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Friday, February 8

8th Feb - Weekender: Best of the Week

Picks from my posts since the previous 'Best of'.

Previously on MoreLiver’s:

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Morgan Stanley On Europe: "We're Getting Worried"ZH
…systemic risk in Europe is now at recent lows...and just as in 1H12 and 1H 11, core yields are rising notably, peripheral spreads compressing, money-market curves are steepening, and 2s5s10s cheapening.

As the Eurozone tries to turn the corner, one member nation continues to lagSober Look
The trends in the composite PMI measures for France vs. the rest of the Eurozone have diverged.

'Europe's A Fragile Bubble', Citi's Buiter Warns Of Unrealistic ComplacencyZH

The Good, The Bad, And The Ugly Six Charts Of EuropeZH

ECB Preview: Good cop, bad copTradingFloor
ECB will continue stating that everything is improving (bad cop) but promises to monitor the situation and to act if things get worse (good cop)

ECB afterthoughts: verbal interventionTradingFloor
Draghi was honest about the state of the economy and in doing so expectations of a rate cut later reemerged. By verbal intervention alone, he was able to move the EURUSD by 200 pips - though QE comments by the Fed's Evans also helped a lot.

Adios Austerity, But Debt Will Still Limit Spain’s Growth MeasuresBB
Prime Minister Mariano Rajoy oversaw 62 billion euros of tax hikes and spending cuts, 851,000 job losses and three different deficit targets, all in his first year in office. Now European Union budget enforcer Olli Rehn is ready to ease up on the beleaguered premier. 

Morning Briefing (EU/US): Cyprus Q&ABNY Mellon
  With the debate over the bailout for Cyprus now coming into focus, it’s time to start looking at the details and to come to some tentative conclusions as to how this may play out.

Euro Tremors Risk Market Respite on Spain-Italy, BanksBB
Europe’s political tremors risk spoiling the region’s market calm, with corruption allegations buffeting Spanish Premier Mariano Rajoy and Italy’s Silvio Berlusconi narrowing the front-runner’s lead as elections loom.

The Fed, Credit Bubbles and ExitCFR
Jeremy Stein’s speech  today–“Overheating in Credit Markets:  Origins, Measurement, and Policy Responses”–provides valuable insight on the issue of credit bubbles that could result as a consequence of current Federal Reserve policy.  As such, it speaks to the upcoming debate over the Fed’s exit strategy. 

"In Feb 2013, Fed Will Buy 75% Of New 30y Treasury Supply"ZH
straight from this quarter's Treasury Borrowing Advisory Committee (i.e., Primary Dealers) presentation to the Treasury Department

Where The Consensus Is... WrongZH
Via Gluskin Sheff's David Rosenberg

How should central banks think about the financial system?Free exchange / The Economist
Monetary policy alters the incentives for financial firms to take risk, for both good and ill. The good news is that, in theory, central bankers have the tools to restrain both bubbles and panics. The bad news is that the price stability and financial stability mandates are often “orthogonal” in the short term, according to Mr Brunnermeier. Actions taken to prevent disinflation can encourage excessive risk-taking, while anti-inflationary measures can inadvertently exacerbate or induce panics.

Economic nationalism will only fuel failureThe A-list / FT
Stephen King: Currency wars may be all the rage but they are merely a symptom of a much more deep-rooted problem. We are witnessing the return of economic nationalism. At the 2009 London Group of 20 summit, it seemed for a fleeting moment that nations had learnt how to work together to solve the world’s economic and financial problems. That dream no longer holds. Persistent economic stagnation has left our political leaders increasingly looking for national solutions to what have become deeply-entrenched international problems.

The End Of An EraTullet Prebon / ZH
The economy as we know it is facing a lethal confluence of four critical factors – the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy-returns cliff-edge.

Falling tail-risk = New secular bull?Humble Student
The best explanation I have is that the current bull is a cyclical upswing and not a secular one. This analysis suggests that we are still in a range-bound market. Stocks could go higher from these levels, but don't expect them to rocket to sustainable new highs in the next 12-36 months.

Full data setReinhart and Rogoff

Blogs we likeLighthouse IM

Suggested Reading ListUMASS Finance Society (pdf)
Apparently from Goldman Sachs around 2007.

The Complete And Unabridged Works Of Dylan GriceZH
244-page compendium covering the bulk of Grice's work over the past 4 years. Covering the financial gamut: from Valuation, to the Euro Crisis, to Japan, to Asia, to Gold and commodities, all the way to the Philosophically arcane, we are confident that the attached presentation will provide countless hours of reading pleasure for all.

Stress Indicators - not as good as you would expectTradingFloor
I expected that the Stress Indicators would show new lows in yield, risk aversion etc, but I am surprised by the charts

Stress IndicatorsTradingFloor
Stress Light - Is tail-risk coming back?

The Vulnerability Of The ElitesWorld Economic Forum / ZH
Geopolitical Risk in 2013: Categorizing the major themes, risks, opportunities, and wild cards—based on discus-sions of the Global Agenda Council on Geopolitical Risk in Dubai, November 2012

Man in the machine Babbage / The Economist
For the past nine years Scott Maxwell has worked on Mars. Or at least as close to it as is possible on Earth. This, it turns out, is Pasadena, California, home to NASA's Jet Propulsion Laboratory (JPL), which manages many probes, rovers and satellites for America's space agency.

Ruotsi on hyötynyt omasta valuutasta – analyysi vain pitää tehdä kunnollatyhmyri

Eurooppalainen SuomiHeli Hämäläinen / US Puheenvuoro

Vai vakautta ja kasvua – katin kontitJan Hurri / TalousSanomat
Euromaat ovat sopineet, että kunkin jäsenmaan ja koko euroalueen talous on vakaa ja kasvaa. Kriisi on osoittanut, että moiset sopimukset ovat pelkkää paperia ja vaikuttavat jopa tarkoitustaan vastaan. Kaikista maailman talousalueista juuri euroalueen talous on jo vuosien ajan ollut epävakain ja heikoin.

Kasvaako tulevan Euroliittovaltion hinta päivä päivältä?tyhmyri

Suomen talouden madonlukuja sijoitusammattilaisen analyysissä – euro tulee ja euro tappaatyhmyri

Miksi eurokriisi palaa ja todennäköisesti entistä suuremmalla voimalla?tyhmyri

Epäolennaisuuksien EurooppaHenri Myllyniemi / Piksu

Suomen julkisen sektorin ongelma on talouden tipahtaminen eikä niinkään yllättävä pöhöttyminentyhmyri

Pinnan alla kytee kolme poliittista pommiaJan Hurri / TalSa
Eurotalouden tyyntyneen pinnan alla kytee ainakin kolme poliittista pommia. Hyvässä lykyssä ne jäävät suutareiksi, mutta niissä on riittävästi ruutia myös kriisin uuteen kärjistymiseen. Tyven repeää uudeksi myrskyksi, jos nämä pommit räjähtävät yhtä aikaa. Ne kytevät Espanjassa, Italiassa ja Kyproksella.