October, 2011
Further reading
Elsewhere on Monday,
- “Everyone does too little”: the failure of Obama in 2009.
- “It was not the money that made TARP unpopular. It was the unfairness.”
- The forever recession in jobs — worse than the Depression?
- To live and die in the eurozone without a LOLR.
Pink picks
Comment, analysis and more from Monday’s FT,
James Kynge: Cracks in Beijing’s financial edifice
The last time – in late 2008 – that economic peril was stalking the US and Europe, China marshalled the might of its state-directed economy and engineered a muscular rebound that led the subsequent global recovery,
Snap news
Breaking pre-market news on Monday,
- Dexia rescue plan announced; France and Belgium to provide €90bn of guarantees — statement.
- Michael Page says markets have weakened; visibility reduced — statement.
FTfm on AV
Some highlights from Monday’s FTfm.
Banks dash to deal with volatility
Investment banks are reported to be scrambling to create complex volatility-based vehicles to help shield investors from the risk of big market falls
Call for property price falls
Real estate prices in peripheral eurozone countries need to fall to reflect the possibility of a break-up of the currency union,
Weekender
This week on FT Alphaville,
- Analysts hypothesised the breakup of the euro.
- The LTRO carry is back! Maybe…
- Goldman helped a frenemy (or did it?)
- China’s shadow banking sector looked increasingly shaky.
Further further reading
For the commute home,
- A chart to help you understand the European crisis.
- And a guide to the ECB’s latest operations.
- “Greenspan, wrong again.”
- QE2 is imperfect but inaction is worse.
Goldman helps a frenemy in need
Can olive branches stem bleeding?
Goldman Sachs Options Research made a bold recommendation Friday to buy $16 calls on Morgan Stanley and to sell short-dated CDS. MS reports earnings on October 17 and Goldman argues that they will surprise on the upside,
Fitch downgrades Spain and Italy
Fitch gives an unwelcome weekend parting gift to traders and hacks with dual downgrades on Friday afternoon of Spain and Italy. Portugal was given a stay of execution, according to Bloomberg.
Start with Italy,
US Markets Live transcript 7 Oct 2011
Markets Live chat transcript for the chat ending at 15:13 on 7 Oct 2011. Participants in this chat were: Cardiff Garcia John McDermott, FT Paul Murphy Izabella Kaminska Joseph Cotterill, FT Lisa Pollack,
Keep on carrying on LTROs
It’s baaack! The prospect of eurozone banks buying more sovereign debt to take advantage of new cheap one-year ECB liquidity, that is.
You’ll have heard that the ECB will offer not one but two one-year Long-term refinancing operations to banks before the end of 2011,
Mild upside surprise with payrolls at 103,000
Sighs of relief all round as the non-farm payrolls report for September steps lightly over an expectations bar that was just inches above ground.
We’ll have a breakdown and further commentary during US Markets Live,
Mechanics of a euro breakdown
There’s been a lot of talk about the possible break-up of the euro, but until now little has been written about the actual mechanics of a euro breakdown (other than it just can’t happen, so let’s not write about it.)
But a few banks have recently dared to speak the unthinkable.
Bailing out RBS
A predictably furious response from RBS to the FT’s front page splash on Friday.
Via Reuters:
“The design of any new application of the EU stress tests is completely up in the air. Any analysis of how any bank will be affected is nothing more than speculation,”
Markets Live transcript 7 Oct 2011
Markets Live chat transcript for the chat ending at 11:21 on 7 Oct 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT NHhola Rabble NHsorry we are late
Volatility is change, and the world is changing
“All we have left to show for our three year liquidity orgy is the most correlated period in modern finance.”
That’s the succinct and telling view of volatility guru Christopher Cole at Artemis Capital Management.
Blood from an EBA stress test stone
For now, the European Banking Authority’s 2011 stress tests are a starting point to determine the potential bill for recapitalising euro banks for their sovereign exposure. Most analyst estimates of capital needs — those big juicy €100bn,
Is Premier Foods brown bread?
You can say lots of things about Premier Foods (and we have – Ed) but the company is nothing if not consistent. The maker of Hovis bread and Mr Kippling cakes just keeps churning out the profit warnings.
Accounting for sovereign stress
Or the trouble “reviewing bank capital positions” — euphemism du jour from the European Banking Authority.
The EBA’s denied on Thursday that they’ll do actual new stress tests on banks in order to model bigger write-downs of peripheral sovereign debt and possibly identify where more capital is needed,
Moody’s downgrades 12 UK financial institutions
And you thought it was going to be a quiet Friday?
No such luck. Moody’s has today downgraded 12 UK financial institutions. Here are the details (our emphasis):
London, 07 October 2011 — Moody’s Investors Service has today downgraded the senior debt and deposit ratings of 12 UK financial institutions and confirmed the ratings of 1 institution.
Further reading
Elsewhere on Friday,
- ”If the ECB starts to print finally, we will see an absolutely hellacious rally.”
- Peter Thiel, Great-Stagnationist.
- Where to stow your gold.
- Where are the Frannie mortgage write-downs?
- What makes a reserve currency — a history lesson.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Philip Stephens: Save the euro – let Greece default
It is time to let Greece go. I do not propose stamping on the fingers of the Athens government as it clings to the edge of the euro cliff.
Snap news
Breaking pre-market news on Friday,
- RBS says it is among the strongest capitalised banks in Europe — report.
- Moody’s downgrades 12 UK financial institutions; two notch cut for RBS — statement.
Further further reading
For the commute home,
- What’s Occupy Wall Street all about?
- Same question, shorter answer.
- There have been many, many, many nice tributes to Steve Jobs.
- But these two are our favourites:
Crunch de crédit
Credit:
Crunch:
Both charts from the ECB’s latest lending survey of banks. Clear signs, we’d argue, that funding pressures did spike over the third quarter, and critically, to the extent that these pressures also pushed banks to choke off corporate credit — alongside signs of a deteriorating economy.
Goldman predicts a fire sale of USD assets by French banks
There were a few cheeky titbits in an otherwise workmanlike Goldman Sachs note published Wednesday on US banks.
First up for a teasing: French banks. As we know, US banks are sitting ducklings in the middle of the European maelstrom.
Dexia still bringing stress to a town near you [updated]
Dexia isn’t just a Franco-Belgian basket case; it’s your basket case too. And since there’s been a bit of talk about the link between the bank and the US muni market here’s our quick take.
As the FT’s Nicole Bullock reminds us,
China’s shadow banking sector needs a bail-out, says SocGen
Earlier in the week, Société Générale’s economist Wei Yao had a striking note about China’s shadow banking problem (h/t Also Sprach Analyst), which she and her team estimated to be worth Rmb14,000bn – 15,000bn:
Markets Live transcript 6 Oct 2011
Markets Live chat transcript for the chat ending at 14:00 on 6 Oct 2011. Participants in this chat were: Joseph Cotterill, FT Neil Hume, FT Lisa Pollack, FT JCHello! JCAnd welcome to Price Stability Live
No change at the ECB (inflation hawks win)
PRESS RELEASE 6 October 2011 - Monetary policy decisions.
At today’s meeting, which was held in Berlin, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.50%,