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Monday, September 5

5th Sep - Hellenic Monday



Summary: U.S. market holiday today. Very bad EZ news both from the periphery and the core: Austerity targets will not be met in PIIGS, scrapping all sorts of projections made for the bond swap and EFSF sufficiency. ECB seems unable or unwilling to keep a cap on the Spanish and Italian yields. Merkel lost a key election on Sunday and the future of bond purchases by ECB and the realization of EFSF are questioned.

Meanwhile from the U.S. a lawsuit against the big banks on their mortgage activity is both directly and indirectly hitting the EZ, as banks like Barclays, HSBC are also being sued. End result: stock markets in Europe down heavily, led by financials, gov bond yields down in core and up in periphery, euro weaker – typical risk-off day. There is of course lots of risk aversion going on, as the U.S. is closed and everyone and their granny will be worried about the mortgage law suits.

There’s a surprise meeting tomorrow between China, South Korea and Japan, on European and U.S. situation – it’s probably nothing, but could be something. Today some interesting links, the first three euro crisis links are ‘must-reads’.

Views: Greece is completely bankrupt and has lost everybody’s faith. Next stop Italy: the treasury needs to roll a lot of debt (estimates vary from 25 to 60bn) in September. ECB is signaling that it is not going to support Italian bond prices, as it thinks it has broken the unofficial agreement of “austerity vs. ECB support”. Given the political "leadership" in Italy, anything can happen.
 
Joke of the day: “I want to be very clear here. The European Union and the euro are strong and resilient” – Barroso denied recession today.

Joke of the day 2: Youtube link: South Park vs. Cafe Del Mar - And It's Gone (sorry, no embed)

Quote of the Day: “The more politicians start to believe former Federal Reserve Chairman Paul Volcker’s adage that the only contribution the banking industry has made to society in the past 20 years is the automated teller machine, the more the non-utility parts of the industry will be squeezed.” - Alen Mattich / The Source WSJ

EURO CRISIS, first the best
For Wed court decision. “Germany is not a banana republic. It is a sovereign democracy under the rule of law. Europe is belatedly discovering why this matters.”

Interview of IMF Chief Lagarde: “growth-oriented fiscal easing and bank capitalization needed”.


ECB head, before the end of his work, opens up.
Commentary on the above.

then the rest:

CDU 23.1% (-5.7%), SDP 35.7% (+5.5%), Left Party 18.4%: Weak government coming, with less support for current eurosclerosis.

Deutsche Bank’s outgoing CEO tells as it is.

Why now? To stop forced capitalization of banks (and put the bill on EU taxpayers instead)?
Ackermann unplugged – alphaville FT

Italian yields surging, ECB not seen. Is this revenge for canceling austerity measures?
Where’s the ECB? – alphaville FT

SocGen released first-half of August funding figures. Shows what is going on.

Japanese, Chinese and South Korean market regulators have a meeting on the “American and European financial health”, on Tuesday. What will they try to agree upon?

Very good article with political background info

General summary of this week.


 “I want to be very clear here. The European Union and the euro are strong and resilient”


FINANCIAL CRISIS
Good summary of the “Friday night special” mortgage law suits


OTHER
“The excess returns earned during the 24hrs prior to scheduled FOMC announcements account for more than 80 percent of the equity premium over the past seventeen years. “

Thinking differently from the rest is key to alpha and good risk management, but is thought crazy by the rest. And some contrarians really are crazy. Very interesting discussion.

Ritholtz’s piece on how Apple destroyed its competition

Huge graph of labor and wealth data showing by Robert Reich for NYT

DIVERSION

Follow the GPS-equipped  ”Happy Feet”-penguin on a map.


Ai Weiwei finds China’s capital is a prison where people go mad.
The City: Beijing – The Daily Beast