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Wednesday, December 7

7th Dec - Summit hangover already?

UBS in the spirit of Christmas
You really ought to check last night’s post, the themes of two bailout funds, S&P downgrade threat and especially Bundesbank is broke are worth your time. Longer editorial coming up later today - basically my idea why it is time to sell the periphery bonds again, in anticipation of a summit disappointment.  I’m off to an interview. Close shaves and haircuts for all!
- MoreLiver
Joke of the Day: “The rating agencies were one of the motors of the crisis in 2008. One can ask if they are not playing that role again today.” – Christian Noyer of the Banque de France:

Then to the links:

News (Wed morning) – BTH
2012 early funding needs are enormous
Danske Daily – Danske Bank (pdf)
Market Preview – Saxo Bank
FX Update – Saxo Bank
  Central bank cavalcade over next 30 hours
Morning Briefing – BNY Mellon
  Eurozone and CHF

FX option vols – Saxo
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT

S&P Downgrade Warning Gives European Politicians A Chance To Remind You That Eurozone Crisis Is All S&P’s FaultDealbreaker
But here we are, with both S&P and the Basel Committee slowly and tentatively lurching toward atoning for past mistakes by toughening up. And all they get for it is grief.

UBS' Advice On What To Buy In Case Of Eurozone Breakup: "Precious Metals, Tinned Goods And Small Calibre Weapons"ZH
Indeed, it is distressing to see how many misconceived ‘remedies’ are put forward by seemingly reasonable people. In what follows we review some of the odder ones and explain why they don’t make sense.
Also UBS doubts your eurozone contingency plan is good enoughalphaville / FT

Eurozone debt redemptions will force the EMU to act in Q1 2012Pragmatic Capitalism

Has The Imploding European Shadow Banking System Forced The Bundesbank To Prepare For Plan B?ZH
three simple things: a scarcity of quality assets that can be pledged at various monetary institutions in exchange for cash or synthetic cash equivalents, a resulting lock up in interbank liquidity, and above all, a gradual freeze of the shadow banking system.

European Banking Authority and the capital of European banks: Don’t shoot the
The newborn EBA has been fiercely criticised in the few months of its life. This column argues that most of the criticisms have been driven by lobbying interests more than by noble worries on the future of the European economy. It adds that the current market turmoil requires a pan-European guarantee scheme for banks, a ‘big bazooka’ for sovereign debt which does not boil down to a pop gun, and stronger bank supervision at the EBA level.

Goldman: A Clean Resolution From Friday's Summit Is Now Ruled Out; Outcome To Fall Short Of Market ExpectationsZH
The ‘clean’ solutions that would have seen clear resolution of that impasse appear to have been ruled out following Monday’s German/French meeting. That makes something altogether fuzzier likely to emerge from Friday, and this risks falling short of market expectations. The sequencing that we believe is being followed will be delayed further into the new year.

Merkozy Dog-and-Pony Show is Nothing but Fleas; Immense Arrogance, Loose Cannons, No CredibilityMish’s
As with grand plans for the EFSF, still not finalized, the Merkozy plan has morphed into nothing but budget rules that the EMU will not be able to enforce because Sarkozy would not cede fiscal control to the EU. Merkel will not accept Eurobonds, because she can't, by German supreme court ruling.

Weighing the (rest of the) Week Ahead: The Eurozone SummitA Dash of Insight
Funny! Both (Rehn and Merkel) are correct.  This resembles a prime-time (market) soap opera with a continuing plot and a story and climax within each episode.

Martin Wolf: Merkozy failed to save the eurozoneFT
If the most powerful country in the eurozone refuses to recognise the nature of the crisis, the eurozone has no chance of either remedying it or preventing a recurrence. Yes, the ECB might paper over the cracks. In the short run, such intervention is even indispensable, since time is needed for external adjustments.

ESM loses all its
The most important announcement went largely under the radar—that the ESM will not force losses on private bondholders. This transforms the ESM from a vehicle that might have actually helped (though many details were still needed) to yet another insufficient bailout mechanism that is poised to sink even the core EZ countries.

The Global Community Should Ask Europe to Abandon Unanimity on Crisis FinancePIIE
Of course, any further European country requesting IMF assistance—Italy and Spain will need to roll over large amounts of debt in the coming year—must accept the usual conditions placed on financing. These include fiscal adjustment, restructuring of the banking sector, and structural adjustment.

The Five D's Of Dystopian MarketsZH
Citigroup’s structured credit outlook Apocalypse yesterday: return assumptions are broken, liquidity is gone, forecast distributions wide, funding difficulties, deleveraging as deregulation is in reverse.

The Worldwide Depression/Recession Of 2012The Daily Capitalist
While these economies are shrinking, demand for commodities, capital goods, and manufactured goods all decline. This is impacting commodity prices; they have been falling since this summer (mainly a supply-demand factor, not just a money deflation issue). Each country/zone will have a different reaction to all this. Most will continue to inflate (“print” money).

Basel Rules Face Change With No-Risk Sovereign Debt a FocusBusinessweek
…may let banks use equities and more corporate debt, in addition to cash and sovereign bonds, to satisfy new short-term liquidity standards…

On the Analyst's Couch with David CronenbergGQ
The director of A Dangerous Method discusses his new movie's dynamic duo, Michael Fassbender and Viggo Mortensen, Jews in history, and deviant sexuality