Benny and the Inkjets – Central Bank Focus
Guest post by Peter Tchir.
Ben Bernanke
Today I will be attending Ben’s talk in NY. I’m curious to see him speak in person, but can’t help but think of the questions I would ask if I could.
- Do you think that low rates are hurting savers, allowing big established businesses to make money while stopping new entrants, and do you finally admit your wealth effect theory is totally wrong since the wealth isn’t well distributed and has failed to produce results?
- At one point will you admit that the ultimate exit strategy is to just forgive the debt? That for all the talk about fiscal cliff, it would still leave us with a large annual deficit and really no end in sight to a ever growing pile of debt, making debt forgiveness the logical next step since you already pay back all the coupon income?
Okay, those are the questions that I would like to ask, but if I was given a chance to ask those questions, I would probably be too nervous. They seem obnoxious, even by my standards, and as much as I’d like answers to them, here are some more likely questions I’d ask.
Another record month for leveraged loan funds
From one bubble to another bubble? By Sober Look.
If you look at the chart from last week that shows outflows from high yield funds (see discussion), one thing that stands out is that loan funds are still seeing inflows. Part of the HY outflows actually ended up going to leveraged loans, as the recent uncertainty pushed investors to move higher in the capital structure. In fact loan funds AUM hit a new record in October.
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Oh lala
From Bloomberg.
Ceilings, Cliffs and TAG: Three Immediate Risks
Guest post by Lance Roberts of Streettalklive.
The recent market selloff has not been about the re-election of President Obama but rather the repositioning of assets by professional investors in anticipation of three key events coming between now and the end of this year – the “fiscal cliff”, the debt ceiling and the expiration of the Transaction Account Guarantee (TAG). Each of these events have different impacts on the economy and the financial markets – but the one thing that they have in common is that they will all be battle grounds between a dividend House and Senate.
While there has been a plethora of articles and media coverage about the upcoming standoff between the two parties, little has been written to cover the details of exactly what will be impacted and why it is so important to the financial markets and economy.
Fiscal Cliff
One of the primary reasons for the market selloff since the announcement of QE3 has been in anticipation of the some of the largest tax hikes in the history of America, which will take place at the end of the year. These tax hikes will impact families and businesses, the middle class and the rich, the economy and the markets.
In 2001, and then again in 2003, President Bush and Congress enacted tax cuts to help restart the economy post the tech bubble, 9/11 terror attack and recession. Primarily these tax cuts were focused on small business owners, families, and investors and, while dubbed the “Bush Tax Cuts”, they became the “Obama Tax Cuts” when they were extended in 2010.
Millions Join Largest European Strike Ever
Europe’s Mediterranean rim trembled on Wednesday as violent clashes broke out following the largest coordinated multinational strike in Europe ever. In the hope to stave off decades of austerity, precarity and unemployment, European labor unions united for the first time since the start of the European debt crisis to organize strikes and protests in a total of 23 EU member states, with millions of workers walking off their jobs and marching on parliament buildings across the continent. Bloody street battles ensued across Spain, Portugal and Italy.
In Italy, over 300,000 protested in over 100 cities as workers observed a 4-hour stoppage in solidarity with Greek, Spanish and Portuguese workers. In Milan and Rome, scenes of street “guerriglia” were witnessed as thousands of students clashed with riot police, bringing traffic to a standstill and leading to dozens of injuries. In Sardinia, industry minister Corrado Passera and Fabrizio Barca, minister of territorial cohesion, had to be evacuated by helicopter after angry protesters besieged a meeting and started burning cars all around them.
Courtesy ZCommunications.
Learning to love Volatility
Although Bernanke doesn’t acknowledge Mr Taleb, we still argue you reading his oice from the WSJ. Taleb is one of our favourite Derivatives free thinkers.
Several years before the financial crisis descended on us, I put forward the concept of “black swans”: large events that are both unexpected and highly consequential. We never see black swans coming, but when they do arrive, they profoundly shape our world: Think of World War I, 9/11, the Internet, the rise of Google.
In economic life and history more generally, just about everything of consequence comes from black swans; ordinary events have paltry effects in the long term. Still, through some mental bias, people think in hindsight that they “sort of” considered the possibility of such events; this gives them confidence in continuing to formulate predictions. But our tools for forecasting and risk measurement cannot begin to capture black swans. Indeed, our faith in these tools make it more likely that we will continue to take dangerous, uninformed risks.
How big is Fiscal Cliff?
This is the Fiscal Cliff.
Via Sober Look.
And for some perspective on the size of the FC, check below.
Obama Doesn’t Understand Blowback
Guest post by Azizonomics.
There’s no country on earth that would tolerate missiles raining down on its citizens from outside its borders. So we are fully supportive of Israel’s right to defend itself.
Barack H. Obama
Well, he’s got one thing right. No country would tolerate missiles raining down on its citizens from outside its borders. And that goes for Gaza just as much as it does for Israel. Having lived in what David Cameron referred to as a “prison camp” for all their lives — Israel controls Gaza’s airspace, territorial waters and border crossings — and living under constant threat of Israeli F16 and drone raids, should Israel really find it surprising that young Gazans are fighting back? Hamas may have a counterproductive and dangerous strategy driven by a violent religious ideology that ends up hurting the Palestinians more than anyone else, but that’s not the point. The point is that nations don’t tolerate missiles raining down on citizens. That’s just as true for Palestine as it is Israel.
Merde!
French government ministers have reacted angrily to the front cover of the latest issue of the Economist magazine’s latest front cover – which features a bundle of French baguettes with a lighted fuse, under the headline “The time-bomb at the heart of Europe“. The special report warned that the dire state of the French economy – with its high unemployment, lack of competitiveness, dying industry and high public spending – could be the next biggest threat to the eurozone, dwarfing the problems of Greece or Spain.
The magazine warned François Hollande’s reforms did not go far enough to address the country’s economic woes and if these were not resolved, France could jeopardise the future of the euro. (The Telegraph).
Find the French video below.
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