Three years ago, investors received a brutal lesson in why it can be risky for banks or other financial institutions to fund long-term holdings with short-term debt. But could it be time for investors to relearn that concept now in relation to sovereign debt? (FT)

http://www.ft.com/cms/s/0/39220a04-8214-11e0-a063-00144feabdc0.html#ixzz1Mp83QxjM

chart, dshort

…and we can read another interesting piece on that same Reuters page.

With Europe pushing hard to keep the IMF leadership in the wake of Frenchman Dominique Strauss-Kahn’s resignation after his arrest for attempted rape, Lagarde has emerged as Europe’s strongest candidate to fend off the claim of emerging economies.

Her fluent English and more than two decades of practicing law in Chicago enhance her transatlantic appeal.

However, her prospects could be undermined by a legal row, unlikely to be resolved before June at the earliest, over her decision to settle a dispute between the state and businessman Bernard Tapie, a personal friend of President Nicolas Sarkozy.

Lagarde denies any misconduct, and there is no suggestion of personal profit. But legal trouble could delay her appointment or even make her unacceptable to the IMF as it tries to polish its image after Strauss-Kahn’s dramatic fall from grace.

http://www.reuters.com/article/2011/05/19/us-strausskahn-imf-lagarde-idUSTRE74I3U820110519What’s up with the Europeans?

What’s up with these Europeans? Looks like Greece will be waiting with empty hands for some longer.

Some news that actually mean something, for all non LinkedIn newly rich ones. Obama is holding a rather important speech about MENA today. For those not captured by the no volume melt up stock, this is worth reading. From WSJ;

I want to thank Hillary Clinton, who has traveled so much these last six months that she is approaching a new landmark – one million frequent flyer miles. I count on Hillary every day, and I believe that she will go down as of the finest Secretaries of State in our nation’s history.

The State Department is a fitting venue to mark a new chapter in American diplomacy. For six months, we have witnessed an extraordinary change take place in the Middle East and North Africa. Square by square; town by town; country by country; the people have risen up to demand their basic human rights. Two leaders have stepped aside. More may follow. And though these countries may be a great distance from our shores, we know that our own future is bound to this region by the forces of economics and security; history and faith.

http://www.nytimes.com/2011/05/20/world/middleeast/20prexy-text.html?_r=1

LinkedIn just sniffed 120 Usd. Deja Vu grande style. Welcome to the real bonanza, where we price stock at + 1000 P/E, but who cares about those old fashion P/E ratios, now it is all about social networking. Zynga next? Below, link so you can follow some intraday action if you don’t have your own Reuters terminal.

http://www.marketwatch.com/investing/stock/lnkd

For the European close. Some pictures from Spain. Barcelona, Granada, and outside the Spanish Embassy in London. None of the crowd members seem long LinkedIn shares. Keep a close eye on this development, it could start something major in Europa very soon.

Another day, with more great news;

• Philly Fed at 3,9, from April 18,5 and March 43.4 levels.
• Existing home sales declined 0,8% mom in April.
• Leading Economic indicator fell 0,3% mom, (exp increase 0,1%)
• IPO bonanza, LinkedIn traded at 90 for a brief moment. That is app P/E 1000.
• Spain is on fire, austerity kicking in
• Japan in recession

Below some risk off cintraday charts, oil, audjpy and Nasdaq. Nice timing LinkedIn.

Great, we are back to where it all started. Social networking bonanza is here, but don’t forget, this time is different. These are great companies, that make great products, that everybody will buy, or? Trading in LinkedIn is delayed due to huge orders and matching is now more than 30 minutes delayed, but that is not a bubble. We will all be buying virtual pink cows in the future. LinkedIn IPO price was raised by 30% some hours ago, and is now trading at another 100% higher. The company will most probably loose money in 2011, or? Bring out those 1800-Flowers.com shares, the bull is back.

Welcome to Irrational Exuberance part 2 and P/E 1000. Great intraday trade by the way from LinkedIn.

The top hedge fund in the world is looking to exit some positions near term. Fed officials agree on exiting, but they don’t know when to press the button. Timing will be essential. We are looking forward to see how big the bids actually are.

Federal Reserve policy makers neared agreement on the sequence of tools they will use to withdraw record monetary stimulus, with little accord on when to start.

The central bank should first end its policy of reinvesting proceeds from maturing securities and later raise interest rates and sell assets, majorities of policy makers said at their April 26-27 meeting, according to minutes released yesterday. The caveat: Talks about the exit strategy don’t mean that tightening “would necessarily begin soon,” the report said.

“It’s almost like planning for retirement but not knowing when you’re going to retire,” said Keith Hembre, a former Fed researcher who’s now chief economist and investment strategist in Minneapolis at Nuveen Asset Management, which oversees about $205 billion. (Bloomberg)

http://www.bloomberg.com/news/2011-05-19/fed-nears-agreement-on-how-to-exit-stimulus-with-timing-unclear.html

Let’s turn to the more important consequences of Mr Kahn’s arrest. Beyond if and what has happened, is a fragile economy. Greece is in great trouble. The other PIIGS are not acting very well. Spain’s younger population is getting tired of austerity, huge unemployment and are taking over streets in Madrid and other cities. Welcome to AustEurope.

While the International Monetary Fund is a global concern, saving the European Union has been Strauss-Kahn’s primary mission in recent years. “At these high levels and issues of national and global importance, personal stature and personal chemistry do matter,” wrote Jan Randolph, head of sovereign risk analysis at IHS Global Insight, after Strauss-Kahn’s arrest. “DSK has been involved right from the start.” The IMF’s managing director—a high-living socialist who was apparently hiding more paradoxes than previously known—used his charisma to keep Greek Prime Minister George Papandreou committed to politically harmful but necessary reforms. He prodded and coddled German Chancellor Angela Merkel over the design of the various bailout packages, their terms, and the need for a more permanent solution to the wider euro zone crisis, Randolph wrote. “The presumption was that with Strauss-Kahn at the helm, the IMF would not turn its back on Europe, that the IMF would continue to support Europe. Now, with Strauss-Kahn gone, that proposition becomes a little dubious,” says Eswar Prasad, a senior fellow at the Brookings Institution in Washington. The next IMF chief may not be nearly as charismatic as DSK—and may not even be European.

The populations of debtor nations are in no mood to swallow more austerity. Greek unions kept ferries docked at ports, grounded flights, and shut hospitals and schools in early May in protests against Prime Minister Papandreou’s plans to sell state assets and usher in more spending cuts. The Irish, meanwhile, have been insisting on getting an aid package at least as generous as the ones being handed out to the Greeks and the Portuguese. The looming worry is Spain, whose economy is twice the size of those three nations’ combined. The Workers’ Socialist Party of Spanish Prime Minister José Luis Rodríguez Zapatero is likely to lose big in regional elections on May 22 in a rebuke of his government’s austerity polices, nationwide polls show.

http://www.businessweek.com/magazine/content/11_22/b4230007838086.htm

Crises abound. Washington is relying on finding pennies down the back of the sofa while politicians are deadlocked over the debt limit. Europe is seriously debating a Greek default. Meanwhile, bullets continue to fly in the Middle East, emerging market inflation is still high, economic data are no longer reassuring and QE2 ends next month. (FT short view)

http://www.ft.com/cms/s/0/a3a9996c-8194-11e0-8a54-00144feabdc0.html#ixzz1MnYnwxfB