A short note today; as you may imagine life is quite busy at the moment as markets tank, with traders de-risking their books for the weekend and the inter-bank market wobbling.

First up is the good news from the US as the benchmark non-farm payrolls showed job growth of 290K in April, well above market expectations and hopefully pointing the way to self sustaining recovery. Although before we get too excited it is worth pointing out that the headline unemployment figure is actually up to 9.9% from 9.7% in March.

Now the bad news, because being correct about unfortunate issues is rarely satisfying; however, at least we now believe that the market is starting to get it. More and more commentators are stepping forward and pointing out that Greece will have to default on or restructure its debt as the current position is unsustainable. The current rescue package (ironically just approved in the German Parliament) would leave Greece with Debt to GDP at 140/150%. The idea is that robust growth will then help them balance the books. Really, how? When Latvia tried something similar growth just dried up after all the cuts they had to make to balance the books, and as for Greece the market for olive oil is only so big.

To be fair we have just had a meeting with the chief strategist at a major international fund management group and he believes the problems are rationally solvable and will be. And while we agree with the first point we are very sceptical on the second, we just don’t have much faith in human rationality in the face of crisis.

Anyway, a recent note from New York scares us as it points out that Spanish Cajas (think building societies) has outstanding loans to property developers worth 23% of Spanish GDP, held at book value. In light of the Spanish property crash, if that was written down by 50%, that is 11.5% of GDP. As I said, scary.

Finally the UK election: a hung Parliament is the result. How this will feed through to policy is now completely open and the pound and UK government debt have been sold down as a result. This is not the outcome we needed when capital markets are facing the possibility of seizing up.

In the meantime the FTSE 100 has been oscillating between flat and about 200 points lower as the bears fight the bargain hunters. We are not sure who will win but some of those bears look mighty grizzly.