John McDermott
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.
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,
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”
Further further reading
For the commute home,
- John Paulson proposes a sovereign-guarantee scheme for Europe.
- Reformed Broker picks his top 10 market moments of 2011.
- Daron Acemoglu suggests five books on inequality.
CME Group plays old-school Chicago politics
In case you missed it, last night Jon Corzine was artfully thrown under what looked like a bomb-strapped bus being driven by the Chicago Mercantile Exchange, with no Keanu Reeves in sight.
Terry Duffy,
Further further reading
For the commute home,
- Breaking: CME head says he was told by an MFG employee that Corzine did know about the missing money.
- The New Scientist takes a long look at peer-to-peer lending.
- Shiller on neuroeconomics.
FOMC statement, 13 December 2011
Go back to watching Mario. See you in 2012.
– FOMC statement, 13 December 2011
Not quite, of course, but as expected, there’s nothing to see in the December FOMC statement. Rates remain the same and Twist continues.
European banks ‘need tons of money’, says GMO
In a note released on Tuesday, GMO, the global asset management firm headed by Jeremy Grantham, writes that ”European banks need tons of money” to correct capital shortfalls. This much, we know.
But the five scenarios used by Richard P.
Sino-Forest admits default
Is it all over for Sino-Forest?
The timber firm can’t even keep its own deadlines, never mind those of bondholders.
Sino’s third quarter results were due on Thursday, along with a $10m interest payment on convertible notes.
“Financial repression” part II: a critique
So, “financial repression” is everywhere — or is it? In Part 1, we gave you a recap of the concept from a recent BIS paper.
At the back of the paper are critiques from Ignazio Visco and from Alan M.
“Financial repression” part I: a recap
“Financial repression” was common in the four decades after the second world war and is essential to understanding policymakers’ responses to current credit problems in the US, Europe and China.
These are the conclusions of a BIS working paper by Carmen M.
The Weekender
This week on FT Alphaville,
- Post-euro currencies and post-euro economies were both charted.
- The EBA released its latest capital hole estimates.
- Private creditors got their hopes up, but why?
- Apparently there was a summit in Brussels.
The gap between summit rhetoric and reality
Judging by markets’ immediate responses to the EU summit, Gavyn Davies’ summary of the new reality seems spot on:
My initial take on the deal is that it will be sufficient to dampen the acute phase of the crisis,
US Markets Live: 10am NY time, 3pm London time
Okay, so we’re not holed up in a convention centre in the city of permanent meetings. But Merkoky’s latest patchwork policy quilt is all anyone is talking about so we’ll be doing the same at the usual time and place.
Is this enough to save the eurozone?
… or at least to agree a date for the next summit.
The first day’s negotiations went on until 5am Brussels time and culminated in this statement from European leaders (click through to read)…
From the statement,
Introducing the ESM bank, rejecting the ESM bank
Well, it wouldn’t be Summit Eve without rumours and counter-rumours. But the clown show might have outdone itself this time.
Forty minutes before US markets closed, Reuters reported that the ESM would receive a banking licence and run side-by-side for one year with the EFSF,
Jon “to my recollection” Corzine returns
After a break for voting, it’s back to the MF Global hearing, where Jon Corzine is facing questioning. Click through for the live feed:
So far, the former MF Global chief hasn’t gone much further than his prepared testimony,
Sweet deals in European bank deleveraging
What links Hershey to the eurozone debt crisis? Well, aside from making a product that cracks under pressure, the confectioner has recently renewed a syndicated lending deal that Nomura’s analysts say augurs further European bank deleveraging.
For sale: one timber company, hardly used
It’s about time we heard again from Sino-Forest.
The timber flipper has been quiet since it published the interim report into allegations of fraud made in June by short seller Muddy Waters. Third quarter results aren’t out until December 15,
Who does the ECB call when it wants to speak to Europe?
Answer: the United States.
The Washington Post on Wednesday has a sympathetic piece highlighting US officials’ behind-the-scenes roles in the eurozone crisis.
Most of which shouldn’t be surprising considering Tim Geithner’s background and the Stackelbergian morass in Europe, but there were a couple of interesting nuggets:
The problems with the ECB-IMF switcheroo
It’s been the subject of more rumours than Kim Kardashian but the ECB-IMF switcheroo is increasingly likely, at least according to reports from Bloomberg and Reuters.
One would think the involvement of the credible-again IMF would be good news.
Step inside the mind of Willem Buiter — but tread carefully
Bobby Robson, the former England football coach, once described a player as being so truculent he could have an argument with himself.
Willem Buiter has gone one better. In his latest note, the Citigroup chief economist has invented someone so he can have an argument.
Flipping ‘eck — the size of the second home bubble
Finance writers and television shows have used flipping houses as a symbol of the pre-crisis housing bubble.
But we weren’t aware of any statistical evidence until we saw this post on Monday from Liberty Street Economics,
The Weekender
This week on FT Alphaville,
- The German bond market was all about ‘buy and hold’.
- Redenomination risk popped up in the strangest places.
- The ECB was the Pawnbroker of Last Resort.
- We asked whether this was a Minsky moment in the eurozone?
- The UK provided liquidity support to the banks.
US Markets Live with added Gapper: 10am New York time
That’s 3pm London time for you folks across the pond.
Today we have a special guest, John Gapper, the FT’s chief business commentator, and all round brilliant chap, who we’re reliably told was at one point one of the 100 most influential men in Britain.
Further further reading
For the commute home,
- Bloomberg has a new economic history blog.
- On Draghi and transmission mechanisms.
- Italian government appoints wrong person to junior cabinet position.
- How Citi sank itself on the Fed’s watch.
What ECB QE could look like
Oh Mario, you big tease. From the FT on Thursday:
Mario Draghi, European Central Bank president, has called for a “fiscal compact” between governments to restore investor confidence in the eurozone – and hinted such a step could pave the way for a more aggressive ECB response to the region’s debt crisis.
So much for a grand settlement [updated]
On Thursday the Massachusetts Attorney General Martha Coakley sued five US banks for alleged illegal mortgage practices, further destroying hopes of a grand 50-state settlement between state lawyers and banks. This was expected but it’s still a potentially damaging blow to Bank of America,