Here are
the best links from my ending week’s blog posts.
Previously
on MoreLiver’s:
31.8. Best of August most read pieces + all my ’views’
30.8. US Close nice one
30.8. US Open nice one
EUROPE
Merkel Pushes Convention to Draft New EU
Treaty; United States of Merkel?
– Mish’s
If the treaty is a simple majority rule treaty,
Germany would be at risk of being overruled by the club-med states. If the
treaty is by percentages, the club-med states would be at risk of being
dominated by what is good for Germany and France (assuming of course Germany and France can agree). No matter how a treaty is structured, some countries are
guaranteed not to like it.
A German Sovereign Wealth Fund to save the euro – voxeu.org
Daniel Gros
& Thomas Mayer: Target 2 claims are
ultimately backed by the securities of banks in deficit countries delivered as
collateral for ECB credits under the various facilities. A large part of these
securities is probably of dubious quality…(with SWF) Imbalances would gradually disappear and German foreign assets would
move from zero interest nominal claims on the ECB to diversified real and
nominal claims on various private and public foreign entities in a variety of
asset classes.
Balkanisierung – alphaville
/ FT
If you’re a central banker, how might you
counteract the trend for core banks to match assets with liabilities in their
peripheral subsidiaries? One reason, perhaps, that bond-buying won’t be the end
of efforts to tackle convertibility risk.
Charting sovereign bond
holdings across the eurozone – alphaville
/ FT
At a point when government bonds are considered
risky assets, euro-area banks are faced with both balance sheet and
reputational risks compared to their non-euro area counterparts, and may prove
reluctant to increase this exposure further.
Has the EU failed its
original agenda? – qfinance
Perhaps the European Commission should consider
a back track of policy and only aim for a softer political union similar to the
post war arrangement, scrapping the idea of a single European currency.
Which way for Europe? – bruegel
The big question to which nobody has a clear
answer is whether Europe is in the process of inventing a model of its own or whether it has
only taken a detour from the inevitable choice between disaggregation and
convergence on the standard federal template.
Citigroup Has The Best
Summary Of Europe's Fiasco Yet: "Losses Are Unquantifiable" – ZH
Matt King’s “Passing the potato”-headlined report.
Matt King’s “Passing the potato”-headlined report.
Converging competitiveness
and balance sheet recessions – alphaville
/ FT
Nomura’s Richard Koo is back to bang the
balance-sheet-recession-drum and has taken a look at falling unit labour costs
across the eurozone periphery and where they are likely to meet Germany’s as
they creep upwards.
[Interview] France and Germany moving towards closer political union – euobserver
"You will be surprised in the autumn by
the degree of movement that will have taken place in some member states,"
says Thomas Wieser, one of the economists preparing plans for banking union
ahead of the October EU summit.
The crash of the Dutch housing market reminds us of a much older market
bubble – Sober
Look
With 80% of the Netherlands' GDP coming from exports, the nation is already highly exposed to global growth.
This housing market decline could tip the Dutch economy into a recession (also Rabobank’s 20-page report)
Introducing the Bruegel dataset of sovereign bonds holdings (and more) – bruegel
To our knowledge, this is the first
cross-country database on sectorial bond holdings that covers almost all the
sovereign issuer of the euro area and we believe that it could therefore add a
significant value to the existing sources. (Data in Excel
format)
EUROPE: GERMANY’S CONSTITUTIONAL COURT
Europe’s Crisis Goes to Court – Project
Syndicate
Economists almost everywhere are debating
potential solutions to the euro crisis, while failing to account for one
crucial element of any resolution: the German Constitutional Court. But, given that no solution can be implemented without the court's
approval, debates that disregard it are meaningless.
Morgan Stanley: Concerns about
the German Constitutional
Court? – ZH
40% Chance German Court Does Not Ratify ESM
40% Chance German Court Does Not Ratify ESM
Judgment Day for the Eurozone – Project
Syndicate
Hans-Werner
Sinn: Nobody knows how the Constitutional Court will rule on these objections. Most observers believe that the Court is
unlikely to oppose the ESM treaty, though many expect the judges to demand
certain amendments, or to ask Germany’s president to make his signature subject to certain qualifications.
EUROPE: PIIGS
Portugal and a second bailout – alphaville
/ FT
A second bailout may well be on the cards if the Troika is genuinely convinced that the government cannot do more to reach the agreed targets and that further austerity measures will just exacerbate the recession.
A second bailout may well be on the cards if the Troika is genuinely convinced that the government cannot do more to reach the agreed targets and that further austerity measures will just exacerbate the recession.
Impression from Madrid (presentation) – Nordea Bank
(pdf)
Here is a presentation containing charts and
comments supporting our general view on Spain. I have added a slide
on the order of events leading to a Spanish request for rescue fund support
topped with ECB intervention, which I believe will happen within a month or
two.
Chart Of The Day: For Spain, The Real Pain May Be
Just Beginning – ZH
Couple of
charts from Goldman Sachs
EUROPE: ECB
The "revised" Eurozone chain of events – Sober
Look
How many times have we seen this scenario play
out? The Eurozone leadership declares that it has the ultimate solution that
ends up failing at the implementation stage. This certainly feels like one of
those situations. Here is the "revised" chain of Eurozone events
In ECB-time, “the coming weeks” might be more than 4 – alphaville
/ FT
Draghi may wait until Germany’s Constitutional
Court rules on the legality of Europe’s permanent bailout fund before unveiling
full details of his plan to buy government bonds, two central bank officials
said. D’oh! With the court set to rule on Sept. 12, investors looking for
Draghi to announce a definitive purchase program at his Sept. 6 press
conference might be disappointed,
When ECB bond-buying meets collateral – alphaville
/ FT
Chart via Nomura’s rates strategists. It’s
their version of what the plumbing of the European Central Bank’s rejigged bond
purchases should look like
Goldman Sachs: Three Rationales
For Sovereign Debt Purchases – ZH
As a flexible and immediately available source
of sovereign funding, central bank financing is a powerful tool to deal with
crisis situations. But it lacks political legitimacy and can blunt the
incentives for more fundamental consolidation and reform to take place, helping
to transform a crisis into a chronic problem.
BuBa President on ECB Bond
Purchases 'Too Close to State Financing Via the Money Press' – Spiegel
Jens Weidmann, the 44-year-old head of Germany's central bank, has made a name for himself by championing price
stability and opposing bond purchases by the European Central Bank. In a SPIEGEL
interview, he criticizes the ECB's latest plans and insists he only wants to
secure the euro's long-term future.
Draghi's incomplete vision
for the future – Open
Europe
Ultimately, Draghi's unwillingness to put a
price tag on any of his suggestions or explain how they can be delivered in a
democratic manner makes them hard to believe. The German public deserve better
'solutions' than this.
Draghi’s Master Plan Matrix – ZH
Morgan
Stanley’s thoughts with charts
ECB's bond purchases should start with Portugal – Sober
Look
JP Morgan: It really can't do too much with Greece at this point, but
the central bank could focus on Portugal first. Portugal is supposedly on track with its fiscal plan (at least they have
satisfied the Troika requirements). Yet the low rate policy transmission is
broken, as short-term rates (as well as effective household borrowing rates)
remain stubbornly high.
TRADING & MARKETS
Goldman Explains "Where To Invest Now" – ZH
72 slides.
What's Priced In? – ZH
Citi: traders 'expect' the US, Europe, and Canada
all to be tightening (raising rates) within 18 months, while expectations are
for Australia (and the rest of the China-reliant nations across Asia) to see
notable easing in that period - and already priced in.
A Look at 9 Quotes from George Soros – Ivanhoff
Capital
Buffett’s Alpha – Yale
(pdf)
Berkshire Hathaway has a higher Sharpe ratio than any stock or mutual fund with a
history of more than 30 years and Berkshire has a significant alpha to traditional risk factors. However, we find
that the alpha become statistically insignificant when controlling for
exposures to Betting-Against-Beta and quality factors. We estimate that
Berkshire’s average leverage is about 1.6-to-1 and that it relies on unusually
low-cost and stable sources of financing (For more on this, see also mebanefaber)
What Caused the Crisis? – The
Aleph Blog
I have wanted to write this article for some
time, but decided to sit on it in order to consider the matter more closely.
What caused the financial crisis of 2008?
Quant: A Dangerous Word Frequently Misused and Misunderstood – Minyanville
Aaron
Brown’s long and highly enjoyable piece.
Why Does Wall Street Always Win? – Economix
/ NYT
Simon
Johnson: But be warned: while fascinating, much of what is in this book will
turn your stomach. Mr. Connaughton is now out of politics, and I very much
doubt that he will ever return. Hence the complete honesty missing in most
political memoirs; no bridge is left unburned.
Weekend Reading: Scoundrels,
Birds and Bees, and Risky Shifts – CFA
Institute
Over the past couple of weeks there have been
lots of compelling articles for financial advisers. Here are some of my
favorite reads in case you missed them.
Which Asset Classes Are Most Vulnerable To 'Policy' Disappointment? – ZH
Deutche
Bank’s interesting data tables. Equities are the most exposed class.
Golden Instability – Krugman
/ NYT
The truth is that returning to gold is an almost comically (and cosmically) bad idea.
The truth is that returning to gold is an almost comically (and cosmically) bad idea.
The monetary Maginot of the
Gold Standard – Telegraph
You could say that human folly and wickedness
debauched the beautiful Gold Standard in the interwar years, but to concede
that is to concede the argument. It is to admit that gold does not in fact
prevent politicians running amok. It is just another monetary Maginot Line.
One More Bear Market, Please – The
Short Side of the Long
I plan to respect both the time and inflation
adjusted price of the current equity bear market. Relative to previous
historical patterns, my secular bear market model shows that an expected bottom
should be somewhere in the middle part of this decade.
CALENDARS
SocGen’s Annotated European Event Calendar – ZH
The Complete 'Ranked' World
Calendar Of Events To The End Of The Year – ZH
UBS’s list of events with estimated levels of market impact included.
OFF-TOPICS
Moon Machines
Great
documentary on the Apollo program, on Youtube:
5. Suits 1/3 , 2/3, 3/3
50 genius facts about GoodFellas – ShortList
Stuff I bet
you didn’t know about this classic movie.
WikiLeaks and Free Speech – Opinion
/ NYT
by Michael
Moore and Oliver Stone
IN FINNISH
Tähän velkojen
verkkoon Suomikin sotkeutuu – Jan
Hurri / TalSa
Kreikalle lisää aikaa,
Espanjalle lisää apurahaa, EKP uusiin tukiostoihin, EVM:lle rajaton rahoitus,
EU:sta pankkiunioni... Ideoita sinkoilee, mutta näilläkään keinoin kriisi
tuskin päättyy. Näin ei liika velka vähene. Se kasvaa, muuttaa muotoaan – ja
päätyy Suomen kaltaisten vapaaehtoisten maksajien piikkiin.
Pankkiunioni kasvattaisi
eniten Suomen pankkiriskiä – Jan
Hurri / TalSa
EU:n komissio
muuttaisi rahaliiton pankkiunioniksi ja siirtäisi ainakin suurimmat pankit
pankkiunionin valvonta- ja pääomitusvastuulle. Pankkiriskien tasajako
euromaiden kesken hyödyttäisi suoraan suurimpia pankkimaita ja epäsuorasti
kriisimaita. Suomi ei ole kumpaakaan – mutta saisi vastuulleen suhteellisesti
eniten uutta pankkiriskiä.
Espanjan budjetista paljastui uusi miljardiaukko -
"he yrittävät salata jotakin" – TE
Markkinatalouteen
kuuluu, että osa valallisista ei koskaan maksa velkojaan – tyhmyri
Olli ja Otto-Ville
– Esko
Seppänen / US Puheenvuoro
Ennätysmaksun syy
paljastui: Suomi maksaa muiden helpotuksia – US
Suomalaiset
EU-asiantuntijat ja kompetenssi – median
vahtikoira
John Cage
Viitasaarella 1983 - entiset nuoret kertovat – YLE
Kesällä 1983
Viitasaaren nykymusiikkitapahtuma järjestettiin historiassaan toisen kerran.
Festivaalin taiteellinen johtaja, uuden musiikin pioneeri Suomessa, säveltäjä
Jukka Tiensuu onnistui kutsumaan paikalle John Cagen, toisen maailmansodan
jälkeisen avantgarden kärkihahmon Yhdysvalloista.
Taakka – Hannu Visti
Ajan hengessä on
jotain äärettömän outoa, sillä yhteiskunnan sentimentti tuntuu kallistuvan
enemmän ja enemmän kieltämisen kannalle. Ikään kuin tuskailemme kaiken
vapautemme taakan alla ja ahdistusta lieventääksemme taakkaa pitää keventää
luopumalla osasta kuormaa. Mutta milloin vapaudesta on tullut tällainen
sietämätön taakka?