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Presenting French fund manager Edouard Carmignac’s valedicton to European Central Bank president Jean-Claude Trichet, in full:
Dear Sir,Extraordinary stuff. Sadly there’s the rest of the ECB Governing Council to persuade…
Farewell, you certainly won’t be missed! During your career you will have dealt a fatal blow to the French industry with your strong franc policy in the 90s, deepened the impact of the 2008 crisis by underestimating its scale and, more recently, endangered the euro with ill-considered rate hikes and clearly inadequate support for the debt of weakened European countries.
Tomorrow, you will chair the ECB council meeting for the last time. This will be your last chance to leave on a positive note. May I thereby bring forward the following proposals for your consideration:
- cut the ECB’s key interest rate to zero. Immediately lowering the entire eurozone interest rate’s burden by 1.5%, would provide a welcome boost, in particular, to the weakest member states. It would also have the advantage of helping to fight the euro’s overvaluation, which has been crippling exports for nearly five years.
- make a declaration of intent to purchase unlimited amounts of distressed countries’ sovereign debt without sterilising these interventions. To prevent any abuse, you could enforce that once the Bank’s total purchases exceed a given percentage of a country’s GDP, the country concerned would be required to follow an IMF structural adjustment programme. Giving the ECB a heightened role on the sovereign debt market would solve two major problems. It would give weakened countries renewed access to markets on non-prohibitive terms. Also, it would relieve European banks of the more than problematic need for massive, immediate recapitalisation, required by the depreciation of their sovereign debt holdings. Finally, whatever the monetarists may claim, the liquidity created through these interventions would not be inflationary. It would merely lessen the strength of the powerful deflationary forces generated by widespread deleveraging, while also exerting downward pressure on the euro. But wouldn’t a weak euro be preferable to no euro at all?
The situation is serious and calls for immediate action. The vicissitudes of the European construction imply that neither politicians nor any institution but the ECB is in a position to act decisively. Hence, the formidable task of filling this role is yours.
I sincerely hope that the zealous civil servant we all know will reveal himself a true statesman.
Yours faithfully,
Edouard CarmignacCARMIGNAC GESTION
Source: Ftalphaville
What this letter tells me is that when Carmignac funds do well it is "thanks to Mr Carmignac and his management team". But, when the same Carmignac funds underperform, then it is "Because of Mr Trichet". When I had invested in Carmignac funds (3 of them) nowhere in their prospectus was written "We will perform well only if Mr Trichet will lower the ECB interest rate". I sold last week all 3 of them and invested the money elsewhere. That operation will save me at least the costly management fees that I no longer have to lose to the fund manager.
RépondreSupprimerMonsieur Trichet is gone. Signor Monti has already cut the ECB interest rate by 25 points. Still,Carmignac Funds' NAVs keep going down. Should we replace the NATO, FIFA, and UNESCO chiefs,too, hoping for a NAV rally?
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