Posts from Tuesday May 8 2012

The Closer


Global equities declined today, led down by Greek stocks nearly hitting a 20-year bottom, though the S&P 500 rallied in the US afternoon to finish down just 0.4 per cent. (Financial TimesRead more

Fact of the day, US government workers edition

Government workers account for 9.1% of the working age population, equaling the lowest share on record. When this government employment share of the population was last witnessed in 1984, it was alleviated in part by a massive surge in government spending, with yearly real federal spending topping out at 10.6% in 1985. Yet such an offset seems unlikely in the quarters ahead, as major government spending increases in the current political climate are verboten.

 Read more

Oh, Greek moratoria

*Tsipras says must be moratorium on Greece debt payments

That, earlier on Tuesday, was Alexis Tsipras — head of Syriza and current owner of the mandate to form a coalition government (as forlorn as that is now looking). Syriza took second place in Sunday’s elections. Read more

The era of the ‘negative money multiplier’ – Part 2

As we discussed in Part 1 of this post, Manmohan Singh and Peter Stella believe the system is in the grips of a negative money multiplier effect, because banks have been depending too much on shadow banking for funding.

The Fed may even have inadvertently made things worse by intervening in more than just the illiquid security markets which shadow banks abandoned. Read more

Hedge funds are flying high

Five months in and it’s been a pretty good year for hedge funds with the HFRI fund weighted composite index up 4.4 per cent year to date, following its strongest first quarter performance since 2006. The index fell 5.25 per cent last year.

There was a small 0.36 per cent fall last month, but it’s unlikely to deter investors who have been scrambling to take advantage of the strong start to the year. Total hedge fund capital reached a dizzying record $2.13tn at the end of last quarter on a mix of performance and net inflows, according to Hedge Fund Research estimates. Read more

The era of the ‘negative money multiplier’ – Part 1

Or, why hyperinflationists are wrong. And why everything you were ever taught about the money multiplier is not applicable to the here and now.

The following observation comes from a new VoxEu piece by Manmohan Singh and Peter Stella: Read more

Here’s where all the oil hedgers have gone…

Last week we wrote about John Kemp’s column pointing out that CFTC data suggests hedgers — those who are exposed to physical prices through their business operations — fuel resellers and others hedge against their operational exposure to oil prices — collectively had the smallest net short position in six years in late April.

We advanced a few possible explanations of our own, including the idea they’d mainly popped over to the Brent market. Read more

The subpriming of commodities

Is the new fad for securitising commodities creating dangerous parallels with the subprime crisis?  It’s an observation we made the other day. But it turns out we’re not the only ones to share this view.

The logic is simple. If by leveraging housing stock — using the stock as collateral — the process of mortgage securitisation encouraged subprime lending to people who (arguably) couldn’t afford them, could leveraging commodities in the same way be encouraging equally uncouth lending practices? Read more

French banks say adieu to Asia

Many banks in the eurozone have a significant international presence. The diversification is a positive if the home market is suffering disproportionately. That being the case, perhaps one could expect further investment in less sickly markets abroad?

Maybe. Read more

Markets Live transcript 8 May 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…


Further reading

Elsewhere on Tuesday,

– Merollande? Hollankel? Merkande? OK, nothing’s going to sound as good as Merkozy, but it’s the start of somethingRead more

Moss to step down as Aviva CEO


8 May 2012 Read more

Overnight markets: Slightly higher

Asian stocks rose after falling the most in six months and copper gained as companies reported higher earnings and German manufacturing data improved, says Bloomberg. The Australian dollar slid after the country’s trade deficit more than doubled.

Asian markets
Nikkei 225 up +66.04 (+0.72%) at 9,185
Topix up +2.96 (+0.38%) at 775.02
Hang Seng down -10.70 (-0.05%) at 20,526 Read more

The 6am Cut London

Spain is planning a state bail-out of Bankia, the country’s third biggest bank by assets, in a move likely to involve the injection of billions of euros of public money into the troubled lender, the FT reports. Soon after the news broke, Rodrigo Rato, Bankia’s executive chairman and a former International Monetary Fund managing director, resigned from the bank. Local press reports suggest up to €10bn could be injected, says the WSJ.

Greece is bracing for a repeat general election, reports the FT. Technocrat premier Lucas Papademos will leave office next week, making way for a caretaker administration.  Decision-making on further reforms, including finalising a new €11.5bn medium-term austerity package, will be stalled until a new administration is in place. The stalemate puts at risk the timetable for disbursement of Greece’s next loan tranche from its second €174bn bailout. Read more