Lunchtime update: Greek CDS auction under way (Bloomberg, MarkIt). EFSF held a conference call with investors, planning to sell 10-20 year bonds to finance the Greek mess – until now, the rescue vehicle has only sold short maturity instruments. Some very nice articles: my favorite Simon Johnson blasts the Fed’s stress tests and Grant Williams’ latest newsletter is again good stuff. For my views see the weekend postings.
News And Market Re-Cap – RanSquawk / ZH
Today in the euro zone – MacroScope
The Lunch Wrap – alphaville / FT
EZ Crisis Daily Press Summary – Open Europe
EZ Crisis Daily Press Summary – Open Europe
EURO CRISIS
Spanish House Prices Tumble – WSJ
Spanish house prices tumbled at their fastest pace on record in the fourth quarter, a sign that a long-running property bust will continue to weigh on Spanish households and banks.
ASSET CLASS VIEWS
HOUSING: Rent to own shows the “buy high, sell low” mentality of investors – Pragmatic Capitalism
people were euphoric buying homes at 30-40% higher levels with rates 200 basis points higher. Now with affordability at record highs, these same people are piling into rentals.
Some of this excess premium may therefore be justified because of crude's utility as a hedging tool.
Theory: Now this “short” position taken on by the banks on behalf of the producers is starting to be covered. This time with real deliveries, since the positions can no longer be rolled forward for a profit by the banks.
BONDS: Is There a Bubble in Treasuries? Both Sides of the Case; Explaining the 2011 Treasury Rally (It's Not What You Think); Where to From Here? – Mish’s
Even if the 30-year long-bond does nothing more than rise to the top of that channel shown in the first chart, treasury holders will be massacred. If the recovery is real (I do not think it is, others do), yields should rise to the top of that channel at a minimum, probably sailing even higher.
Nice look at the US stock market sectors: My inner investor remains bullish, but he is a nervous bull. My inner trader tells me not to worry. These issues with the American economy and consumer are 3Q or 4Q problems. So let's party on, but keep an eye out for the exit.
Long post discussing US equity valuations – main view stocks relatively expensive
OTHER
Things that make you go hmmm… – Grant Williams via The Trader (pdf)
Again a very good long text, oil being the main theme
Federal Reserve Stress Tests Make Us All Muppets – Simon Johnson / BB
The Fed has an imperfect view of the future, as do we all. It has repeatedly demonstrated a limited ability to control economic outcomes. In light of this, the Fed could have required banks to build up shareholder capital on their balance sheets in case their aggressive risk-taking again becomes reckless and creates enormous losses.
BizDaily – BBC (mp3)
How will China tackle endemic corruption and rapidly growing inequality? Justin Rowlatt speaks to Gary Liu, the deputy director of Lujiazui International Finance Research Centre, and Jim O'Neil, Chairman of Goldman Sachs Asset Management. Plus Lucy Kellaway on whether our bosses should decide when we travel.
Review of “The Origin of Financial Crises” by George Cooper – Portfolio Probe
It talks about two subjects: 1) Why markets for goods and services tend toward equilibrium but financial markets do not 2) Why central banks are useful and what they should do (which they currently don’t).
In any case, the outrage shouldn’t be focused on MS, it should be focused on the governments that do the trades, and the regulators who let this system continue to exist in all its opaque glory.
Roger Lowenstein’s Disgraceful Propagandizing via “Bernanke as Hero” Piece – naked capitalism
The Fed couldn’t have gotten better PR if it had paid for it. Lowenstein’s account has just enough muted criticism of Bernanke (he was slow to see the severity of the crisis, his critics on the left may have a point in saying he hasn’t been aggressive enough in trying to reflate the economy) to mask its hagiography.
OFF-TOPIC
The Longform Guide to Early Computing – Slate
As the new iPad debuts, a look back at the greatest stories ever written about the first computers.
A Curated Linkfest For The Smartest People On The Web! – Simoleon Sense