Diary of a Financier

Bookshelf Update: Top Newsstuffs (March 5-11)

In Bookshelf on Sun 11 Mar 2012 at 15:02

Some newspaper clippings from this year’s “March 9th” week.  There’s just something about March 9th that brings out the big guns…


The Greek Contingent Liability Exposed | Mark Grant
Identifies Greek (“Hellenic Republic”) contingent-guaranteed debt of €107.2b via municipal authorities. In addition, don’t forget the new, post default Troika loans of €172b.
Import surge sends China trade to decade-deep deficit | Reuters
Chinese trade deficit swings to -$31.5b. With CNY revalued and Japan/Australia/Brazil also reporting trade deficits, the US is getting what it asked for, but high energy prices still have US reporting their own deep trade deficit.
Interview: Ray Dalio, Bridgewater | The Economist
  1. He constructs his investment ideas by reading old newspapers from past periods of economic distress… he isn’t big on reading academics.
  2. To understand demand properly, you must know whether it is funded by the buyers’ own money or by credit from others… he was able to predict the Euro crisis by figuring out how much debt would need to be refinanced, when, who would need it, and who could buy it.
  3. Inflation & growth are the only economic conditions and an investor only needs to understand how they interact & affect asset values; All Weather portfolio is built to survive all 4 “economic regimes” that’re possible, given the following combinations of those conditions:
    • Rising/falling inflation
    • Rising/falling growth
Government Loans: Nothing “Fair” about It | Bruce Krasting
Official Federally-guaranteed loans total $2.665t, which excludes $6t from Fannie Mae/Freddie Mac/TARP. Plus, 1990’s Fair Credit Reporting Act (FCRA) lets the government account for loan costs without incorporating the cost of risk–“market risk” as in Fair Value Accounting. The understatement amounts to 3-4% or $350b in FMV losses on total government debt 160% of GDP.
LTRO Term Sheet | Peter Tchir
Loans are actually floating-rate tied to ECB short-term rate, starting at 1% with a 1-year prepayment option.
European Banks Now Face Huge Margin Calls As ECB Collateral Crumbles | ZeroHedge
ECB ‘Deposits Related to Margin Calls’ shows huge spike from €200mm in November 2011 to €3B in February.  Represents additional collateral that ECB counterparties (banks & LTRO participants) have had to post this year as asset values continue to deteriorate.  LTRO assets total €1T, so I don’t think this is material.
Buba: ECB Policies Spurring Inflation, Real Estate Boom | Seeking Alpha
The Bundesbank looks on in worry as the ECB’s easy money policies have spurred not just inflation (2.7%), but a real estate boom in perennially sluggish Germany. “The housing market is being swept clean,” says Pimco’s Andrew Bosomworth, saying low real rates and easy loans put Germany where Spain and Ireland were 10 years ago.
Leaked IIF Memo: What a Greek Default Will Cost Europe & the World | Business Insider




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