Monthly Archives: March 2012

Opening Quotes – Ireland’s Choice; Europe’s Fate

FT: ‘Ireland must vote for an end to its humiliation in Europe’

Not sure we really have a choice – and/or it really matters if we vote yes.

But it does highlight the underlying fallacy:

“Austerity does not work when applied over four or more years to countries that do not have sovereignty over monetary policy, that endure broken banking systems, whose households are in the grip of a severe economic shock and whose neighbouring economies are also weak. Ireland, SpainGreece, Portugal and possibly even France are examples.”

Irrespective of Ireland ….

” ….. the crisis is by no means over. As John Maynard Keynes argued in The Economic Consequences of the Peace, the acts that apparently brought closure to one crisis sowed the seeds of greater economic, social and political turmoil.”

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Opening Quotes – The Premium of Bernanake’s Call

Highly recommend reading this:

http://www.bloomberg.com/news/2012-03-28/four-numbers-add-up-to-an-american-debt-disaster.html

The thought occurs that the ‘roll-over risk’ associated with the European LTRO ‘pyramid scheme’ is minor compared to what the Federal Reserve has created:

“The Federal Reserve purchased 61 percent of the net Treasury issuance last year, according to the bank’s quarterly flow-of-funds report. That’s masking the decline in demand from everyone else, including banks, mutual funds, corporations and individuals, Goodman says.

Of course, Fed Chairman Ben Bernanke might look at the same numbers and see them as a sign of success. His stated goal in buying bonds is to lower Treasury yields and push investors into riskier assets.”

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Opening Quotes: Economics is NOT a Science

Seth Rinsen (FT): “Time for economists to eat humble pie – again”

I wouldn’t entirely agree with the analysis of the ‘euro-zone crisis’ ….. but throughly endorse his view of economists.

It ain’t no science:

“They fell victim to an exaggerated confidence in themselves. Most of us in the social sciences are aware of our limitations. Economists, for their sins, have worked themselves into a frenzy about being “scientific”. Overconfidence leads to hubris. The economists let their guard down.”

AND

“……..they indulged in predictions, the economist’s ultimate vanity, but their models are no more than equations with countless unknowns. The need to predict, a psychological urge in the economic tribe, led to the wildest warnings.”

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Opening Quotes – Rewriting the Bernanke Call (Again)

Front page of the FT: “Fed doubts big US jobless falls will last”

For good order Bernanke also dissed the notion the US is growing much quicker than the data suggests.

But – and this is Financial Capitalism 101 – given a choice – the (equity) markets will always take the cash and worry about the ‘real’ economy (= earnings) later.

“Rapid recent falls in US unemployment may prove to be a one-off unless economic growth picks up, Ben Bernanke, chairman of the US Federal Reserve, warned on Monday.

The downbeat comments, underscoring the Fed’s support for easy monetary policy, may calm investors who had begun to doubt the central bank’s forecast of exceptionally low interest rates until “late 2014”.

Phew – good to ‘calm’ investors.

Today.

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Opening Quotes – Asking Mr Monti

FT: Spain ‘causing concern’ – Monto warns

Spain’s new government rejected criticism of its handling of a “difficult” inheritance. Asked what Mr Monti meant by his comments, Iñigo Méndez de Vigo, Spain’s EU minister, said, “You better ask Monti, not me.”

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Opening Quotes – Yield Curves Matter

Despite yards of buying …..

“Marc Chandler, currency strategist at Brown Brothers Harriman, noted Italian 10-year yields have fallen 180bp so far this year while Spain’s have risen by 39bp.

“That is after two LTROs,” he said. “That definitely concerns me. When the bonds rally it helps the banks’ balance sheets. But when yields start rising it hurts the banks even more. It is a vicious circle.”

 http://www.ft.com/intl/cms/s/0/575cf306-7405-11e1-bcec-00144feab49a.html#axzz1pfGt9OGG
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Opening Quotes – MF Irish Style

http://www.irishtimes.com/newspaper/finance/2012/0321/1224313641061.html

WorldSpreads said its directors believed that, as of the close of business on March 16th, there was a shortfall of about £13 million pounds (€15.6 million) of client money. It added that gross amounts owed to clients were estimated at about £29.7 million, while the company had total cash balances of about £16.6 million.

Conor Foley, who is also WorldSpreads’ largest shareholder, stepped down as the company’s chief executive last Wednesday, two weeks after chief financial officer Niall O’Kelly submitted his resignation on the day the group issued a profit warning.

Mr Foley released a statement on Monday stating that his resignation was “completely unrelated” to the financial issues at the firm and he only learned of them on Friday, at the same time as the rest of the WorldSpreads board.”

Yeah ……
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Opening Quotes: ‘We’re all Muppets now’

Simon Johnson (Bloomberg):

“Failure to do so is the kind of hubris we should fear. The Fed has an imperfect view of the future, as do we all. It has repeatedly demonstrated a limited ability to control economic outcomes. In light of this, the Fed could have required banks to build up shareholder capital on their balance sheets in case their aggressive risk-taking again becomes reckless and creates enormous losses. Instead, the Fed is allowing big banks to reduce capital levels, increasing the likelihood of another financial and fiscal crisis and endangering the broader U.S. economy.

We are all muppets now.”

 

http://www.bloomberg.com/news/2012-03-18/federal-reserve-stress-tests-make-us-all-muppets.html


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Opening Quotes

FT: http://www.ft.com/intl/cms/s/0/605fe1ba-6ebb-11e1-afb8-00144feab49a.html#axzz1ot7u7EAf

Canaccord Genuity analysts said their checks “indicated record pre-orders, with wait times for shipping iPad models now reaching two to three weeks”.

They predicted Apple would capture more than 80 per cent of the tablet industry’s profits in 2012, selling 65.6m iPads, compared with an earlier forecast of 55.9m. They raised their share-price target to $710 from $665. Katy Huberty from Morgan Stanley went further, setting a base-case price target of $720 and a bull case of $960. Of 56 analysts tracking Apple, only one has a sell rating, Bloomberg data shows.

NOTE: $600 = $550billion market cap.
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http://go.bloomberg.com/euro-crisis/2012-03-14/the-ecbs-difficult-crisis-exit/

“One of the consequences of the ECB’s crisis measures is that the Bundesbank has become an increasingly significant “creditor” to the “debtor” central banks of Italy, Greece, Spain, and other poorer European countries. Before the crisis began, these “peripheral” nations accounted for one-sixth of ECB borrowing; now, they account for two-thirds.”

 
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