Are CDS markets the euro zone’s iceberg?

February 15, 2010

icebergIn an unfortunate turn of phrase at the height of his country’s current debt crisis, Greek Finance Minister George Papaconstantinou on Monday compared his government’s Herculean task in slashing deficits and debts as akin to changing the course of the Titanic. Sadly, we all know where the great “unsinkable” ended up almost a century ago and I’m sure,  given the chance, Mr Papaconstantinou would have chosen another metaphor. But if the Greek economy (or perhaps the euro zone at large?) is to be cast as the Titanic, then what is its potential iceberg?

ECB to cash junkies: Get into rehab

November 5, 2009

European Central Bank President Jean-Claude Trichet  signalled on Thursday that the days of 12-month loans to banks will come to an end soon and that will be the start of a gradual exit from unlimited liquidity injections.***”The market, as far as I see, it is not expecting that we will prolong (our) one-year operation, I will say nothing to dispel this present sentiment of the market,” Trichet said in a news conference after the 16-country bloc’s central bank kept rates at 1 percent. “The enhanced credit support … was not for eternity,” he added.******The ECB started the 12-month cash injections to help the ailing banking sector back into form, and banks reacted with joy, snapping up nearly half a trillion euros of cheap money in the first such operation in June.******But Trichet also had soothing words for banks addicted to cheap money. The ECB would keep interbank interest rates well below the main refinancing rate, he said.  But it seems banks will have to learn to play again with each other rather than relying only on the ECB’s largesse.******And before signing off, Trichet also had words of advice for the media.  “This is exactly the same language as we always have utilised. Everybody knows that, so no news there.”******That advice seemed fall on deaf ears, as most media, including Reuters, would make a lot of hay out of his words on 12-month liquidity injections and keep it the centrepiece of their coverage.

“Normal” bank lending is no longer realistic

October 14, 2009

MacroScope is pleased to post the following from guest blogger James Carrick.  Carrick is economist at UK fund firm Legal & General Investment Management. He says here old patterns of lending are unlikely to return and that this means slow growth in developed countries.

from The Great Debate UK:

It’s all over: The banks have won

September 21, 2009

Laurence Copeland- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

Central bankers come out on top in cost-benefit analysis

September 11, 2009

Bankers worried about losing their bonuses might be well advised to consider a cost-benefit analysis of the contribution of their public sector colleagues.

from Global Investing:

The Big Five: themes for the week ahead

August 3, 2009

Five things to think about this week:

-  Stocks have managed to extend their rally but potential hurdles, such as this week's U.S. non-farm payrolls, could prove increasingly hard to leap given valuations -- European stocks are trading at their highest multiples of earnings since May 2008 while the multiple for the S&P is the highest since mid-September 2008. If investors are to boost equity holdings -- which Reuters polls show already back to pre-Lehman levels -- it may require more concrete evidence of economic expansion, rather than just economic stabilisation, and signs that profit margins will be supported by revenue growth, rather than cost cutting. 

from Global Investing:

The Big Five: themes for the week ahead

July 20, 2009

Five things to think about this week: 

- The early wave of Q2 earnings last week prevented any major risk shakeout but there are plenty more results this week, including from banking, technology (Apple, Microsoft), and other sectors (Lockheed Martin, Coke, McDonalds). Investors with bullish inclinations will be looking for the VIX to stay subdued after it fell last week to lows last seen in September 2008, especially if more pent up cash is to be released from money market funds. Bears will be thinking that what might be the S&P's best weekly performance since mid-March could be setting the market up to be more sensitive to bad news.

from Global Investing:

The Big Five: themes for the week ahead

July 13, 2009

Five things to think about this week

- The tussle between bullish and bearish inclinations -- with bears gaining a bit of ground so far this month -- is being played out over both earnings and economic data. Alcoa got the U.S. earnings season off to a good start but a heavier results week lies ahead and could toss some banana skins into the market's path. Key financials, technology bellwethers (IBM, Google, Intel), as well as big names like GE, Nokia, Johnson and Johnson will offer more food for thought for those looking past the simple defensive versus cyclical split to choices between early cylicals, such as consumer discretionaries, and late cyclicals, such as industrials, based on the short-term earnings momentum. Macroeconomic data will need to confirm the picture painted by last week's unexpectedly German strong orders and production figures to give bulls the upper hand.

from Global Investing:

EBRD to puzzle over E.Europe crisis

May 14, 2009

Ministers and bankers meeting at the European Bank for Reconstruction and Development's annual gathering in London tomorrow and Saturday have a sorry mess to scrutinise.

from Global Investing:

Big Five

April 27, 2009

Five things to think about this week:

- The global stock market has lost some of its spring, although it still managed a seventh straight  week of gains last week. A serious pullback has yet to be seen and the VIX is managing to hold fairly close to the sub-40 lows. Faced with a deluge of earnings, investors are picking their way through a mass of mixed earnings news and forecasts and displaying a more symmetric reaction to good/bad news than in past months.