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| "It's life, Jim, but not as we know it". Source |
The 50% haircut (seen as 15% cash, 35% bond exchange yielding 6% rather than 15%+ currently) would help to bring Greece’s debt down to 120% of GDP (in line with Merkel’s earlier comments) while the EFSF would be leveraged 4-5 times to approximately EUR1 tln. With regard to timing, the new EFSF framework is expected to be in place by end-November, a second Greek aid package by end-of-year with the bond swap likely in January. – Saxo Bank
Quote of the Day: The only agreement on anything is a mandate for further talks. This is the second summit in four days, and 14th summit in 21 months. We can hope they talk themselves to death, but at this point that hope seems futile. – Mish’s
News (Wed evening) – BTH
Credit Update – Macronomics
Danske Daily – Danske Markets FX option vols – Saxo
TV: Bloomberg, CNBC, BBC World News
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT
EURO CRISIS
The problem with current policy is that it is turning both the public and private sector into a ‘credit event’ which will make it extremely difficult for the borrowers to switch lenders.
Anaemia, exuberance, and vulnerability: A post–financial crisis new global economic geography – voxeu.org
an index to identify the post-crisis winners and losers, digging into the causes of the new economic geography and exploring the vulnerability of emerging economies to a recurrence of a Lehman-type virus.
Coordinating bank-failure costs and financial stability – voxeu.org
under the national solution, some countries might have to pay extremely large amounts to support their banking systems. When these outlays are also large compared to a country’s GDP this can cause widespread financial instability, as the sovereign may not be able to support the ailing financial institution.
Delaying the End-Game – Morgan Stanley
On a long view, I'm bearish on the end-game for all the highly indebted economies (including Europe, the US, Japan and the UK).
Ambrose Evans-Pritchard: Her own government is the architect and enforcer of one-sided austerity policies – without offsetting monetary and exchange stimulus, or demand growth in the North – that are pushing Southern Europe into debt deflation and a downward economic spiral.
THE SUMMIT
Statement by van Rompuy after the summit – europa.eu (pdf)
Statement by IMF’s Lagarde on the summit – IMF
The EBA details the EU measures to restore confidence in the banking sector – EBA
Q& A by EBA on bank recap – EBA (pdf)
EBA: €106bn of bank capital needed — we think – alphaville / FT
Barclays Explains Why A 50% Greek Haircut "Would Be Considered A Credit Event, Consequently Triggering CDS Contracts" – ZH
Here Is How The 50% Greek Haircut Is Actually Just 28% – ZH
Dear bondholders, you are invited to… – alphaville / FT
Who wants to be a Greek bond holdout? – alphaville / FT
Ironically, of course, allowing Greece CDS to pay out could end up salving contagion elsewhere in the periphery. With CDS protection, you could hold that Italian bond. Without it, it’s not worth the lack of risk management.
Here’s the EU Statement: Details Conveniently Can Be Counted With Just One Hand – MarketBeat / WSJ
Eurozone ‘Plan’ Weaker Even Than Pessimists Expected — Euro, Stocks Rally Anyway – MarketBeat / WSJ
OTHER
Ray Dalio's radical truth – Institutional Investor
Academia versus industry – Locklin on Science
Daniel Kahneman: Bias, Blindness and How We Truly Think – Simoleon Sense
Excerpts and links to three recent articles by Kahneman on BB.
One Long Argument: A Big List of Behavioural Biases – The Psy-Fi Blog