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| The deposit run from the Greek banks continues |
Plenty of talk on the PSI agreement. The risk seems to be that some investors are not taking the voluntary bond swap deal, instead pushing for a CDS-triggering credit event. It would make it very hard for the banks and especially the ECB to pretend that all is well and no losses need to be marked to market.
As the next bailout payment ought to be coming in March and the Troika of IMF, ECB and EIB have stated that the PSI resolution is a prerequisite, something has to give. Scenarios are:
1) Greece is allowed to default (inevitable, just do it and deal with the consequences).
2) Troika gives in and sends more taxpayers' money to the Sub-Alpine Africa even without the PSI agreement. (expensive muddle-through, problem unsolved)
3) Someone else picks up the tab (do I see any hands? anyone?)
ECB would get really hurt under the first alternative and require a recap from national central banks. It would also be the first EZ sovereign default and possibly open up the road for others with unsustainable debt levels. Other man's debt is other man's asset, so things would get really interesting next Spring.
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| From the Mish's article. U.S. QE was bigger |
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
EURO CRISIS
The euro crisis isn't really about money. It's about the fiction that Europeans ever existed at all.
From last December, but if you missed it: In this edition of the Foreign Policy/Brookings Institution Deep Dive, we delve into the dimensions of the European debt crisis, the potential solutions, and the future of the eurozone and global financial system
ECB refuses to hand over Nov 2010 threat letter sent to Brian Lenihan – NAMA Wine Lake
The letter from Trichet to Ireland’s finance minister demanded that banks’ unsecured bond payments must be made.
German negative yields as harbinger of deflation – alphaville / FT
…a negative yielding regime of this sort could bring about exactly the sort of voluntary capital destruction conditions that turned the 1930s crisis into a depression… In short, we suffer a decline of ‘safe’ assets in the developed world, a situation which calls for united central bank action more than ever.
George Soros Taught Us: The World Can Survive a Currency Union Breakup – MarketBeat / WSJ
There is one bright spot among history’s failed currency unions: The best-known one — the one that actually worked — is the U.S. dollar, established by the National Currency Act of 1863. This mechanism survives because of the federal government’s ability to raise taxes and transfer wealth within the union.
GREECE
To ring-fence the ECB in Greece… or not – alphaville / FT
If ECB does not participate in PSI and get their bonds converted to English law, they will keep the old ones, just as Greece is changing its laws to make it easier to default on Greek law.
If ECB does not participate in PSI and get their bonds converted to English law, they will keep the old ones, just as Greece is changing its laws to make it easier to default on Greek law.
Buiter on odds of German vs Greek euro exits – alphaville / FT
Citi’s 2012 outlook believes ECB rescues, perhaps after some auction failures, ring-fencing troubled countries by LOLR or via lending to IMF. Banks are recapitalized nationally or through EU institutions.
Hedge funds play hardball over Greek restructuring – ekathimerini.com
Without PSI, the Troika will not make the second bailout payment. Some investors are not agreeing, as they expect payments from CDS contracts, and this could push Greece to default next March. Also a summary by Zero Hedge.
A Couple Of Questions To Start The Day…. – TF Market Advisors
The situation in Greece is reaching a peak. A voluntary resolution seems less likely by the day, but that leaves open the ECB’s positions…
Disappearing Ink – Peter Tchir / ZH
Collective Action Clauses will ensure a Credit Event, and will cause investors to pull away from sovereign debt markets as the willingness to treat certain holders preferentially and the willingness to change the laws arbitrarily are risks they aren’t getting paid sufficiently to take.
Collective Action Clauses will ensure a Credit Event, and will cause investors to pull away from sovereign debt markets as the willingness to treat certain holders preferentially and the willingness to change the laws arbitrarily are risks they aren’t getting paid sufficiently to take.
Greece Bank Run Shows No Sign Of Stopping: Deposit Outflows Continue In November – ZH
The year is not over yet, and already Greece's banks have lost €36.7 billion of their deposit base in 2011, and a whopping €64.6 billion since the beginning of 2010, which is down from €233 billion to €173 billion in under two years.
Tiger Global, RenTech’s RIFF and Dalio’s Pure Alpha are the top three.
Hedge fund returns: More damning data – Buttonwood’s / The Economist
95% of a typical fund manager's measured skill can be explained by whether they report to a database
STOCK MARKETS
Stock Volatility: Not What You Might Think – PIMCO
Volatility tends to amplify stock returns so higher risk generally leads to higher returns in a positive market and greater losses in a negative market… Over the long run, lower volatility stocks can lead to higher returns because avoiding the downside can have powerful effects on compounding.
Return of the large caps – alphaville / FT
Morgan Stanley thinks that after ten years of underperformance, large caps might be a good bet.
OTHER
Chris Cook: Naked Oil – naked capitalism
Former IPE director Chris Cook: I believe that the market price is about to collapse as it did in 2008 and that this will mark the end of an era in which the market has been run by and on behalf of trading and financial intermediaries.
Bank Lending, M2 Money Supply Soar in China; Premier Wen Jiabao calls for "Measures to Boost Confidence in Stock Market"; US vs. China Money Supply - Who is Printing More? – Mish’s
The FP Survey: Follow the Money – Foreign Policy
What's wrong with the world economy? We asked top experts to fill in the blanks -- and they had a lot to tell us.
By the time that Basel II was finally implemented, in 2008, it was already too late. It was overtaken by the Global Financial Crisis (GFC), which was exactly the type of credit related calamity that Basel was meant to prevent.
The Counter-Narrative – The Reformed Broker
You already know everything that can go wrong… So by all means keep those issues in mind while I spin the counter-narrative.
DIVERSION
European Identities Part I – Francis Fukuyama / The American Interest
This excerpt deals with how different European countries have dealt with Muslim immigrant assimilation, and the second excerpt will discuss the lack of identity at a European level.
Network: The Secret Life of Your Personal Data, Animated – brain pickings
Disclosing 736 daily pieces of self, or what we talk about when we talk about privacy.
Ten All New Management Terms for 2012 – Macro Man
…genetically modified 2012 Management Terms into the vocabulary. Hopefully, if adopted by enough, they will help to show how silly most existing terms are, leading to their demise.
Recent thinking about scientific explanation – Understanding Society
So scientific explanation is context-dependent in at least this important respect: we need to understand what the question-asker has in mind before we can provide an adequate explanation from his/her point of view.
The Willpower Trick – Frontal Cortex / Wired
Although we might not be able to resist the delicious temptations of the world — they are simply too tempting — we can outsmart them, finding ways to avoid that internal conflict in the first place. The only way to boost willpower is to recognize the inherent weakness of the will.
Think Again: Intelligence – Foreign Policy
I served in the CIA for 28 years and I can tell you: America's screw-ups come from bad leaders, not lousy spies.