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Saturday, September 8

8th Sep - Weekender: Best of The Week

Here are the best links from the past week.

Previously on MoreLiver’s:
7.9. US Close: BigU = QE3 (payroll special)

All the coverage on ECB’s decision  is in my ECB Watch-post (continuously updated).

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ECB WatchMoreLiver’s
Commentary on the ECB decision both before and after the event, continuously updated

A Referendum on Europe: It's Time to Ask the People What They Think Spiegel
The Germany democratic system has suffered as a result of the euro crisis, but it has also made fighting the crisis harder. Now it's time to hold a referendum on European integration. Only then will Berlin have the democratic legitimacy it needs to take effective action.

ESM Permanent Bailout Fund Prepares for Prime Time Spiegel
The court battle against the permanent euro bailout fund, the ESM, has become the largest in German legal history. Yet despite widespread concerns, fund head Klaus Regling is preparing for action. The most important question surrounding the fund, however, remains to be answered: Will it work?

European ExceptionalismJean-Claude Trichet / Project Syndicate
Fiscal and certain other economic policies in eurozone countries should be subject to activation of a “federation by exception.” Instead of imposing fines on countries that transgress rules and ignore recommendations, the European authorities should decide directly on measures to be implemented in the countries concerned.

Paul Krugman: “The euro is a shaky construction” L’express / presseurop
To save the single currency beset by difficulties that stem from its initial design, Economics Nobel Prize laureate Paul Krugman argues that Europe should set its sights on low inflation but forget about implementing uniform austerity measures.

European Safe Havens Bid As Big Three Questions RemainZH
SocGen answers: How will the ECB address seniority? When will Spain request assistance? Is the German Constitutional court ruling only preliminary?

In the Picture: European banking unionThe World / FT
very good rounup summarizing (and linking) tons of material

Moody's Downgrades European Union To Outlook NegativeZH
see the full text, the logic is important to understand. Alphaville / FT had a shorter summary, and sophisticates can always refer to the original text on Moody’s.

The limits of a purely intra-euro rebalancing strategybruegel

Bernanke's ApologyMoreLiver’s
My Fed-Watch-collection.

Employment Data Ahead Tim Duy’s Fed Watch
If we believe Lockhart, Bernanke's speech was less of a signal than the general consensus would believe.  But if we believe Bullard, the FOMC is moving in the direction of additional easing in any event.  Greater than 50% odds, but still a close call?  Sounds about right.  The employment report could ramp the odds up to 80%, or push us back to the break even point.

Did the Republicans Force Bernanke's Hand? Tim Duy’s Fed Watch
While I think the state of the economy should have forced the Fed's hand long before now, the possibility that they might only get one more bite at the apple should be extra inducement to act. 

Quick Data NotesTim Duy’s Fed Watch
That same low growth looks consistent with inflation drifting below the Fed's mandate, providing the Fed with plenty of justification to act.  This is especially case given the downside risks posed by the global environment and fiscal policy. Of course, that was the case three meetings ago.  But each meeting has brought us closer and closer to a new round of easing, and we may finally have crossed the line. 

Blogs review: The Fiscal Cliff bruegel
What’s at stake: In an update to its budget and economic outlook, the Congressional Budget Office (CBO) reminded of the approaching “fiscal cliff” – a popular wonk-speak used to describe the significant automatic cuts in federal spending and tax increases scheduled to take place at year end under current laws.

Credit Guest: Structural InstabilityMacronomics / MoreLiver’s
The New Normal Of Investing: Bonds For The Price, Equities For The YieldZH
David Rosenberg of Gluskin Sheff: Back in the early 1980s, investors bought equities for capital appreciation and they purchased Treasury securities for yield. Today it is the complete opposite.

FX Comment: something’s cooking?Nordea
short piece discusses the CB balance sheet differences as a driver for EURUSD, China’s prospects as a driver for AUDUSD. Quick and worth it.

Time to resurrect the ‘missing variable’?alphaville / FT
Alan Greenspan becoming confused about America’s exceptional growth in the 1990s… Greenspan, confounded by the disconnect, concluded that some sort of missing variable must have been responsible for the mismatch.

Ahhhh! No robots!alphaville / FT
It questions the assumption, nearly universal since Solow’s seminal contributions of the 1950s, that economic growth is a continuous process that will persist forever. There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely. Rather, the paper suggests that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.

Gordon on GrowthThe Grumpy Economist
Gordon's paper is about the biggest and most important economic question of all: Long-run growth. It's easy to forget that per-capita income, the overall standard of living, only started to increase steadily in about 1750.

Democracies and debt: Voters are now facing a harsh truthThe Economist

Global Housing CyclesIMF (pdf)
This paper documents the characteristics of housing cycles in a large set of countries, and examines the determinants of house price movements. Empirical analysis shows that house price dynamics are mostly driven by income and demographics but fluctuations in these fundamentals and credit conditions can create deviations from the implied equilibrium path. We conclude with a discussion of the macroeconomic implications of house price corrections.

How to Unscramble an Egg Absolute Return Partners / PragCap
Policy mistakes: The repeal of the Glass-Steagall Act, Permitting mercantilism, The European Monetary Union, Austerity misunderstood, Ignoring pension liabilities, A return to the gold standard?

New financial forecast: On your mark, get set…Nordea
or go straight for the full pdf

MPT Implodes: Mean Variance Optimization Bites the DustSystematic Relative Strength
If we remove the academic flourishes, what he is saying is that mean variance optimization is dreadful and is easily outperformed by simply equal-weighting the asset classes.

Why the Investment Case for Hedge Funds is Still SoundPragCap
Alexander Ineichen’s 30-minute video (I’ve read one book by him, it’s ok!), or alternatively the direct link to Youtube.

Looking at the Ins and Outs of Volatility TradingAdvanced Trading
In a video interview with Opalesque TV, Maple Leaf trader Michael Wexler breaks down the ins and outs of volatility trading.

Inside Abel Noser's Trading Floor Advanced Trading
Advanced Trading takes you on an exclusive tour of Abel Noser's New York trading floor, where the agency broker known for transaction cost analysis, is customizing algorithms for the buy side, while growing its fixed income trading and transitions business.

The Luck of the Average Minyanville
One of the most common risk errors is to do a computation assuming average values for uncertain inputs and treat the result as the average outcome.

The Best Night $500,000 Can BuyGQ
On the nightlife in the elite clubs of Las Vegas.

Repellent; The Magical Law of Attraction Psy-Fi Blog
Positivity isn’t a neutral thing; it leads to negative outcomes for firms, employees and shareholders. It also leads to intense short-termism.

Voice of the New Global EliteThe National Interest
In sum, then, I came away from twenty-two weeks of monitoring the Economist convinced that it is, indeed, the very best magazine of its kind—a status made easier by the fact that it is arguably the only magazine of its kind.

Shattered GeniusPlayboy
The author attempts to interview Grigori Perelman, a reclusive mathematical genius.

The Universe in a Nutshell: Michio Kaku on the Physics of Everythingbrain pickings
(video documentary) The history of physics is the history of modern civilization.

Richard Feynman on the Role of Scientific Culture in Modern Societybrainpickings

A New Kind of Social Science for the 21stg CenturyEdge
These three things—a biological hurricane, computational social science, and the rediscovery of experimentation—are going to change the social sciences in the 21st century. With that change will come, in my judgment, a variety of discoveries and opportunities that offer tremendous prospect for improving the human condition.

Eurokriisi fifty-sixty (audio, 45min) – YLE
Erikoistutkija Heikki Taimion mukaan euro tulee hajoamaan jollain lailla. Ainoa kestävä ratkaisu euron toimivuuden jatkumiseen olisi täysimittainen liitovaltio, mutta siihen taas ei löydy monessakaan maassa riittävästi poliittista tahtoa. Vaikka aikaa onkin ostettu erilaisiin euron tukitoimin niin kriisiä tulee kriisin perään. Todennäköisesti jatkossakin tulemme näkemään erilaisia euron pelastamisyrityksiä.

Euron kriisissä kyse ei ole vain siitä että kaikki kriisimaat olisivat eläneet yli varojensa, vaan pinnan alla on Taimion mukaan kyse enimmäkseen ihan muusta. Mikä on ollut Saksan rooli täässä kaikessa? Ja entä EKP:n? Ja millainen on Suomen kohtalo tässä kaikessa? Eurokriisi nousee taas enemmän esille, kun Euroopan lomakausi alkaa olla ohitse. Tilanne on haastava, ja ennustuksia on vaikea tehdä. Brysselin koneessa erikoistutkija Heikki Taimio Palkansaajien tutkimuslaitoksesta pohtii mistä euron kriisi johtuu ja miten tässä voi käydä.

Podcast-vinkki: "Kuinka ratkaisisin eurokriisin kahdessa viikossa" - euroetana

Risto E. J. Penttilä: Kreikkaa ei voida enää puolustaa - Suomen hallituksen muutettava eurolinjaustaan SK

Tämä on vain alkua: Lopulta taivaalta sataa euroja Jan Hurri / TalSa
EKP on luvannut tehdä "kaiken tarvittavan" euron pelastamiseksi. Ensi viikolla selviää, tarkoittaako lupaus muuta kuin yhä railakkaampia raharuiskeita kriisivaltioiden ja -pankkien tukemiseen. Tätä menoa "kaikki tarvittava" tarkoittaa, että pelastustoimien päätteeksi taivaalta sataa euroja

Euro tuhoaa suomalaisten eläkkeetOlli Pusa / US Puheenvuoro
Kuntarahoituksen entinen toimitusjohtaja Olli Pusa on ehkä eurovastaisimpia kommentaattoreita joita olen nähnyt. Uskomatonta, että joku uskaltaa sanoa, mitä mieltä on asioista.

Jan Hurri: Pankkiunioni uhkaa pahentaa Euroopan velkapöhöäTalSa
EU:n kaavailema pankkiunioni ei puutu velkakriisin varsinaisiin syihin, joten se tuskin ratkaisee kriisiä eikä se estä seuraavaa. Sen sijaan kaavailut tekisivät tilaa suurimpien pankkien kasvamiselle nykyistäkin suuremmiksi niin kuin Yhdysvalloissa on käynyt. Vaarana on, että Euroopan velkapöhö vain pahenee.

Talousnäkymät – Hitaasti kiiruhtaenNordea

Talousennuste vuosille 2012–2013 PT (pdf)
Euroopan velkakriisi hidastaa kasvua (lehdistötiedote pdf kiireisille/laiskoille)

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