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Monday, November 21

Best of the Week

Here are last week's better links. On weekend I posted a particularly nice Weekender - When a massacre is a comic relief and ECB to QE or not to QE?, an euro crisis-special on the possibility of quantitative easing by the European Central Bank. Leave a comment, follow me on Twitter, Facebook or email me.

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EUROCRISIS
Decision Time For Europe: The Definitive Presentation On The Future (Or Lack Thereof) Of The EurozoneZH
Swiss private bank Pictet’s research paper: Current response to the crisis has created conditions leading the euro area towards depression…things are going to get worse before European authorities decide to wheel out their heavy artillery.
Special report: Europe and its currencyThe Economist
Notice that there eight parts to this report.

The Euro Is DeadZH
Nomura’s research note: the euro area as currently constructed is not stable and so it will have to change, any new variable geometry euro will take a long period of time to set up. How then to cover the intervening period?

Europe Gets It Peter Tchir / ZH
What has
Europe done, hasn't done (that they were supposed to), hasn't done (that wasn't in the plans)

It’s a capital ratio of two halvesalphaville / FT
Markets are not currently playing nice about handing capital to the banks, making new funding rather expensive. Given this, banks are taking aim at the denominator of the capital ratio by deleveraging their balance sheets. Some are even getting all fancy about it by re-jigging their models to have lower risk weights than previously… It’s like a veritable garage sale out there… and it’s going on all in the same street. Wonder what that will do for prices.

Asset Swaps Are Adding To The ProblemPeter Tchir / ZH
Banks will often buy a fixed rate bond and enter into an interest rate swap to “effectively” turn it into a floating rate asset… Yes, there is that ugly term again, counterparty risk.  Who is owed money on the swap by the banks that bought bonds via asset swaps?  It is another dynamic that is at play that we just don’t know.  It also makes it harder for banks to sell their assets because they would have to close out the interest rate swap at the same time.

Presenting Europe's Remaining 2011 Bond And Bill Auctions... All 104 Of ThemZH
This is a good one from Barclays - has details too!

France and Japan Next, says Kyle Bass HistorySquared
Many very good observations, e.g.: UK and US have recapitalized their banks, no one else has, so their debt ratios will be worse once they do.

An existential crisis in Eurozone ratesalphaville / FT
With the GC existential crisis potentially compromising collateralised rates, that leaves only the currency basis swap market as a liquid and truthful indicator of real funding costs in
Europe. And the key reason it’s so much more useful than the OIS-Euribor spread is because it specifically identifies costs for banks with dollar exposures — which are not backstopped by the ECB to the same extent as those with European exposures.

The Euro Fiasco Suicide Formula (EFSF)Lighthouse IM
Very good critical outline of the program: In case Italy and Spain need money, 30% of the guarantors would “step out”, at which point the self-insurance scheme collapses

Steen's Chronicle: Is Europe set to declare a Chapter 11 in early 2012?tradingfloor.com
Europe may need to pull a Chapter 11 – a US-style bankruptcy, which would permit a market shutdown and Euro Zone reorganization before reopening for business.

Angela's choiceHumble Student of the Markets
To soothe German attitudes, Merkel had to manufacture a crisis: The brinkmanship and all the hawkish statements coming out from Germany that we see today may be just for public consumption. This is all theatre to show that we are indeed headed for a crisis, so they have to take extraordinary measures to save Europe.

Europe’s Perfect Storm: When Possibility Meets ActualityGlobal Policy
Italy is on the verge of losing market access. Spain will be next, and the fire may reach France within a month. France has already all but lost its AAA rating, with S&P accidentally revealing last week that it is preparing to downgrade the country

European Portfolio Strategist 10th NovCiti (scribd)
40 pages: Euro to survive, To ECB or not ECB, Political risks, Market Risks, What to do.

The Future of the Eurozone and U.S. InterestsCongressional Research Service
32 pages prepared for members and committees of congress.

Samsung Securities: Prepare for the Italian bank runsPragmatic Capitalism

Futures Tumble, Spreads At Record, Euro Drops On Another Awful Spanish Auction; More LCH Margin Hike RumorsZH
Plenty of charts and roundup of comments on the Spanish auction.

ECB
Presenting Deutsche Bank's Pitchbook To The ECB To Go "All In"ZH
With full slides on DB’s report “The Tipping Point – Time to Call the ECB”. This week's must-read - and it's only Wednesday!
Strategic Briefing: The ECB's Last Stand?The Capital Spectator
Several recent or classic summarized articles on ECB.

Bundesbank's Jens Weidmann Discusses The ECB's Role As An Overthrower Of European Rulers, Bashes EFSF IncompetenceZH
after all it took the ECB's bond buying program - the
SMP - just two days of not buying Italian bonds for Silvio Berlusconi to resign after BTPs hit an all time rock bottom price…

ECB Independence Workaround - Lend To IMF And Turn A Blind EyeZH

Playing Chicken With The ECB: The Market Has Issued A Boycott On Draghi Until He PrintsZH
BoA: We are all waiting for the catalyst to a better or worse market - to us this means that the markets are now waiting for the ECB to step in… While the relevant time horizon is highly uncertain it feels more like a matter of two weeks than two months.

OTHER
The Grand Unified Presentation Of Everything ZH
Outtakes from the Pictet Investment Strategy 2012

The great de-leveragingalphaville / FT
After Zero Hedge, now FT takes a look at Citi’s “Payback Time: The Coming Decade of Deleveraging”. Check both.

Perspectives Nov 2011Pictet & Cie (pdf)
Europe: some respite from the debt crisis, Safe havens – chasing rainbows? etc.

OTC Derivatives Market: Update on current regulatory initiativesDB Research (pdf)
In 2009, G-20 leaders agreed that all standardised OTC derivatives should be cleared through CCPs, non-centrally cleared contracts should be subject to higher capital requirements and all OTC derivatives should be reported to trade repositories by the end of 2012.

DIVERSION
Google and Microsoft Talk Artificial Intelligencetechnology review

The Godfather Wars (Mar 2009)Vanity Fair
After violent disputes over the casting of Marlon Brando and Al Pacino, they tangled with the real-life Mob, which didn’t want the movie made at all. The author recalls how the clash of Hollywood sharks, Mafia kingpins, and cinematic geniuses shaped a Hollywood masterpiece.

Earth: Time Lapse View from Space, Fly OverNASA, ISS / vimeo