July 28th EARLY

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Summary: yields up, stocks tumble, banks get hit by bad news from the past and the future. Traders postponing holidays to watch the U.S. and probably after that to watch the euro show. Long time to Christmas.

View: Surprised to see that Fed agrees with my previous view on housing, and MS agrees with my yesterday’s private chat with a Head of X on the current ignorance of household debt over the more pressing sovereign trouble. I also don’t like the rising correlations of S&P 500 constituents to the index and am bearish for the next months. Hire me.

EURO CRISIS

Charts of household and non-financial corporation debt levels in euro area countries. Even Germany is deleveraging, but Finnish household are still acting like it’s 1999.

Credit growth in the euro area - seriously, where is it? – newsneconomics.com

Greek bail-out was a one-off, says German finance minister Wolfgang Schaeuble – The Telegraph

Hoi polloi are not happy with 40% youth unemployment. I wish lots of luck with implementing any kind of austerity programs.

Spanish Protesters are back – The Trader

Probably banks will have to recognize large balance sheet impairments on the Greek bond holdings. Includes Citi’s comments and a graph on who holds how much and which maturity.

Ready, set, impair those Greek bonds! – alphaville / FT

This should probably be put in ‘Diversion’ J

Spanish Bank Puts Cristiano Ronaldo Up As Collateral For ECB Loans – Business Insider

FINANCIAL CRISIS

Spread Between July 28 And August 4 Bills Hits 12 Bps, Widest Ever On Default Risk – Zero Hedge

Includes links to Fed and BIS papers on topic + a Fed presentation. Good read for people not familiar with shadow banking. I guess that makes it everybody.

Nomura: US Downgrade May Cause Repo Market Liquidity Freeze – Zero Hedge

MS’s report highlights household leverage

Around the world, in leverage – alphaville / FT

New paper surprisingly agrees with my yesterday’s gut feeling call of when housing turns around

SF Fed: Residential Construction Won't Fully Recover Until 2014 – Economist’s View

ISDA’s FAQ on what, when and who says a credit default has happened (hint from aleablog.com)

Greek Sovereign Debt Q&A (Update) – ISDA

CDS on US Sovereign Debt Q&A – ISDA

CAD strengthening, CAD-US yield spread falling: this could continue for a while

Hide in Canada? – Humble Student of The Markets

OPERATORS

Credit Suisse Q2 net down 52%, axing jobs, Statement and Report, via FT

Credit Suisse Plans to Cut About 2,000 Jobs – BB

UBS Sued by U.S. Over $4.5 Billion in Mortgage Securities – BB

EMERGING / COMMODITIES

China is starting to export inflation and this comes at an inconvenient time for the global macro cycles.

Guest post: The end of ‘Made in China’? – beyondbrics / FT

Can mathematics explain China’s soaring wage bill? – beyondbrics / FT

U.S. Sovereign Credit Rating Cut Would Threaten Trade in Asia, ADB Says – BB

China should move from investment-led model to consumption driven model.

China’s crumbling infrastructure model - MacroBusiness

Yes says the post.

Guest Post: Should I Buy Gold At Its All-Time High? – Zero Hedge

OTHER:

Correlation of S&P 500 constituents to the index are rising, again just like in 2^nd half 2008, 2^nd half 2010. I don’t like the stock market right now.

More S&P 500 correlation – Portfolio Probe

Illiquid assets exist to illustrate high yields to non-knowledgeable and to pay large commissions to providers.

The Costs of Illiquidity — II – The Aleph Blog

The Evolution of Overconfidence – Infectious Greed