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Friday, November 2

2nd Nov - Weekender: Best of The Week

The best links from the ending week's posts. Previous 'Best'.

Previously on MoreLiver’s:

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How much of the “improvement” in peripheral EZ sovereign creditworthiness is actually due to the CDS short selling ban? Bond Vigilantes

The EC can claim "success" in CDS regulationSober Look

European Union Exit? Concerns Grow for Britain NYT
Now, with the euro zone almost three years in crisis, British public opinion has hardened. The overwhelming majority of Conservative lawmakers are euro skeptics, and many privately favor withdrawal.

The euro is heading for a permanent state of depressionThe Telegraph
If the euro survives in its current form, then Mario Draghi, president of the European Central Bank, will surely have earned his place in the history books as one of the chief architects of its salvation.

The Dynamics of Eurozone DisintegrationEconoMonitor
The Euro is a currency sui generis. A deficiency in the monetary setup of the EZ dooms the entire Euro endeavor to failure. Ever more monetary and fiscal assistance in the course of the OMT and the ESM operations is the result of rational political decision-making. Without fundamental reforms of the EZ institutional setup, however, these policies will eventually only serve to increase the probability of an exit from the EZ core.

What if the eurozone breaks up?Nordea (pdf)
The analysis explores four eurozone break-up scenarios: i) Greece leaves the euro, ii) several countries in difficulties leave, iii) Finland exits on its own accord, and lastly iv) the entire eurozone splits up into two or breaks up altogether.

Cross Border Lending and Imbalances in EurolandEconoMonitor
The immediate cause of the crisis was the imprudent lending of (mostly) European banks (just as the US crisis was caused by imprudent lending of US banks), but the lasting flaw in the EMU is the separation of fiscal policy from currency issue. As I’ve said before, if there is an “imbalance” in Euroland, it is one of power, not trade flows. With the Austerians in power, there will not be the capacity to mount a sufficient fiscal response to end the crisis.

The Complete 'Advanced' Economy Sovereign Ratings Cheat-SheetZH
Citi: We expect that Moody’s will place France on a ratings review for a possible downgrade (ie Negative Watch) in the next 2-3 quarters, largely because of the fiscal program and weak economy. Moreover, we also expect that S&P will likely place the UK on Negative Outlook in the next 2-3 quarters (in line with Moody’s Aaa Negative Outlook). We also expect that Portugal will be downgraded over the next 2-3 quarters due to continued recession plus the probable need to extend its Troika programme.

Euro-zone banks not about to boost a recovery any time soonNordea
The results from the ECB’s latest bank lending survey (Q3) only add to worries that credit growth is not going to support an economic recovery any time soon.

Euro area bank lending: Halloween editionalphaville / FT

Euro area credit tighteningDanske Bank (pdf)

Two more years of extend and pretend?Open Europe
Total cost of extension: €28.5bn, how? 1. Interest rate reduction, 2. Increased short term debt issuance and further austerity, 3. Rescheduling debt (extending the length of Greek loans), 4. ECB forgoing interest and/or profit, 5. Bond buybacks, 6. Write-down original eurozone bilateral loans… We expect a short term stop gap programme to be created with a mixture of option 1 and 2. This is likely to be the most painful for Greece but the easiest for the creditors to swallow. Unfortunately, this will add to Greece’s debt burden rather than reduce it,

Putting a new drachma in historical perspectivealphaville / FT

Revising the Greek bailout: Two more years of extend and pretend?Open Europe

The German bloc will have to take its bitter medicine in GreeceThe Telegraph
My guess is that Mrs Merkel will be forced to admit to the German nation that contingent liabilities are turning into real liabilities long before her elections.

Elusive Greek dealMacroScope / Reuters
Eurogroup head Jean-Claude Juncker looked forward to a final settlement at the ministers’ face-to-face meeting on Nov. 12.

Not Exactly The Greek OrthodoxZH
The IMF has suggested that Europe take the pain and Europe is refusing and so the IMF may decide not to fund and leave the nations on the Continent to their own designs. Any extensions in terms will require another $40 billion give or take and some countries might actually refuse to participate as a matter of national politics.

The Spanish Bad Bank Emerges, Confirms Real Estate Absolute DisasterZH
Full presentation on Spain’s new bad bank, e.g. haircuts of 80% on foreclosed land

Spain's unrealistic expectationsDanske Bank (pdf)
The Spanish government expects the recession to come to an end by mid-2013. In an environment of fiscal tightening and sliding house prices, that appears to be wishful thinking. Even if Spain manages to deliver the anticipated -0.5% growth in 2013, this does not justify the government’s expectations that the unemployment rate should decline slightly in 2013. It is simply at odds with the empirical evidence. We expect that the Spanish economy will contract 1.5% or more in 2013, that Spain will miss its fiscal target and that the unemployment rate will rise to at least 26.5%.

Election update - political uncertainty to continueDanske Bank (pdf)

America's Most Expensive StormsNPR

Sandy round-upalphaville / FT

Billions in Hidden Riches for Family of Chinese LeaderNYT
Family has at least 2.7 billion USD.

Seasonally Affective Investing DisorderThe Psy-Fi Blog
It shouldn’t therefore be particularly surprising that we’re unconsciously affected by environmental conditions: there was a time, not so long ago, when nothing else mattered.  Now, cosseted by central heating and air conditioning, we’re remote from our material world but, it turns out, for investors our material world is not remote from us.

Intraday Share Price Volatility and Leveraged ETF Rebalancing SSRN
Over the last few years, market watchers and regulators have been concerned about leveraged ETFs' role in driving up end-of-day volatility through their daily rebalancing activities…Given the predictable patterns of leveraged ETF rebalancing demands, we also explore the implications for strategic trading and for leveraged ETF tracking errors during periods of large market swings.

New Financial Forecasts: Still waiting for Spain and Greece…. Nordea (pdf)
or read the summary.

G10 Weekly: Monetary policy – To infinity, and beyondNordea (pdf)
The assertion that central banks can create and control inflation under current circumstances isn’t necessarily wrong, but definitely arguable.

How Central Bank Policy Impacts Asset Prices 
SocGen's charts and comments.
Part 1: Equities – ZH
Part 2: Bonds – ZH
Part 3: FX – ZH
Part 4: Commodities – ZH
Näin kriisillä "tienaaminen" köyhdyttää SuomeaJan Hurri / TalSa
Eurokriisin tähän mennessä hölmöimpiä väitteitä on, että Suomi jotenkin tienaisi kriisillä. Moinen möläys sulkee silmät tosiasioilta – ja on mahdollisimman väärä. Suomi ei ole tienannut eikä tienaa tällä kriisillä euroakaan, vaan kärsii parasta aikaakin isompia menetyksiä kuin moni muu maa.

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