October, 2011
EFSF as bond-buyer (and repo monster)
Presenting… how to buy sovereign debt if you are the EFSF:
(Big hat-tip to Tracy Alloway — click images for documents)
Those are: full draft guidelines on the EFSF buying debt in primary markets and in secondary markets – and some bonus guidelines on constructing bailout-lite credit lines to states.
[Explaining backwardation] Are index funds the new swing producers?
FT Alphaville’s three-part series attempting to explain the current backwardation in the market…
…continued.
Index funds the new swing producers?
In many ways, Saudi Arabia’s position as the ultimate swing producer in the oil markets is key.
Markets Live transcript 20 Oct 2011
Markets Live chat transcript for the chat ending at 11:19 on 20 Oct 2011. Participants in this chat were: Bryce Elder/FT Tony Tassell Lisa Pollack, FT BEGood morning BEAnd welcome to Markets Live
[Explaining backwardation] The curious case of super-backwardation
A heads up — This is a three-part series attempting to explain the current backwardation in the market. We will make three arguments: 1) That contango trades helped to create fake demand in 2009/2010 2) that index funds replaced Saudi Arabia as key swing players,
Steeling for more commodities volatility
Remember when Vale and BHP, two of the world’s biggest iron ore miners, changed their pricing contract methods with China and Japan?
The move from annual to quarterly contracts came amid resurging Chinese demand for iron ore,
Who’s not worrying about their shorts
It has been posited that short squeezes might be behind some of the rallies we’ve seen recently.
It would help to explain some of the macacque-level volatility and the markets’ willingness to rebound at any vaguely positive headline with Merkozy in it (Bruni-Sarko baby news,
Further reading
Elsewhere on Thursday,
- So, you want to target NGDP levels…
- Herman Cain’s tax policy in a really, really, really long graph.
- China’s whacky GDP.
- Peak US oil production.
- Oil geopolitical risk picture du jour.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
John Gapper: Olympus shows Japan’s negative side
With hindsight, Michael Woodford foretold his downfall in this year’s Olympus annual report,
Snap news
Breaking pre-market news on Thursday,
- Dexia confirms Dexia Bank Belgium nationalisation, agrees terms on sale of municipal lending arm — statement.
- Competition Commission provisionally clears BATS/Chi-X Europe merger — statement.
Further further reading
For the commute home, may your path be clear of lions and tigers and bears,
- Seriously, what the hell?
- The Atlantic tallies the benefits of the proposed foreclosure settlement.
- Home prices and the consumer.
The continuing mystery of US banks’ European exposure
Europe may or may not be saved but Q3 earnings releases by US banks suggest they’re content with their exposure to the continent.
We looked at the methodology behind exposure disclosure in this post.
Citi, Credit Suisse settle SEC CDO probe
Sums involved: $285m for Citigroup, $2.5m for Credit Suisse.
From the SEC release:
Washington, D.C., Oct. 19, 2011 – The Securities and Exchange Commission today charged Citigroup’s principal U.S.
The great governments are reading blogs crisis of 2011
Larry Fink, chairman and CEO of BlackRock, reckons he’s found one of the reasons for the world’s troubles.
Comments just in from Wednesday’s Q3 earnings call:
“When the government focuses on short termism,
Will EFSF insurance actually help bond prices?
Another good point on EFSF bond insurance, the subject du jour — from Shahin Vallée of the Bruegel think-tank:
The entire proposal rests on the premise that financial markets are now shunning these debts because of marginal doubts about their recovery value in the case of a credit event and that therefore by guaranteeing a small portion of this debt,
A ’5x Inverse Eurozone Volatility ETN’ to save the Eurozone?
Has the answer to the eurozone problem been staring us in the face all this time? Could we equitise the EFSF and float the stock to investors so as to raise funds, rather than relying on bond insurance?
FT Alphaville would like you to consider the following offering*:
Morgan Stanley’s Q3 “beats”, with a boost from “fluctuations”
Morgan Stanley beat analyst expectations with third quarter earnings Wednesday morning. FT Alphaville looks under the bonnet, but first, here’s the announcement (with our emphasis and including some choice footnotes ’cause that’s how we roll):
Should the Fed target a nominal level of GDP?
Anything Lord Wolfson can do…
LONDON, Oct 19 (Reuters) – A leading British businessman is offering a 250,000 pound ($390,000) reward for economists who can come up with the best plan for countries to quit the European single currency zone.
Markets Live transcript 19 Oct 2011
Markets Live chat transcript for the chat ending at 11:39 on 19 Oct 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT neil collins NHHola NHand welcome to Markets Live
Yes, we have no bazookas (but maybe Bradys?)
We definitely don’t have a bazooka, because we have a rubbish balance sheet.
We know the EFSF insuring sovereign debt has huge capital and also sovereign correlation risk. Basically not enough capital and way too much correlation wrong-way risk between this capital and the fund guarantors.
Are ETFs responsible for short-covering rallies?
In a Ponzi scheme, investors get duped into thinking their money has been invested in a profit-generating investment, when in reality their investment doesn’t actually exist.
Rather than being invested,
Reflections on the latest Eurozone tape bomb
Kaboom.
For Tuesday, the market received a jolt higher in the final hour of trading after the Guardian reported France and Germany agreed to increase the size of Europe’s rescue package to more than €2 trillion ($2.7 trillion).
Further reading
Elsewhere on Wednesday,
- “Fix negative equity and you will fix the US economy.”
- NGDP targeting, on top of the world.
- The case for commodity bonds.
- Austrians and MMTers duke it out over sovereign debt.
Pink picks
Comment, analysis, and other offerings from Wednesday’s FT,
Martin Wolf: There is no sunlit future for the euro
Hurrah! The eurozone’s crisis will be solved at the European Union’s summit this Sunday.
Snap news
Breaking pre-market news on Wednesday,
- Home Retail Group to assess dividend in light of full year trading outcome –statement.
- BSkyB warns growth will be harder to come by in next few quarters — statement.
Moody’s downgrades Spain to A1 from Aa2
It’s that time again. 11pm in Madrid, which can only mean a downgrade of the Spanish sovereign, this time by Moody’s.
It’s a double-notch downgrade, taking Spain to A1 with negative outlook, using Moody’s schematic.
Further further reading
For the commute home,
- Goldman even does DVA differently.
- What moves the markets, part one and part two. (H/T: Deus Ex Macchiato)
- Mervyn King is gloomy.
- Ben Bernanke is reflective.
Breaking: Europe is saved! Actually, wait…
Well, you’ve heard of the FT effect, what about the Guardian effect?
“Breaking” on Tuesday afternoon New York time, reports of a €2,000bn deal between Germany and France to augment the EFSF, save the euro,
Bank of America reports, confuses, wins and loses
Listening to Bank of America’s Q3 earnings call reminded us of this sweary scene (5:46 onward) from BBC comedy the Thick of It:
“What we do is we overcomplicate…stats, percentages, international comparisons,