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’A sub-optimal solution to the Euromess [updated]
Policy changes the ECB announced last week will help banks directly and governments indirectly. But the EU fell short on every element of a comprehensive deal. On Friday, investors reacted positively to what was sold to them as a “fiscal compact”.
EFSF: a circular, counterproductive, and creative cannibal (continued)
Part two.
Unfortunately, Nomura’s analysis of the EFSF’s shortcoming is both more convincing and more extensive. Here are some choice extracts, with our emphasis:
1) Correlation or Circularity is deepened:Neither option solves the correlation or circularity problem (i.e.,
EFSF: a circular, counterproductive, and creative cannibal
The revamped EFSF risks becoming the wiggle side chair of financial engineering, lauded for its creativity but rarely used for its intended purpose.
On Monday, Nomura strategists released a useful note explaining the two new aspects of the EFSF — the special purpose investment vehicle (SPIV) and the credit insurance option — along with their pros and cons.
A tale of two stock markets
US equities could be in line for a secular bull market as soon as next year, but European stocks should be handled with care.
That is a synopsis of the latest thinking from Citi. For more details read on:
Vol nightmares unrealised, for now
Here’s something to ponder for the commute home, via Deutsche Bank:
One topic of conversation with investors is why realized volatility has been similar to levels during 2010 (the onset of the European sovereign crisis),
Jefferies: for the love of a Greek God, how many times must we explain this?
Jefferies really wants you to know that its net position is “insignificant”.
In a statement released on Friday the broker took the rare step of disclosing not only the size of its dealings with peripheral Europe,
The epistemology of US banks’ European exposure
Can we really know anything about US banks exposure to Europe?
A familiar epistemological question, which is being asked again in the wake of MF Global’s demise and Jefferies’ circuit-breaking slide.
Approaching the Italian endgame
Amid EFSF revamps, Greek politics, and ECB rate cuts, remember that in the end, it all comes down to Italy.
In particular, 10-year Italian government bond yields remain well over 6 per cent at pixel time.
Venizelos drops a bomb
Kaboom.
Greek Deputy PM Evangelos Venizelos’ bombshell statement upon arrival from Cannes on Thursday morning:
Work out where the money is with these handy EFSF guides
RBC Capital Markets has busted out the PowerPoint to depict the two ways EFSF could achieve the “several fold” leverage pledged last week by European leaders in Brussels. They may come in handy as you prepare to jet off to this week’s G20 summit in Cannes.
Greed and fear with Bob the Bear
And now for something completely different.
In his latest note to clients, Nomura’s Bob Janjuah goes all technical:
In terms of the secular outlook, I wanted to do something different, so I have included below a classic Greed &
Europe meets, talks, leaks, fights and still we wait
It’s all happening in Brussels. But don’t confuse activity with action.
The European Council summit (i.e. all leaders of the European Union) has concluded and the leaders of Poland (which currently holds the rotating Presidency) have been out briefing the press:
A tale of two PMIs
China Flash PMIs out on Monday showed a seasonally-adjusted figure of 51.1 — the highest in five months and a big turnround from September’s 49.9. The preliminary PMIs are compiled by HSBC and Markit Economics,
More on that looming crunch de crédit
The looming European credit crunch may not be the first thing on European leaders’ minds this weekend, but it’s coming, at least according to Citigroup.
Three of the bank’s European economists, Jürgen Michels,
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.
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,
US to Brics: thanks, but Europe needs to save itself
Not quite, but near enough, according to reports on Friday afternoon from the FT and Reuters.
The pink paper revealed on Thursday that Bric countries were looking at ways to support the eurozone, such as via a unicorn SPV,
Taking the stress test to nine (ex-bad stuff)
Just like the good old days. A Pestowire ‘exclusive’ on banking recapitalisations.
From the BBC:
The European Banking Authority is proposing that eurozone banks should hold capital equivalent to between 9% and 10% of their risk-weighted assets,
The mystery of US banks’ European exposure
This might just be the most important piece of paper in US banking right now:
FFIEC 009 is the form US banks send to regulators about their exposure to Europe (sovereigns and corporates) and it provides the basis for many of the estimates of vulnerability.
Nomura: Trichet to deny Europe a fun going-away present
Or, why this letter is likely to make its way quickly into the recycling bin.
Just a couple of weeks ago, the conventional wisdom was still for a 50bps rate cut at Thursday’s ECB meeting — Jean-Claude Trichet’s last as ECB president — in light of rising expectations rise of an eurozone recession.
Europe’s web of revenue [updated]
Graphics and analyses of the interconnected nature of the global economy are mighty popular with the world’s latest financial crisis. Debt exposures, counterparty exposures, and now revenue exposures — courtesy of Morgan Stanley’s Global Exposure Guide.
US banks take the sitting duck test
The duck test is a paradigm of inductive reasoning. If, as Douglas Adams chirpily wrote, “it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands.”
Risk off, Europe edition #784
An unnerving afternoon, and we could be headed for another tense weekend. Dow’s off three per cent at pixel time.
You already know that ECB chief economist Jurgen Stark has resigned — ostensibly for “personal”
JPMorgan’s “alternate” eurozone-free universe
JPMorgan believes a break-up of the eurozone is “very unlikely”.
But it wants you to be prepared.
The bank launched its “Alternate States” series of research notes on Thursday, which attempt to describe the probable course of improbable events.
And we cross to Karlsruhe (updated)
Breaking (via Reuters)….
RTRS-GERMAN CONSTITUTIONAL COURT SAYS REJECTS LAWSUITS AIMED AT BLOCKING GERMAN PARTICIPATION IN EURO ZONE BAILOUTS
RTRS-GERMAN CONSTITUTIONAL COURT SAYS RULING ON BAILOUTS WAS “VERY TIGHT”
Ackermann unplugged
RTRS – SOME BANKS WOULD NOT SURVIVE HAVING TO REVALUE ALL SOVEREIGN DEBT AT MARKET LEVELS – SPEECH TEXT.
A statement of the obvious you might think. But what makes the above interesting is the source:
Goldman’s doom-mongering eye-bleeding slide deck
On Thursday the Wall Street Journal reported on a doom-laden research note by Goldman Sachs strategist Alan Brazil sent on August 16 to hedge fund clients.
Unfortunately it didn’t share the report, but Zero Hedge has acquired a copy and it makes for interesting reading,