As Greece is about to default and exit the euro zone, same ideas will come up or be forced upon other countries as well. Obviously this implies that Blue horseshoe loves Portugal.
This weekend, I've posted Best of The Week, Press Digest, and Weekly Support. I've gone through 207 feed subscriptions three times, scanned the headlines of hundreds of articles and selected and summarized only these few for your eyes. I do this every day. If you feel this is high-quality work, spread the word.
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- MoreLiver
EURO CRISIS: GENERAL
Restoring confidence in the Eurozone's sovereign credit markets – Sober Look
Two key events to restore confidence: ISDA must trigger default on Greece and ECB must take the same haircut as everyone else. Private bond holders subordinated to the IMF, EFSF, ESM and ECB makes it very hard to convince anyone to invest in European bonds again.
Bickering Over Who's at the "Three-Speed" European Table – Mish’s
Clearly we have the Euro Pact, the Euro-Plus Pact, and the 27-nation EU-Pact. That sounds like three tables to me. Poland demanded the topic be debated on Monday
Leaders in Euro Zone Shift Focus Beyond Gloom – NYT
The talk seems to be have shifted away from doomsday forecasts of an imminent euro collapse. Instead, the debate is now focusing on the best way for the euro zone to weather an economic downturn and whether it can emerge stronger from the ordeal.
Federal Reserve's 'helicopter' Ben vs. ECB's 'super' Mario – Saxo
In US, monetary policy tries to accomplish growth, while in Europe it tries to prevent the complete collapse of the banking system.
EURO CRISIS: GREECE
Unless Germany, pardon the Troika, gets the one condition it demands, namely "absolute priority to debt service" and "transfer of national budgetary sovereignty", as well as a "constitutional amendment" thereto, there is no Troika funding deal.
Hopes Rise For Greek Debt Deal? – Pension Pulse
Very nice roundup of several articles and videos on Greece, Portugal also mentioned. Bottom line of the post: Stay long risk assets, the decision makets are in Davos and agree to stop the rot.
Greek Debt Solution Likely to Trigger Credit Default Swaps – Mish’s
The ECB is now alone in its opposition to a credit event. Then again, the ECB alone was against haircuts, soft defaults etc. As late as May 7, 2011 former ECB president Jean-Claude Trichet insisted there would be "no Greek debt restructuring"…Since then there have been two restructurings, and we are now headed for an involuntary restructuring that will trigger credit default swaps.
Tomorrow And Tomorrow And Tomorrow: The IIF Is Full Of Sound And Fury, Signifying Nothing – ZH
Timeline of statements, all of them saying how a deal is imminent.
Timeline of statements, all of them saying how a deal is imminent.
Prepare for Greece to Leave Eurozone; German Government Calls for Greece to Cede Sovereignty Over Tax and Spending Decisions to Eurozone "Budget Commissioner"; Text of the German Demands – Mish’s
Perhaps I am mistaken but I do not see any chance Greece will agree with this proposal… Thus, if Germany does not back down and the IMF insists on a 10-page list of “prior actions” a Greek exit from the Eurozone is at hand.
ECB will not take losses from involuntary restructurings – governments will. After the “austerity leads to growth”-idiocy, there is a danger of policy overshoot – stimulating too much.
EURO CRISIS: PORTUGAL
The IMF seems insistent that they won’t provide new money without a high participation rate in an exchange with worse terms than many thought… The Portuguese debt problem is much smaller than that of Greece, but it should be attracting more attention. The entire EU community has stated over and over that Portugal is not Greece, and PSI is going to be unique to Greece. They can say that, but clearly the market doesn’t believe it.
The 78 bln euro aid package was too keep Portugal form having to issue medium and long term debt until May 2013. In October 2013, Portugal has a 9 bln euro bond maturing that it will need to roll. This may seem to be too far in the future to be very meaningful, but these kind of things seem to take on a life of their own.
When a sovereign or corporate becomes sufficiently distressed, a flip can happen in the way the credit default swaps are quoted. According to Markit, this is happening with Portugal now, with the CDS moving from being quoted in conventional spread to upfront.
EURO CRISIS: ECB
LTRO smackdown – alphaville / FT
Our question really is not whether the LTROs were a liquidity game-changer but what comes next, especially if banks are mostly using the cash to pay off their own creditors but not for extending to the real economy…Buried in the ECB’s release on December’s monetary developments, for example, Societe Generale analysts noted the biggest-ever monthly decline in loans to the non-financial sector:
The ECB is Plugging Holes – EconoMonitor
As each private funding market shuts down, the ECB compensates by relaxing its lending facilities and collateral rules, effectively shoring up bank liquidity… It’s pretty clear what the ECB is doing: plugging up the bank funding holes left exposed by private capital markets. What’s next?
Draghi Points to Signs of Stress in Financial System – DealBook / NYT
After underestimating the risk of government bonds in the years leading up to the crisis, investors “are overshooting government risk, and this may go on for a while,” Mr. Draghi said. “These things don’t wash away immediately.”
EMERGING
Emerging economies: Who has the most wiggle room? – Free exchange / The Economist
China, Indonesia and Saudi Arabia have the greatest room to support growth. At the other extreme, Egypt, India and Poland have the least room for a stimulus, thanks to excessive government borrowing, large current-account deficits, and uncomfortably high inflation. Brazil is also in the red zone.
STOCKS
Cutting Into Muscle - The Record Corporate Margin Juggernaut Has Just Rolled Over – ZHSTOCKS
The US Weekly Kickstart from Goldman Sachs believes that corporate margins are to drop, thus earnings have probably peaked.
Correlation Nation Presentation – The Big Picture
What happens when all markets and asset classes are in correlation? 34-slide presentation.
PLAYERS
In Punishing Year for Hedge Funds, Biggest One Thrived – DealBook / NYT
Bridgewater Associates, which manages nearly $120 billion, posted returns of 23 percent in 2011 — a year when the average hedge fund portfolio lost 5 percent.
Summers: “Inside Job had essentially all its facts wrong” – Felix Salmon / Reuters
Summers: “Inside Job had essentially all its facts wrong” – Felix Salmon / Reuters
In mid-2009, I went on a search for apologies, from the people who laid the intellectual and regulatory foundations for the financial crisis. I wondered whether and when Larry Summers, in particular, would apologize for what he did at Treasury, and I was heartened when Bill Clinton came out and said that, with hindsight, he was wrong about derivatives regulation.
Living In A QE World – The Big Picture
All central bank balance sheets are exploding higher, or engaged in QE
Why People Become Investment Bankers – theibanker.com
Most of those motivations can be grouped into a handful of categories (see diagram above for examples). They also explain why so many bankers agree to work unusually long hours, put up with abnormally high levels of stress and sacrifice personal and leisure time.
OTHER
The Transparency Trap – John Mauldin via The Big Picture
This week we take a brief pause in our series on the choices facing the developed world to look at some items that are catching my attention. We will get back to the US next week, as somehow I think we will not solve our problems between now and next Friday, and there will be plenty left for us to talk about. So today we look at the “shift” in Fed policy, and at the balance sheets of central banks, US GDP, Portugal and the ECB, the LTRO policy, and yes, there’s even a tidbit on Greece.
With this report we are moving closer to QE3. The Fed has clearly become more dovish following a change in composition of voting rights and is already having an easing bias.
Commodities Quarterly – Danske (pdf)
Overly negative outlook priced into commodity market
DIVERSION
DIVERSION
Con Artist Starred in Sting That Cost Google Millions – WSJ
Mr Whitaker helped the Feds to set up Google in a sting that proved the company knowingly sold ad space to sellers of illegal medical drugs
Mr Whitaker helped the Feds to set up Google in a sting that proved the company knowingly sold ad space to sellers of illegal medical drugs
The first sexual revolution: lust and liberty in the 18th century – The Guardian
Adulterers and prostitutes could be executed and women were agreed to be more libidinous than men – then in the 18th century attitudes to sex underwent an extraordinary change
How Much Can a Celebrity Make for Tweeting? – New York Magazine
When Ad.ly introduced self-destructing Charlie Sheen to Twitter, he was paid about $50,000 per tweet. It was worth it. Sheen’s tweet for Internships.com generated 95,333 clicks in the first hour and 450,000 clicks in 48 hours
Is there anything we need on the moon? – Foreign Policy
Helium-3, but mining it won’t be easy – or cheap.
The World’s First Computer Password? It Was Useless Too – Wired
In the spring of 1962, Scherr was looking for a way to bump up his usage time on CTSS. He had been allotted four hours per week, but it wasn’t nearly enough time to run the detailed performance simulations he’d designed for the new computer system. So he simply printed out all of the passwords stored on the system.
The future of teaching – Difference engine: Let the games begin – Babbage / The Economist
Despite their compelling content, the interactive textbooks seen so far perpetuate the “linearity and conformity” of traditional learning, where everything is geared—from kindergarten to high-school—to preparing for college entrance; where mistakes are expunged at the cost of creativity.
Online privacy: Relearning to forget – Babbage / The Economist
On 25-Jan European Commission overhauled the data protection rules: (the) 117-page booklet might affect every one of the European Union's 500m citizens, every one of its businesses, and many more beyond.