As much as I like Satyajit Das’ books (his new offering, Extreme Money, is just out and was reviewed favorably in the Financial Times), I wish he’d get on TV more often. His being in Sydney puts him at a bit of a disadvantage.
This clip is amusing.
Read more...By Sell on News, a macro equities analyst. Cross posted from MacroBusiness
I have been reliably informed by Houses & Holes that we are “all going to die”, and rather sooner than we all imagined. Something to do with the economic meltdown in Europe and America, I believe. While I have no reason to doubt such potent insight — after all, death is the best one way bet available — I think it could do with a little refining. What is dying is the industrial era in the developed world, a trend that is obscured by the fact that the developing world is industrialising at an accelerating pace.
Read more...The European markets had a bad day Thursday and the gloomy data releases in the US (terrible Philly Fed manufacturing numbers and an unexpected fall in existing home sales due to contract cancellations) led to a second day of sharp falls in equity prices overseas. . Asia didn’t fare too well either. The Nikkei closed down 1.9% and the Hang Seng was off 3.0%. The yen is back in nosebleed territory at 76.4. S&P futures are off 19 points.
Read more...By Marshall Auerback, a hedge fund manager, portfolio strategist, and Roosevelt Institute fellow. A version of this post appeared at New Economic Perspectives.
Forget about the S&P downgrade, which has had ZERO impact on the global equity markets. The downgrade was supposed to mean that it would be more likely that the US government would not be able to pay its debt than previously assumed. IF the markets took this warning seriously, then they would have attached a higher risk premium to US government bonds. Of course, the opposite occurred. US bonds soared in price. In other words, investors, both here and abroad, voted with money as loudly as possible that they view the US government debt as a very safe haven in a time of financial turmoil
So if it wasn’t the S&P downgrade which caused this downward cascade in the global equity markets, then what was it? By far, the most important factor currently driving the market’s bear trends is Europe or, more specifically, the future of the euro and the European Monetary Union. Systemic risk has migrated across the Atlantic to the euro zone.
Read more...You know things are not normal when a 4%-5% movement in equity markets looks routine.
I’ve been a bit surprised that it has taken investors this long to get the memo that the prospects for the economy (both domestically and internationally) are lousy. The stunning US GDP revisions of last month should have been a wake-up call, but they seemed to be swamped by the deficit ceiling/S&P downgrade theatrics.
Read more...As much as the dot com era conditioned US individual investors to focus on stock market movements, credit markets are where the real action lies. Deterioration in the bond markets almost without exception precedes stock market declines (although debt instruments can also send out false positives). In the stone ages of my youth, the rule of thumb was a four-month lag. In 2007, that guide was not at all bad. The bond market turn began in June 2007 (yours truly took note of it then, see here for the critical development, but was not convinced it was the Big One until corroborating data came in in July). The stock market obligingly peaked in October 2007.
Now given the extraordinary degree of government interventions, turns are not as obvious, market upheavals have repeatedly been beaten back, and relationships between stock and bond market price movements are likely to be less reliable than in the past. But one thing that is a clear danger signal is liquidity leaving the banking system. It’s like the preternatural calm when the water leaves the beach, revealing much more shore than usual, before the tsunami rolls in.
Read more...Bank of America’s actions continue to betray its words. CEO Brian Moynihan bravely maintained in an investor conference call last week that the beleaguered bank would be around for the next 230 years and did not need more new capital. He nixed selling equity at its current price levels, because it would be highly dilutive.
Yet we and others have raised the issue that the bank is in a corner in dealing with its not so hot balance sheet.
Read more...Yves here. This article gives one of the best high level summaries of the problems besetting the Eurozone I have seen. I’m not as keen about his remedy, which is not to say that it isn’t clever and wouldn’t in theory work. But from everything I can tell, the ECB is simply not prepared to expand its balance sheet anywhere near as much as would be needed.
By Daniel Gros, Director of the Centre for European Policy Studies, Brussels. Cross posted from VoxEU
Investors are anticipating the unravelling of the 21 July 2011 “solution” and a breakdown of the interbank-market that would throw the economy into an “immediate recession” like the one experienced after the Lehman bankruptcy. This column argues that this will happen without quick and bold action. The EFSF can’t work as designed but if it were registered as a bank – which would give it access to unlimited ECB re-financing – governments could stop the generalised breakdown of confidence while leaving the management of public debt in the hand of the finance ministers.
Read more...A savvy and cynical reader sent me this story from the Boston Globe yesterday, “Rating agency downbeat on Mass. communities.” We wanted to show readers that we are not merely after Standard & Poor’s but all sorts of rating agency incompetence and socially destructive behavior. Key extracts:
Read more...Reader Valissa pointed to an article at Bloomberg which looks like an effort at hagiography gone flat. Titled “Central Bankers Worldwide Race to Save Growth in 72 Hours of Policymaking,” it tries to perpetuate the myth of the overlords of the money system as all powerful, concerned with the public good, and competent. But as we know, they are increasingly politicized, hostage to ideology, unduly concerned with the pet wishes of banks, and tend to deny the existence of problems until they are acute.
Look at this impressive list of actions:
Read more...By Philip Pilkington, a journalist and writer based in Dublin, Ireland
We hear it time and time again: EU taxpayers are paying for the bailouts in the European periphery. The problem with this statement? As popular as it may be in the media right now, it’s not quite true – at least, it’s not true if you take a proper macroeconomic perspective on the crisis rather than looking at it through the crass lens of nationalism.
Read more...Wow, am I sour faced in this one!
I had gotten to the studio ahead of time (standard protocol) and was miked up earlier than usual. So I listed to probably 12 minutes of unbelievable cheerleading, which is not the sort of thing I expected on BNN, which usually does not sell the CNBC Kool-Aid. I think I was braced for a fight which never came.
Hope you enjoy it regardless.
Read more...Wellie, nothing like a lack of leadership to turn an ugly market day into an utter rout. But in another sense, the fake leadership in lieu of real leadership (as in taking a tough stand now and again and bringing the public around) is what set up conditions for a spectacular market unwind in the first place.
It’s one thing to do the equivalent of put the financial system on life support to deal with a crisis, quite another to leave the patient on life support and pretend you’ve returned to status quo ante.
The downdraft continues.
Read more...Obama created an unnecessary financial crisis. Not that we would have escaped eventually having one, but he played like a fool into the Republican desire to use the debt ceiling to push for budget cuts, and he tried outsmarting them to get his long standing desire of entitlements cuts through. Having the S&P downgrade hit when the Eurozone crisis was in an acute phase was like rolling a car full of explosives into a burning house. “Obama victory” may come to be the modern version of “Pyrrhic victory”.
And the man touted as a silver tongued orator can’t even talk up the markets. He actually managed to talk them down. Big time.
Read more...Since this will be trumped by the market opening in the US, I’ll be brief.
So far, this is playing out like I expected. Bad but not horrific.
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