Latvia - oneway ticket down. When will the Ostriches smell the coffee?

*Latvian Industrial manufacturing down 24.2% YOY for Feb

This is just going one way - down. Have a look yourselves; http://www.baltic-course.com/eng/analytics/?doc=12160
IMF has also decided to freeze any further loan payments for Latvia. (The next one is due in June). At least til the Latvian government has made further budgetcuts via new amendments in order to keep the budgetdeficit below 5% of the GDP. The Latvian government expects these amendments to go through the Latvian parliament in April.

The Latvian government themselves expect the the deficit to be 12% of GDP for 2009, compared with 5% stipulated in the IMF agreement. Well, if IMF is not going to fudge this one (seems the to be all the rage these days) Latvia will have to do the corresponding cuts in expenditures. This means budget cuts of 20,30,40,50% sounds viable? Not to me anyway.

I guess the Swedish banks and the Swedish government will follow the fudging and manipulation trend currently in place and pretend the Baltic and Ukrainian assets are actually worth anything close to where they are marked on the respective banks balancesheets.

Well, if the industrial production is down 24.2% YOY how many job layoffs might that generate? How many NPL;s? This will just go on and on as long as long as the LVL remains fixed. A few Swedish banks are sitting on undetonated nukes. One day they will detonate though,,,,

As I mentioned in my earlier piece today, I am bullish assets at the moment, but I will remain long this digital risk and if anything buy equities without this nuke built in. Alternatively just go long gamma on them as they will most likely gyrate wildly going forward.

As always, good luck





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