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Tuesday, January 31

31st Jan - When even UK looks sane

I wrote about the evils of Sarkozy last night. I still wonder these selfish bureaucrats who needed the help of their class mates with their course work in their elite universities, but were very good at looking and feeling convincing and trustworthy (=your typical politician). How much are they prepared to destroy the national wealth and competitiveness just to get re-elected? I repeat my FU to Sarkozy. UK is probably the only country in Europe with somewhat sane and sober leaders. And that is a lot for a country where cabinet members are found dead in their closets with an orange in their mouth.

In the real world, an intervention might be coming up in Japan, as the USDJPY is near the 'magic 76'-level. In Europe, the main drivers are still Greece, Portugal and the next LTRO.


Quote of the Day: The door will be open and we'll be able to welcome many more French banks, businesses and others to the UK – Cameron after Sarkozy’s FTT plan

News – BTH
News – The Trader
Morning BriefingBNY Mellon
  takes a look at the Persian Gulf
Daily – Danske (pdf)
Market Preview – Saxo

FX option vols – Saxo
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
Tracking Europe’s Debt Crisis – NYT

EURO CRISIS: GENERAL
Eurozone ProblemsKrugman / NYT
Crisis is driven by private, not public debt. In Europe the internal current account imbalances, caused by divergences in price levels. Internal devaluation has not and will not work. None of the austerity countries are on a road to sustainability.

A Growth Compact for the European UnionRe-Define
Sony Kapoor’s version of the statement that the EU leaders should present.

Capitano Crunch: Europe’s Collapsing Monetary AggregatesGlobal Macro Monitor
Credit Suisse’s charts shows the European money supply decrease, credit crunch and the deposit runs from the periphery to the core.

Brussels Hit by First Coordinated Strike in Nearly Two Decades; Spain to Miss Deficit Reduction Goals; France Halved 2012 Growth Forecast to 0.5 Percent; Ten Things to Expect in EuropeMish’s

You Ain't Seen Nothin' Yet; Another Trillion (or Two) Euro LTRO Coming Next MonthMish’s
Don't expect the next LTRO to make it into the real economy. It won't. Rather the LTRO will fuel more bank speculation and more leverage in government bonds. Money supply will soar, lending won't and this rates to be good for gold.

ESM, EFSF, Or EB, Will Any Of It Work?TF Market Advisors
It appears that the market is cheering the move that the ESM will be implemented sooner than originally expected. That would be good if the ESM was materially different than the EFSF or if it was being done for some reason other than that the EFSF has been a total failure.

EURO CRISIS: PIIGS
Merkel voices 'frustration' on Greeceeuobserver.com

Greek-German Wrangling Just Pointless Fury?Pension Pulse
As a Greek-Canadian who knows Greece and Greeks all too well, I think Germany needs to take a step back here. Importantly, Germany cannot change 60 years of corruption, public sector bureaucracy and huge tax evasion in 60 days by ramming austerity down the throats of Greeks, most of whom had nothing to do with this crisis. It will backfire in a spectacular fashion.

Portugal's Debt Will Be Restructured; 3-Year Government Bond Yield Tops 25%; CDS at Record High, Implies 72% Chance of DefaultMish’s

OTHER
On austerity and political suicidealphaville / FT
The conventional wisdom, which holds that large reductions of budget deficits are the kiss of death for the governments implementing them, isn’t backed up by very much empirical evidence.

‘Vulnerable to External Influences’ – The Economic State of Australia (Part I)Satyajit Das / EconoMonitor

Limit Orders, on the Crumbling Edge of Behavioral FinanceThe Psy-Fi Blog
Discussion on whether limit orders are dumb as they expose the investor to winner’s curse

Iran + Avg Crude Prices: Will Global Growth Suffer?Tail Chaser
Will US attack Iran? What is Iran thinking? What are the others thinking?

Functional Finance and Exchange Rate Regimes: The Twin Deficits DebateCredit Writedowns
US Dollar probably will not remain the world’s reserve currency. From the US perspective, that might be a disappointment. In the long view of history, it is inconsequential. There is little doubt that China will become the world’s biggest economy. Its currency is a likely candidate for international currency reserve, but that is not a foregone conclusion—nor something to be feared.

Are equity analysts getting better at their jobs?alphaville / FT
Nomura: Maybe analysts are getting better at forecasting quarterly results, or perhaps the general environment has become more stable, reducing the incidence of surprises. Whatever the explanation, it is one of the most striking features of the Q4 ‘season’ so far.

Is Japan ready for another currency intervention?Sober Look

Long-Dated VIX Still Priced For Depression RiskZH
The volatility (variance swaps) market is expecting realized volatility to be very high over the next 5-10 years - the only time this has happened was during The Great Depression… Although markets are in a healthy state at the moment it would only take a relatively mild cross-wind to expose the problems again.