Credit Matters

Talk of super injunctions has got Gary Jenkins thinking about sustainability. Given that injunctions cost a lot of money and only work for a very short time, he wonders if there are parallels for those contemplating how best to deal with the debt problems of peripheral Europe.

Sovereigns in financial distress have clearly been playing on the mind of intrepid analyst Gary Jenkins since he was a child, when he would try to interest his friends in the Marx Brothers film Duck Soup, about the bankrupt nation of Freedonia. But with the European bail-out club now totalling three members, he doesn’t have to use his imagination any more.

Theory is often upset by reality, as our intrepid analyst Gary Jenkins has found throughout his career. Thinking about the latest paper from the Bank of England’s Andrew Haldane, he observes that a small tweak of the data leads to a very different result.

Being a credit analyst isn’t all about being an expert. Sometimes it’s more about guesswork — educated or otherwise. Dragging himself away from his favourite cartoon to consider his own children’s futures, Gary Jenkins wonders just what you need to know to do his job.

Once upon a time, the tops of the highest mountains were at the bottom of the ocean — such are the extraordinary effects of change over the millennia. Gary Jenkins sees a parallel in the world of credit, where the concept of risk free has been turned on its head.

Gary Jenkins has been worrying about poor bond investors that have to try to drum up returns in a market that doesn’t make it easy. Will Cocos be the answer?

With the support of none other than the UK’s Chancellor of the Exchequer ringing in his ears, veteran banker Gary Jenkins can show his face again. Strutting his stuff in pinstripes and bowler, he wonders why anyone would ever doubt the merits of those at the top of his industry.

Expect the unexpected should be the motto for City veterans. But who’d have thought, says Gary Jenkins, that analysts would this week be talking of ‘contagion risk’ — which last year was all about European peripherals — in the Middle East?

The Deutschmark was dead. There was no doubt about that. Dead as a door-nail. Angela Merkel knew it was dead. Of course she did. How could it be otherwise? They were partners for many years but she had buried it in 2002 and was not so dreadfully cut up by the sad event. So just to be clear on the matter, the Deutschmark was dead. This must be distinctly understood.

It’s sometimes easy to forget that bail-outs are just more debt. And, as Gary Jenkins points out, refinancing that in a world of two-tier sovereign paper will not be pretty.

After first cobbling together the EFSF as a safety net for Greece, EU officials have had plenty to say about getting bondholders to “share the pain” when it comes to the struggling peripheral economies. But as Gary Jenkins points out, their use of game theory has backfired spectacularly.

Once upon a time European sovereigns were deeply in love with each other. But since those romantic Maastricht days, some of the EU constituents have grown apart, or to be more precise some are growing more than others. Our happily married credit analyst Gary Jenkins wonders if the likes of the German politicians wish that their predecessors had insisted upon some kind of pre-nup all those years ago. It might have saved them a lot of heartache.