Quote of the day: It is as much a tale of over lending as it is of over borrowing and, just as nobody should feel undue sympathy for those who miscalculated the amount of debt they could service, nobody should feel for those who miscalculated their lending risks. – Joshua Rosner
News – BTH
News – The Trader
Market Preview – Saxo Bank
Morning Briefing – BNY Mellon
FX option vols – Saxo
...and now to today's links:
Markets Live – alphaville / FT
Debt crisis: live – The Telegraph
...and now to today's links:
EURO CRISIS
What the euro crisis is not – Macroscope / Reuters
Joshua Rosner: not a bailout of periphery, but a bailout of banks in the core. It is as much a tale of over lending as it is of over borrowing.
The European Union in disarray: A comedy of euros – The Economist
The EU has suffered plenty of disappointing summits without the sky falling in—a good many of them in the past year. But unlike the marathon dispute over a new constitution, the euro is in a race against time because markets are pushing countries to insolvency. As investors and voters lose faith, the task of saving the single currency grows harder. Sooner or later, the euro will be beyond saving.
France in Recession; Italy in Recession; Poles Protest; Credit Agricole Quits Commodity Business; Liquidity Crunch Continues; Italy in Recession; Poles Protest; Credit Agricole Quits Commodity Business; Poetic Irony – Mish’s
The story of Credit Agricole is symbolic of the banking sector everywhere. Banks are shedding assets, not because they want to, but rather because they have to. The reason they have to is they are over-leveraged or need to raise capital because of new Basel requirements.
ECB Success and Folly – Macrobusiness
The big question is whether the latest night’s auction result was spurred on by the new ECB long term repo operation which could be encouraging Spanish banks to purchased their nations sovereign bonds and then front up to the ECB… If this is the case, then this is obviously a positive for struggling sovereigns because the ECB liquidity operations are providing a small sovereign backstop.
Nothing much matters except Europe: it is the headline, the volatility, the counter-party risk, the recession contagion and earnings threat of the world.
EFSF presentation updated – EFSF (pdf)
EURO CRISIS: BANKS
Founder of BlueCrest in his first-ever tv interview opens up, big time.
Very nice roundup of recent writings and events, concentrating on the aftermath of shadow banking, repo markets, rehypothecation.
Now That European Banks Have Money, Lots Of People Have Ideas For What They Should Do With It – Dealbreaker
Since they’re now all flush and awesome, various people have come out of the woodwork to help them spend their money. (I’m happy to help too! Call me!) One possible answer is “bail out your reprobate governments,” which FT Alphaville have dubbed the “Sarko trade”…
OTHER
Where Is the Volcker Rule? – Economix / NYT
Simon Johnson: The main problem is that the rule as drawn does not set out the clear, bright lines that banks and regulators need, nor does it provide for meaningful enforcement. Instead of drawing the lines, the proposed rule mandates that firms write many of the rules themselves.
Peak credit – The Aleph Blog
As it is, we face many years of slower growth ahead as we bleed debt out of the economy, or a number of years of inflation ahead, as we inflate away debts. I suspect the former, but I can’t ignore the latter.
What is the new normal for volatility? – Pragmatic Capitalism
Correlation Ruled 2011 But It Won’t for Ever – The Source / WSJ
Credit Suisse makes life a little harder for aspiring rogue traders – Marketplace
The purpose of forcing traders to take two-week blocks of vacation without access to their computers is not, of course, to make sure that they are well-rested and effective.
DIVERSION
Physics Envy – WSJ
Malkiel reviews Derman’s book: Creating financial models involving human behavior is like forcing 'the ugly stepsister's foot into Cinderella's pretty glass slipper.'
Malkiel reviews Derman’s book: Creating financial models involving human behavior is like forcing 'the ugly stepsister's foot into Cinderella's pretty glass slipper.'