14th Nov - No Santa

Good morning! On Sunday I posted the Weekender  with summaries, previews and the usual linkfest. I will later today post the Best of the previous week's links. Follow MoreLiver's Daily on Twitter, Facebook or email me. - MoreLiver

News (Mon morning) – BTH

Danske Daily – Danske Bank (pdf)

FX option vols – Saxo

TV: Bloomberg, CNBC, BBC

Markets Live – alphaville FT

Debt crisis: live – The Telegraph

EZ crisis Live blog – The World / FT

EURO CRISIS

Decision Time For Europe: The Definitive Presentation On The Future (Or Lack Thereof) Of The Eurozone – ZH
Swiss private bank Pictet’s research paper: Current response to the crisis has created conditions leading the euro area towards depression…things are going to get worse before European authorities decide to wheel out their heavy artillery.

Weekender - Emergency exits

So now it is official, Berlusconi is out. End game scenarios have gained a quiet acceptance in Germany and France, but Brussels and the eurocrats are having none of that – at least not yet. Their time will come later. The biggest obstacles to a crisis solution have been the adherence of ECB to its now hopelessly irrelevant mandate and the holy cows of “no defaults”, “no competitive devaluations or exits from EZ”. 

I believe we will see all of them very soon – maybe already this year, but definitely latest early next year (only because of can-kicking and good old SMP by ECB coupled with the approaching holiday season and thinner markets). The talk on euro bonds, EFSF expansion etc. has died down, and hopefully the Great Leaders realize this and stop developing pre-agreed constructions that do not serve their original purpose anymore. Somebody should teach the eurocrats the idea of sunk costs.

Instead of backstopping the crisis, the only thing the ECB has been doing is peeing in the pants in the winter to keep warm – or perhaps even worse. With a less dim fellow leading the ECB and the rot spreading to the core, the odds of at least a partial, albeit temporary solution, is increasing.

11th Nov - Stupidity is not credibility

Commentary is getting very one-sided - the viability of the summit strategies is mostly gone and more or less the haircut/breakup/what happens next dominates the discussion. ECB purchases are deemed the only working (albeit temporary) solution at the moment,  but it is almost certain that the core countries rather break up the currency union than go down that path. 

I think Krugman is on to something very important - in the event of a breakup, there is a danger that everyone gets really prudent with their purses and launch austerity and anti-inflationary measures to establish "credibility" to scare away the bond vigilantes. The problem with this is that a serious recession would follow, leading to negative feedback loop. I hope the politicians will understand that there are many ways to establish credibility, but given their track record they will probably do more of the same, leading to a catastrophic scenario.

10th Nov - Elvis is leaving the building

News (Thu evening) – BTH

News (Fri morning) – BTH

Danske Daily – Danske Bank (pdf)

FX option vols – Saxo

TV: Bloomberg, CNBC, BBC

Markets Live – alphaville FT

Debt crisis: live – The Telegraph

EZ crisis Live blog – The World / FT

EURO CRISIS

European Interest Rates – Dr Ed’s Blog

Wrong with the last summit: destroying CDS market, a plan without details, raising and dashing expectations doesn’t instill confidence.

Guest Post: Credit overview by Macronomics

Good morning. The game over is approaching, and while yesterday’s Game Over? and Silvio is not the crisis handled the latest Italian twist in the EZ crisis saga pretty well, I’ve included today a credit overview guest post from Macronomics. Follow MoreLiver's Daily on Twitter, Facebook or email me.

- MoreLiver

Quote of the day: At 7.25%, Italian 10yr yields are deep in junk bond territory. Arguably, they are undervalued relative to the probability weighted spectrum of possibilities. However, the money that capitalizes on these opportunities are in a mountain fort somewhere, along with cans of beans and some guns. In the meantime, issuance continues. – Global Macro Trading