Good day! In this post on SEC's data mining efforts to detect insider dealing and the usual euro crisis. I suggest you read last night's Sweep the leg instead of this - there was plenty of quality material there. I heard a new name for PIIGS: Subalpine Africa. News (Fri morning) – BTH
Danske Daily – Danske Bank (pdf)
Morning Briefing – BNY Mellon
Morning Briefing – Saxo
FX option vols – Saxo
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT
EURO CRISIS
Current Grand Plan: ‘non-standard’ ECB methods to follow fiscal integration: If the eurocrats were to choose to go this route of fiscal integration with all of the 17 eurozone countries, then watch for some language in the proposal for exit from the eurozone to be used as a stick to beat the non-compliant countries…Given the obstacles involved, I am not optimistic.
Why Liquidity Solutions for Solvency Problems Won’t Work – The Daily Reckoning
Once again, the Fed is distorting the signals the private market is trying to send. The market is saying there is a solvency problem and the Fed is saying it’s just a matter of liquidity. And don't forget, one of the reasons US money market funds are hunting around Europe for a decent return is because interest rates are so low in the US…thanks to the Fed and it's flawed attempt to 'kick-start the economy'.
Eurobills, not Eurobonds – voxeu.org
Fiscal union is now officially on the European agenda, but the issue of Eurobonds remains controversial. This column argues that the Eurozone instead needs Eurobills – debt instruments of maturities under a year. It claims that issuing Eurobills – up to 10% of Eurozone GDP – would help with crisis management as well as financial regulation and monetary policy, while minimising the risks of moral hazard.
Public-debt crises and bad equilibria: Lessons from the GIIPS Countries – voxeu.org
The countries most affected by the Eurozone debt crisis seem also to be characterised by bad institutions and large shadow economies. This column describes the bad equilibrium in which bad governments offer few and low-quality public services and make people less willing to pay for services. Firms stay underground, public receipts stay low, and governments remain inefficient. In sum, the presence of inept bureaucracy may be strongly associated with the shadow economy.
UBS On "How Bad Might It Get" – ZH
UBS: Steps toward fiscal union and a more proactive ECB, after all, will still not address the fundamental imbalances and competitiveness issues that bedevil the Euro zone. Nor will they tackle the inadequacy of structural growth drivers and the deep-seated demographic challenges that the region faces in the period ahead. Monetary initiatives designed to shore up confidence can give politicians more time to enact the necessary policies. But absent those policies and sooner or later intense instability will resume.
UBS: Steps toward fiscal union and a more proactive ECB, after all, will still not address the fundamental imbalances and competitiveness issues that bedevil the Euro zone. Nor will they tackle the inadequacy of structural growth drivers and the deep-seated demographic challenges that the region faces in the period ahead. Monetary initiatives designed to shore up confidence can give politicians more time to enact the necessary policies. But absent those policies and sooner or later intense instability will resume.
Killing the Euro – Paul Krugman / NYT
“The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, then the president of the European Central Bank. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.” But the confidence fairy was a no-show.
“The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, then the president of the European Central Bank. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.” But the confidence fairy was a no-show.
That doesn’t mean euro zone integration is necessarily doomed to fail without trillions in subsidies from wealthy countries such as Germany and the Netherlands. But it helps explains why, as Goolsbee argues, Europe is so much more dependent on healthy growth to haul itself out of its debt crisis than the United States or post-reunification Germany.
Run, run, run – Free exchange / The Economist
There are more ties to worry about, of course. If France and Italy get into serious trouble, then German, Swiss, and Dutch banks will also be in very serious trouble, and British and American exposure to those countries is also enormous. And so the full scope of the danger begins to become clear. It was very important for the euro zone to limit trouble to Greece, Ireland, and Portugal.
I will also observe that it seems implausible that political constituencies will be willing to endure years of austerity measures in order to maintain the euro.
France: EU passport-free travel should be 'reconsidered' – euobserver.com
Eight countries want to limit EU aid for laid-off workers – euobserver.com
ECB
This is a monetary crisis, caused by a jejune central bank that aborted a fragile recovery by raising rates earlier this year, allowed the money supply to collapse at vertiginous rates in southern Europe, and caused a completely unnecessary recession — and a deep one judging by the collapse in the PMI new manufacturing orders in November… Clearly a lot of investors think that Wednesday's central bank drama is a sign that something big is starting, that authorities of Europe and the world "get it" at last. Well, I'm sorry. The world gets it OK, but Germany does not, and nor does the ECB.
Has Ambrose Evans-Pritchard Lost His Mind? – Mish’s
What's disappointing about his article is that he predicted well in advance that the Euro experiment would end in failure. Rather than bask in the glory of being correct early and often, he has now lost his mind attempting to save the unsaveable. If that's not losing one's mind, what is?
The ECB is Open to Extending Its Role in Debt Crisis – Credit Writedowns
At the moment there are five competing and complementary ideas that are being bandied about as short- and long-term fixes. (fiscal union, ECB liquidity, Eurobonds, austerity, IMF)… What I see happening now is an attempt to cobble together a credible enough form of fiscal integration or a credible enough commitment to it to allow the ECB to intervene while a more permanent structure is implemented. If the Europeans get that far, only then would Eurobonds enter the picture.
Advice for the European Central Bank: Reduce Interest Rates – PIIE
A strong case can be made for a dramatic expansion of the ECB’s non-standard toolkit to address the European crisis. Innocent bystanders in the rest of the world hope that this will be a major component of the next comprehensive plan to address the European debt crisis that is expected from the next European summit on December 9. Whatever the outcome in Brussels, it would be inexcusable if the ECB did not act aggressively and proactively the day before to lower its interest rates by 100 basis points.
SEC
New S.E.C. Tactics Yield Actions Against Hedge Funds – DealBook / NYT
On Thursday, a new “analytics” division tasked with mining hedge fund data announced actions against six individuals and three hedge fund firms for alleged fraud.
For Wall Street Watchdog, All Grunt Work, Little Glory – DealBook / NYT
Since Wall Street’s financial crisis in 2008, this fledgling fraud task force has entered the front lines of fighting insider trading, even if the group rarely earns the credit.
DIVERSION
On self-destruction – Emanuel Derman / Reuters
Very well-written, subtly very depressing. Everyone is getting tired.
Get a Piece of the Schlock – The Aleph Blog
Immunize yourself from salesmen: Be skeptical. Nothing good is easy. Anything advertised in investing can’t be that good. I knew this, and my experience proved it as I reviewed the charlatans.