During the week the proposed Death Star (leveraged EFSF) has been mostly shot down by commentators: it has been argued that it does not solve the underlying fundamental problems of the eurosystem, leverage would not be credible, ECB’s commitment is uncertain and above all, markets are not impressed, as the EFSF and the Death Star-EFSF is too little, too late.
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| Lifted from The Economist - good article. |
On to this weekend’s links, the best ones are highlighted and the good ones are placed at the top of the section. Towards the end of the section the links generally get worse, less topical, repeating the points in better links or just boring. Bonus points are awarded for being short, having original points and being “respectable” – political solutions are always about who says, not what they say. I have begun to update posts, so if I find new stuff, like the GS's weekly U.S. kickstart document, I will include it here - as this is the "weekender".
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Friday evening headlines: Today's Headlines – Between The Hedges
Weekly Bull/Bear Recap: Sep 26-30 – Rational Capitalist
Succinct Summation of Week’s Events – The Big Picture
Weighing the Week Ahead: What about Jobs? – Mish’s
EM Week ahead – beyondbrics / FT
Next Week’s Tape: Hoping for Hiring – MarketBeat / WSJ
EM Week ahead – beyondbrics / FT
Next Week’s Tape: Hoping for Hiring – MarketBeat / WSJ
Bloomberg, CNBC etc. television on the web: Livestation
Debt crisis: live – The Telegraph
Eurozone crisis: live blog – FT
EURO CRISIS
Evans-Pritchard: “the Bundestag will not prop up the ruins of monetary union for much longer…There will be no fiscal union, Eurobonds, debt pool, EU treasury, fiscal transfers. There will be a stability union - or no monetary union…If this means the euro will shed some members or blow apart – as it almost certainly does – then the rest of the world must prepare for the day.”
“Fabius Maximus”: At least the eurocrats now publicly recognize the seriousness of the situation, but are ready to only fix the banks.
The European recession of 2011/12 – alphaville / FT
JPM: more slow and late crisis containment expected, which makes creating a base for future recovery difficult.
Peter Oborne 'Idiot' Comments Prompts EU Spokesman To Storm Off Newsnight – Mish’s
Video from a BBC round table talk. Oborne was right, by the way.
Transaction Taxes and Transparency – London Banker
In favor of the tax.
EU's financial transaction tax is feasible, and if set right, desirable – voxeu.org
Avinash Persaud: burden should be on HFT that provides liquidity only when the markets don’t really need it.
We’re Getting Closer – Bruce Krasting
Chair of IASB said “European banks carried out "blatant breaches" of IFRS in valuing their holdings of Greek debt.”, Krasting: possible that EU banks try to wash this over one more time in their Q3 statements, think near impossible to issue annual reports for 2011 without full disclose.
Fiscal correction, bank capitalization, economic governance.
Either existing EMU framework is completely changed, or incentives for fiscal policy are strengthened.
Euro Money Market Survey Sep 2011 – ECB (pdf)
EFSF / “DEATH STAR”
Levering the EFSF — privately… and painfully – alphaville / FT
Nomura: leverage is simply asking for ECB balance sheet expansion. Private money would not like it, because there are correlated default risks between the guarantor pool and the asset portfolio of the EFSF. Loss tolerance of the sovereign guarantor is limited, and that’s why structured sovereign finance is not a big business.
“It's a solution to a problem that no longer exists. Back in July the eurozone crisis was a multi-billion euro problem. Now it's a multi-trillion euro problem…The debate moves on to Cannes in November and the next G20 summit, by when the crisis will have entered another acute phase”
German bailout vote is 'too little, too late' – The Telegraph
RBS: rescue fund too small, leaving ECB to prop up the system, Germany’s IPF: collapse of monetary union now appears unavoidable.
$4T bonds of heightened credit risk countries, $0.4T bank losses from investments in sov bonds and other financial institutions, $0.2T bad bonds in ECB. Complete disagreement how to proceed.
Simon Johnson: periphery cannot devaluate, cut wages or pull austerity. The real questions are whether Italy will get complete and unfettered access to ECB, and when we will know.
Leveraging the EFSF – Marginal Revolution
“Who will fund the leverage? BRICS? American investors? Ultimately other Europeans? All of those parties already can construct their own leveraged positions in Italian government debt, if they wish.”
German and French hypocrisy – Fintag’s Newsletter
“The euro-TARP will soon become the world's largest ever toxic bucket of subprime debt… 31 Dec. There will be 2 Euros.”
Moral Judgment and Bad Economics from the ECB – The Street Light
ECB's policy prescriptions are being guided more by ideology and moral judgment than by sound economics.
GREECE
Remember that the endgame is a Greek default – Humble Student of The Markets
Favors a Swedish-style bailout (recap banks with public money and partial nationalization). Overview of recent articles.
Thinking about the endgame – BNY Mellon
Situation is much worse, with no solutions. People can't take more austerity.
Greek civil servants block troika from entering finance ministry – euobserver.com
Special cabinet meeting coming on Sunday. The austerity measures sure don’t seem to be very popular.
FINANCIAL CRISIS
Credit - Misery loves company – Macronomics
Looking Back To the Late '80s For 'Contagion' Guidance – Real Clear Markets
People are buying bonds for unusual reasons – to hedge stock holdings, safe haven, trend riding, speculation. Buying something for the wrong reasons ends nastily.
Looking Back To the Late '80s For 'Contagion' Guidance – Real Clear Markets
This time there is no fiscal or monetary help: “What is surprising to many is the sheer number of players (debt claims) and the disastrous deficiency of chairs (productive assets). The mad scramble for those remaining chairs will be impolite and unfortunately violent.”
“The best way to prevent garden-variety, negligent, looks-pretty-shitty-but-isn’t-obviously-a-crime financial shenanigans isn’t to pick one poor sucker out of every hundred and send him to jail for a decade. It’s to seek reasonable penalties, based on clearly proven negligence rather than tenuous criminality, in more cases.”
“`large' credit rater appeared to leak pending rating”: includes a scribd link to the SEC summary report
S.E.C. Faults Credit Raters, but Doesn’t Name Them – NYT
The G20 and Recovery and Beyonds – policydialogue.org (pdf)
142 pages of solving the crisis by Arrow, Persaud, Stiglitz etc. from Feb 2011.
"International Policy Implications and Lessons From the Global Financial Crisis" – Econbrowser
Seven research papers from a recent conference.
Le Spleen de Morgan Stanley – alphaville / FT
Includes Moody’s Analytics comments. Exposure to euro area, is MS the next BoA?
Peter Tchir: While BAC follows mortgage markets, MS has moved only with China moving. Maybe MS’s holdings and exposure to EM bond markets should be watched more closely?
Similarities between Morgan Stanley and European banks?-Why are CDS prices shooting higher? – the trader
EMERGING MARKETS
Chanos calls China syndrome – The Globe and Mail
Long article on Jim Chanos, the famous short-seller who made loads of money shorting Enron.China: The Risks of a Hard Landing Are Growing – MarketBeat / WSJ
With comments from Barclays: growth could slow to 4.5% in 2012.
Capital inflows into China in August rose to $32.6 billion from $5.8 billion in July – probably Chinese money heading home as mainlanders look to deleverage in case of a credit crunch.
Market getting bigger, activity slowly picking up, snippetis from an old Citi research note on who the buyers and sellers are.
Fund flows: EM floodgates swept away – beyondbrics / FT
OTHER
You Don’t Have Alpha – Quantivity
Abnormal returns reward regime-sensitive risk premia traded via established systematic trading methodologies.
Buffett Says European Bank(s) Have Asked Him For Money – ZH
Text outtakes and video of a five-minute interview.
Research and Publishing – World Beta
Mebane Farmer’s Cambria links to their six recent investing-related research papers
Only wise investors are dumb enough to invest in these markets – tradingfloor.com
At some point, it will be wise to enter the stock markets, and it has to be done before everyone else thinks it is time.
Another Huge Earnings Miss Coming? – The Big Picture
“if the economy goes into recession, the earnings forecasts are horribly wrong. They might be so wrong that one can make the case that the market might be overvalued.”
Notes from the DoubleLine Lunch with Jeffrey Gundlach – The Reformed Broker
Short commentaries on almost everything.
DIVERSION
Good at Chess? A Hedge Fund May Want to Hire You – DealBook
The history, current status and future of hiring gamers to investment roles
Michael Lewis and Meredith Whitney in muniland – alphaville / FT
Sutor, ne ultra crepidam – Self-Evident
Occupy Wall Street:
Wall Street Protest: Time for Conservative Endorsements – ZH
Future Shock: Techno-Paranoia Narrated by Orson Welles – brain pickings
Red-Blooded Risk: The Secret History of Wall Street – Amazon
Aaron Brown’s latest book is worth every penny.
Statistical Science and Philosophy of Science: Where Do (Should) They Meet in 2011 and Beyond? – RMM Journal
Several journal articles and conversations
The (mis)reporting of statistical results in psychology journals – andrewgelman.com
Fifth of the journal articles contain stat errors, sixth have their significant results wrong. Higher error rate when the error supports research hypothesis or the journal is of lower ranking.
Twitter tweets our emotional states – WP
Proof that Mondays stink. Don’t miss the good graphic.
Eloquent JavaScript: an interactive programming tutorial – This is the Green Room
Very good – a console on the page open all the time to test the lessons.
Retrieving stolen digital devices: Difference Engine: To catch a thief – Babbage / The Economist
The Pentagon’s Cyberstrategy, One Year Later – Foreign Affairs
“More destructive cyberweapons are being created every day, and an increasingly sophisticated technology black market virtually guarantees that they will eventually land in the hands of the United States' enemies. Robust defenses are no longer a luxury, they are a necessity.”
Social Media Report – State of The Media Q3 2011 – The Big Picture
Slides from Nielsen, who, what, where, why.
A History of Violence – Edge
One of the most important trends in human history – decline in violence