Diary of a Financier

Bookshelf Update: Top Newsstuffs (February 27-March 4)

In Bookshelf on Sun 4 Mar 2012 at 12:48

From micro to macro, a lot of media caught my attention this week.  Trying to balance my focus between secular, company/sector-specific opportunities and cyclical economy-wide risks.  The dichotomy is reflected in this week’s Top Newsstuffs:


$867B Student Loan Debt Bomb Threatens U.S. Housing Market | The Street
Chinese reduce US Treasury holdings to $1.307T, down 13% since June 2011. Watch the Chinese trade surplus to see if US domestic demand needs to start filling the void. (FYI, TIC data is usually incomplete.)
Sean Corrigan Crucifies MMT | ZeroHedge
Fractal study of 2007 SPX/XLF daily correlates with 2010-12 SPX/XLF weekly charts. Tells me our policymakers have been “dexterous” in deferring the double dip, but the market will correct regardless.
Discusses Willem Buitier’s analysis of ECB balance sheet risk: ECB and Eurosystem central banks have a capital buffer of €80B v. balance sheet of €2.7T [before LTRO II]. Citi calculates the ECB can absorb €3.4tr in losses, because of two factors:
1. ECB “revaluation accounts” include unrealised gains worth €500B on the eurosystem’s holdings of gold, FX, and other investments.
2. ECB gains from “seigniorage,” since the cost of printing the euro currency is far less than the value of that fiat. At least €2tr in future gains.
Jonathan Tepper: “Default, Exit and Devaluation as the Optimal Solution… during the past century sixty-nine countries have exited currency areas with little downward economic volatility… Previous examples include the Austro-Hungarian Empire in 1919, India and Pakistan 1947, Pakistan and Bangladesh 1971, Czechoslovakia in 1992-93, and USSR in 1992.”
Pension Pain Mounts as Fed Policy Boosts Liabilities | Bloomberg
Shareholders beware: “big U.S. employers… making a record $100B in 2012 pension contributions, 67 percent more than two years ago, as low interest rates boost companies’ liabilities.”
The Asian Financial Crisis Proves That Austerity Can Work | Stephen Roach
Counterpoint to US Energy independence talks. JPM presents charts accounting for US imported crude oil.  Were we to change to a domestic energy policy, Natural Gas production would have to increase 48% (vs. EIA projected 6%) by 2030 to replace the gasoline component of imports alone. (And gasoline is only around 45%-50% of total refined products. The US would also have to come up with suitable domestic or foreign replacements for jet fuel, heating oil, fuel oil, lube oils, asphalt, etc.)
The Natural Gas Game Changer | PIMCO




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