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Thursday, August 18

18th Aug LATE - After hi-hats, crash

Recession: terrible manufacturing index from the U.S.
Summary: Wow. Macro from U.S. terrible, both SEC and S&P pants down, European banks scrutinized in U.S., gold at record highs, US bond yields at record lows, stocks down everywhere and circuit breakers are on. CFTC showing customer’s position lists to WSJ, there goes anonymity in financial markets.
CDS prices in Europe up, but yield spreads mostly unchanged, probably thanks to ECB. Must-reads today include the Rolling Stones-article (linked earlier today) by Matt Taibi, one of my favorite journalists ever since his Exile-days.

Unemployment: index correlates with employment
Quote of the Day: "I’m also overdue for a post on the Eurozone mess (although this is beginning to feel like Wagner, where you’ve heard the same motifs over and over again and you wonder how the soprano has the pipes to keep singing this long and you feel like a philistine for being fidgety and wishing for it to get to the crashing real final crescendo and be over with)."  –  naked capitalism

Velasco, former minister of finance of Chile: “Eurobonds plus fiscal rules: this formula is the euro’s best hope for salvation. Unfortunately, another crisis or two might be necessary before European leaders consider it seriously.”
Eurobonds without Fear – Project Syndicate

Only two choices: inflation or Eurobonds, which is less revolting to German taxpayers?
The Big Cannoli –

Societe Generale is down 13%, Credit Agricole 7.6% lower and BNP Paribas down 8.1%.

The stability facility is in difficulties: national governments and in some cases parliaments have to approve it first. This looks dicey now.
EFSF Wobble – The Source WSJ


Philly Fed: A total disaster – Pragmatic Capitalism

Global GDP 2011 from 4.2% to 3.9%, 2012 from 4.5% to 3.8%

Presumed anonymity of players in the oil futures market. Now CFTC shows position lists to WSJ – with Goldman and its customers holding 35.2% of WTI open interest on June 20th 2008. View: CFTC/government making it clear that the next time there is a bubble in strategic products, they will come down hard on you.

Financial transaction tax is not that bad, as liquidity is not an unmitigated good. Illiquidity makes people pause and think about the long run.
Tobin or not Tobin? – Emanuel Derman blog Reuters

..and a lot more negative view on the merits of the proposed tax

Irish foreign aid-funded seminar: officials warning about overheating housing markets, suggest stopping the party before it’s too late. But hosts think it was not a “cause for concern” yet.

Persistent risk aversion in the markets requires new policy approaches
Risk Off – Bank of England

This was written before today’s lousy macro. ‘Mish’ is truly worth following.

How much can earnings fall in a recession, how bad could stocks get in a recession? Author thinks worse, and that was before today’s drop.
How cheap are stocks?humble student of the markets