Here are
the best links from the past week.
Previously
on MoreLiver’s:
7.9. Guest: On Mario's Shock and Awe (excellent)
7.9. US Close: BigU = QE3 (payroll special)
EUROPE
Commentary
on the ECB decision both before and after the event, continuously updated
A Referendum on Europe:
It's Time to Ask the People What They Think – Spiegel
The Germany democratic system has suffered as a
result of the euro crisis, but it has also made fighting the crisis harder. Now
it's time to hold a referendum on European integration. Only then will Berlin have the democratic legitimacy it needs to
take effective action.
The court battle against the permanent euro
bailout fund, the ESM, has become the largest in German legal history. Yet
despite widespread concerns, fund head Klaus Regling is preparing for action.
The most important question surrounding the fund, however, remains to be answered:
Will it work?
European Exceptionalism – Jean-Claude
Trichet / Project Syndicate
Fiscal and certain other economic policies in
eurozone countries should be subject to activation of a “federation by
exception.” Instead of imposing fines on countries that transgress rules and
ignore recommendations, the European authorities should decide directly on
measures to be implemented in the countries concerned.
Paul Krugman: “The euro is a
shaky construction”
– L’express
/ presseurop
To save the single currency beset by
difficulties that stem from its initial design, Economics Nobel Prize laureate
Paul Krugman argues that Europe should set its sights on low inflation but forget about implementing
uniform austerity measures.
European Safe Havens Bid As Big
Three Questions Remain – ZH
SocGen
answers: How will the ECB address seniority? When will Spain request assistance? Is the German
Constitutional court ruling only preliminary?
In the Picture: European banking
union – The
World / FT
very good rounup
summarizing (and linking) tons of material
Moody's Downgrades European Union To Outlook
Negative – ZH
see the
full text, the logic is important to understand. Alphaville
/ FT had a shorter summary, and sophisticates can always refer to the
original text on Moody’s.
The limits of a purely
intra-euro rebalancing strategy – bruegel
USA
Bernanke's Apology – MoreLiver’s
My
Fed-Watch-collection.
Employment Data Ahead – Tim
Duy’s Fed Watch
If we believe Lockhart, Bernanke's speech was
less of a signal than the general consensus would believe. But if we believe Bullard, the FOMC is moving
in the direction of additional easing in any event. Greater than 50% odds, but still a close
call? Sounds about right. The employment report could ramp the odds up
to 80%, or push us back to the break even point.
Did the Republicans Force
Bernanke's Hand? – Tim
Duy’s Fed Watch
While I think the state of the economy should
have forced the Fed's hand long before now, the possibility that they might
only get one more bite at the apple should be extra inducement to act.
Quick Data Notes – Tim
Duy’s Fed Watch
That same low growth looks consistent with
inflation drifting below the Fed's mandate, providing the Fed with plenty of
justification to act. This is especially
case given the downside risks posed by the global environment and fiscal
policy. Of course, that was the case three meetings ago. But each meeting has brought us closer and
closer to a new round of easing, and we may finally have crossed the line.
Blogs review: The Fiscal
Cliff – bruegel
What’s at stake: In an update to its budget and
economic outlook, the Congressional Budget Office (CBO) reminded of the
approaching “fiscal cliff” – a popular wonk-speak used to describe the
significant automatic cuts in federal spending and tax increases scheduled to
take place at year end under current laws.
MARKETS
Credit Guest: Structural Instability – Macronomics
/ MoreLiver’s
The New Normal Of Investing: Bonds For The Price, Equities For The
Yield – ZH
David
Rosenberg of Gluskin Sheff: Back in the
early 1980s, investors bought equities for capital appreciation and they
purchased Treasury securities for yield. Today it is the complete opposite.
FX Comment: something’s
cooking? – Nordea
short piece
discusses the CB balance sheet differences as a driver for EURUSD, China’s prospects as a driver for AUDUSD.
Quick and worth it.
ECONOMICS
Time to resurrect the
‘missing variable’?
– alphaville
/ FT
Alan Greenspan becoming confused about America’s exceptional growth in the 1990s… Greenspan, confounded by the disconnect,
concluded that some sort of missing variable must have been responsible for the
mismatch.
Ahhhh! No robots! – alphaville
/ FT
It questions the assumption, nearly universal
since Solow’s seminal contributions of the 1950s, that economic growth is a
continuous process that will persist forever. There was virtually no growth
before 1750, and thus there is no guarantee that growth will continue
indefinitely. Rather, the paper suggests that the rapid progress made over the
past 250 years could well turn out to be a unique episode in human history.
Gordon on Growth – The
Grumpy Economist
Gordon's paper is about the biggest and most
important economic question of all: Long-run growth. It's easy to forget that
per-capita income, the overall standard of living, only started to increase
steadily in about 1750.
Democracies and debt: Voters
are now facing a harsh truth – The Economist
Global Housing Cycles – IMF (pdf)
This paper documents the characteristics of
housing cycles in a large set of countries, and examines the determinants of
house price movements. Empirical analysis shows that house price dynamics are
mostly driven by income and demographics but fluctuations in these fundamentals
and credit conditions can create deviations from the implied equilibrium path.
We conclude with a discussion of the macroeconomic implications of house price
corrections.
Policy
mistakes: The repeal of the Glass-Steagall Act, Permitting mercantilism, The
European Monetary Union, Austerity misunderstood, Ignoring pension liabilities, A return to the
gold standard?
New financial forecast: On
your mark, get set…
– Nordea
or go
straight for the full pdf
TRADING
MPT Implodes: Mean Variance
Optimization Bites the Dust – Systematic
Relative Strength
If we remove the academic flourishes, what he
is saying is that mean variance optimization is dreadful and is easily
outperformed by simply equal-weighting the asset classes.
Why the Investment Case for
Hedge Funds is Still Sound – PragCap
Alexander
Ineichen’s 30-minute video (I’ve read one book by him, it’s ok!), or
alternatively the direct link to Youtube.
Looking at the Ins and Outs
of Volatility Trading
– Advanced
Trading
In a video interview with Opalesque TV, Maple
Leaf trader Michael Wexler breaks down the ins and outs of volatility trading.
Inside Abel Noser's Trading
Floor – Advanced
Trading
Advanced Trading takes you on an exclusive tour
of Abel Noser's New York trading floor, where the agency broker known for transaction cost
analysis, is customizing algorithms for the buy side, while growing its fixed
income trading and transitions business.
One of the most common risk errors is to do a computation
assuming average values for uncertain inputs and treat the result as the
average outcome.
OFF-TOPICS
The Best Night $500,000 Can
Buy – GQ
On the
nightlife in the elite clubs of Las Vegas.
Repellent; The Magical Law of
Attraction – Psy-Fi
Blog
Positivity isn’t a neutral thing; it leads to
negative outcomes for firms, employees and shareholders. It also leads to
intense short-termism.
Voice of the New Global Elite – The
National Interest
In sum, then, I came away from twenty-two weeks
of monitoring the Economist convinced that it is, indeed, the very best
magazine of its kind—a status made easier by the fact that it is arguably the
only magazine of its kind.
Shattered Genius – Playboy
The author attempts to interview Grigori
Perelman, a reclusive mathematical genius.
The Universe in a Nutshell:
Michio Kaku on the Physics of Everything – brain
pickings
(video
documentary) The history of physics is
the history of modern civilization.
Richard Feynman on the Role
of Scientific Culture in Modern Society – brainpickings
A New Kind of Social Science
for the 21stg Century
– Edge
These three things—a biological hurricane,
computational social science, and the rediscovery of experimentation—are going
to change the social sciences in the 21st century. With that change will come,
in my judgment, a variety of discoveries and opportunities that offer
tremendous prospect for improving the human condition.
IN FINNISH
Eurokriisi fifty-sixty (audio, 45min) – YLE
Erikoistutkija Heikki
Taimion mukaan euro tulee hajoamaan jollain lailla. Ainoa kestävä ratkaisu
euron toimivuuden jatkumiseen olisi täysimittainen liitovaltio, mutta siihen
taas ei löydy monessakaan maassa riittävästi poliittista tahtoa. Vaikka aikaa
onkin ostettu erilaisiin euron tukitoimin niin kriisiä tulee kriisin perään.
Todennäköisesti jatkossakin tulemme näkemään erilaisia euron
pelastamisyrityksiä.
Euron kriisissä kyse
ei ole vain siitä että kaikki kriisimaat olisivat eläneet yli varojensa, vaan pinnan
alla on Taimion mukaan kyse enimmäkseen ihan muusta. Mikä on ollut Saksan rooli
täässä kaikessa? Ja entä EKP:n? Ja millainen on Suomen kohtalo tässä kaikessa?
Eurokriisi nousee taas enemmän esille, kun Euroopan lomakausi alkaa olla
ohitse. Tilanne on haastava, ja ennustuksia on vaikea tehdä. Brysselin koneessa
erikoistutkija Heikki Taimio Palkansaajien tutkimuslaitoksesta pohtii mistä
euron kriisi johtuu ja miten tässä voi käydä.
Podcast-vinkki: "Kuinka ratkaisisin eurokriisin
kahdessa viikossa" - euroetana
Risto E. J. Penttilä: Kreikkaa ei voida enää
puolustaa - Suomen hallituksen muutettava eurolinjaustaan – SK
Tämä on vain alkua: Lopulta taivaalta sataa euroja
– Jan
Hurri / TalSa
EKP on luvannut tehdä
"kaiken tarvittavan" euron pelastamiseksi. Ensi viikolla selviää,
tarkoittaako lupaus muuta kuin yhä railakkaampia raharuiskeita kriisivaltioiden
ja -pankkien tukemiseen. Tätä menoa "kaikki tarvittava" tarkoittaa,
että pelastustoimien päätteeksi taivaalta sataa euroja
Euro tuhoaa
suomalaisten eläkkeet – Olli
Pusa / US Puheenvuoro
Kuntarahoituksen entinen toimitusjohtaja Olli Pusa on ehkä
eurovastaisimpia kommentaattoreita joita olen nähnyt. Uskomatonta, että joku
uskaltaa sanoa, mitä mieltä on asioista.
Jan Hurri: Pankkiunioni uhkaa pahentaa Euroopan
velkapöhöä – TalSa
EU:n kaavailema
pankkiunioni ei puutu velkakriisin varsinaisiin syihin, joten se tuskin
ratkaisee kriisiä eikä se estä seuraavaa. Sen sijaan kaavailut tekisivät tilaa
suurimpien pankkien kasvamiselle nykyistäkin suuremmiksi niin kuin
Yhdysvalloissa on käynyt. Vaarana on, että Euroopan velkapöhö vain pahenee.
Talousnäkymät – Hitaasti kiiruhtaen – Nordea
Talousennuste vuosille 2012–2013 – PT (pdf)
Euroopan velkakriisi
hidastaa kasvua (lehdistötiedote pdf kiireisille/laiskoille)