Only the brave (reloaded)

“But sometimes the market gets it all wrong, as is the case now.”

Hence, his argument continued, Italy’s debt was a much safer bet than others, such as the UK’s triple A. Italy would get things done and make it.

Erik gave me the occasion for my first tweet ever, on that very day:

Two and a half years and almost three thousand tweets later, I want to spend some time, again, to praise Erik’s ability to “see through the fog”. In his usual “Sunday Wrap”, released today, Erik could write, amongst other things:

“But here we are, just short of 2½ years later. Those of you who focused on fundamentals and had a bit of understanding of Europe, and who bought the 5-7 year sector in Italy in mid-October 2011, now sit on an annualized return of 12.5% (in euros), compared with 1.7% (in sterling – and well below inflation) if you had gone with the 5-7-year gilts.”

Italy and so called “peripheral Europe” have surprised many, but not all. I wish to finish with Erik’s own words, again in today’s “Sunday Wrap”:

For someone like me who has spent the last 2 ½ years arguing that the Italian sovereign should not pay higher yields than the UK, seeing the 5-year BTP trade through its equivalent UK gilt this past week came with some satisfaction.   Longer term, this is right.

Well-done, Erik. But also well-done to the many courageous people who’ve worked to ensure that this could happen.



Tommaso Arenare

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