News That Matters
Ft.com
Some of Europe’s biggest fund managers have confirmed they are dumping euro assets amid rising fears over a possible Greek exit from the eurozone and single currency turmoil. The euro’s sudden fallthis month caught many investors by surprise. Europe’s single currency has lost 5 per cent in the past three weeks after barely moving against the US dollar for much of the year. On Thursday, the euro hit a fresh 22-month low at $1.2514. http://www.ft.com/intl/cms/s/0/92f5c37a-a5a1-11e1-a77b-00144feabdc0.html#axzz1vr0JKlSp
Europe’s political leaders need to make a “brave leap” towards greater fiscal union to address the eurozone’s deepening debt crisis, the head of the European Central Bank urged on Thursday. Mario Draghi said his institution may have bought the eurozone time through its massive injection of cash into Europe’s banking system and sovereign bond markets but now it needed to embrace much closer integration. http://www.ft.com/intl/cms/s/0/281e032c-a5b6-11e1-b77a-00144feabdc0.html#axzz1vr0JKlSp
Wholesale brokerages including Knight Capital and Citadel suffered trading losses that could top $100m as a result of computer glitches in Nasdaq OMX’s software on the morning of Facebook’s trading debut last Friday. Problems with the exchange’s trading software meant the brokers were unable to calculate their precise shareholdings in the social network through more than two hours of share trading, people close to the firms said. http://www.ft.com/intl/cms/s/0/68cc8164-a5c5-11e1-a3b4-00144feabdc0.html#axzz1vr0JKlSp
All news below.
Zuckerberg Swings and Misses, but….
With Monti creating a carbon copy move of yesterday, let’s tune in to some thoughts by Biderman on the Facebook situation.
By now there is no question that the Facebook IPO was totally screwed up. Not only was just about every aspect of the deal FUBARed, but the overall size of the deal, $18 billion, magnified the mess. Yes, Nasdaq and Morgan Stanley both did a horrible job. But ultimately the blame for the disaster is solely on Facebook’s 28-year-old CEO Mark Zuckerberg. All final decisions regarding each aspect of the IPO had to be made by Zuckerberg. That is what CEOs do.
I should know. Over the last 40 years in my career I personally have met or talked with over a hundred public company CEOs. What I have learned from that experience is that every company is only as good as the CEO. So going forward ultimately Facebook will only be as good as is Mark Zuckerberg.
Before the IPO was priced I was planning to buy a small amount after the offering and expected to hold it over time. I thought then and still do that Facebook has the potential of becoming a huge financial success. The key word being potential. Even though I gave Mark Zuckerberg strike one for how he handled the IPO I did buy a few FB shares Monday and Tuesday. If there is a strike two, I will sell my shares. On the other hand if Zuckerberg becomes a hitting machine, I will buy more. Full video below.
Herd Behavior
With the RORO (risk on risk off) market having seized investors we simply have to recall herd behavior.
Simple explanation via Ash’s experiments back in the days people didn’t even dream about HFT.
We need Expansion
Stop worrying about debt, inflation and abandon the austerity scheme. Krugman on the way forward saving the Eurozone. Interview via Spiegel online.
SPIEGEL: Mr. Krugman, does Greece have to leave the euro zone?
Krugman: Yes. I don’t see too much alternative now. It’s going to be terrible in the first year if they do leave. So I am really reluctant to say that it’s a little bit like shouting “Fire!” in a crowded theater, but what is the realistic option here? It’s not as if anything anyone’s proposing has any hope at all of getting them out of the mess they’re in.
SPIEGEL: If Greece should leave, will this finally contain the euro crisis or, rather, make things worse?
Krugman: What happens if Greece leaves? Then you have again a bank run in other peripheral countries because they’ve set the precedent. But, again, that could be contained with lending from the ECB (European Central Bank). What has to happen is that the ECB has to be willing to replace all euros withdrawn as is necessary. And I think the case we’re making for that lending becomes a lot easier because the Greeks were actually irresponsible. The Greeks actually did behave badly, and so the political case for unlimited exposure to Greece is very hard to make. A much easier case to make is for Spain and then Portugal and Italy, all of which did nothing wrong on the official side. So you could argue that the bad actor has been ejected, but we need to save the good actors.
PMI and rates
Nice chart by Scotty Barber.
A Modest Proposal to fix the Mess
By now majority know Europe is in a mess, but what should we do about it? Below are some proposals by Golem.
I propose our platform should be -
To stop bailing our insolvent banks.
To force private debts back on to those whose debts they were. They pay them or they die trying.
To recapitalize solvent banks to take the place of the insolvent.
To separate the casino from the deposit side of banking.
To raise the bar for ‘confidentiality’ so high you need binoculars to see it. A presumption of open public acces for ANY information for any public or publically traded body.
To roll back and severely limit the rights of corporations as people-like entities. They are not people. They should not have those kind of rights.
To regulate Derivatives.
To declare that all products must be marked to market. No excpetions. Those products the bankers say are hard to price … their problem. No one forced them to make hard to sell and price products.
News That Matters
Ft.com
European leaders put off any decisions on shoring up the region’s banks at a late-night summit on Wednesday despite rising concerns that instability in Greece was undermining confidence in the eurozone’s financial sector. Instead, the heads of the EU’s main institutions were given the task of drawing up proposals for closer fiscal co-ordination in time for another summit next month, including plans that could include a path towards a Europe-wide deposit guarantee scheme and, in the longer term, commonly-backed eurozone bonds. http://www.ft.com/intl/cms/s/0/81d5eab0-a539-11e1-b421-00144feabdc0.html
Millions of Egyptians went to the polls to choose a president in a historic election intended to end army rule and usher in a new democratic era more than a year after the uprising which overthrew Hosni Mubarak. Lines formed in front of voting stations and a brisk flow of voters cast their ballots, though turnout in the first of two days of the election appeared lower than in the first post-Mubarak parliamentary poll held late last year. http://www.ft.com/intl/cms/s/0/7ed1b966-a43a-11e1-a701-00144feabdc0.html
The shale gas boom in the US has led to a big drop in its carbon emissions, as power generators switch from coal to cheap gas. According to the International Energy Agency, US energy-related emissions of carbon dioxide, the main greenhouse gas, fell by 450m tonnes over the past five years – the largest drop among all countries surveyed. http://www.ft.com/intl/cms/s/0/3aa19200-a4eb-11e1-b421-00144feabdc0.html
All news below.
Is China Really Liquidating Treasuries?
Guest post by Azizonomics.
The news that China has become the first sovereign to establish a direct sales relationship with the U.S. Treasury (therefore cutting out the middleman and bypassing Wall Street ) raises a few interesting questions.
From Reuters:
China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters.
The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world.
The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.
China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn’t been necessary.
The documents viewed by Reuters show the U.S. Treasury Department has given the People’s Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.
The biggest Chinese outflows in U.S. Treasuries occurred in the months following the establishment of this relationship:
FB the new VIX?
FB up market down, market up FB down.
Presented without comments.
The 6 billion Dollar Bet
Remember Corzine?
Frontline investigates MF Global’s disastrous bet on European debt.
Must see video below.
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