December, 2011
Further reading
Elsewhere on Monday,
- The ECB’s cunning plan?
- Not a big enough bazooka.
- How’s poor old Ireland?
- Downward spiral.
- China’s biggest problem.
- Come out of the closet, Finland.
- Are economists selfish?
- Euro-bank-recap-map.
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Edward Luce: The long haul in Washington gridlock
At this stage in America’s electoral calendar, hopes start to shift on to the year after next,
Snap news
Breaking pre-market news on Monday,
- Ocado warns on its measure of profits; sees full EBITDA between £27.5m to £28.5; analysts expecting £34.3m — statement.
- HMV puts Live business up for sale;
FTfm on AV
Some highlights from Monday’s FTfm.
Slowdown in new fund launches
The European fund industry is running out of steam, with new fund launches dropping to their lowest level in nearly a decade. The decline reflects concerns about the eurozone crisis and the outlook for equities.
[Something for the weekend] Life’s a beach (or not)
Life’s a beach (or not)
Ah, the holiday season. Dreams of surf, sea, sand – and soggy share prices, or so it must seem to the bewildered shareholders in Thomas Cook. The travel agent’s “amendment to bank facilities”
Further further reading
For the commute home,
- The Trans-pacific Partnership, the most important trade deal you’ve never heard of.
- Worst. Empire. Ever.
- A timeline of the year in protests.
- Slate’s collection of tributes to Christopher Hitchens.
The Weekender
This week on FT Alphaville,
- The Sarko trade was launched. And quickly grew.
- Gold collateral becomes the new standard.
- Financial repression was analysed and criticised.
- The IMF became the ECB’s potential borrower of last resort.
The cost of global central bank balance sheet expansion
From a speech by Jaime Caruana, the general manager of the Bank for International Settlements, given at the Bank of Thailand-BIS conference on December 12:
A stylised central bank balance sheet can be helpful in clarifying the various transmission channels (Table 1).
Regulatory arbitrage: Basel is watching you
Nearly a year ago, the Federal Reserve came out with a letter that in summary said something along the lines of:
Dear Banks,
About engineering financial transactions that allow you to defer losses and arbitrage regulatory capital charges:
The curious case of ‘abnormal’ backwardation
John Kemp at Thomson Reuters is a big fan of commodity curves — backwardation, contango and all the principles that come with it.
As he often notes, one of the key theories affecting the area is the idea of a convenience yield,
US Markets Live transcript 16 Dec 2011
Markets Live chat transcript for the chat ending at 16:07 on 16 Dec 2011. Participants in this chat were: John McDermott, FT Cardiff Garcia JMGood morning CGHello! JMGood morning
US Markets Live: 10am New York time, 3pm London time
It’s the last one of 2011, which means we’ll be marking the passing of this arbitrary time period in typical research-house fashion: spurious predictions and lists, lots of them.
We’re also looking around for any news from today to talk about,
Banks, bezzles, and ECB liquidity
Quote du jour from an excellent IFR article, doubting the Sarko trade:
With bank debts coming due and most firms unable to raise fresh funds in bond markets – which remain largely closed – bankers say it is much more prudent to use ECB loans to pay off their own creditors rather than speculate that European governments pay back all their debt.
The IMF’s Greek sunk cost
Chart of the week — from Gabriel Sterne of Exotix:
Bit of a wonkish one, we know, but bear with us.
It more or less sums up this week’s IMF review of the Greek bailout — the fifth such review,
A heretical glimpse into the ghost of copper future
Simon Hunt Strategic Services — the eponymous market analysis vehicle of copper market veteran Simon Hunt – has just published its 2012 outlook.
Be warned, though, it carries the following disclaimer:
Deutsche’s Reid on shorter business cycles
It must be nearly Christmas, for the last Deutsche Bank Early Morning Reid of 2011 was today.
Luckily, strategist Jim Reid and his team left us with a note on their thoughts for what the new year will hold,
Markets Live transcript 16 Dec 2011
Markets Live chat transcript for the chat ending at 11:58 on 16 Dec 2011. Participants in this chat were: Bryce Elder/FT Paul Murphy BEGood morning BEAnd welcome to Christmas Live
Endangered supranational kangaroos
Here’s an interesting ripple effect to consider… downgrades of AAA-rated European supranational debt, hitting the Australian bond market.
As Nomura rates analyst Martin Whetton wrote in a Friday note — there aren’t that many Australian government bonds.
Further reading
Elsewhere on Friday,
- Vile profit, and the Sarko trade.
- Ken Rogoff — chess addict.
- Why it was red ink that killed MF Global.
- Under-performing Bill Gross = bad news for EM assets.
- “The political one per cent of the one per cent”.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Philip Stephens: The highs and lows of democracy
The story of 2011 has been of the advance of democracy and the failure of democracies, says the FT’s Philip Stephens.
Snap news
Breaking pre-market news on Friday,
- National Grid loses Long Island Power Authority Management contract — statement.
- Sports Direct International decides not to procede with offer for Blacks Leisure — statement.
Fitch downgrades a slew of investment banks
Fitch follows S&P and downgrades a gaggle of investment banks.
Unlike S&P, however, this isn’t down to a change in methodology. Rather, as our emphasis below suggests, the rating agency argues that the banks aren’t as protected in “periods of exogenous financial stress”
Let there be credit claim collateral
OK — you’re sick to death of hearing about the European Central Bank’s three-year liquidity may, or may not, get banks to buy sovereign debt to pledge as collateral.
So why not hear about all the other extra trash assets the ECB will now accept? Potentially much more economically critical trash.
Terminado del forebearance
Here’s an interesting exercise from Fitch — they’ve counted up 8,235 properties which were repossessed in Spanish RMBS that they rated.
These are some of their findings:
Average 43% Value Depreciation:
More on the collateral crunch
From the ECB’s Mario Draghi on Thursday (our emphasis):
RTRS-ECB’S DRAGHI SAYS REDUCING LENDING WOULD BE THE WORST OPTION OF ALL 11:50 15Dec11
RTRS-ECB’S DRAGHI SAYS STABLE SOURCES OF FUNDING ARE
How big could the Sarko trade go?
Some €15-45bn for Spanish banks and their government’s bonds at least, according to Morgan Stanley’s Huw Van Steenis, who has just produced a very interesting note on the carry trade du jour – or to use its technical name the ECB’s 3-year LTRO.
It’s the balance of payments, stupid
Just in case the point has not been hammered home over the last few years, or even the last few days, here’s a chart showing how quickly and dramatically the external debt imbalances got out of hand in the eurozone:
China’s iron ore imports mystery, solved…
Earlier this week we looked at the rebound (of sorts) in China’s iron ore imports pricing from $120/tonne to almost $140/tonne, when much of the data was pointing to a deceleration in demand. At the same time,
Markets Live transcript 15 Dec 2011
Markets Live chat transcript for the chat ending at 12:16 on 15 Dec 2011. Participants in this chat were: Neil Hume, FT Paul Murphy Bryce Elder/FT neil collins NHHola rabble NHRight,