7th May - US Open: Bounce after 'MerDe'

Here are the US open links - UK was closed and markets are reacting just as I expected: the "buy the rumor, sell the news" is working in reverse, and markets are rallying after the "bad news".

Joke of the Day

Merkel arrives to Athens airport. 

Immigration officer: Nationality?

Merkel: German

Immigration officer: Occupation?

Merkel: No, I am here only for a meeting.

After 'Merkozy', what should we call Hollande and Merkel? Merklande, Hollkel, Homer, Merde, Mellande, Mellander, Merder or Landmerk? Or is it so that there will only be a Merkel from now on?

 

Quotes of the Day 

Gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold - they invest in productive businesses. – Charlie Munger

Mr. Munger is known for his delicate touch. Piping up on the compensation consultant issue, he remarks that when it comes to that profession, prostitution would be “a step up.” Mr. Buffett only notes afterward that his longtime buddy “is in charge of diplomacy” at the company. – DealBook / NYT

Mr. Buffett relates one anecdote where unnamed regulators asked Mr. Munger whom Berkshire lends money to. The succinct Mr. Munger replied, “Not people like you.” – DealBook / NYT

Here's what you missed during the weekend (the Calendar-page has been updated as well):

7th May - Morning Briefings: Post Elections 

6th May - Credit Guest: Peripheral Banks, Kneecap Recap  

6th May - Sell-Side Research (weekly reports from GS, JPM, CS…)

6th May - Credit Guest: From Hektemoroi to...

5th May – Weekender: Trading & Markets

5th May - Weekender: Economics

5th May - Weekender: Euro Crisis

5th May - Weekender: Elections  (updated)

4th May - Weekly Support (weekly reviews and previews)

4th May - US Payrolls Aftermath

4th May - Recognition?

4th May - Best of The Week

Daily US Opening News And Market Re-Cap: May 7 – RanSquawk / ZH

Frontrunning: May 7 – ZH

Daily Press Summary – Open Europe

The Lunch Wrap – alphaville / FT

EM New York headlines – beyondbrics / FT

Overnight Sentiment: Clutching At Straws – Bank of America / ZH

Morning MarketBeat: Markets Have a Hollande-Daze – MarketBeat / WSJ

Broker Note Briefing: – WSJ

Morning Take-Out – DealBook / NYT

AM Dear Dairy: Election Aftermath  – Macro and Cheese

Initial Anxiety Stemmed, More Later and 6 Observations  – Marc to Market
The T Report: Europe Wasn’t Destroyed in a Day – TF Market Advisors

Pre-market Commentary – Marketwatch

Pre-Market Trading – CNNMoney          

Pre-Market – NASDAQ

US Equity Preview – Bloomberg

Earnings & Events – The Street

MarketCurrents – Seeking Alpha

TV: Bloomberg, CNBC, BBC

Debt crisis: live – The Telegraph

Europe Crisis Tracker – WSJ

Tracking Europe’s Debt Crisis – NYT

FX Options Analytics – Saxo Bank

EURO CRISIS: GENERAL

Why the Eurozone Crisis is Not Over – PIIE

Martin Wolf, Financial Times on May 3: Wolf believes that the euro area crisis in fact has barely begun and requires a process of adjustment that could take a full decade and posed the question of whether the member countries have the political will to make that process work and resolve the crisis successfully. Audio (mp3), Video (youtube), Presentation (pdf), Transcript (pdf)

Lies, Damned Lies And Statistics – Mark Grant / ZH

What I find particularly difficult is what they are doing in Europe and continue to do because they are formulating systemic lies and they are doing it knowingly, purposefully; with the single motivation being to fool people. It can no longer be said that it is not systemic as the European Union does not object, has not objected, so that even Germany and the Netherlands and Finland have become accomplices to the schemes.

German savers should applaud the growing TARGET balances – voxeu.org

The Eurozone debt crisis has led to increasing imbalances among Europe’s central banks, the causes and consequences of which are the subject of fierce debate. But this column argues that the discussions are missing a fundamental point – the extent to which the German financial sector and German savers benefit from this arrangement.

Dummies Guide To Europe's Problems – ZH

Spain-Accumulated Imbalances – The Trader

Full doc here (pdf)

The Spanish Bank Bailout Begins – ZH
"Spain may pump public funds into its banking system to revive lending and its recessionary economy, Prime Minister Mariano Rajoy said Monday, signalling a policy U-turn. The government had pledged to not give money to the banking industry that is struggling in the wake of a collapsed, decade-long, housing boom. "If it was necessary to reactivate credit, to save the Spanish financial system, I wouldn't rule out injecting public funds, like all European countries have done"

Citi: Probability of Greek’s Euro exit rises to more than 50% – Also Sprach Analyst

Hollande win, Greek deadlock – the analysts react – alphaville / FT

SocGen, Nomura, RBC. For full coverage of the elections, see this.

What does Europe want to do now? – Wonkblog / WP

Perhaps the reality of the euro zone right now is that this isn't just about what Hollande does now. It's about what Merkel wants to do now, and what the ECB wants to do now. The old consensus is no longer politically sustainable.

EURO CRISIS: AUSTERITY DEBATE

The debate on austerity: are economists barking up the wrong tree? – bruegel

While economists are trying to convince politicians of the high costs of too much austerity, the reality may be different. Europe’s politicians don’t need convincing that austerity is costly. They know this. But they think this is a price worth paying. Instead of trying to argue why austerity is or isn’t costly, economists should try to understand why politicians adhere to this point of view.

Euro-zone stabilization: Not countercyclical enough, then or now – Free exchange / The Economist

The insight that the fiscal policy stance in the periphery prior to this crisis was insufficiently countercyclical also allows for a more convincing argument against the German emphasis on austerity: if they criticise the periphery's fiscal policy before the crisis on macroeconomic grounds, they should be in favour of more fiscal stimulus and less austerity now.

Draghi's "growth pact" = Internal devaluation – Humble Student of The Markets

Notwithstanding the news flow over the pending elections, the fight over austerity and structural adjustments is by no means over, regardless of the electoral outcome. My bet, in the long run, is still on Draghi and Merkel. In the short run, however, anything can happen.

How to Get the Balance Right: Fiscal Policy At a Time of Crisis – iMFdirect

Sweden provides an interesting case study for countries’ current predicament…. In response, Sweden initiated a comprehensive set of reforms. Favorable external conditions helped, but domestic policies played a critical role in the adjustment.

CENTRAL BANKS

On the Odds of an Ease – Bruce Krasting

I’m going to go against the consensus opinion. The Fed is on hold until December. We will not see another LTRO operation this year. If I'm right, what does it mean for those lines on that chart? Nothing good.

Watchful Waiting – PIMCO
Today, the Federal Reserve itself faces an “unusually uncertain” period because it lacks a complete understanding of the potential side effects of its unconventional policy actions; in particular the elongated timeline of its zero interest rate policy and its massive money printing. What matters in shaping market expectations about inflation and deflation are the credibility of fiscal policy, the prospect for real economic growth and the central bank’s commitment to step back from the punch bowl.

Central Bank reserve creation in the era of negative money multipliers – voxeu.org

Are central banks printing vast quantities of money? This column explains how money-multiplier economics (central banks create reserves that allow commercial banks to create money) no longer holds. Today, non-bank financial institutions play a pivotal role in money/liquidity creation, but hold no reserves. Their lending depends on “private reserves”, mainly highly liquid government securities. Creating more ‘public’ reserves by buying such ‘private’ reserves doesn’t trigger money creation – it just substitutes among reserve types. Open-market purchases only create money if they swap a monetary base for assets that are no longer accepted at full value as collateral in the market.

Strategic Briefing: Fed Governors & Monetary Policy Under Pressure – The Capital Spectator

Summaries of and links to recent articles

 

OTHER

‘Battle of the beards’: Paul Krugman vs. Ben Bernanke – WP

Krugman accuses Bernanke of being too timid in fighting high unemployment and slow economic growth. Bernanke calls Krugman’s policy proposals “reckless.” h/t The Trader

Economic surprise index eerily reminiscent of last year – Sober Look

Chinese banks “among the most thinly capitalised” – Also Sprach Analyst

I continue to intensely dislike Chinese banks, as banks are highly financially levered with little capital.  Slight reduction in banks’ asset value (through non-performing loans, for example) can have big impact on the value of banks’ equities

Flash Crash, Two Years Later – MarketBeat / WSJ

The Last Chartist – Price Action Lab Blog

Surrounded by robots he knew the end was near. One chartist against 1,000 HFT robots.

A new way of thinking about the global machine – FT

It is useful to think of the global economy as one dynamic and complex machine. And in recent years, many have noted that the old clunker is stalling, even suggesting that it is in need of a total overhaul. The benefit of a breakdown is that it gives us all time to reflect.

Economists, Liquidity Mongers and the Banker Assault on Financial Reform – naked capitalism

Bankers and their lobbyists and economists help grease the skids not just with money – but with terms of “econ-speak” such as “cost-benefit analysis”, and most commonly, “liquidity”. Used and manipulated by the wrong hands, such boring and innocuous sounding concepts can turn dangerous, even fatal in the banker battle against safer financial regulation. The list of delays, loopholes and obstacles is too long to fully recount, but here are a few of the most important.

Shadow Banking 101 – Azizonomics

The status quo is that we have a broken and dangerous system that doesn’t really work, surviving on government subsidies. Sure, a full collapse of shadow banking in 2008 would have been painful. But we may have created a bigger and more painful collapse further down the road.

Berkshire Annual Meeting Highlights – ZH
Mr. Buffett relates one anecdote where unnamed regulators asked Mr. Munger whom Berkshire lends money to. The succinct Mr. Munger replied, “Not people like you.”

Economic Tribalism – Krugman / NYT

People aren’t very receptive to evidence if it doesn’t come from a member of their cultural community. This has been blindingly obvious these past few years.

A Graphic Presentation – John Mauldin / The Big Picture

April Employment, A Graphic Review of the Strategic Investment Conference

OFF-TOPIC

A Curated Linkfest For The Smartest People On The Web! – Simoleon Sense

The Dalai Lama on Science and Technology – brain pickings

Pain, pleasure, and what sets man apart from machine.

An era of human-affected Earth – FlowingData

Nice animation

7 things every Facebook user needs to know – Barking up the wrong tree