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| Knowledge is income, income is knowledge |
Still breathing after a full day of psychometric testing. An old piece of advice on how to deal with nosy reporters: make sure you are recording. When you are asked for a comment, say that you will only provide background commentary and can be quoted only unnamed. If the journalist (foolishly) accepts, then say “no comments”. Now they have nothing to quote and can’t even put down “did not want to comment” attached to your name. Nice! I am back to regular postings tomorrow. Enjoy the show!
Videofeed from Eurosummit Press Conference 22:00 – europa.eu
News (Tue evening) – BTH
News (Wed morning) – BTH
Credit Update – Macronomics
Danske Daily (Wed) – Danske Markets
Danske Daily (Thu) – Danske Markets (online Thu morning)
FX option vols – Saxo
TV: Bloomberg, CNBC, BBC World News
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT
EURO CRISIS
Whenever you assert responsibility for issues you do not have authority to tackle, you risk a crisis of credibility that undermines the authority you do have. Europe’s leaders see themselves as mustering resources for a war with the markets: a war which they will lose, not just because they will never find sufficient resources to defeat the markets, but because they are really fighting reality.
The poisoned bank recap chalice – Humble Student of The Markets
The €2 trillion that would convince everyone is 20% of world’s FX reserves. Getting more transfer money from Germany or IMF/USD BRICS is out of the question. ECB has to print.
The ECB is not here to save the world – alphaville / FT
George Soros’ 7-point plan: ECB * 7
The ECB: Unwilling Saviour – The Street Light
The ECB is really the only institution that can establish a backstop in eurozone sovereign debt markets that is completely credible. This would be especially effective if the ECB targeted an interest rate for Spanish and Italian bonds rather than a quantity of intervention.
Eurozone running out of knights – alphaville / FT
Brazil and other big countries have declined to send money for euro crisis.
I don’t care what Silvio Berlusconi says about the need for a lender of last resort. Italy will dangle in the wind until they make structural reforms. Only then – or if spreads shoot to the moon – will we see whether the ECB backstops Italian debt.
Hans-Werner Sinn: Deposit facilities count as central bank money and have inflationary potential, given that the German banks could withdraw those funds at any time. If they do, more than the Target balances could be exploding in Europe.
THE SUMMIT
What could tonight’s summit agreement involve? – openeurope blog
The Beginning Of The European Endgame – ZH
Peter Tchir: I believe the ECB has a portfolio of 55 billion of Greek debt. If average price was 80 then that is a 16.5 billion actual loss. ECB, unlike our beloved FED, doesn't want to just print money so they make a capital call on their members. Yes, the same members that back the EFSF… France I think was planning on loading up the ECB with so much debt they would just capitulate and print money.
Guilt, Growth, Lies, Laziness, And Liquidity – ZH
Peter Tchir: EFSF will be only about one or maybe two of these things
The EFSF as a Band Aid till the ECB ambulance gets here – Re-Define
EFSF first-loss guarantee would increase peer pressure and even the lazy eurocrats would kick Berlusconi to action.
European summits in ivory towers – voxeu.org
Paul de Grauwe says Europe’s leaders have lost touch, that the ECB has the firepower but is not prepared to use it, and that the outcome of all this is depressingly clear: Defeat by the financial markets.
The pitfalls of EZ sovereign debt restructuring – voxeu.org
Lucas Papademos (ex. ECB VP and Greek finmin): the most effective and prudent way is to implement the July agreement, reinforced by ‘firewalls’ to protect financial institutions and avoid contagion. Both require a substantial increase in EFSF ‘firepower’. Bank recapitalisation is necessary, but not sufficient.
GREECE
A Greek Short Back and Sides – The Source / WSJ
To get to an average 50% default on Greece’s outstanding debt, while ensuring the ECB and the IMF don’t take any losses on their holdings, would mean the privately-held component of Greek debt probably being written off entirely.
...the only way to avoid draining the EFSF of most of its remaining capacity is to get the private sector to take a much bigger hit, of up to 60% of the debt’s face value.
Greek Debt CDS Triggers Likely: Nomura – MarketBeat / WSJ
The Dealbreaker: Barclays Sees A 50-60% Haircut As A CDS Trigger – ZH
Greek Crisis Will Require €500 Billion ($700) in 2010-2020 – And it Won’t Be Enough – EconoMonitor
Most importantly, Greece is not the only euro economy close to insolvency.
Greece Pension Plans Insolvent; No Conceivable Way to Make Promises; Can Spain and Portugal be Far Behind? – Mish’s
OTHER
Paul Volcker interviewed – Charlie Rose
Researchers find a country's wealth correlates with its collective knowledge – physorg.com
The full free book in pdf format is here
How ‘Delta One’ really works – alphaville / FT
Delta One desks are not covered by the new proprietary trading restrictions. This is attractive to banks as the returns can be exceptional. Goldman Sachs made $1.2 billion this year according to a recent JPMorgan report.
IMF is also hosting a conference on 27th Oct with some big names, press release here.
Why do we need a financial sector? – voxeu.org
Wouter den Haan: Standard measures of the financial sector’s economic contribution overestimate its true value to a modern economy. As such, regulation that makes it more difficult for the sector to perform some activities is not necessarily a bad thing.
The region is witnessing uncertainty and economic pressures from domestic and external sources, which will likely be exacerbated by the recent worsening of the global economy.
Volatility Term Structure and the Cross-Section of Option Returns – SSRN