Everything Has A Limit

 It was interesting to see a Merryn Somerset-Webb tweet earlier today (sorry, I do not know the original source), plus her reaction and the reaction of most respondents (sample given).

The clip was of a proposal that mothers in the UK should receive shopping vouchers as an incentive to breast-feed their babies.

The response was, perhaps unsurprisingly, one of disbelief mixed with anger.

One of the more interesting sideshows from the Cypriot "bail-in" was the cause of the effective insolvency of Laiki (Popular) Bank and the impact that everything had on the Bank of Cyprus.

Although people talk of the "eurozone crisis", that is somewhat misleading. While the fundamental causes of the problems are the same – monetary union without fiscal union, an initial set of exchange rates that woefully undervalued the old Deutschmark and (implicitly) woefully overvalued nearly all of the other currencies that joined the euro, and interest rates set at the levels required by Germany rather than those required by the peripherals – the problems expressed themselves in a number of different ways. They also expressed themselves with different degrees of urgency.

In Ireland and Spain, as we have seen, the problems arose because the low interest rates created an asset bubble. In Greece the problems arose because the Greek government fudged the statistics, concealing how much more they were consuming than they were producing. In Italy the problem was no more a problem under the euro than it had been under the lire – eventually the country would go broke, but it wouldn't go broke straightaway unless there was a crisis of confidence.

But why did the problems arise in Cyprus? There was no massive property asset bubble, and the country was not anywhere near as profligate as Greece. Indeed there was optimism as late as early last year that Cyprus was on track to reduce its deficit to 2.7%.

You can see, therefore, that if you said that it was all one big problem, and if you pointed out that the problems in Italy (and, to a certain degree, Spain) were ones of confidence rather than fundamental insolvency, then you could pretend that the entire problem was one of a crisis of confidence.

But if you saw that in some cases (in particular, Italy), the problem today was really one of confidence, even though the problem in the distant tomorrow was one of forthcoming insolvency, but in other cases (particularly, Greece), it was one of absolute stone cold insolvency, then you could also see that "solutions" in one part would not work in others.

Now, let's fast-forward from the crises of 2008/09, when half the banks in Europe effectively had to be bailed out, to early 2012.

In those three years (a vital three years for banks and insurers) one of the things that nearly all financial institutions did was offload their Greek bonds – frequently at a significant discount to par. They buyers were, in the main, hedge funds and private equity punters who reckoned that, eventually, saving the euro would be more important than anything else, and that Greek bonds would be saved.

Unsurprisingly, some of the banks with the biggest exposure to Greek bonds, as a proportion of their capital, were the Cypriot banks. Cyprus, in fact, had a problem that was closest to that in Iceland. It had a banking system far too large for its GDP. It also had a problem that Iceland did not have – it was in the euro.

But, as we have seen, Cyprus was not guilty of lunatic lending to any wide-boy property dealer. Indeed, Cyprus has fairly strict building laws. There was none of the mass over-development that blighted Spain and Ireland.

Although there were clearly TOO MANY banks in Cyprus, that problem disappeared if you started thinking of Cyprus as a kind of in-house Cayman Islands, or Guernsey, or Bermuda. All of these territories have financial systems that are huge compared to their GDP. But they survive. Indeed, they prosper, with the average GDP per capital approaching $100,000.

In other words, having a financial sector that dwarfs the rest of the country's production isn't necessarily a recipe for disaster. And Cyprus had other products – mainly tourism. Sure, banking was bigger, but not necessarily to the degree that meant inevitable disaster.

It is here that the Greek bond default, for that is what it was, becomes phenomenally significant for Greece. Last March the owners of Greek debt agreed to exchange their bonds for new ones, with a longer term, at a lower interest rate, and with a lower face value. You may recall that the European Central Bank, for reasons of politics rather than economics, actually managed to sidestep a write down on its own Greek bonds, but that is a story for another day. The Cypriot banks were not so lucky, and it was on March 9th that the death sentence for Cyprus was written.

It may seem a little unfair, therefore, that a write-down forced on (some) unwilling bondholders by the EU (and, in particular, Germany) should lead less than a year later to mainly Russian deposit holders having to take a massive haircut on their Cyprus deposits.

But, as is the case with virtually everything in the euro crisis, all is not as it seems.

In late 2009 and early 2010 the Bank of Cyprus spent billions of euros buying Greek bonds. This was when nearly every financial institution that I was writing about was selling them off. The Greek debt was yielding very high interest rates and – and this is a significant point – the ECB (which had its own chunk of Greek bonds) and the regulatory system Basel II meant that sovereign bonds could be counted at 100% of redemption value. It was still maintained that sovereign bonds – when it came to calculating capital – were safe.

Here it gets murky. It would appear, but it has not been proved, that bank executives at bank of Cyprus were buying Greek bonds, but that they were keeping the details of those purchases from Board Directors. Indeed, in December 2009 the Bank of Cyprus claimed that most of the bank's Greek bondholding had been sold. And it appears that the Board of Directors believed that this was the case. Unfortunately, many, if not more, Greek bonds had also been bought.

The long-standing ties between Cyprus and Greece are well-known, but the purchase of Greek bonds from 2009 onwards was, let's face it, mental. It was as mental as the actions of the Icelandic financial system (buying up stuff for far too much money in an attempt to pay the interest rates that it had promised foreign subscribers).

Here Reuters takes up the story:

On December 10, 2009, Yiannis Kypri, a general manager at Bank of Cyprus, told a Cypriot website, Stockwatch, that the bank had "minimal exposure to Greek sovereign debt" after reducing its holdings from 1.8 billion euros to 0.1 billion.
The same day, according to the investigators' report, Andreas Eliades, then Bank of Cyprus's group CEO, instructed his treasury department to begin new purchases of such bonds. With these new instructions, that day the bank bought debt worth €150m, and a total of €400m by the end of 2009, according to the consultants Alvarez and Marsal.

Bank of Cyprus later tried to rewrite history by claiming that Kypri's statement referred to only a temporary sell-off. That, clearly, is bollocks. Kypri's statement was clearly interpreted as a permanent reduction in exposure. Did Kypri know this? If so, he said nothing to disabuse the markets of their interpretation. If he didn't, then he can't have been paying much attention.

By April 2010 Bank of Cyprus had €2.4bn worth of Greek bonds – above the Bank's own limit, but that limit was raised a month later. Bank of Cyprus bosses still maintain that "everybody was buying into Greek bonds at the time". Well, yes, there were lots of sellers (mainly banks) and lots of buyers (mainly private equity speculators). There were not many bank buyers. At the end of 2010, only two banks in Europe actually had bigger holdings than BoC (€2.2bn) and Laiki (€3.3bn). Those banks were the vastly larger operations BNP Paribas and Société Générale. And both these banks got hurt hard when the default came.

More interestingly, it appears that the Bank of Cyprus knew that it was in a bit of a mess. Notwithstanding the claim that Kypri was only referring to a short-term sell-off in response to market conditions, in April 2010 BoC moved €1.6bn in Greek bonds out of its trading book and into its "held to maturity" book. That meant that the bank could count the Greek bonds at the price it paid (the value of Greek bonds had been falling for some time). BoC said at the time that the move was made because Greece would redeem the bonds – a triumph of hope over reality, as the events of early 2012 proved.

Andreas Eliades, CEO of the group until April last year, still insists that no-one could have imagined that a European country in the euro could default.

That, of course, is an excuse we have heard from many others in the banking sector – not just in Cyprus. "No-one could have foreseen it; no-one predicted it", was said again and again, despite the fact that from 2000 onwards several people were foreseeing a credit bubble and several people were predicting that it would end in tears.

When the axe fell last March, Bank of Cyprus was €1.8bn in the hole. Cyprus, whose GDP outside of offshore banking was tiny, was never going to be able to bail out BoC and Laiki. I've written before about the farce that led to a short period where all bank deposits at Boc and Laiki were going to suffer a hit. That nightmare scenario, which within 18 months would have led to banking crises in several other countries in the eurozone (starting with Slovenia) was thankfully abandoned a week later. But the larger depositors had to take a hit, and the effect was to destroy the Cypriot financial system. No-one would leave money in the Caymans if they thought their money would be confiscated. For Cyprus, the game is over and the economy is shot.

But things get even murkier. As we've seen, it would appear that the managers of the bank were almost operating on their own, with a Board of Directors who didn't really know what was going on. Was this true?

We shall never know. As Reuters reported, one day last October a memory stick was placed into a desktop computer at the Bank of Cyprus. There was some clever software on that memory stick. It quickly erased a staggering 28,000 files, including internal emails in late 2009 and early 2010 – precisely when many of the Greek bond purchases were taking place.

As such we will never know who knew, and, more importantly, we will never know the motives of the people who decided to do the buying. Did they really believe, unlike nearly every other bank and life assurer in the western world, that Greek bonds were a good bet? Even if they did, such expenditure as defended by Eliades would have been grossly irresponsible in reality (but not in EU fiction, which still maintained that Greek bonds were rock solid in terms of capital requirements). Banks are not about taking good bets that are risk that, if they go wrong, will bankrupt both the bank and the country. That's just too big a risk, even if it is plus EV. It's the old story of Warren Buffett coming up to you and offering you two-to-one on the toss of a coin, but you have to put up your entire wealth. The marginal value of money comes into play.

Or were the buyers of those bonds less stupid than they pretend they are; were there other, familial, reasons for buying Greek bonds? Was it misplaced loyalty to a country that had supported Cyprus in the past? Were there incentives from the selling counterparties?

We shall never know.

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The number €30bn is going to crop up more than once in this piece. It's the key figure in the mandatory "bail-in" of the Cyprus Banks, which the Cyprus government appears at the moment to be having difficulty getting through the Cyprus parliament.

We can come later to the (potentially profound) implications of this hit on depositors with Cypriot Banks. But let's look first at how it happened and why it happened.

One reason that we have not had many runs on banks since the Second World War is that lessons were learnt from the depression of the 1930s in the US (when many banks failed that were not insolvent, simply because no-one trusted any banks at all) and from watching the film It's A Wonderful Life.

As George Bailey (James Stewart) observes when depositors come asking for their money back:

"The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can

.

To prevent this "madness of crowds", deposit protection schemes were invented. Under these systems your deposits were protected by a government guarantee, up to a certain amount. This meant, the theory went, that solvent banks would not be sent under by public panic. And, because banks were actually fairly solid institutions, that meant the deposit protection scheme, by its very existence, would not be needed.

You can possibly see the flaw in this line of thought. What if, heaven forbid, a bank WAS insolvent?

The impact was that there still wasn't a run on the bank, because, hell, the money was guaranteed, so it didn't matter a toss whether you banked with a solvent bank or an insolvent bank. So long as the amount you deposited with them (i.e., lent to them on an unsecured basis) was guaranteed by the government, there was no need to withdraw the funds.

This had two effects – both of moral hazard. One was that it encouraged depositors to deposit recklessly, and the other was that it encouraged banks to lend recklessly.

Now, if a bank actually IS insolvent, eventually it won't matter if there's a run on the bank or not; it will still go bust. And, in Cyprus, Laiki, the country's second-largest bank, was very, very bust. Bust to the extent that the cheap ECB loans that have been used by several zombie banks in the weaker parts of the eurozone for day-to-day operations were no longer available to Laiki. And, if Laiki went, then the Bank Of Cyprus would go too. That would be about 50% of the Cypriot banking market.

The Deposit Protection Scheme would stop functioning as it was meant to function – as a scheme that would never be needed because it provided the confidence that would be enough to keep the banking system stable – and would actually come into play as a protection for depositors.

And it was at this point that the Deposit Protection Scheme in Cyprus was proved to be a fraud. Because the collapse of the two largest banks in Cyprus would cost the government €30bn, And the Cyprus government didn't have €30bn.

If the Cypriot government did have €30bn, it would have nationalized the two banks, guaranteed the deposits, and the system would have continued. This is precisely what the UK did on the weekend of October 2008 when RBS was on the verge of having to close its doors.

But, the Cypriot government didn't. It was broke. That was why it was having the "bail out" talks leading up to last weekend, looking for €17bn.

At last the Finns, who have been itching to get at southern Europe for its profligate ways ever since the crisis erupted, saw an opening. After all , much of the money deposited in Cypriot banks was said to be laundered Russian money, a benefit of rather lax oversight procedures when it came to asking where the cash came from. By insisting that depositors take a €7bn hit of the €17bn bail-out, and allocating them "shares" in the banks in return, it could be argued that the right people were being penalized.

As it happens, the amount of money the Russians have invested in Cypriot banks is, about, €30bn. That in effect means that the haircut imposed at the weekend amounts to a €3bn expropriation of Russian cash. It's a staggering act of protectionism that verges on piracy. It certainly won't do much for cross-border trade between Russia and the EU.

The haircut (a "bail-in" of depositors into the banks because a loan is turned into a shareholding) also cut out the bankrupt middleman. Because Cyprus could not offer cash to depositors and take on the shares itself, it has transferred the (probably worthless) shares directly to the depositors.

It is, in effect, a sovereign default, passing to unsecured creditors some probably worthless paper instead of cash. The alternative for the government would have been a double banking collapse and either a complete wipe-out of all deposits, or a complete wipe-out of the Cypriot government debt.

At the time of writing, the vote in the Cypriot parliament has been postponed, indicating that it might not get through if the haircut remains as originally proposed. I would not be surprised it the banks didn't stay shut again tomorrow. If the vote does not go through, then we have Cypriot financial armageddon. The banks fail. The government fails. The Sovereign Debt defaults. I don't actually see all of those things being allowed to happen. It could therefore be interesting to see how Germany and the Finns react if the Cypriot parliament (with Russian encouragement?) votes down the proposal, and Russia then starts flexing its diplomatic muscle.

This has been a victory for the IMF, under Lagarde, over the European Commission and the ECB, under Barroso, although as victories go this one could turn out to be more pyrrhic than most. And it all happened because in September 2000 a €100,000 deposit protection scheme was enabled without anyone actually thinking what this would signify were a bank to actually go bust.


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There have been not a few commentaries already about the implications. From reading the above, at first glance one would have expected the euro to fall off a cliff on Monday morning. But it didn't.

Why not?

Because, basically, the IMF has found another way for a country to be broke without officially being declared broke. If by some chance the hit on depositors does not cause mass withdrawals from banks elsewhere. If the "Russian connection" could be played to a level that Cyprus was seen as a unique case, then the "solution" could be seen as euro-positive. Although the state of the disaster in Cyprus was thrown into sharp relief, the view was that, if the hammering of depositors could be pushed through, the euro was more likely to survive, not less. It would be a case of "someone else taking the pain" (€3bn Russia, €4bn to sundry others, including not a few British expatriates).

That's the good news. The flip-side is unremittingly bad.

The minor point is the impact on relations with Russia, a country which, remember, has a hefty degree of control over energy supplies. Finland was the loudest noise in favour of this solution (supported less manically by Germany and Netherlands) but one wonders whether they will be so enthusiastic about it if they woke up to see that Russia had sealed the borders and cut off Finnish/Russian trade.

The major point is the impact on the psychology of ordinary savers. It has just been demonstrated, quite explicitly, what some of us have been writing for several years. No matter how safe you think your wealth is, it isn't really safe. The confidence that "money in the bank" is 100% safe just vanished down the Cypriot plughole. No matter that Cyprus is a special case, that it had too many banks, too many pampered staff, made too many dubious loans, and basically were not very well-run. What matters is that people will no longer think that a bank in your own country is just about the safest place for your money to be. This isn't like a savings account with Kaupthing or Icesave. This is everyday cash from week to week, the account into which your wages are paid (remember, we no longer have the legal right to insist on being paid in cash).

For the first time in many years, the question can be asked rationally: "is my money safer in the bank, or in the mattress?"

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"Work hard at your job and your boss will appreciate you" is one of those well-worn conventional wisdoms that probably springs from the naive belief that life is fair. Do good and good will be done to you. What goes around, comes around.

But, is any of it true? Perhaps in the days of small companies and situations where you had a personal, non-economic, relationship with your boss, as well as a strictly economic one, it might have been. These days, I think that things are different.

My bosses are uncomfortable with me being good at my job. More specifically, they are very uncomfortable with the thought that I might be irreplaceable in my job. Now, as we know, the cemeteries are full of people who thought that they were irreplaceable. But with two senior people leaving from Insurance Day, both of them very knowledgeable about insurance and both of them good journalists, it has come home to roost that, as a breed, we are not that common. In times of full employment, we are no less common and are even harder to find in an "available" state.

Economically, if you could make the same profit on a product that was less good because it employed less competent people, that would be the sensible way to go.

In times of full employment, being unusually good at your job can be a bad idea on at least two fronts (from the point of view of your employer). In the immediate sense, it might make your boss feel bad about the fact that he or she isn't working as hard as you are (a point I wish I hasten to add doesn't apply to my case personally) and in the more general economic sense, you are creating a monopsonistic situation which no sensible company wants to find itself in. Just ask all the farmers who supply Tesco, and no-one else, what happens when you have only one buyer.


So, kids, the next time someone (such as a teacher) tells you to work as hard as you can at your job because then your boss will appreciate it, point out the economic flaw in their argument. Far better to be just a little bit better than everyone else. But don't, whatever you do, make yourself irreplaceable. Because, if you do, there's a good chance that a sensible employer will simply change his business structure so that your "irreplaceable" job doesn't exist.

Those of you with longer-than-average memories may recall that I put some money into Vodafone sometime last year when they were at, well, a little bit of a higher price than they are at now (and a lot higher price than they were eight weeks ago), on the grounds that the new management might spot that Vodafone was now in a mature industry, and that Vodafone would sell of its US and Japanese stuff and return a bundle to its shareholders in the form of a special dividend.

As usual, timing is everything and, as usual, I was ahead of my time. As Stravinsky said to Diaghilev of The Rites of Spring, "it's years ahead of its time!". To which Diaghilev replied sagely "Yes dear, so why do it now?"

It would appear that Vodafone has, at least in part, come round to my way of thinking. If I had timed my assessment of the situation as did a certain French lady (who does have the advantage of being a senior Vodafone executive) who bought shedloads of Vodafone shares at 110p at the end of January, then I could have cleaned up. As it is, after the special dividend, I shall just be minorly in profit. Bastards.

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Here's an interesting piece from this week's Hedgeweek. Now, first you must realise that these people are investment managers. And you know my opinion of investment managers. However, of more interest is the immediate analogy to how some people play cash games.

Merrill Lynch Investment Managers has launched "Target Driven Investing" for defined contribution investment schemes. I won't go into the fluff surrounding the justification for this, which basically says that the predominant "lifestyle" approach is too risky (this is the one that gradually reduces your exposure to equities as you approach retirement age). The interesting part is MLIM's "solution".

"DC Target Return has twin objectives: generating a target return of cash plus 3% and preserving accumulated capital. ... DC banking works on the principle of setting a long-term target rate of return measured over a member's career and includes a regular banking mechanism whereby a proportion of the risk assets is switched into safer assets every time the return target can be locked in.

Now, read that carefully, because this is what in poker is called "eating like a mouse and shitting like an elephant". What, for example, do you do when you are way short of cash plus 3%? Logically, you have to shift into riskier assets.

In fact, this is either the strategy of "quit when you are up by a certain amount" or "play weak-tight when you are up by a certain amount".

If I had an investment manager who told me that whenever a particular asset class had performed well enough for the year he would immediately switch into safe assets to preserve the gain, my first question would be "and would you switch into riskier assets if I was down? Or would you just increase the stakes? And, if I may ask, what's wrong with taking your locked-in profit and smacking it into something really risky, provided you are plus EV on the deal?"

Target-driven investing just about makes some sense if you are getting very close to the end of the investment period (i.e., the member is nearing retirement); because, in a very real sense, it is getting close to the last hand that you will ever play, so 52% edges aren't that good an idea. But for someone in their 40s, a TDI approach is madness.

Still, it's Merrill Lynch. People will fall for it because they haven't got a clue. I just hope some of the guys working at MLIM are playing on Party Poker.

OK Harrison, I bet you haven't been playing this music choice in the past few weeks!

It always amuses me when people battle against the closure of final salary pension schemes. My employer is the result of millions of mergers/takeovers, and because of this there are myriad schemes within the company. However, since turnover outside editorial is quite high (let's face it, would you stay in sales or marketing for longer than two years?), there are only a few employees in my building on the final salary scheme offered by the now-no-more Lloyd's of London Press (yes, we publish Lloyd's List, the world's oldest daily newspaper).

As they fret that this scheme might be taken away from them, I say that I wouldn't enter a final salary scheme if it was thrown at me. Money purchase schemes, I tell them, are far preferable. Since these people tend to believe what they read in the newspapers (you would think that they would know better) they look at me as if I am mad.

Look, I say, if you are in a final salary scheme you are effectively lending money to your company at a very generous rate. And, if they spunk it all away so that there is none left, you are very near the bottom of the pile (just above shareholders) when it comes to getting any money back. And the government compensation scheme recently introduced merely exacerbates the moral hazard. I, meanwhile, get the money that is placed in my pension scheme parked somewhere else, every month, where the company can't get near it. Now, which would you prefer?

Hmm, they say, when you put it like that...

The only people who might logically argue in defence of final salary schemes are employees in the public sector. But I suspect that even here there may be trouble ahead. What happens if urban councils can't put up their local taxes enough to pay for existing pensions? Already we have local councils doing a fair impersonation of General Motors or Ford in that a large part of their budget is now allocated to people who aren't doing any work any more. It can't go on forever.

Centrally funded civil servants probably have the right to feel safest. Governments, after all, never default, do they?

Tell that to retired teachers and army staff in Russia. The ones selling any old trinkets on street corners, because their pensions are now, basically, worthless, thanks to the clowns running the country when Yeltsin was in power.

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And, speaking of sovereign debt, a subject dear to my heart (particularly the misleading phrase "emerging markets", when it isn't clear where they are emerging from or, indeed, where they are emerging to — but "sub-prime" markets doesn't have the same ring, does it?) I see from today's Lex Column in the FT that yields on Italian sovereign debt (Birks opinion, little better than shite, triple B minus) are a mere 20 basis points above that of Germany (Birks opinion, double A plus). The only logical exxplanation for this narrow spread is that investors continue to hold the naive belief that the EU will not allow a member's debt to default. That might have been the case when there were six, nine, or even 12 members, but I don't think it holds true now. There is a tangible, and not minute, chance that Italy will fall apart. There is a definite chance that it will default on its debt within the next 20 years — perhaps not up there with the chance of GM defaulting within the next five years (now happily sitting at above 50% probability), but a significant chance nevertheless. If I were in the markets, I'd be punting on widening spreads between triple A sovereign debt (T-Bonds) and, ahem, "emerging market" debt. Italy's yield will be somewhere between the two.

Some time ago I wrote about the mysterious goings-on in the equity markets, with the rapid rise in equity levels since May defying logical explanation in the face of rising commodity prices, poor profits expectations and rising interest rates. I presumed that there was some kind of short squeeze of the small players taking place, although the reasons might have been less complex -- perhaps certain institutional investors were increasing their equity weighting because they felt that they had to put their money somewhere, that gilts looked a horrible bet, and they felt inflation was a threat (see recent performance of gold as a support for this hypothesis). This would indicate a much longer timeframe on the part of the investors than I usually allow for -- say, 10 years, rather than the normal maximum of 18 months. Such long-termism is commendable, even if it is happening for the wrong reasons.

I mention the 10-year timeframe because we currently have an even more recession-indicative situation (although I will return to this point later). The US yield curve has flattened to such a degree that 10-year treasuries now pay 12 basis points more than 2-year treasuries. Now if you are talking to an individual investor, I reckon it would be fairly hard to try to persuade him to tie up his money for 10 years rather than two for an extra 0.12%. But institutional investors are not like you or me. They want to match liabilities to investments. And pension funds in particular like long-distance certainty.

But a 0.12% spread, while not actually an inverted yield curve, is still fairly pathetic, particularly since only a year ago the spread was 1.8%. That seems massive now, but in the grand scheme of things, an extra 1.8% for an extra 8 years of money tied up is nothing to write home about.

Of course, you might say that the money is not tied up. You can trade these products in a very liquid market, and if you had made a swaps trade for 10-years over 2-years a year ago, then you would be sitting on a nice profit today.

But the fundamental nature of the product remains the same. One is a 10-year product and the other is a 2-year product. One has far more certainty attached to it (what will happen in the next two years) than the other (what will happen in the next 10 years). To accept an extra 0.12% for 8 years of uincertainty implies either that you are very certain nothing untoward is going to happen in those 8 years, or that the general appetite for risk is so great that people are prepared to accept a very low price for taking on that risk.

Why is the flattening curve an indicator of a possible recession? Ahh, I'm afraid that you have got me on that one. I think that it's related to a pessimism about the two-year horizon, rather than optimism about the 10-year horizon. But this kind of indicator (most associated with the inverted curve) would imply an expected low appetite for risk over 10 years and and even lower appetite over two years. What we have today is a high appetite for risk over two years and a ridiculously high appetite for risk over 10.

It will end in tears, I tell you.