Google Analytics

Monday, September 12

12th Sep Late – Murphy, Squared


Summary: Full weekend to do something, and eurocrats and other pols did nothing? Banks in Europe down around -10%, PIIGS-hit in the air, FT alphaville crashes and explosion at a French nuclear waste treatment facility.  EURUSD broke to new lows already in Asia, after Friday’s “no positions over weekend”-day.

Joke of the day: "Is anyone else getting sick of Europeans serving us continental breakfast every morning?" - U.S. blogger's tweet


EURO CRISIS


Opinion from Mark Dow: capitalize banks, deep haircuts and euro exit for select PIIGS, ECB changes mandate from inflation watch to bond yield watch

“There no longer seems to be a politically feasible path for the resolution of the sovereign debt crisis.”

Dissent could lead to populist, unsound political movements, which could help unite the now quarreling ‘proper’ parties to actually solve the crisis.
** Does Europe need a Tea Party? – The Curious Capitalist / TIME

200 pages of statistics, stress tests, debt sustainability analysis, all politically correct, all useless
(pdf) 2011 Report on Public Finances in EMU – European Commission

GREECE
Long background article. Important reading since Germany is the key.

**Should Greek bondholders tender? – Humble Student of The Markets

Interesting and long article. Author says thinks Stark leaving was good news, as he was against ECB’s bond purchases and his replacement is much less “prudent”. ECB printing coming anyway.

“The fate of Greek bondholders will be determined by Germany in the next two weeks”

Austerity has failed: “Economics has to an increasing degree become an exercise in promoting ideologies to defend the privileges of the rentier classes.”

Summary of what the German newspapers are saying

EURO BANKS
The bank published a presentation stating how profitable and stable it is. Greek exposure €900mio, write-offs now at 35%, hardly impressive haircut.
SocGen’s ‘hard facts’ – alphaville FT

Good analysis: the bank never actually states its short-term high quality liquid assets with respect to its short-term wholesale funding requirements. That is, its coverage ratio.

Even SocGen referred to them in its hard facts-report as key means for managing short-term USD liquidity. This preference by eurobanks shows up in the price, which is near Lehman-levels.

Good look at Ireland by a good economist. As almost all countries in Europe seem to be turning into Irelands, this one might be good to read when you have time.
Crying All The Way To The Bank – A Fistful of Euros

ICB REPORT

Increased capital requirements sound good, but would not have protected banks from PIIGS-hit. Annual cost to banks estimated to be £5.5 billion.

While the continental banks were hit hard today, U.K. bank stocks were relatively calm, even given the news of estimated costs of ICB plans. It could have been worse.
ICB – the market reacts – alphaville FT

EMERGING
Lower projected growth, followed by required austerity from bond vigilantes, risk aversion to emerging countries and pretty soon CEE could be the next PIIGS

OTHER
Interesting WP looks at 1000+ releases by 37 cb’s, measures releases’ contents and analyzes the following market volatility. Methodologies here could be used to build something..
(pdf) Central bank communication on financial stability – National Bank of Poland