Rolfe Winkler

The Euro’s final battleground: Spain (Fidler, WSJ) The folks at Variant Perception warned the world about the impending disaster in Spain last August. Here’s a copy of their report, which they’ve graciously allowed me to share. (Though they’re famous for that one, they do write about more than Spain.) Anyway, Spain’s economic problems are prompting mainstream discussion that the euro could actually collapse. Greece is small enough that it can be rescued by Germany and France. Spain not so much.

What Greece tells us about Europe (Defterios, CNN) “It is not often discussed, but many [striking] government workers enjoy preferential tax rates, can retire at the age of 54 (in some cases earlier) and enjoy 14 months of pay for 12 months worked.”

Detroit Mayor emphasizes need to shrink city (MacDonald, Detroit News) Detroit is at the forefront of dealing with economic decline. The U.S. economy is overgrown and collapsing under its own weight. More to the point, we don’t have the resources to support all of our commitments. Some mode of shrinkage is necessary. Doing it proactively, as Mayor Bing seeks to do in Detroit, is better than the alternative….

Cash-strapped L.A. goes after unlicensed dogs (AP)

Madoff whistleblower Markopolos says he thought about killing Madoff in new book (Baram, HuffPo)

Idol winners: not just fame but big bucks (Wyatt, NYT) And you don’t have to win Idol to cash in….you just need to finish near the top.

Henderson back at GM, for $3,000 an hour (Taylor, Fortune)

Stand up while you read this (Judson, Opinionator) “Your chair is your enemy.”

Cringeworthy video resume…(more examples at Gawker)…be sure to check out the Michael Cera parody at the bottom. Disappointed that Gawker forgot the most infamous video resume of all time.

New flower for North Korea may be succession ploy (Lim, Bloomberg)

Greece’s Goldman Sachs swaps spawn EU dispute on disclosure (Martinuzzi/Finch, Bloomberg) Greece was rebuked as early as 2004 by the EU for “deficit inaccuracies,” and again last month for under-reporting deficit figures for the past decade. The latest disclosure about swaps used to hide debt may make a bailout more distasteful, but won’t stop it. Too much is at stake.

The Greek derivatives aren’t Goldman’s fault (Felix, Reuters) Risk magazine was talking about this long before the NYT…

Why Greece should default (Kemp, Reuters)

Investors recruit terminally ill to outwit insurance cos on annuities (Maremont/Scism, WSJ) An underhanded variant of the life settlement business…

Japan eclipses China as top holder of Treasurys (AFP) China’s holdings dropped while Japan’s grew.

Leaving Ireland (Capell, BusinessWeek) Unemployment is driving a generation away.

Roger Ebert: The essential man (Jones, Esquire) “It has been nearly four years since Roger Ebert lost his lower jaw and his ability to speak. Now television’s most famous movie critic is rarely seen and never heard, but his words have never stopped.”

Tortoise vs. cat (pogpog)

Rubik’s cube solver (built entirely from “Lego elements”)

Wall St. helped Greece to mask debt, fueling Europe’s crisis (Story/Thomas Jr./Schwartz) When an addict is hooked on a drugs, whose fault is it? The guy selling him the junk? Or his own for getting hooked in the first place? It’s convenient (and not entirely wrong) to blame bankers, mortgage brokers, real estate agents and others who sell us debt to finance more lavish lifestyles than we can afford. They do so to generate income via transaction fees. But at the end of the day, the Greek government knew what it was doing. As do most folks piling on leverage…

For some firms, a case of “Quadrophobia” (Thrum, WSJ) Public companies fear the digit “4.” Earnings per share, when calculated down to tenths of a cent, suggest companies use accounting gimmickry to make sure they can round UP to the nearest cent.

Pirate boss to make web pay (BBC) I’m skeptical. A micropayments product that relies on the generosity of users will be about as successful as a PBS funding drive. But I’ll support anyone who wants to help users pay directly for good content creation. Personally, I think the future of micropayments could be via cellphone. Carriers already have a billing relationship with everyone, all that’s needed is someone to facilitate the flow of payments from buyers to sellers via your phone. (Full disclosure: I previously worked for a company, Fotolog, whose parent company was also in this business)

Edwards: Collapse of euro “inevitable” (Fleming/Shipman, Mail) SocGen’s Albert Edwards as bearish as ever.

Magic Johnson in talks to buy publisher of Ebony/Jet (Pulley, Bloomberg)

How Christian were the Founders? (Shorto, NYT) Long, but worth reading to the end.

Dubai CDS spreads jump (Connaghan/Brown, WSJ) The cost of insuring Dubai debt against default is back near levels from December, before Abu Dhabi offered assistance.

Harrisburg moves a step closer to default (Hurdle, Reuters) Pennsylvania’s capital city excludes debt payments in its 2010 budget. It has a scheduled interest payment of $2.1 million on March 1.

“4-foot-nothing mother goose” … epic voice mail.

VIDEO: “Hurt Locker” in Cambodia (YouTube) Guy clears land mines in Cambodia with stick and pocket knife. FF to 0:50 mark.

Bing Maps are cool….(but it appears that there’s no support for Firefox…)

EU seals deal to help Greece, details murky (Grajewski/Toyer, Reuters) We need to know more about what help is being offered and what strings will be attached to it.

A Greek crisis is coming to America (Niall Ferguson, FT)

Google plans experiment to offer superfast web (Sherr, Reuters)

Buffett takes on Chicago chokepoint with Burlington (Lippert, Bloomberg) This article is 500 words too long, but it’s still interesting!

Immelt disagrees with Paulson’s recollection of Sept ’08 (Layne, Bloomberg) Immelt is lucky that companies like AIG and Goldman have absorbed much of the public’s bad feelings about the bailout. It doesn’t sound like Immelt is really disagreeing with Paulson, he just doesn’t remember discussing GE’s funding problems in the commercial paper market. Uh, really? The Fed created the Commercial Paper Funding Facility in large measure for GE. And GE sold $60 billion of government guaranteed paper through FDIC’s Temporary Liquidity Guarantee Program.

Fed in talks with money market funds to help drain $1 trillion (Torres/Condon, Bloomberg) Interesting….

New black hole simulator uses real star data (Muir, New Scientist)

Driving behind a hearse… (imgur)

Sausage fingers (clusterflock) iPhone users in cold places will appreciate this…

A brief history…

How a new jobless era will transform America (Peck, Atlantic)

Bernanke testimony (Fed) Key line: “Also, before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate.” That’s not the same as raising the Fed Funds rate or the rate paid on excess reserves, but it’s the first time Bernanke has indicated policy may be tightened. Also, the balance sheet will be allowed to shrink on its own as mortgagees prepay.

For $110, godless will adopt pets of blessed after Judgment Day (DiPaolo, Bloomberg) Great story. And a great way to clear $10 grand! One of many money quotes: “With the economic downturn we’re in, I’m trying to figure out how to cash in on this hysteria to supplement my income … Given the intellectual capacity of believers this could be a gold mine!”

Chinese military officers urge economic punch at U.S. (Buckley, Reuters) Their economic nuclear option….

Eurozone holds intensive talks about Greek rescue (Sobolewski/Maltezou, Reuters) Some combination of #1 and #2 is indeed the way Europe and Greece appear to be attacking this problem. Here is an update of sovereign CDS:

How Brussels is trying to prevent a collapse of the Euro (Der Spiegel)

Google tweaks Gmail to challenge Facebook, Twitter (Oreskovic, Reuters) Should Zuckerberg fear Larry Page and Sergey Brin? Or will Buzz impact Facebook as weakly as Docs impacted Microsoft Office?

Mervyn King leaves his options open (Brereton/Hannon, WSJ) The head of the Bank of England won’t rule out more money printing to buy assets (“quantitative easing”). Not that this shouldn’t be expected.

Blast off (imgur)

Slow motion lightning….more here

Funny how the market is just waking up to the Euro debt problem. Many have argued that debt levels are unsustainable, yet the IMF has adopted the neo-Keynesian line that governments can spend with impunity so long as unemployment is high. If there are unemployed workers in the economy, then conventional wage-push inflation — i.e. workers negotiating higher wages, which in turn drives up consumer prices — can’t happen. Or so the argument goes.

But this ignores bond market realities. The PIIGS on Europe’s periphery — Portugal, Ireland, Italy, Greece and Spain — have huge budget deficits as a percent of GDP, but don’t have the power to print money to pay it back. So bond markets are bidding up the cost to insure their debt:

Readers should offer their own view, but seems to me there are three options here, two bad and one nuclear.

1) The PIIGS cut their budgets to pay back debt. Such austerity programs are typically very difficult to get done in democracies. Deficit spending stays high long past the point that it’s possible to work off debt over any reasonable period. To successfully dig out of the hole requires cuts so deep, voters never agree to them.

2) Europe bails them out, which is the easiest solution in the short-run. Richer European countries certainly have the wherewithal to bail out a small country like Greece or Portugal. But it’s a dangerous precedent to set. What about Spain? It’s 14% of the Euro economy compared to 6% for Portugal/Ireland/Greece combined. If economies keep spending with an eye towards a bailout from the ECB, eventually you get #3.

3) The monetary union breaks apart. The customary way out of a debt crisis is to devalue one’s currency, see Argentina in 2001. It couldn’t maintain it’s dollar peg and still service its debt, so it devalued its currency and defaulted on debt. But this locked the country out of the international capital markets and drove them into a deep, though brief, Depression. For Greece to devalue, it would have to pull out of the Euro, pass a law that it’s debts are payable in new local currency and then devalue.

Some combination of #2 and #1 is probably the only sustainable solution. And that’s what the market appears to expect, what with Greek 5-yr CDS falling back to $389,000 from $425,000 yesterday.

But any help must come with tough conditions. Cuts must be deep enough that further rounds of bailouts won’t be needed.

UPDATE: Nick Gogerty points out that the IMF is another potential source of rescue funds. But whether bailout cash originates from the Germans or the IMF doesn’t change the fundamental problem, which is that Greek state is living well beyond its means…

Bernanke didn’t have staff support on AIG bailout (Ed Harrison) Ed has a copy of a letter from Rep. Darrell Issa, in which he claims Fed staffers weren’t keen on bailing out AIG. He wants another subpoena.

Fed as chump or Fed as crony (Yves Smith) Long form thoughts about why Tim Geithner’s defense yesterday was troubling.

Bernanke seen winning second term (Felsenthal, Reuters)

FOMC statement, redacted (David Merkel) Picking apart the Fed’s FOMC Statement yesterday. The headline is that they still see rates staying low for an “extended period,” which is problematic language/policy in my opinion because it will lead to bank/investor complacency. Quantitative easing, i.e. printing electronic money to buy MBS and other paper, will end on schedule at the end of March. Look for it to pick up again in the future. To fight off deflation, the Fed will be forced into multiple rounds of quantitative easing….just like the Bank of Japan.

Bono invests in Yelp (Bits) Elevation Partners, the VC firm funded by U2′s lead singer (among others), is committing $100 million to the local search site. No word on the % stake the money will buy, but $75 million will be paid to existing shareholders to cash them out. Good deal for Yelp? We know that they turned down a $500m offer from Google recently. If Elevation is getting anything less than 20% of the company for this investment, it would value the company at greater than $500 million.

Prime Minister: Greece victim of “rumors” (Bloomberg) Yeah, uh huh. And Wall Street was unfairly maligned by short sellers worried about capital shortages in fall ’08.

Freddie delinquencies increase sharply (CR)

Divided SEC makes climate another “risk” (Scannell/Hughes, WSJ) Investors aren’t clamoring for this information in 10-Qs. The Republican commissioners have this one nailed: “a breathtaking waste” of the SEC’s time/resources and a foolish, misguided gesture to put the SEC’s imprimatur on an agenda about which it has zero expertise.

How to report the news (YouTube) Brilliant.

Academics fight rise of creationism at universities (Guardian) I had no idea this was a problem outside of the American bible belt.

VIDEO: Dump truck destroys pedestrian bridge in Turkey (Break) A guy on the bridge sees trouble coming but freezes…..doesn’t think to run back….

Jon Stewart on Obama’s war against bankers…

Note: Apologies for no links yesterday. Busy day writing columns!

SEC to vote on new money fund rules (Johnson, WSJ) Unfortunately, the SEC won’t do away with $1 NAVs, price fluctuations will be published on a 60 day lag. So investors will continue to treat money funds as cash equivalents, even though they aren’t, and the systemic risk they pose won’t really go away.

Fed weighs interest on reserves as new benchmark (Lanman, Bloomberg) This will be a key interest rate to watch whether or not the Fed makes it the benchmark. The expansion of the Fed’s balance sheet over the past year+ has stuffed banks full of excess reserves, reserves that banks will lend out if the economy — and loan demand — picks up. The Fed needs to keep those excess reserves sequestered in order to prevent inflation. To do so, it may have to pay higher rates. For a fuller explanation see this previous column.

Failed Senate vote on budget commission shows difficulty in cutting deficits (Faler, Bloomberg) So much for a fiscal commission based on the base-closing commission…

After three months, only 35 subscriptions to Newsday’s website (Koblin, NY Observer) Print subscribers get free online access. But this is still not a good showing for selling online only subscriptions. The NYT needn’t worry that it’s pick up will be this small when they put up their pay wall. I, for one, will pay for their content, as I pay for WSJ. I ‘d subscribe to FT too if their website wasn’t so slow…

Top English central banker supports splitting banks (Thomas, NYT) This should come as no surprise. A speech by Mr. King in October laid out his support for steps similar to those Obama just released.

Roubini: Greece is bankrupt (Khan, CNBC) Thank you, Captain Obvious.

Obama aims to ax moon mission (Block/Matthews, O.S.) There’s no constituency for budget cuts, so Obama deserves support from budget hawks for moves like this. We all like the moon I’m sure. But I like things like veterans benefits much more.

Iraqi government spends $85m on dowsing rods sold as “bomb detectors” (Hawley/Jones, BBC) Those not familiar with dowsing rods, see Wikipedia.

Wait, how much snow? (YouTube) No. He didn’t.

Wow…

Substantial bank losses needed to fix housing (Bloomberg) To avoid foreclosures, principal has to be written down. That implies hefty losses, especially for banks that hold lots of home equity loans on their balance sheet. Such loans get wiped out before first mortgages lose a penny. Complicating matters, many big banks service both the first and the second mortgage, which means they are highly conflicted. They don’t want to eat a loss on the second mortgage, even if writing it down would make the first perform much better…

Greece defies Europe as crisis grows deadly serious (Evans Pritchard, Telegraph) Provocative idea: To relieve its debt burden, Ambrose says Greece should devalue its currency. That’s not easy since they use the Euro. He recommends Greece ditch the Euro, “restore its currency, devalue, pass a law switching internal euro debt into drachmas, and “restructure” foreign contracts. This is the ‘kitchen-sink’ option. Such action would allow Greece to break out of its death loop.” Call it the nuclear option… (ht Implode-o-Meter)

Whole Foods Republicans (Petrilli, WSJ) The Republican party is missing an opportunity to reach independent college-educated voters…

Cuts come to New York: Two subway lines may get eliminated, along with subsidized fares for students. In the meantime, Gov. Paterson announced that he will withhold payments to schools and local governments.

Monsanto seed biz role revealed (Leonard, AP) Abusing quasi-monopoly power.

For America’s Santas, it’s hard to be jolly (Woo, WSJ)

The other Lamborghini (Wikipedia)

VIDEO: “I was hot as a pistol” (Google) Oldie but a goodie….autistic high school basketballer scores 20 points in 4 minutes.

View atop the Tower of Babel Burj Dubai…

Jamie gets a deal! (Bloomberg) Prof. Linus Wilson had been estimated that warrants the government got as part of its TARP bailout for JP Morgan were worth $11-$37.  They ended up selling for $10.75. The lower price is most likely because these are not common securities, are illiquid, and therefore worth less than we all thought. Can’t really complain. The market spoke. Dimon looks smart for refusing to negotiate bilaterally with Treasury to repurchase them. Treasury was driving too hard a bargain. IIn retrospect, that means the deals on TARP warrants for the likes of AmEx and Goldman ended up going off much better for taxpayers. But Hank Paulson still did far worse negotiating with banks for emergency capital than Warren Buffett. Shame.

Ginnie Mae’s growth puts taxpayers on the hook (Grow/Goldfarb, WaPo…via Patrick) Ginnie packages FHA mortgages into mortgage-backed securities. It’s the next Fannie/Freddie….

Stratfor: It’s not just Greece, other Eurozone countries (Delivingne, Money Game)

Wealth rebound in Q3, is it sustainable? (EconomPIC data) More fun from the Fed’s flow of funds report.

Why women are hottest in coutries with too few dudes (Hooking up smart) Supply and demand at work.

Craigslist and eBay in legal fight (Hals, Reuters)

The Morgan Freeman chain of command (Maxim)

Bad choice of ClipArt (imgur)

I find this hilarious….a pretty emotional reaction to Return of the Jedi….”do they put R2D2 back together?”

Volcker criticizes bankers (Dealbook) “Wake up gentlemen.” Indeed.

Geithner extends TARP to next October (Treasury) He buries the lead near the bottom of his letter. It had been scheduled to expire in December. Nothing so permanent as a temporary government program….

50% bonus tax would hit 20,000 London bankers (Aldrick/Armitstead, Telegraph) What’s to stop banks from boosting salaries in response? This is a backwards way to shrink the banking sector. Recapping balance sheets (i.e. bankruptcy) is the way to go.

Greek finance minister says no risk of default (Lacqua/Petrakis, Bloomberg) Reminds me of last year when every troubled bank reassured us that liquidity and capital were solid. When they have to make that comment publicly, you know the run is already on.

MUST READ—Greek debt could be timebomb for euro (Reuter, Spiegel)

Gerry Corrigan’s case for large integrated financials (Johnson, Baseline Scenario) Corrigan is one of the more responsible folks in the banking sector, yet he’s repeating the same old tripe that we “need” large banks.

Fed keeps testing the exit (NY Fed) It’s third tri-party reverse repo test in the last week. This, again, is one of the mechanisms that the Fed says it will deploy to pull liquidity out of the system, when and if it decides to.

Hillary ex-pollster Mark Penn got $6m of stimulus funds (Bolton, The Hill)

Drug dealer takes a snowday (imgur) Clever…

Tiger, lion, bear form unusual friendship (Telegraph) see below…

(Reader note: still working on the bugs….please click “continue reading” to see all the links)

Banks, U.S. spar over TARP repayment (David Enrich) This is the kind of thing that gives me a better feeling about Tim Geithner and Ben Bernanke. They are hammering banks to raise equity capital to get out of TARP. They have leverage and are using it productively, forcing bank shareholders to eat losses via dilution so that balance sheets are more stable. Great! Stick to your guns guys!

Questioning the unemployment rate (Kaminska, Alphaville) Dennis Gartman doesn’t buy the good news in the jobs report.

FASB wants accounting standards “decoupled” from bank capital rules (Norris, NYT) Can you blame ‘em? Seems to me Bob Herz just wants to be left alone. If regulators want to give banks more slack, fine.

Consumer credit contracts again (Federal Reserve) Though the contraction seems to be moderating. Just the latest improvement in the second derivative. I’m a fan of this trend. As consumers get out of debt, they rebuild their savings.

NY Fed President Dudley says monetary policy can limit leverage (CalculatedRisk) CR hightlights some key sections of Bill Dudley’s most recent speech. On the one hand it’s good to see him talk about the Fed’s ability to prevent credit bubbles by limiting leverage. On the other, he repeats that rates will stay low for an extended period. So the Fed is doing what it does best, inflating the next bubble. This time ’round they say they understand why that’s a problem. Yet they seem unwilling to do anything about it.

Obama to announce new jobs program (Zeleny, NYT) Including a cash for caulkers program….

BofA CEO candidate under scrutiny (Nadgir/Comlay/Eder, Reuters) Greg Curl was one of two names discussed at Judge Rakoff’s famous hearing back in August…

Greece faces ratings downgrade over spiraling deficit (Atkins/Oakley/Hope, FT) Alphaville is all over this story.

Don’t try this at home…

Missed connection (Craigslist)

Late for work…