Posts from Wednesday Apr 10 2013

The eurozone’s second sovereign restructuring?

Please note the question-mark.

Our colleagues at FT Brussels Blog got their hands on the draft debt sustainability analysis for the Cyprus bailout and bail-in — click for the full docRead more

The Closer

Record-high closes for the S&P 500 and Dow Jones industrial average. The S&P 500 passed its October 11, 2007 intraday high to close at 1,587.73, a 1.22 per cent increase, having risen as high as 1,589 (Reuters).

The latest FOMC minutes came out early. Lobbyists and officials at banks including Citigroup and Goldman were accidentally sent the minutes by email on Tuesday afternoon, well before their official release on Wednesday. The minutes were released to the public at 9am on Wednesday instead of 2pm following discovery of the error. The central bank has notified the SEC and the CFTC of the lapse (Wall Street Journal). Read more

#000000 Wednesday

In Bitcoinland. Click for interactivity…

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Robots, China and demographics

Marginal Revolution’s Tyler Cowen linked to a new paper by David Autor, David Dorn, and Gordon Hanson entitled “Untangling Trade and Technology: Evidence from Local Labor Markets”.

Long story short, it suggests computers haven’t been taking our jobs, China has. Read more

This is the VaR that slipped through the cracks

Mr. Hagan had never previously designed a VaR model. According to JP Morgan Chase, having an employee from a business unit design the unit’s risk model was somewhat unusual, but it did not violate bank policy…

Mr. Hagan told the Subcommittee that he was told the objective of his research was to design VaR models that, when fed into the RWA model, would produce lower RWA results for the CIO, since both he and the CIO traders viewed the bank’s standard RWA model as overstating CIO risk.948

Apologies for all the jargon there. The above is from the Senate Permanent Subcommittee on Investigations staff report on the JPMorgan “Whale trades” that lost the bank over $6bn in 2012.

While the portfolio that lost all those billions was comprised of outsized credit derivatives trades, building up such positions wouldn’t have been possible without a significant change in a key risk model that the bank was using — the Value-at-Risk (VaR) that predicts possible losses over a given time horizon. Read more

Stumbling JGBs

Something to keep an eye on (the respective reaction of the 6mth, 2-year, 5-year, 10-year and 30-year JGBs to the BoJ’s QE onslaught):

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Fed fat finger [updated]

According to Reuters the Fed says it inadvertently released minutes of the March 19-20 FOMC meeting to Congressional staggers and lobbyists on Tuesday afternoon. Oops. Upside: we get them early-ish too. Read more

The pari passu saga, catch up quickly video edition

A short video to catch up on Joseph’s pari passu saga. We hope you enjoy.

Markets Live: Wednesday, 10th April, 2013

Live markets commentary from FT.com 

The (early) Lunch Wrap

Argentina: what is the pari passu saga? – The Video || ECB’s first Household Finance and Consumption Survey || Revisiting monetary transmission || Goldman advises to short gold || EU seeks new powers for trade probes || KPMG resigned as auditor to two US companies || AT&T vs Google on fibre optic broadband || Southeastern Asset Management on Dell || Google faces having to offer more choice || Austria and Luxembourg to revisit bank secrecy rules || Markets update & more Read more

Of political power and dual-currencies in Cyprus

Some post-Cyprus thoughts from Citi’s Buiter et al… first on rolling capital controls and the chances of a new Cypriot pound being forced into existence (our emphasis):

The lack of internal convertibility of euro notes (through the limitations on cash withdrawals and on electronic payments) will, if they persist for more than a few weeks, likely lead to a search for alternative media of exchange for internal transactions. IOUs of large, respected enterprises could for example be countersigned and start to circulate more widely as media of exchange and means of payment. This was the case, for instance, during the 1970 bank strike in Ireland, uncleared cheques were made negotiable (like bills of exchange) and pubs and shops served as credit verifiers. These could later develop into more full-fledged parallel currencies, if internal euro liquidity in Cyprus remains very scarce.

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Goldman advises to short gold

Last week it was SocGen that declared the gold era was over. Now the precious metals team at Goldman is taking a similar view.

This is from their latest commodity research note: Read more

Revisiting monetary transmission and something to look for in the FOMC minutes

The chart comes from a presentation by the New York Fed in March 2012 (click to enlarge).

I like this chart. It’s visually intuitive and provides a handy way to discuss various facets of Fed policy, but it’s also flawed — and indeed one of its omissions is especially instructive. Read more

Who’s the eurozone’s poorest, really?

The figures provided in this report incorporate the best judgement available at this time. Nonetheless, caveats remain. The data for Cyprus appear not to be comparable with those for other euro area countries in a number of dimensions and should therefore be interpreted with caution. However, once the above mentioned factors are accounted for, the net wealth figures for Cyprus appear less of an outlier…

Yes, we can imagine why the ECB’s first Household Finance and Consumption Survey might have wanted to make that clear at the outset. (Survey methodology here.)

Possibly because of headlines like this, landing after the German-financed bailout of Cyprus: Read more

Further reading

Elsewhere on Wednesday,

- Deficit derangement syndrome.

- Trade vs technology.

- High-performing, high-maintenance narcissists

- Chinese shun US business schools Read more

The 6am Cut London

Overnight record high for the Dow, Asian stocks rose. In Tokyo the Nikkei edged up as high as 0.9 per cent and shares in Mitsubishi UFJ, Japan’s biggest bank, headed for their June 2009 high (Bloomberg).

Chinese exports grew less than expected for the first time in four months. First-quarter trade with the US rose by 10.8 per cent from a year earlier, but China’s trading with the EU fell 1.9 per cent to $124.4bn. Overall shipments abroad rose 10 per cent, below the 11.7 per cent median estimate of forecasters (Bloomberg, Financial Times). Read more