Radical Tsipras refuses “everything”-Greece about to leave EZ?
The radical left’s Tsipras has picked up all the (bad) habits of a politician trying to take advantage of a country in full blown economic and social chaos. The Grexit procedure seems underway. Don’t forget pulling out those drachmas,
Latest out of Greece via Ekathimerini.
Coalition of the Radical Left (SYRIZA) leader Alexis Tsipras has challenged New Democracy and PASOK to form a government but has insisted he would not be “complicit in their crimes”.
Tsipras appeared to close the door on any lingering hope that SYRIZA could take part in a unity government following talks with the other party leaders and President Karolos Papoulias on Sunday.
“They are not just asking SYRIZA to agree, they are asking it to be complicit in crimes and we will not do that,” he said. Tsipras said he had asked Papoulias to publish the minutes of the meeting so “citizens can draw their own conclusions.”
Let’s not forget what a conversion to the Drachma would mean for the rest of the Eurozone:
What Americans can Learn from Eurocrisis?
By Hudson. Headlines around the world greeted the election results in Greece and France as a rejection of austerity programs by the electors of those countries. Well, what can Americans learn from the results of these elections and from the crisis in the eurozone?
The same thing is happening in Europe that’s happening here. Left-wing parties, socialist parties, labor parties all say that they’re going to preserve the social contract, and as soon as they get into power, they sell out to their financial backers, they doublecross labor. The socialist party in Greece fell from 44 percent to 14 percent because the last party simply [incompr.] the most vicious anti-labor measures in Europe. Same thing in France now. Hollande of the French socialists, before the election, said he was going to beg, ask Europe, will you please not insist that we roll back our social programs. And just this morning he said, well, I asked and they said no. I’m afraid that in order to preserve Europe, in order to preserve the idea of a political harmony, we’re going to have to go ahead and impose more austerity on the people. I’m terribly sorry. But if you don’t like it, you can vote for another party in four years. But there’s going to be austerity, and we’re going to have to lower wages here, and there’s nothing to do. If you don’t lose our campaign contributors, the banks could lose, and we couldn’t have that, because if the banks lose, they say that that’s intolerable to them.
Video below and full transcripts here.
Spain is crying
No real news with regards to the suffering Spanish economy.
The property bubble has much more to go before we start approaching realistic property values, and reach an equilibrium.
Massive property supply is hitting the market. Meanwhile, ask yourselves where the banks have marked their property holdings.
Charts below.
Is Gold a Good Investment?
Guest post by Gresham’s Law.
Even though gold has already enjoyed an 11-year bull run we still think that it’s a good investment. Here we present a few charts that suggest that the current gold price is actually quite cheap!
There are three simple (but apparently elusive) charts that indicate the cheap valuation placed upon gold at present. [Note: We'll be updating these charts every week so that you can track their progression over time.]
Chart 1: What Percentage of Each Federal Reserve Note is Backed By Gold?
JPM-Hit by the limits of statistics?
We are amazed by the many articles discussing (and giving advice) the JPM “perfectly hedged” trading CIO book, by mainly journalists that don’t understand risk, trading nor (the) greeks. JPM, claiming to have one of the world’s most sophisticated risk management, has apparently lost at least 2 billion USD. What actually happened will probably never hit the media. While journalists debate whether or not to drop VaR as a risk measure, we think it is appropriate to review an old article from Nassim Taleb, one of few clever minds when it comes to understanding “real” risks. From Taleb’s Fourth Quadrant, via Edge.
Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the “logic of science”; it is the instrument of risk-taking; it is the applied tools of epistemology; you can’t be a modern intellectual and not think probabilistically—but… let’s not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let’s face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).
The current subprime crisis has been doing wonders for the reception of any ideas about probability-driven claims in science, particularly in social science, economics, and “econometrics” (quantitative economics). Clearly, with current International Monetary Fund estimates of the costs of the 2007-2008 subprime crisis, the banking system seems to have lost more on risk taking (from the failures of quantitative risk management) than every penny banks ever earned taking risks. But it was easy to see from the past that the pilot did not have the qualifications to fly the plane and was using the wrong navigation tools: The same happened in 1983 with money center banks losing cumulatively every penny ever made, and in 1991-1992 when the Savings and Loans industry became history.
Reaffirming the Recession Call … Again
Guest post by Doug Short.
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in today’s public release of the data through May 4. This is essentially unchanged from last week. However, the underlying WLI again rose fractionally from an adjusted 124.6 to 125.4 (see the fourth chart below).
ECRI Reaffirms it’s the Recession Call … Again
The big news this week, however, is not the weekly data update but ECRI’s latest reaffirmation of its recession call in a Bloomberg interview with ECRI’s Lakshman Achuthan earlier this week. I’ve embedded a link to the nine-minute video on the Bloomberg website.
Two of Achuthan’s key points in in the interview are that year-over-year jobs growth is falling and real personal incomes, year-over-year, are at recessionary levels. To illustrate the second point, here is a chart of Real Personal Incomes, year-over-year, since the BEA began tracking this data in 1959.
Derivatives: The Unregulated Global Casino for Banks?
Just a reminder of the size of the derivatives market.
9 Biggest Banks’ Derivative Exposure – $228.72 Trillion.
And no, it is not perfectly hedged.
Full infograhics at Demonocracy.
Spanish and Italian bondholders. Guess who is buying and who is selling….
Charts of Spanish and Italian bond holders.
Presented without comments
Courtesy Scott Barber.
JP Morgan Debacle Reveals Fatal Flaw In Federal Reserve Thinking
The JPM news are getting a lot of attention today. Some smart, other less smart comments. A few clever thoughts from Simon Johnson.
Experienced Wall Street executives and traders concede, in private, that Bank of America is not well run and that Citigroup has long been a recipe for disaster. But they always insist that attempts to re-regulate Wall Street are misguided because risk-management has become more sophisticated – everyone, in this view, has become more like Jamie Dimon, head of JP Morgan Chase, with his legendary attention to detail and concern about quantifying the downside.
In the light of JP Morgan’s stunning losses on derivatives, announced yesterday but with the full scope of total potential losses still not yet clear (and not yet determined), Jamie Dimon and his company do not look like any kind of appealing role model. But the real losers in this turn of events are the Board of Governors of the Federal Reserve System and the New York Fed, whose approach to bank capital is now demonstrated to be deeply flawed.
What Could have Happened at JPM
Peter Tchir’s thoughts on the JPM news. Whatever happened or not, the whale has accumulated some rather big positions.
Well for once we don’t have to talk about Spain or Greece.
This is the end of synthetic CDO’s and may well be the end of CDS as an OTC product, but we have time to look at that later. There will be a lot of information and misinformation out there. For now, the key is what is this going to do for the markets. As best as I can tell, they were generally short High Yield risk. They were mostly short tranches, mostly in off the run, and had some curve trades on. Against that, they were generally long IG, mostly tranches, mostly IG9, and had some curve trades on. The positions, if we ever find out exactly what they were, are complex. At some level this disclosure has something to do with mark to model. Gp
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