Diary of a Financier

Top Newsstuffs (June 11-17)

In Bookshelf on Sun 17 Jun 2012 at 00:19

Greek elections today. Event Horizon? Doubtful. They may inspire a washout of the remaining weak hands in the market though. Egyptian and French parlimentary elections are today too. Then the Fed’s FOMC meeting Tuesday & Wednesday. ECB meeting Thursday. Eurogroup finance ministers Thursday & Friday. The whole week is a kind of “D-Day” (er, week) with markets apparently dependent on some immediate action from policymakers.

That being said, check out this past week’s Top Newsstuffs…


Complete Guide to the Greek Election | Citigroup

QE3 Coming Next Week from FOMC Meeting | Goldman Sachs

“House of Morgan” Nurtured by Crisis-Mystified Senators | Ron Chernow
House of Morgan author compares Jamie Dimon’s 6/13 Senate testimony to J.P. Morgan’s in 1933. Says FDIC insurance makes today different, bankers should be more conservative since taxpayers back them.

Are U.S. Debt Levels Now Manageable? (Yes & No) | Jim Bianco
Private sector has continued deleveraging, outpacing the releveraging of government debt: total debt/GDP has fallen from 3.73x to 3.36x, even though gross debt is at alltime highs.

The Cyprus Bailout: Russia & EU Compete to Provide the Funding? | Bruce Krasting
Cyprians need €5b for banks & €20b for Treasury, but creditors may compete. Cyprus is a potential naval base, offshore natural gas resource & already an offshore bank center. Russians provided €3b in 2011 emergency loans and might want to again. EU just wants Cyprus to remain in currency.

QE3 “Hope” No Longer a Bullish Catalyst | JP Morgan
JPM sees limited downside due to SPX valuation, but hope of QE3 is misguided until macro dataflow worsens. EU SMP buying, IMF rescue & short selling bans not bullish; only hope is ESM banking license.

Africa’s Capital Exodus | TripleCrisis
There’s the usual capital flight due to trade misinvoicing, smuggling, and embezzlement of revenues from natural resource exports. External borrowing may be a bigger problem though: “every year 40 to 60 cents of each borrowed dollar spins out of the revolving door as capital flight, often returning to the same banks that issued the loans. On net basis, Africa is transferring more money to the rest of the world than it is receiving in terms of borrowing and aid… Africa is net financier to the rest of the world rather than the other way around as commonly perceived.”

Family Net Worth Drops to Level of Early ’90s, Fed Says | New York Times
Financial crisis erased two decades worth of prosperity growth with median net worth $77,300 in 2010 (v. $126,400 in 2007).

What’s next for the U.S. Dollar, QE3? | Merk Funds
Argue for US LTRO, a demand-driven way to allocate liquidity to the banks who want/need it, as opposed to QEs, which force liquidity upon Primary Dealers. [Problem is, LTRO is term financing that creates acute, systemic roll-risk.]

Eurozone Debt/GDP & Deficits | Tullett Prebon Research

The Myth Of “Cash On The Sidelines” | Jim Bianco
Fed revised its estimates after 1q12, reducing corporate cash by 22% to $1.74t. Going back to 1970s, Liquid Assets as Percent of Total Assets hasn’t really changed (10-14%).

Bank of America targets energy projects | Reuters
BAC announces $50b target over 10 years for environmentally-friendly energy projects, as it’s completing 2007’s $20b 10-yr goal early.

5 Huge Myths About Gold | Trust Company of the West (TCW)
Gold is not an inflation hedge, an FX hedge, nor safe haven.

Euro Breakup Precedent: Soviet Union’s Ruble Zone | Bloomberg
15 countries joined currency union with Russian Ruble (RUB) in 1992, and it started dissolving in ’93. Breakup was “messy and leads to loss of income and inflation.”

Cambodia: An Underdog Story | Peter Pham

Spain’s Real Debt To GDP Right Now: 146.6% | ZeroHedge
Includes contingent liabilities (regional debt) and Eurozone guarantees.

Spanish Bank Bailout: The Complete Guide | Deutsche Bank
DB published this note on Friday, before the bailout. They expected this recap, and they modeled different outcomes based upon its size. They suggest that the loan must balance the right shock & awe magnitude with the need for Spain to maintain a “sound fiscal position.” They say €80b is the best amount to accomplish both, bringing Debt/GDP to 95% with a chance to reduce it to 90% by 2020.

Spanish Bank Rescue: Will the Treatment Make the Patient Worse? | Yves Smith
Yves offers three problems [I add two of my own]:
1. Structural Want- does nothing to fix real economy, 25% unemployment.
2. Sovereign Downgrade- the loans are a contingent liability of Spanish government, taking their debt-load up to €700b and forcing ratings agencies to downgrade them from A to BBB.
3. Subordination- preexisting bondholders are subordinated to the recap funds.
4. Spain’s Bailout Pledges- removes Spain’s committed capital from ESM & EFSF pool, increasing Italy (19-22%), France (22-25) & Germany’s (29-33) share.
5. Greek & Irish Envy- they want no strings bailouts too.

Eurozone agrees to lend Spain up to €100 billion from EFSF | Reuters
Decision after a “heated” call among 17 EU finmins. Funding through Spain’s Fund for Orderly Bank Restructuring (FROB), without conditions, once independent bank audits determine the precise need.


  1. […] into next week.  This past week was fraught with headline risk, “D-Day” [week], as I called it.  The coming week will provide the reaction, and the charts show an SPX at the doorstep of the […]


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