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Sunday, November 18

18th Nov - Weekender: EU, US, Asia

Europe is experiencing all the problems at the same time - real economy tanking, world not looking good, PIIGS suffering, political will weaning. The only thing that is not bad is the market pressure. Market pressure is kept away by Draghi's promise. In US, until recently relatively good data has now started to surprise to the downside - corporate earnings and real economy are looking cold, while fiscal cliff and uncertainty over monetary policy is troubling the markets. China got themselves new leaders, and it looks like it will be more of the same - playing tough on corruption but not reforming the economy. In other words - it seems all the bad news are already out in the world - a perfect opportunity to buy risk assets. But one thing I don't get - what happens when market pressure on Europe is back on? Thus, only tactical longs, boys and girls.

Previously on MoreLiver’s:

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Brussels blog round up for 10– 16 Novembereuropp / LSE
More delays for Greece’s bailout, strikes across Europe, and will France be the next victim of austerity politics?

Merkel has decided to pay up for the euroFT
The best way to look at what is happening in the eurozone is as a classic negotiation between creditor and insolvent debtors. Germany knows that the debtors cannot pay in full but before it agrees to a writedown, it is determined to extract guarantees that history will not repeat itself. Ms Merkel has decided to pay up, but in return she needs assurances sufficient to convince German voters that this is not just a first instalment.

Demographics suggest low for longNordea (pdf)
The European working age population will decline in coming decades. The pattern in Germany is similar to that of Japan, whose demographic problems are well known. The declining population is expected to lead to lower growth, which limits the scope of grow-ing out of the current debt burden. An ageing population also points to low interest rates.

France and the euro: The time-bomb at the heart of EuropeThe Economist
Why France could become the biggest danger to Europe’s single currency. The threat of the euro’s collapse has abated for the moment, but putting the single currency right will involve years of pain.

Europe’s banking union: Made in BrusselsThe Economist
The euro zone needs a banking union, but this isn’t it

EurogeddonThe Economist
Two bold writers on what needs to be done to fix the euro

Who will dictate Europe's future?BBC
Which country holds the key to the euro's fate? Which of the 17 members will turn out to be the "pivot state" - the country around which the future of the eurozone will turn?

Spain’s’ only three options for recoveryFabius Maximus
The Euro-crisis began in March 2010, and yet its causes and basic elements remain widely misunderstood — including, based on their public statements, by many of Europe’s leaders.  Here Prof Pettis gives a clear explanation of what’s happening, and of Spain’s only three ways out of this crisis.

The Club Med and the euro: Workers of Europe, protest!The Economist
The first hints of optimism are appearing in Europe’s troubled Club Med countries. They are not to be found in unemployment or growth figures, but mostly in the mouths of ministers.

Is the EZ’s “cunning plan” for Greece credible?Kiron Sarkar / The Big Picture
The meeting of the EZ finance ministers next Tuesday (20th November) to “settle” on a deal for Greece is certainly a “must be watched “event. The market consensus suggests that some kind of deal will be done. Well, that may be the case, but let me just raise the following.

The Things That Draghi Didn’t Say in His Milan SpeechEconoMonitor
In short, Draghi did not acknowledge that the ECB faces huge political constraints and that the European crisis is far from over.

Here Is Why The ECB Should Be Freaking OutZH
The current EURUSD rate implies a balance-sheet ratio of 1.08x (see chart above) - which therefore means the market expects the ECB to expand its balance sheet by EUR740bn; this just happens to be the sum-total of Spanish sovereign debt

Eurozone summits: Moments of truth or waste of time? (22-Oct) – BBC

What could happen next if Greece leaves the eurozone? (18-Jun) – BBC

Analysis: Early "fiscal cliff" talks show possible path to dealReuters
President Barack Obama and top lawmakers agreed on Friday to work on a framework for reforming the U.S. tax code and "entitlement" programs next year, in what could be an important first step in averting the upcoming 'fiscal cliff."

Household formation to boost housing starts - assuming government funding stays intactSober Look

China Persists In Refusing To Buy US Paper As Foreign LTM Purchases Of Treasurys Plunge To Three Year LowsZH
in September, the month that Bernanke launched QEternity, for the first time in 2012, foreigners were net sellers of US Treasurys, dumping a total of $17.3 billion in paper, with foreign official institutions selling $919 million and non-official "Other Foreigners" offloading a whopping $18.3 billion: a record amount for this data series

Expect more from the Fed — and soonThe A-list / FT
Mohamed El-Erian: officials are considering additional measures, and are confused about what they should do next.

How big will the Fed’s QE3 end up being?MacroScope / Reuters
Minutes from the Federal Reserve’s October meeting point to solid support within the central bank for ongoing monetary easing via asset purchases well into 2013.

Understanding the Fed’s Primary PurposePragCap
It allows the money supply to be elastic and based almost entirely on a market based demand structure, but has elements of a nationalized banking system that help create oversight and order in a market that would otherwise be fragmented.  Unfortunately, it’s all the other stuff the Fed does that gets all the negative press and takes the spotlight off this rather ingenious system design.

-0.4% on Sandy Effect – BB
Is October Slide Another Storm-Related Victim? – The Capital Spectator
-0.4% in October due to Hurricane Sandy, Cap.Util. decreased – Calculated Risk

China's New Leaders (Agenda) stratfor

China’s Credit DilemmaThe Diplomat
The data in the coming months will demonstrate whether China’s financing model has indeed shifted away from normal bank lending. If this is the case, analysts need to consider the consequences of the shift. Responsibility for supporting the investment heavy growth model would have then shifted to private and retail investors. With it would come the risks associated with continued lending after overinvestment has already become problematic.

China’s leaders: Changing guardThe Economist
China shuffles its leadership, putting a “princeling” in command

China and the American DreamProject Syndicate
China may be just a few years away from becoming the world’s leading economic power, and America’s strategic centrality may be on the wane. But America still makes people dream, and, as Barack Obama's reelection showed, its emotional hold on the world remains unique.

China’s Growth ChallengeProject Syndicate
A key question for China's new leaders over the next decade is whether official growth targets will be enough to preserve social cohesion as further economic and political reforms are gradually implemented. As the economic pie grows less rapidly, greater social justice, it seems, will be crucial to maintaining stability.

China's Economic Espionage: Why It Worked in the Past But It Won't in the FutureForeign Affairs
Deng Xiaoping launched China’s rise by reforming its economy and opening the country to the West. With this opening, however, came a long-running, state-sponsored espionage program to acquire advanced technology and accelerate the growth of Beijing's civil and military industries. But what was tolerable for a developing economy is no longer acceptable when it is a potential military competitor.

Charting China’s Economy: 10 Years Under HuWSJ

Japan's public works stimulus provides support to the equity marketSober Look

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