedge against this? Well the usual candidates of precious metals, commodities, energy, corporate bonds, and TIPS. Well worth a read in general though if a little sobering at points.

• On the left we have the markets selling every Euro bond it can find driving yields higher and higher, reinforcing the debt death spiral until it gets what it wants – a guarantee the ECB will be a true lender of last resort.
• On the right we have the ECB and most of Germany refusing to budge an inch, paralysed by the idea of hyperinflation on the one hand but equally unable to propose anything serious as a viable alternative to releasing the Krakken (in the form of the ECB).

FIGHT!

Well this is getting really really nasty now – a true risk off day. Not helped at all by the “super” committee in the US failing to agree – well anything. The only “super” thing about it was how “super’ bad it was at doing its job.

It strikes me that on all fronts at the minute – in the US, in Germany, in Greece, Italy, Spain and possibly even the UK politicians are acting solely to save their own asses instead of doing their jobs and considering the people they represent.

If Merkel relaxed about voters she’d print – or at least have an adult conversation about a way out of this endless depression cycle of negative events driving sentiment and markets lower. Just saying “nein” to everything is not a solution. And neither is hoping against hope the markets will suddenly relent or forget or move on. It won’t. Markets don’t work like that.

If the USA senators cared at all about the USA’s reputation at all they would sit down and have an adult conversation about how to balance a budget (an activity I hasten to add a reasonably intelligent 10 year old could do) and relax about getting voted back in next year.

In the UK Cameron might just admit he made a mistake in cutting quite so fast and come up with a plan B. Yes he can call it A2, or A Plus or whatever. Just get with a plan.

In Greece Samaras could get his head out of his arse and consider he is driving his country into oblivion all for the sake of thinking voters will be stupid enough to forget it was him wot did it and vote him into power next year. Shame on him.

In fact shame on every single one of these politicians.

I am not saying it is perhaps right ECB prints but its _just essential_ they come up with a credible plan in the next few days or weeks. Catastrophe is just a few yield points away.

• Its emerged that the UK government was working to a deadline with the EU whereby it had to sell the Rock before 2013. So given by selling for £750m it is incurring a £300-400m loss on its investment this only says to me one thing; that it expects market conditions to materially worsen in the next year. If they thought conditions were going to materially improve then it would make no sense to sell at such a loss now. This is an important statement of how the UK government perceives how the economy is going – badly and going to get worse.
• One of the investors providing the cash for the purchase for Virgin has made the point the Virgin brand has a 100% brand awareness set against a 83% disapproval rating for banks in general. This means one of two things; if successful Virgin will make a killing here. If it isn’t it will mire the Virgin name in the same way as RBS, Barclays or Lloyds has for retail banking. I suspect Virgin will only be modestly successful. Personally I associate Virgin with megastores, records and airlines. Why I would entrust my money to Virgin I’m not quite sure.

To whats the other half then? Well the other half is CAA is not the same CAA I have grown to love over the years. The sulky girl on the front desk barely  acknowledged me walking in and even less so when walking out. The girl downstairs, a bit more friendly, but (possibly worst for a craft gallery) seemingly clueless about a new artist I was interested in finding more about (and she has yet to send me any details even though I left my details). Finally the standard of work, particularly on the ceramics side, is just so weak and disappointing. I know my standards are fairly high but even so a few years ago I could be guaranteed to see at least one world class work there every time I visited. Its been months if not years this has been the case. I can’t help but feel with the departure of Sarah Edwards some months ago the gallery has somewhat slid on many fronts. If current management or any of the trustees read this then can I ask you to think about the following:

• Staff must be friendly and welcoming with any visitors coming through the door, if you know them or not. A smile, or hello, costs nothing but silence just says you are not welcome and reduces the likelihood of any sales.
• Staff must be interested and have, at the very least, a passing knowledge of the craftwork they are selling. To look blankly and say “I don’t know, I’ll look it up” doesn’t inspire confidence.
• Work must not just be continually recycled for sale. I saw today a Takeshi Yasuda large open bowl that has been in the gallery for whats got to be about 5 years and yet, mysteriously, seems to only increase in price each time I see it. If it isn’t sold after six months return it to the maker and get in new stock. If I wasn’t going to by this bowl at £800 I am certainly not going to at £1,300.
• While most of CAA’s sales will come in the £100-300 range its important to cater for the more serious collector and have occasionally some really interesting new work by established makers to show at higher prices. With no other serious galleries of contemporary craft left in London this is, to me, a clear example of an area in which they could re-establish their credentials as the best craft gallery in the UK.
• Finally if you’re going to sell books then don’t let your bookshelf resemble the local library.

• Mario Draghi scolded EU leaders for the lack of implementation of the decisions taken at last months summit. This is important only in that it shows Draghi is acutely aware that the ECB is already acting as lender of last resort. He also understands, as per my post yesterday, that the devil is in the details to solve this crisis.
• Merkel and Cameron clashed over financial transaction tax, use of the ECB and EU treaty changes. Merkel is right to say the UK should either be fully in or fully out. We don’t really deserve to have any say if we are not willing to join up fully to the euro club. On the financial transaction tax I have a suspicion that at best it could be seen as an altruistic tax that is instantly transferred onto the banks customers while at worst it could seal the fate of London as a financial centre. I certainly think it is right Cameron defends the city on this front (but I would say that I work there!)
• Finally we have reports of an interesting development that German bunds are no longer falling in line with rising Italian and Spanish debt yields. This implies that sellers of these bonds (almost certainly to the ECB) are instead of reinvesting in “safe” bunds are repatriating their money into US Treasuries, UK Gilts or just keeping the cash under the mattress. In some ways this could be the stick that the market needs to persuade Germany to begin to act with a bit more haste in solving this crisis. If they genuinely began to see the knock on effect of the crisis on Germany (which up to now has been the sole beneficiary of the crisis!) I would expect them to move very schnell.

On an unrelated eurozone note I was disappointed to see continued negative comment about Chevron in the states – one of my oil stocks. It seems to me as though they are getting into an argument with Brazil about a spill in one of its test drill sites and oil spills are never good news. They lead to environment damage, litigation and being bared from the country. Far better for the company to cooperate, fix the issue and move on rather than rate it a small issue then get fried by the government that clearly doesn’t believe it. Brazil will be an energy hub in years to come and it would serve the company well to have strong ties with the country.

I’m looking forward to this weekend if only to have the markets closed meaning I can’t lose any more money. I’d like to think next week will be better but at the minute I see no positives on the horizon so I expect next week will be more of the same. At least monday week I can sell if I have to!

I think it is fair to say 3 weeks later I made a monumental mistake in buying when I did. Just sell then I here you say! Well working for a bank I can’t as my employer has strict rules saying you have to hold a position for a minimum of 30 days. Doh! I have another week of pain ahead of me and if I get out with an average loss of 15% across all the names I bought i will consider myself lucky.

What this has made me though is very interested in whats going on in the eurozone. A few things seem abundantly clear:

• Top of the list is the fact we have no born leader who is stepping up to the plate and providing the leadership the situation desperately needs. The two most obvious people who could change things are Obama and Merkel. Obama however seems more and more like a one term president, incapable of balancing the books of the USA and thereby having any political clout to wield effectively against Germany, while Merkel is behaving more and more like the ostrich who sticks her head in the sand hoping the problem will just go away. No that isn’t quite fair – she is doing just enough, just before (she thinks) it is about to get out of control. Unfortunately this tactic means she is always behind the market which is relentlessly picking off country after country. I suspect her grand plan here is that she is trying to use the crisis to speed up the formation of a much bigger and cohesive eurozone through treaty changes and only when she has done that will she release the monster that is the ECB to calm things down. She will argue at this point as, effectively, all countries are in it together then on the basis they either all stand or all fall printing is better than not. The other problem with this plan is it needs the one thing she really doesn’t have – time.
• Time is the real enemy here. Time not only makes the debt grow bigger every day that passes it also gives the market more and more opportunities to pick off the weak and escalate the crisis further.
• Finally any policy that doesn’t restore growth to countries has no chance of succeeding in the medium or long term. Greece I think is the ultimate proof that crippling austerity is not the way forward.

How do we get out of this then? Well I agree with what most people are now saying that we are close to a crossroads here. On the left hand side we have eurozone collapse with Germany, and possibly the other stronger euro countries such as Holland and France creating a top tier eurozone, the rest forming a second block and probably the UK, as always, out on its own. To the right we have the ECB becoming a true lender of last resort and proving the funding Italy, Spain and others need on an unlimited basis. Now which do I think we should choose to do? Well the latter for two reasons.

Firstly breakup would be horrendous. We are talking financial collapse of nations and governments, bank runs, unemployment soaring, and deep long lasting depression. The states should be particularly concerned about a breakup as if I was the market and I’d watched my safe haven of German bunds go up in smoke I wonder if there was anywhere else that could go the same way and I would probably think of a particularly indebted country over a particular ocean who’s books are in _far_ worse shape with equally poor political leadership.

Secondly because allowing the ECB to become lender of last resort may actually buy you the one thing you really need – time to sort out the structural problems at hand in a stable fashion without rioters on your streets every day. Oh but it will cause inflation I hear Germany say. Well maybe. It may – but equally it may not. To be so afraid of something that hasn’t happened is no way to live a life or to make sensible decisions from. Far better to give it a try, use the time to change treaties and generally get the monkey that is the market off your back.

Most of all I wish eurozone leaders would stop thinking that kicking the can down the road is a strategy in itself and provide a clear message to everybody about what is actually going on about how we fix this. Give the market hope, give them a plan and whatever you do – GIVE CREDIBLE DETAILS.

What caught my eye here was first the surface – a completely smooth just off white signature glaze catching the light making it stand out next to the dark background it has been set against. Just as striking was the form itself – to me a wing plucked from a bird – or maybe a bird in itself? Indeed to my eye it was as if the work was just about to flap its wings and indeed fly off into the crowd. A truely wonderful and humbling experience. I had to have it. I could not afford it.

I have since gone to to learn a lot more about Fukami and indeed he is one of of the most highly regarded of contemporary artists working in Japan today. Born in 1947 in Kyoto he was born into a potting family. This heritage and tradition served him well although he eventually realised he wanted to create his own work and was more interested in form than function. His work therefore has evolved into more sculpture than pot. Indeed his highly evolved signature technique of using moulds into which he injects liquid porcelain under pressure is unique and is what allows him to make works in the scale he does while retaining the razor sharp edges and lines along with the milky smooth surfaces on his work. He is clearly a perfectionist – he says he doesn’t want to leave any human touch on each work – as if to make the work appear not so much constructed as evolved out of thin air. The interesting thing here for me is that for many potters its the human touch, the imprints and imperfections in the clay that make each work unique and therefore special. Why has Fukami gone down this route therefore? Well I have no idea but I’d like to think at least part of the reason is that he is saying its not important who has made his sculpture, its the form, glaze and technique that makes his work stand apart.

I think Fukami is one of the best artists I have ever seen and having tortured myself at several Collects finally bit the bullet this year and bought one to live with me. I am absolutely delighted to own one and it takes pride of place in my home.

Its a wonder to wake up to each morning.

Its a delight to fall asleep with every night.

Fukami  - thank you.