Google Analytics

Friday, August 31

31st Aug - Weekender: Best of The Week

Here are the best links from my ending week’s blog posts.
Previously on MoreLiver’s:
31.8. Best of August most read pieces + all my ’views’
30.8. US Close nice one
30.8. US Open nice one

Follow ‘MoreLiver’ on Twitter or Facebook 

Merkel Pushes Convention to Draft New EU Treaty; United States of Merkel?Mish’s
If the treaty is a simple majority rule treaty, Germany would be at risk of being overruled by the club-med states. If the treaty is by percentages, the club-med states would be at risk of being dominated by what is good for Germany and France (assuming of course Germany and France can agree). No matter how a treaty is structured, some countries are guaranteed not to like it.

A German Sovereign Wealth Fund to save the
Daniel Gros & Thomas Mayer: Target 2 claims are ultimately backed by the securities of banks in deficit countries delivered as collateral for ECB credits under the various facilities. A large part of these securities is probably of dubious quality…(with SWF) Imbalances would gradually disappear and German foreign assets would move from zero interest nominal claims on the ECB to diversified real and nominal claims on various private and public foreign entities in a variety of asset classes.

Balkanisierungalphaville / FT
If you’re a central banker, how might you counteract the trend for core banks to match assets with liabilities in their peripheral subsidiaries? One reason, perhaps, that bond-buying won’t be the end of efforts to tackle convertibility risk.

Charting sovereign bond holdings across the eurozonealphaville / FT
At a point when government bonds are considered risky assets, euro-area banks are faced with both balance sheet and reputational risks compared to their non-euro area counterparts, and may prove reluctant to increase this exposure further.

Has the EU failed its original agenda?qfinance
Perhaps the European Commission should consider a back track of policy and only aim for a softer political union similar to the post war arrangement, scrapping the idea of a single European currency.

Which way for Europe?bruegel
The big question to which nobody has a clear answer is whether Europe is in the process of inventing a model of its own or whether it has only taken a detour from the inevitable choice between disaggregation and convergence on the standard federal template.

Citigroup Has The Best Summary Of Europe's Fiasco Yet: "Losses Are Unquantifiable"ZH
Matt King’s “Passing the potato”-headlined report.

Converging competitiveness and balance sheet recessionsalphaville / FT
Nomura’s Richard Koo is back to bang the balance-sheet-recession-drum and has taken a look at falling unit labour costs across the eurozone periphery and where they are likely to meet Germany’s as they creep upwards.

[Interview] France and Germany moving towards closer political unioneuobserver
"You will be surprised in the autumn by the degree of movement that will have taken place in some member states," says Thomas Wieser, one of the economists preparing plans for banking union ahead of the October EU summit.

The crash of the Dutch housing market reminds us of a much older market bubbleSober Look
With 80% of the Netherlands' GDP coming from exports, the nation is already highly exposed to global growth. This housing market decline could tip the Dutch economy into a recession (also Rabobank’s 20-page report)

Introducing the Bruegel dataset of sovereign bonds holdings (and more)bruegel
To our knowledge, this is the first cross-country database on sectorial bond holdings that covers almost all the sovereign issuer of the euro area and we believe that it could therefore add a significant value to the existing sources. (Data in Excel format)

Europe’s Crisis Goes to CourtProject Syndicate
Economists almost everywhere are debating potential solutions to the euro crisis, while failing to account for one crucial element of any resolution: the German Constitutional Court. But, given that no solution can be implemented without the court's approval, debates that disregard it are meaningless.

Morgan Stanley: Concerns about the German Constitutional Court? ZH
40% Chance German Court Does Not Ratify ESM

Judgment Day for the EurozoneProject Syndicate
Hans-Werner Sinn: Nobody knows how the Constitutional Court will rule on these objections. Most observers believe that the Court is unlikely to oppose the ESM treaty, though many expect the judges to demand certain amendments, or to ask Germany’s president to make his signature subject to certain qualifications.

Portugal and a second bailoutalphaville / FT
A second bailout may well be on the cards if the Troika is genuinely convinced that the government cannot do more to reach the agreed targets and that further austerity measures will just exacerbate the recession.

Impression from Madrid (presentation) – Nordea Bank (pdf)
Here is a presentation containing charts and comments supporting our general view on Spain. I have added a slide on the order of events leading to a Spanish request for rescue fund support topped with ECB intervention, which I believe will happen within a month or two.

Chart Of The Day: For Spain, The Real Pain May Be Just BeginningZH
Couple of charts from Goldman Sachs

The "revised" Eurozone chain of eventsSober Look
How many times have we seen this scenario play out? The Eurozone leadership declares that it has the ultimate solution that ends up failing at the implementation stage. This certainly feels like one of those situations. Here is the "revised" chain of Eurozone events

In ECB-time, “the coming weeks” might be more than 4alphaville / FT
Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds, two central bank officials said. D’oh! With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed,

When ECB bond-buying meets collateralalphaville / FT
Chart via Nomura’s rates strategists. It’s their version of what the plumbing of the European Central Bank’s rejigged bond purchases should look like

Goldman Sachs: Three Rationales For Sovereign Debt PurchasesZH
As a flexible and immediately available source of sovereign funding, central bank financing is a powerful tool to deal with crisis situations. But it lacks political legitimacy and can blunt the incentives for more fundamental consolidation and reform to take place, helping to transform a crisis into a chronic problem.

BuBa President on ECB Bond Purchases 'Too Close to State Financing Via the Money Press'Spiegel
Jens Weidmann, the 44-year-old head of Germany's central bank, has made a name for himself by championing price stability and opposing bond purchases by the European Central Bank. In a SPIEGEL interview, he criticizes the ECB's latest plans and insists he only wants to secure the euro's long-term future.

Draghi's incomplete vision for the futureOpen Europe
Ultimately, Draghi's unwillingness to put a price tag on any of his suggestions or explain how they can be delivered in a democratic manner makes them hard to believe. The German public deserve better 'solutions' than this.

Draghi’s Master Plan MatrixZH
Morgan Stanley’s thoughts with charts

ECB's bond purchases should start with PortugalSober Look
JP Morgan: It really can't do too much with Greece at this point, but the central bank could focus on Portugal first. Portugal is supposedly on track with its fiscal plan (at least they have satisfied the Troika requirements). Yet the low rate policy transmission is broken, as short-term rates (as well as effective household borrowing rates) remain stubbornly high.

Goldman Explains "Where To Invest Now"ZH
72 slides.

What's Priced In?ZH
Citi: traders 'expect' the US, Europe, and Canada all to be tightening (raising rates) within 18 months, while expectations are for Australia (and the rest of the China-reliant nations across Asia) to see notable easing in that period - and already priced in.

A Look at 9 Quotes from George SorosIvanhoff Capital

Buffett’s Alpha Yale (pdf)
Berkshire Hathaway has a higher Sharpe ratio than any stock or mutual fund with a history of more than 30 years and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha become statistically insignificant when controlling for exposures to Betting-Against-Beta and quality factors. We estimate that Berkshire’s average leverage is about 1.6-to-1 and that it relies on unusually low-cost and stable sources of financing (For more on this, see also mebanefaber)

What Caused the Crisis?The Aleph Blog
I have wanted to write this article for some time, but decided to sit on it in order to consider the matter more closely. What caused the financial crisis of 2008?

Quant: A Dangerous Word Frequently Misused and MisunderstoodMinyanville
Aaron Brown’s long and highly enjoyable piece.

Why Does Wall Street Always Win?Economix / NYT
Simon Johnson: But be warned: while fascinating, much of what is in this book will turn your stomach. Mr. Connaughton is now out of politics, and I very much doubt that he will ever return. Hence the complete honesty missing in most political memoirs; no bridge is left unburned.

Weekend Reading: Scoundrels, Birds and Bees, and Risky ShiftsCFA Institute
Over the past couple of weeks there have been lots of compelling articles for financial advisers. Here are some of my favorite reads in case you missed them.

Which Asset Classes Are Most Vulnerable To 'Policy' Disappointment?ZH
Deutche Bank’s interesting data tables. Equities are the most exposed class.

Golden InstabilityKrugman / NYT
The truth is that returning to gold is an almost comically (and cosmically) bad idea.

The monetary Maginot of the Gold Standard Telegraph
You could say that human folly and wickedness debauched the beautiful Gold Standard in the interwar years, but to concede that is to concede the argument. It is to admit that gold does not in fact prevent politicians running amok. It is just another monetary Maginot Line.

One More Bear Market, PleaseThe Short Side of the Long
I plan to respect both the time and inflation adjusted price of the current equity bear market. Relative to previous historical patterns, my secular bear market model shows that an expected bottom should be somewhere in the middle part of this decade.

SocGen’s Annotated European Event CalendarZH

The Complete 'Ranked' World Calendar Of Events To The End Of The YearZH
UBS’s list of events with estimated levels of market impact included.

Moon Machines
Great documentary on the Apollo program, on Youtube:

50 genius facts about GoodFellasShortList
Stuff I bet you didn’t know about this classic movie.

WikiLeaks and Free SpeechOpinion / NYT
by Michael Moore and Oliver Stone

Tähän velkojen verkkoon Suomikin sotkeutuuJan Hurri / TalSa
Kreikalle lisää aikaa, Espanjalle lisää apurahaa, EKP uusiin tukiostoihin, EVM:lle rajaton rahoitus, EU:sta pankkiunioni... Ideoita sinkoilee, mutta näilläkään keinoin kriisi tuskin päättyy. Näin ei liika velka vähene. Se kasvaa, muuttaa muotoaan – ja päätyy Suomen kaltaisten vapaaehtoisten maksajien piikkiin.

Pankkiunioni kasvattaisi eniten Suomen pankkiriskiäJan Hurri / TalSa
EU:n komissio muuttaisi rahaliiton pankkiunioniksi ja siirtäisi ainakin suurimmat pankit pankkiunionin valvonta- ja pääomitusvastuulle. Pankkiriskien tasajako euromaiden kesken hyödyttäisi suoraan suurimpia pankkimaita ja epäsuorasti kriisimaita. Suomi ei ole kumpaakaan – mutta saisi vastuulleen suhteellisesti eniten uutta pankkiriskiä.

Espanjan budjetista paljastui uusi miljardiaukko - "he yrittävät salata jotakin"TE

Markkinatalouteen kuuluu, että osa valallisista ei koskaan maksa velkojaantyhmyri

Olli ja Otto-VilleEsko Seppänen / US Puheenvuoro

Ennätysmaksun syy paljastui: Suomi maksaa muiden helpotuksiaUS

Suomalaiset EU-asiantuntijat ja kompetenssimedian vahtikoira

John Cage Viitasaarella 1983 - entiset nuoret kertovatYLE
Kesällä 1983 Viitasaaren nykymusiikkitapahtuma järjestettiin historiassaan toisen kerran. Festivaalin taiteellinen johtaja, uuden musiikin pioneeri Suomessa, säveltäjä Jukka Tiensuu onnistui kutsumaan paikalle John Cagen, toisen maailmansodan jälkeisen avantgarden kärkihahmon Yhdysvalloista.

TaakkaHannu Visti
Ajan hengessä on jotain äärettömän outoa, sillä yhteiskunnan sentimentti tuntuu kallistuvan enemmän ja enemmän kieltämisen kannalle. Ikään kuin tuskailemme kaiken vapautemme taakan alla ja ahdistusta lieventääksemme taakkaa pitää keventää luopumalla osasta kuormaa. Mutta milloin vapaudesta on tullut tällainen sietämätön taakka?

Follow ‘MoreLiver’ on Twitter or Facebook