Even with the impressive oil rally of the last two days, it isn’t clear that producers and lenders are out of the woods. While some analysts contend that the bottom is in, others see the rally as technical, driven in large measure by short-covering, and likely to fade.
The uncertainty lies in what is really happening on the production side
Read more...We said that the ECB held the trump cards in dealing with Greece, via being able to impose conditions on its access to the Emergency Liquidity Authority. We thought the ECB would send an initial signal as to how opposed it was to Finance Minister Yanis Varoufakis’ bold proposals in whether it imposed conditions and how severe those were on the Greek Central bank’s request to access ELA funds, which it is sure to approve to tomorrow.
It turns out the ECB isn’t waiting that long to let its views be known.
Read more...Rather than listen to thousands of borrower complaints, housing advocates, foreclosure attorneys, market experts and, well…, us, the Obama Administration tried to paper over the many problems in the mortgage servicing market by creating the foreclosure settlement (officially the National Mortgage Settlementof 2012), as well as the earlier OCC enforcement actions against big mortgage servicers.
Now we have the disaster of Ocwen, the fifth largest servicer in the country, imploding as a result of the settlement charade.
Read more...We’ve said that Greece had a weak negotiating position in trying to get a better deal from its creditors. That is playing out before our eyes. Greek Finance Minister Yanis Varoufakis has stepped down some of his early proposals even before formal talks have begun. This is a sad but predictable situation, since the Germans and the other members of the northern bloc are not at all willing to cut Greece much if any slack, since that would lead bigger, more powerful countries to try to slip the yoke of austerity.
The tragic thing about this situation is that Varoufakis is simply describing economic reality and has a number of sound ideas for how to make conditions better for Greece, which in the end will also lead to better results for its lenders.
Read more...While most NC readers are skeptical about quantitative easing and negative interest rates, those reactions are often aesthetic: they are so far away from any normal operation of financial markets that something has to be wrong with the idea. The problem is that while that instinct may be (and we’d argue is) correct, policy wonks who have drunk the Fed’s Kool Aid will treat those who have visceral negative reactions as simply having a case of novelty aversion, which means they can be ignored.
Ed Harrison provides comparatively short and accessible explanation of why QE and negative interest rates are bound to bomb. I encourage you to send his post to friends and colleagues who’d like to be able to discuss in a more rigorous manner why these approaches are deeply flawed.
Read more...Is Syriza’s bold promise of hope for Greeks about to become a false dawn?
Read more...Victims of austerity and their allies around the world may be placing too much hope in Syriza.
Read more...A US court ruling has warped the otherwise precise meanings of three key words – “republic”, “sovereign”, and “default” – leading to absurdities like a New York district court holding the Republic of Argentina in “contempt of court”! The entire understanding of sovereign debt and its restructuring is being read through private “contract law” that cannot address the complex questions that are inherently public in nature, à la questions around restructuring Argentina’s debt. It appeared that a misreading of key words could benefit some vulture funds, but so far no one has seen as much as a penny! Maybe they never will.
Read more...Please read past the finger-wagging “private lenders are (barely) starting to come back to Greece, better not spook them” talk. This piece provides a useful overview of how the composition of lenders to Greece has changed over time. You can see how significant banks once were and how they were quiet deliberately displaced by various “official” creditors.
Read more...Monday morning I encountered a word in a number of newspapers that I have not read regarding the European Union for years: Hope. The occasion was the election in Greece. I suddenly became aware of how long much of this continent has been living in what appears to be a never ending-crisis.
Read more...The year 2015 has just started, and already there have been two junk-bond casualties: the first on Thursday, and the second one yesterday. They weren’t energy companies. Energy companies don’t even try anymore.
Read more...The machinations over the next round of funding in Ukraine are wild. No one, particularly the US, wants to fund Ukraine and debt default looks likely, yet Ukrainian President Petro Poroshenko is demanding a huge amount of additional funds. Soros is trying to end run the IMF, albeit with not much success so far.
Read more...The most that officialdom seems willing to do to deal with the crisis is messaging that it is over. Most people can tell how well that is working.
Read more...The ECB is set to announce the details of its QE program tomorrow. Many analysts and investors have been trying to puzzle out how its operations might work, since those details will make a difference in what impact if any it has.
Frankly, we are hugely skeptical of this initiative. The US version, which is bizarrely touted as a success, further zombified the economy. It goosed asset prices, which widened wealth and income inequality. Now respectable economists are decrying the widening gap between rich and poor and the lack of class mobility as a brake on growth, yet they also refused to endorse debt restructuring and much more aggressive fiscal spending. And some experts contend that the reason the Fed decided to end QE last summer was that it came to recognize the costs outweighed what if anything it produced in the way of benefits. Of course, they can never admit that publicly or even privately if true.
In Europe, there is even more reason to be expect QE to be at best ineffective. Unlike the US, where as a matter of policy, a lot of financing takes place through the capital markets (for instance, credit card debt, subprime auto loans, home loans are all securitized to a large degree), in Europe, far more credit is on bank balance sheets, and small to medium sized corporate lending is far more important than in the US. Thus, while as we have repeatedly explained, putting money on sale is unlikely to result in more borrowing unless the cost of money is the biggest cost of running your business (ie, you are a bank or a speculator), in Europe you have the added layer that reducing investment yields is unlikely to change how credit officers view lending to small/medium sized enterprises (assuming they even want to borrow) in a weak, deflationary economy.
This Bruegel post describes the major options that the ECB has in designing its QE program, which will help readers benchmark tomorrow’s announcement. One might politely describe the choices as bad and less bad.
Read more...Ed Harrison explains on Boom/Bust why the ECB’s decision to exclude Greece from QE will probably help leftist party Syriza in the elections on January 25.
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