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| Get back on the boat, for fuck's sake |
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| Slicing the pie that nobody wants |
Hope you like this week's reads. I made some changes: the standard article links will now appear in the Weekender-post, while the previous week's reviews and what's ahead are in a new regular called imaginatively Weekly Support, see it here.
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| BNP Paribas flowchart for PSI negotiations |
Earlier on MoreLiver's: Weekly Support, Best of The Week, Press Digest and a Guest post by Macronomics.
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EURO CRISIS: GENERAL
Staring into the Abyss – John Mauldin / The Big Picture Excellent post, and even some concrete guidance for the eurocrats. Spoiler: they will not like Mauldin’s message.
Deadline Approaches for European Banks’ Recapitalizations – DealBook / NYT
Banks have until Friday to provide national authorities with guidance on how they expect to raise the extra €115bn.
Sarkozy Dumps Financial Transaction Tax After Pressure From Banks – Mish’s
Will this flip-flopping by Sarkozy, especially after being adamant that France would go it alone if necessary help his election chances?
Many EU Leaders See Low Job Approval – Gallup
Surprise – the more troubled countries have lower approval ratings. But what is the logic of listing the ceremonial president of Finland, while for Germany they use the chancellor Merkel? Take the figures with the usual salt.
EURO CRISIS: ECB
Collateral squeeze as strong as ever, Icap says – alphaville / FT
ICAP: the collateral crunch hasn’t eased at all, except in Italy: Of course the fact that the Italian plunge coincided with the ECB’s LTRO three-year tender hasn’t gone unnoticed. If anything, the coincidence suggests that the idea to shovel huge amounts of Italian government debt out of the secondary repo market and into the central bank may have been orchestrated to suppress Italian (and Spanish) repo rates more than anything else.
LTRO Version 0.2 – TF Market Advisors
I expect full disappointment for that crowd. I believe the next tranche of LTRO will actually be smaller than the first tranche!
The ECB creates artificial life – alphaville / FT
Citi believes LTRO has animated the corpse, but fundamentals are still bad: So don’t get wedded to this rally – the tighter we go, the more you want to move up in quality, not vice versa in a vain attempt to gain carry.
EURO CRISIS: PERIPHERY
The LTRO has failed to lower Portuguese yields, 10y now above 14%.
The thinking is, if Greece gets private bondholders to write-down losses on their Greek bond investments, thereby reducing its debt load, what’s to stop struggling Portugal from seeking to do the same?
The main and most surprising success of the Monti government so far has been the ability to push through Parliament two structural and “drastic” measures, the pension reform and the new property tax, without incurring any significant opposition
EURO CRISIS: GREECE
Greek Bondholder Talks Stalled, Agreement Unlikely By Monday Deadline – ZH
“Right now there are no talks. There will be consultations with the EU and the IMF to determine where we stand and then we'll see. It (negotiations) has again become complicated with the new demands over the coupon”
“Right now there are no talks. There will be consultations with the EU and the IMF to determine where we stand and then we'll see. It (negotiations) has again become complicated with the new demands over the coupon”
Greek Debt Talks Stall, More Negotiations "By Phone" Later Today; IMF Germany Think 4% Coupon Too High; Greek Haircut Calculator – Mish’s
It's hard to say whether it's the CDS holders who are the only holdouts here. Rather it's possible, there is no general agreement at all. Interestingly, both German and the IMF think Greece cannot recover with a 4% or higher coupon rate. Germany had been arguing for a 2% rate.
The reason why none of the negotiations really matter very much is, as Fidler says, that “if they don’t agree, the holdouts will have the ‘voluntary’ deal forced down their throats”. Greece is going to bolt collective action clauses onto its outstanding bonds — and use those clauses in what’s known as a “cram down”: the minority has to do whatever the majority wants.
More myths around Greek CDS trigger risk – Sober Look
CDS is not like insurance because it's an actively traded mark-to-market instrument… the impact on the "global banking system" of Greek CDS triggering is minimal because banks who wrote protection have already marked these positions to market…these so called speculators already made their money - they don't need to wait for the CDS settlement or maturity…
Caution: Falling wages – ekathimerini.com
The negotiations over wages in Greece due to take place over the next few days will be a defining moment of this crisis, not because a reduction in the minimum wage or cuts to private sector salaries will make a huge difference to the economy but because it is a test of whether those involved in the process – labor unions, employers, the government and the troika – are prepared to face the truth.
EMERGING MARKETS
Emerging Markets Briefer / Jan 2012 – Danske (pdf)
Surprisingly sunny dawn of 2012 – let’s see if it continues
Jim O’Neill Interviewed – Charlie Rose
Chairman of Goldman Sachs Asset Management on his new book "The Growth Map: Economic Opportunity in the BRICs and Beyond". Length: 52 minutes
The chart from Credit Suisse shows just how consistently economists have been underestimating China's GDP growth in their forecasts. A significant slowdown has been in the forecast almost every year.
Erste in CEE: bearly optimistic – beyondbrics / FT
Unfortunately, phrases like “cautiously optimistic” do not inspire confidence and Erste’s equities report, released on Thursday, is anything but bullish.
FOREX
Citi's Contrary FX View: ECB Easing Would Be EUR Positive – ZH
Citi: EUR will be stronger if the ECB compromises its ‘principles’, but succeeds in convincing investors that the sovereign risk is limited to the smaller peripherals, rather than the core.
Goldman’s € forecast: down and up – alphaville / FT
Using a quant model with inputs like US balance-of-payment flows, Goldman Sachs thinks EURUSD should go to around 1.44 by the end of 2012, but could fall to 1.20 before that in current panic.
STOCK MARKET
The Enduring Power Of Passive Asset Allocation – The Capital Spectator
Global Market Index – a passive, unmanaged mix of all the major asset classes weighted by market values – has outperformed nearly 90% of more than 1,200 funds for the 10 years through December 31, 2011
The Stock Ramp Is Just More Deja Vu "Insanity" Warns Morgan Stanley – ZH
MS: Do we really think the result of QE3 is going to be any different than QE2? Or that the second European LTRO is going to end up resolving Europe’s solvency problems simply because the Fed is now supporting a larger effort via its open swaps line? Didn’t we learn anything from the Japanese experience of the past 20 years!
OTHER VIEWS
Debt and deleveraging: Uneven progress on the path to growth – McKinsey
Major economies have only just begun deleveraging. In only three of the largest mature economies—the United States, Australia, and South Korea—has the ratio of total debt relative to GDP fallen. The private sector leads in debt reduction, and government debt has continued to rise, due to recession. However, history shows that, under the right conditions, private-sector deleveraging leads to renewed economic growth and then public-sector debt reduction.
Where Are The Customers’ Yachts? – Pension Pulse
Long and interesting article. Research shows that “a few dozen have produced most of the investors’ returns,” Lack says. And don’t forget the “thousand-year flood” of 2008, when the hedge-fund industry “lost more money than all the profits it had generated during the prior 10 years,” he writes.
Research: US - Recovery taking hold – again – Danske (pdf)
Expect Fed on hold for 2012, no QE3
DIVERSION
What is your favorite deep, elegant, or beautiful explanation? – Edge
192 thinkers from Baron “Borat”-Cohen to Emanuel Derman give their answers
A Raucous Hazing at a Wall St. Fraternity – DealBook / NYT
Kappa Beta Phi, an exclusive Wall Street fraternity whose members include big-name bankers, hedge fund billionaires and private equity titans, met at the St. Regis Hotel in Manhattan on Thursday night for its 80th annual black-tie dinner and induction ceremony.
On the above: we learn that while some of your number have gone into hermetic seclusion either because they've bankrupted a firm or are awaiting sentencing, the party continues for the self-styled Masters of the Universe unabated.
Book Bits For Saturday – The Capital Spectator
Just a month after the U.S. withdrawal, hopes for turning the country into an economic beacon are already in shambles
Václav Havel (1936–2011) – Paul Wilson / The New York Review of Books
The Internet Dodges the SOPA Bullet—For Now – reason.com
Last week the acronyms SOPA and PIPA were unheard of, much less decipherable, by most people. Yet the other day a groundswell of opposition to them, led by Wikipedia, Google, and other Internet entities, was powerful enough to persuade a significant number of members of Congress to abandon their active or tacit support for those things.