Here's my Top 10 links from around the Internet at 7 pm in association with NZ Mint.
I welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Sorry there was no Top 10 yesterday. All manner of news happened yesterday in Wellington and other places...Have a great weekend. Dilbert made me laugh out loud today.
1. Why Europe's 'Big Bazooka' is a lethal weapon - For the firer. Europe hasn't solved anything with its 'uber-plan' announced yesterday.
The markets may be celebrating, but they are premature again, as they have been after every other plan to 'end the crisis.'
To summarise: the bailout fund adds no new money (it is just a pledge to borrow more or insure bonds), the bank recapitalisations are half what is necessary and the Greek haircuts are both inadequate and likely to further freak out already freaked out bond investors.
At best, it buys some time for a real solution, which is some sort of European wide bond and a single fiscal authority.
Both these 'end games' are either impractical or politically unsustainable.
Many believe the only real solution is the break-up of the euro and the return to multiple currencies.
Here's Jeremy Warner at The Telegraph with some excellent points:
As Sir Mervyn King, Governor of the Bank of England, remarked before it had been signed, it might buy a little time, but it is no kind of long-term solution.
Before explaining why, let's first pick some holes in the plan itself, which amounts to pretty much a clean sweep for the German view on how to proceed and poses almost as many questions as it answers. The only bit which is done and dusted is the banking recapitalisations, where 70 banks have been stress tested and some very precise numbers have been put on the required additional capital.
The overall impact of the banking package is none the less somewhat underwhelming. The stress tests are widely thought wanting by many market participants and the additional capital therefore inadequate. BNP Paribas for one should be able to achieve its €2bn through earnings retention alone. The tests seem once again to have been designed so as to bring about the least possible commitment of new public money rather than once and for all to underpin banking solvency.
Furthermore, the statement seems to imply enforced bail-ins of subordinated debt holders before sovereign support is tapped. This is only going to further unnerve debt holders and will likely further enhance the difficulties many eurozone banks face in accessing wholesale market funding.
And here's the diagram that officials used to cook up the Big Bazooka during the 10 hour summit. The cartoon below below #3 tells the story even better. HT Reuters
2. Bernie feels happier and safer inside - Ponzi schemester Bernie Madoff has told Barbara Walters he is happier and safer inside prison than if he was still on the outside trying to cover up his scheme and deal with angry investors.
"I feel safer here than outside," said Walters, paraphrasing Madoff's comments from her interview at the Butner Federal Correctional Complex in North Carolina, where he is serving a 150-year sentence.
"I have people to talk to, no decisions to make. I know I will die in prison. I lived the last 20 years of my life in fear. Now I have no fear because I'm no longer in control."
Meanwhile, his wife Ruth has spoken for the first time about how she and Bernie tried to commit suicide before he was imprisoned. They are now estranged after their son Mark committed suicide last year.
3. Even Nigeria and Namibia are borrowing money - There's an awfully large appetite now for bonds being issued by governments anywhere other than in Europe.
Bloomberg reports Namibia has just offered its first international bond. It is selling US$500 million of bonds at yields of between 5.75% and 6%. It has a BBB minus credit rating.
It is financing a budget deficit headed for 10% of GDP...
Has the world gone mad?
The southern African nation, which borders South Africa, Botswana and Angola, follows Nigeria, sub- Saharan Africa’s second-largest economy, which sold its first dollar-denominated debt in January.
“It sounds relatively attractive compared to African peers,” Stuart Culverhouse, the chief economist at investment bank Exotix Ltd., said in a phone interview from London today. “It’s a relatively unknown name and may have to stimulate interest through the pricing.”
The government is raising funds to help finance a budget deficit that’s forecast to widen to 9.8 percent of gross domestic product in the year through March 2012 from 7 percent last year.
4. And the Japanese are printing again - BBC reports the Bank of Japan has announced plans to increase its government bond buying by US$66 billion.
Analysts said the bank's decision was an attempt to restore faith in the economy.
"Basically it is a message to international sovereign markets unsettled by the European debt crisis, that the BOJ is willing to bailout the Japanese bond market if it is necessary," Martin Schulz of the Fujitsu Research Institute told the BBC.
5. Australian house prices sliding - Leith van Onselen over at Macrobusiness.com.au reports Australian house prices are sliding fast, particularly in Brisbane and Perth.
6. 'Economic models are always wrong' - David Freedman writes over at Scientific American that economic models are always wrong. Constant re-calibration is the culprit.
When it comes to assigning blame for the current economic doldrums, the quants who build the complicated mathematic financial risk models, and the traders who rely on them, deserve their share of the blame. [See “A Formula For Economic Calamity” in the November 2011 issue]. But what if there were a way to come up with simpler models that perfectly reflected reality? And what if we had perfect financial data to plug into them?
Incredibly, even under those utterly unrealizable conditions, we'd still get bad predictions from models.
The reason is that current methods used to “calibrate” models often render them inaccurate.
7. Watch the Chinese - Europe is planning to take its EFSF begging bowl to China.
China will want several metric tonnes of flesh in return.
Here's ZeroHedge quoting from the FT on what the Chinese are demanding:
"It is in China’s long-term and intrinsic interest to help Europe because they are our biggest trading partner but the chief concern of the Chinese government is how to explain this decision to our own people,” said Professor Li. “The last thing China wants is to throw away the country’s wealth and be seen as just a source of dumb money.” Alas, that is precisely how the entire world sees China.
As for the final condition: "He added that Beijing might also ask European leaders to refrain from criticising China’s currency policy, a frequent source of tension with trade partners." And this is how you declare political check mate and shut up all voices that threaten to protest against mercantilist policies. And since it is only a matter of time before China will have to rescue the US, we hope Senate enjoys the time remaining in which it can debate whether or not China manipulates the CNY. That time is about to end.
Couldn't resist this Steve Bell cartoon from The Guardian. The little man in the middle is David Cameron, who is always characterised by Bell as a rubber protective device...
8. NZ electricity demand falls off a cliff - Electricity market figures from WITS free service shows demand for electricity dived sharply in the last couple of weeks.
It could be fine weather, but it's one hell of a dive and well below at the same time last year, which is the light orange line.
Any ideas?
9. Here we go again - Ambrose Evans Pritchard points out at The Telegraph Portugal appears to be heading down into the Grecian vortex of rising debt, rising interest rates and a contracting economy...
Its money supply is contracting at a rate of 21% per annum and it has a debt to GDP ratio of 360%.
Data released by the European Central Bank show that real M1 deposits in Portugal have fallen at an annualised rate of 21pc over the past six months, buckling violently in September.
"Portugal appears to have entered a Grecian vortex and monetary trends have deteriorated sharply in Spain, with a decline of 8.4pc," said Simon Ward, from Henderson Global Investors. Mr Ward said the ECB must cut interest rates "immediately" and launch a full-scale blitz of quantitative easing of up to 10pc of eurozone GDP.
A mix of fiscal austerity and monetary tightening by the ECB earlier this year appear to have tipped the Iberian region into a downward slide. "The trends are less awful in Ireland and Italy, suggesting that both are rescuable if the ECB acts aggressively," said Mr Ward.
A shrinking money supply is dangerous for countries with a high debt stock. Portugal’s public and private debt will reach 360pc of GDP by next year, far higher than in Greece.
I'll leave the last word of reporting to Ambrose, just in case anyone really thinks Europe is solved:
Jean-Luc Mélenchon, leader of the French leftist Front, said Europe is now marching to Germany’s drum and "headed for disaster", a view gaining ground across Europe’s Left.
Albert Edwards from Société Générale said the ECB will have to act, over a German veto if necessary. "The increasingly frenzied attempts of eurozone governments to persuade financial markets that they can draw a line under this crisis will ultimately fail."
"The impending threat of a euro break-up will force the ECB to begin printing money, very reluctantly joining the global QE party. The question is whether Germany will leave the eurozone in the face of such monetary debauchery," he said.
10. Totally Clarke and Dawe on the problems with politicians in Canberra.
They're being looked after and made comfortable.
100 Comments
Bonds will have to be insured the old fashioned way, with interest rates. This will wreck everyone and everything, hopefully it will force those that can, to stop borrowing, and it should put more pressure on lenders to adequetly asses risk. CDS promised risk free return, but delivered return free risk. Simple can be better, and if market pricing of risk was included in interest rates, would we be in the massive debt hole we are in now? Probably, if history has taught us anything it's that people never learn, nothing changes. More bread and circuses anyone?
re 8 My guess would be to look at the big users. Like a certain aluminium smelter being put on the block for sale. I can't imagine its all retail demand causing that.... or maybe everyone went out to watch the RWC?.... I don't think demand has anything to do with rainfall into lakes...supply maybe.
Agree with Belle...definately warmer. Some farmers around here (Waikato) were getting maize crops in real early.....risky stuff but no frosts have eventuated so growing away. They will be pleased to have the feed given the forecast for a dry summer
Re: 8
From the pensioner front:
Hotwater cylinders switched off, heating it up twice a week for 3 hours does the trick too to stay clean.
Cooking only every other day, makes just 5 minutes use of cooktop in between for heating up leftovers.
A second cardigan instead of heaters.
2 hotwater bottles instead of heating blankets.
Powerpoints turned off, not on standby.
Simple.
Japan a mystery or just a symbol of the crazy world ?
The Nikkei stock index rose above the 9,000 mark and ended at a fresh eight-week high. 28/10/2011
The flooding had hit Japanese automobile and electrical products manufacturing facilities hard, he said. "I think this is the biggest loss for Japan's overseas investment," he said. "Hundreds of Japanese companies are now under water. We cannot calculate the losses until the floods recede.
http://www.bangkokpost.com/news/local/262014/japan-suffers-worst-industry-loss-overseas
http://www.youtube.com/watch?feature=player_embedded&v=yfUBMkddhE8
http://australiancannonball.com/2011/10/27/japanese-reactor-leaks-64-tons-of-radioactive-water/
http://ex-skf.blogspot.com/2011/10/this-is-what-passes-as-decontamination.html
…and hardly anyone talks about ??
Is another catastrophic event in Japan maybe in other countries unfolding ?
It seems the situation in Japan is getting worse. How much longer do officials wait to evacuate their citizens to safer countries ? The question is can they waiting any longer ?
I recommend to read other articles on that link.
Unfortunately more bad news.
http://australiancannonball.com/2011/10/29/fukushima-beef-officially-ba…
Bernard - the news from Japan after the Fukushima disaster are increasingly worrying
http://fukushima-diary.com/2011/11/extraordinary-amount-cesium-from-fish-south-to-fukushima/
Are there some precautions measures in place by the government to protect our citizens from that event or to we pay because of negligence later ? Are imported goods from Japan tested ? I'm sure people like to know. Could be an interesting issue for your team.
Ok, so let me get this right. If the recommended limit of radiation above background that a human can safely receive per annum is 50 mSv and the Fukushima Diary that Kunst is reporting above has found a 'hot spot' in Tokyo spewing out a maximum dose of 110 uSv/h how many hours would you need to stand there for before you received what is regarded as the upper limit of the annual safe dose?
50 x10-3 Sv / 110 x 10-6 Sv /h = 454.5 hours.
454.5 hours / 24 h /day = 18 days.
And you want Japan to be evacuated for that? Idiot.
David – before making such comments, please invest time read the links, listen to A. Gundersen and others to find out how disregarding Japan’s authorities and Tepco are dealing with the case Fukushima. Gather your own information and then make your own conclusions.
http://www.japantimes.co.jp/text/ed20111104a1.html
He goes on to say that the health impact of long term exposure to cesium 137 has not been assessed and that Japan owes it to the rest of us to stop down-playing the event and come completely clean about true state of affairs.
Japan and the rest of the world is not over this – only time will finally tell, who the idiots are.
I don’t need to invest any time Kunst. On the contrary it is you who needs to spend the time in learning what all those numbers actually mean. I have used my scientific background to analyse the numbers provided in that link and unlike you I actually understand what they mean, and more importantly, what they don’t mean. And I hope I have conveyed that clearly to the board. It is sad that so many people who ‘care about the environment’ are scientifically illiterate, and don’t or won’t make the effort to ensure that what they are saying is scientifically sound and informed, rather than prefering to speak the bigoted nonsense of fantasists.
Might I also suggest, kunst, that you yourself read the article a bit more closely. In it you will see that a contributor to the comments section has visited that site and they took a Geiger counter with them. Their readings showed nothing above background levels of radiation. Hardly grounds for the evacuation of Tokyo I’m sure you’d agree - well actually I’m sure you won’t agree because if the data runs counter to your preformed views you will do doubt say it's wrong. Try having an open mind for once, kunst, you might find you actually enjoy it.
David – It doesn’t need your scientific background. In that case, I rather listen and understand Mr. Gundersen – an expert in this field http://en.wikipedia.org/wiki/Arnold_Gundersen and his concerns. Like many others, his professional assessments are proving enough, that the situation in Japan is critical. Maybe you should invest a little time gathering information about the situation in Japan.
But then David you are obviously happy, because the government say so.
Your president Iko Leukaemia.
Caught in a blizzard of often conflicting information, many Japanese instinctively grope for the beacons they know. Mr Ichida and his colleagues say they no longer trust the nuclear industry or the officials who assured them the Fukushima plant was safe.
But many experts warn that the crisis is just beginning. Professor Tim Mousseau, a biological scientist who has spent more than a decade researching the genetic impact of radiation around Chernobyl, says he worries that many people in Fukushima are "burying their heads in the sand."
Recommended: http://www.independent.co.uk/news/world/asia/why-the-fukushima-disaster…
The world is shaking up fast - have a nice weekend – folks !
http://player.vimeo.com/video/27920977?title=0&%3bbyline=0&%3bportrait=…
#8 Interest is good at graphs....match it with a weather data temp graph.....however I just replaced my hotwater element....it was probably that.....
Have a look at the samee period and average 10 of them and compare....
but its interesting.......
regional breakdowns?
regards
MF Global may be on the verge of becoming the first U.S. victim of the European sovereign debt crisis as its market value has plummeted 62% this week alone on serious fears about its exposure to the bonds of troubled euro-zone nations
China is dumb money? Buying gold and encouraging it's citizens to buy gold. Gold is formed by a collapsing supernova and is rare, it takes a nanosecond to create a trillion dollars and it is infinite. China is hoarding copper, silver, and rare earth elements the most important components in windpower. They are buying oil fields, coal mines, copper mines, farm land. Also buying votes in the UN, NATO, G20, and the EMU.
Whats the smart money doing right now? Encouraging/forcing people to buy debt, paper stocks etc. Parking militarty on oil fields, gas pipelines, rare earth deposits. Losing support in the UN, NATO etc.
Dumb sounds smart, and smart sounds dumb, the world has turned upside down.
Correction skudiv....gold is also formed here in a Lab in the US.
Beijing rules dude....learn Mandarin and how to Kowtow.
Remember how the US made the Brits pay and pay post ww2.....all that 'lend lease BS'....now the shoe is on the eastern foot and set to boot all the western bums.
here the link about gold: http://en.wikipedia.org/wiki/Gold_synthesis.
The artificial production of gold is the age-old dream of the alchemists. It is possible in particle accelerators or nuclear reactors, although the production cost is currently many times the market price of gold. Since there is only one stable gold isotope, 197Au, nuclear reactions must create this isotope in order to produce usable gold.
I think they are able to create 3 cents worth at a cost of $200! but that doesn't take into a/c the massive govt cost to build the lab...
It is not possible to make gold to a value anywhere near equal to the cost in gold of making it!
Way cheaper to dig it out of the ground skudiv...probably cheaper to mine the stuff on the moon.
$11,333,333 per troy ounce then. And the Chinese can speak english, I dont need to learn mandarin.
By the date of October 28, there are 821 mutual funds with 62 assets managers disclosing the third seasonal report, they generally report money losing in Quarter 3 as China's stock and bonk market maintain declining in the past three months. The 62 assets managers lost 251.074 billion yuan in Quarter 3, according to the Beijing-based market researcher Tianxiang today.
http://www.cs.com.cn/english/ei/201110/t20111028_3105242.html
Because of a strong current Gummy could be flooded as far as Bangkok and now sticks head on in a drain.
The Gummster has just escaped from a bonk market down in Pattaya , to the relative safety of Bangkok .....
.. sad to see that Roger Kerr ( of the Business Round-Table ) has died of the cancer that he was battling .
And also a smidge tragic that Comvita , the Kiwi bee company is being courted for takeover by Singapore food group Cerebos . Alike Charlies , just as a fledgling company starts to show promise , an off-shore predator snaffles it up . Sad .
...... re Thailand : The construction projects are everyfreakingwhere ! A building boom of monstrous proportions is on . And the newly elected hot chick ( ooops , no disrespects Ms Prime Minister ) is promising an egalitarian state , to take from the rich , and give to the poor . She's already hiked the minimum wage ( laptop dancers are only 2 to the buck , not 3 anymore ) , and promises much more each year of her rule . .. [ she visited the flood stricken regions by helicopter , and was noted to be wearing Burberry Gummy Boots ! ... Burberrys for everyone , Ms PM ? ] .... Sad to see such a fine nation trudge down the failed Kiwi path of socialist democracy .
Welcome back Roger – we missed you - in a way. You little “capitalistic pork” is a little bit like me the “socialist rat” – had enough and then obviously a few comments make you excited to come back.
So – you are going to vote for Key (National) in support of a “Southern Pacific Financial Hub” – NZ to become more “productive” - tied up blue and white and of course polished under the table - sitting in café shops in Wellington/ Auckland/ Christchurch talking more 100%NZpure greedy Wall street/ government issues ?
...or are you simply like me - intelegant - voting for capable people and not for parties ?
Thanks , Walter ..... I can only dream of being " intelegant " just like what you is ....
.... but Gummy is on a crusade , to vote Green ! ..
... I know , I know , that is a slight form reversal from me .... but in lieu of a Gareth Morgan party emerging , there's no where else to vote to deliver a long overdue kick to the arse of both of National and Labour .
Great to see the A team back in good bantering form
Cheers.
PS Gummy. Your knowledge of prices in Thailand seems pretty detailed. We'll have to start incorporating that metric into our excellent charts section.
Even amongst the erotic delights of Bangkok , one can find a gummy to suck on . Phongchitt Co. of Petchkasame Road produce a culinary acceptable gummy " Jolly Bears " .. Bhat none of them are durian flavoured , sadly ... orange , grape , apple , strawberry , & pineapple .
..... the tour of the S.E. Asia's better known gummy bars , continues . I'll keep you posted !
As I mentioned many times – why is NZ not dealing on the gold market in order to get rid of our massive account deficit and to refom our economy ? Also interesting gold reserves by nations >
http://en.wikipedia.org/wiki/Gold_reserve List by countries 110 Haiti > New Zealand ??
under consideration of the favourable circumstances of gold right now - why
… is the gold market not easier accessible for the public here in NZ ?
…is NZ missing out on another "golden opportunity" ?
.... is there no incentives to encourage http://en.wikipedia.org/wiki/West_Coast_Gold_Rush and even organise brigades of NZyoungsters (e.g. youth camps) by governments in order to balance the books ?
Brilliant idea Kunst, I'd happily pay taxes to support people on the dole if they were mining gold. I don't mind paying people to be on the dole, but I believe they should give a little back at the same time. The old law of the jungle, no work-ey no eat-ey. There is pleanty of work to be done in NZ, but encouraging a free lunch attitude helps noone. In fact I'd pay more in taxes to increase the dole if people were working for it. Cleaning up the mess of a wasteful society, or planting trees, or just about anything.
If you make ppl work for the dole.....what happens to other ppl who are on the min wage but are employed by private businesses?
Say I employed 50 ppl on the min wage cleaning the streets.....the Govn says oh we have 50 extar ppl who will do that....I cant compete on price, I go out of business and make 50 ppl redundant...then I work for the council organising those 50 ppl.......except where is my incentive to be efficient? tell you waht let me organise 70 ppl....
"Mess of a wasteful society" this is a huge moral hazard...those who make the mess know others taxes will be used to clean up their mess...they have no incentive to be non-messy....it costs them money to do so....
like duh...........
There will always be those who dont want to work, or the un-skilled or the un-trainable....if you push them into the way of those that do, you make the problem worse....
The key here for me is make the dole minimal and the minimum wage high enough to encourage ppl into work.....so the min wage needs to be higher. If the so called clean up jobs need to be done, then charge the ppl who make the mess for it and the balance society needs to pay for......
Gareth Morgan's plan for instance is interesting in this respect.
There are certian areas where businesses shine against public endevours by the loosk of it, utilising the un-skilled and semi-skilled seems to be one of them.
regards
What I am saying is that everyone has the ability to contribute to society, and needs to. If you argue that there is no work for these people, I suggest expanding your mind. As a teenager I worked on fishing boats, and there was always work to do, and that was a very small enviroment. Claiming that evil overseers abuse thier position, is a real issue, but not a valid argument against work. Talk to BB's and they will say how it used to be embarrasing to not have a job, and anyone without work would be trying hard to find a job, because of the stigma. That's the kind of attitude we need to retain. There are pleanty of opportunities for people to contribute.
I see no real reason why a government iniative would be inneffective, in fact the government has no need to make a profit and could increase wages against a commercial business. Value comes in two main forms labour, and resources We have resources, and we have idle labour, match the two together and you can have an even more productive economy.
2 Billion to bailout investors, the financial sector is unable to add value, and yet governement pays them for destroying money, through malinvestment. You could make a lot of widgets, or doodads, or deedaws with that money. Create far more jobs then a cycleway. Priorities are backwards.
skudiv,
"Value comes in two main forms labour, and resources We have resources, and we have idle labour, match the two together and you can have an even more productive economy."
Yes I do agree with the above proposition, but few today believe it is the role of the State to manage the resources within its territorial jurisdiction (our country). Including me. Most of our country's resources are owned and controlled by a small number huge collective institutions (SOEs, corporations, Iwi commercial arms, Local council development arms), run by an interlocked fraternity of corporate executives, many of whom sit on each others board of directors.
John Bates Clarke, the founder of American neoclassical economics referred to wealth creation as, “the mere appropriation of limited natural gifts ..” and that repelling intruders “is almost the only form of labor which exists in the most primitive social state” (p.10). Those who appropriate them create wealth by so doing.
The essential attribute of wealth is “appropriability,” to create which “the
rights of property must be recognized and enforced Whoever makes, interprets, or enforces law produces wealth” J.B. Clarke, 1886 The Philosophy of Wealth
http://www.masongaffney.org/publications/K1Neo-classical_Stratagem.CV.pdf
One of my ambitions for the future is to do a comprehensive survey of which individuals and institutions own the majority of resources in our country. I think the findings of such a survey would be rather revealing. I think people need to reimagine what money actually is. Its merely the means to transfer the claim to and ownership of resources and value them, which would be worthless without the power of the State to confer title to and enforcement of that claim. J.B. Clark virtually confirms this in the above quote.
The state, is actually part owned by me as a citizen. So in a true democracy the role of the state would be to use those resources to the benefit of the citizens. All I see it the state selling those resources to the long term detriment of the citizens, for a quick tax offset, to provide for unsustainable promise, in effect buying power by selling resources. People do vote for these things, believing the lie that the wealth will come to them. Once they realise that said wealth is forever and always beyond thier reach there will come either a day of reckoning or despair.
"The state, is actually part owned by me as a citizen. So in a true democracy the role of the state would be to use those resources to the benefit of the citizens."
Good luck with exercising your claim of ownership over the State, but I doubt your wish will be met anymore than Goldman Sachs, will accept it from anyone who has a 401(k) account with them, haha.
And by the way, we aren't a democracy. We are a constitutional monarchy with a parliament that has unlimited sovereign power. Absolutely nothing to do with democracy.
In passing the Constitution Act 1986 (effective 1 January 1987), New Zealand “unilaterally revoked all residual United Kingdom legislative power.” New Zealand, as of 1987, is a free-standing constitutional monarchy whose parliament has unlimited sovereign power.
The Peace of Westphalia in 1648 helped to establish the notion of a sovereign nation state – one that exercised supreme authority within a territory. [4] In Weber’s influential definition, a state was sovereign because its supreme authority – in the sense of ultimate – derived from its monopoly on the legitimate use of physical force within a given territory. [5]
An Australian economics group looked at the extra $NZ 20 billion in tax that the previous NZ Labour government was taking out of the NZ economy , and concluded that it was wasted money ! ( Cullen raised government revenues by 50 % in just 9 years )
.. they showed that the entire NZ income and company tax structure could be scrapped , if the government reduced it's non-productive extra spending by $NZ 20 billion .
The government now sucks up nearly 40 % of the economy .... I think that it's them who have grossly exceeded their " fair share. "
"banks have lost a mainstay of their profitability - the ability to sell more and more loans....Job losses loom as banks to wield axe..."
FYI Janet Tavakoli rightly points out at HuffPo that Credit Default Swaps are a waste of time if the ref simply allows massive haircuts.
http://www.huffingtonpost.com/janet-tavakoli/standard-credit-default-s_b_1036009.html
"Customers" that accepted ISDA documentation when buying credit default protection on Greece are now discovering that ISDA defends the position that a 50% discount on Greek debt is "voluntary" and therefore not a credit event for credit default swap payment purposes according to its documents. This makes the ISDA "standard" credit default swap (CDS) ineffective as a hedge for the widened spreads (reduced price) of Greek debt, and it makes it ineffective as a protection against default using reasonable standards of impairment to define default. ISDA can defend ambiguous definitions so that payment on the credit default swap is virtually impossible.
Janet Tavokoli is one of my heroines. She is just so knowledgeable about this stuff, being a Professor of Structured Finance who actually understands it and is not bought. Gives me a bit of faith that there are good sorts left in the USA despite appearances otherwise.
Who in their right mind would mind would buy Euro debt if they weren't forced to (as presumably the Euro banks are)?
If you are a bondholder, with cds protection, you can decide not to accept the haircut. Refusal will make any future default involuntary, ie hold till maturity, and recieve face value. If bondholders did this it would keep the pressure on Greece and they would be rewarded for holding till mautrity, either by recieving the face value, or in the event Greece repays less then 79% the cds will still be valid. The whole package is stupid, it expects bondholders to trade greek bonds at 50% for EFSF bonds. They esfs holds the greek bonds, at the 50% haircut till maturity, and continues to lend to greece, up to another 250bln.
In addition to being destructive to the EU bond market by increasing yields, it rewards those who refuse to take part in the scheme. There is nothing set in stone here, and all we have is a plan from the EU and a ruling from th ISDA, the actual participation rate from the bondholders is still unkown, and given that only 85% agreed to the initial proposal for a 21% haircut, I would think this plan still needs to be worked out.
Which is crazy.......both sides knowingly and willingly entered into an agreement.....this is huge moral hazard hedge funds will be laughing so hard money for nothing like duh.......It means in effect that the entire market collapses......in some ways getting rid of the abortion that is CDSs longer term is not a bad result...but the ability to re-insure is important......So Ok if I cant re-insure some of my risk.....where does the basis points go? up is the anwser.....or you dont lend at all....
This is a terrible result....its obscene........
regards
FYI the big Euro deal is already starting to unravel
Bruno Waterfield reports at The Telegraph
Hours after an all-night summit of euro governments ended, flaws began to emerge in a package that was billed as a “grand and comprehensive” solution to the European debt crisis.
The concerns were led by Germany’s powerful central bank, which expressed fears that a plan to leverage a €440 billion eurozone rescue fund to amass a “fire power” of €1 trillion, or £880 billion, resembled the risky finance methods that triggered the crisis in 2008.
Haha "Obama - this deal has calmed the markets" I call it a correlation trade: ie. "the poor are getting poorer - therefore - the rich must be getting richer - go all in long". European growth, well I remain very doubtful that increasing debt is going to produce much in the way of growth. The money isn't being invested, it has already been wasted, the only thing you can buy with that kind of stratagy is time. Spend it wisely.
An even bigger problem is when the PIIS come looking for a haircut too.
Italy may be in the midst of a savage austerity drive but that has not stopped defence ministry officials ordering a fleet of armoured Maseratis to ferry themselves around Rome.
Beijing sauna...haha
"Eurozone leaders were left sweating last night after China played down expectations that it would quickly make a much-needed cash injection to the EU bailout fund."
Phil Goff has released the Labour Party's transport policies : And it is a triumph !
..... Top this , Jolly Kid , you're up against true professionals here : - www.trademe.co.nz/antiques-collectibles/other/auction-417968980.htm
Herr Helen is at the U.N. ,.. her role is giving aid to poor countries ...
... one Ms Clark's duties ( having run the NZ economy into the ground circa 1999-2008 ) , may be to offer U.N. aid to impoverished kiwis , you may soon require her help .....
..... life is full of little ironies , Mr scarife ! ... just form a queue behind the Sudanese and the Ethiopeans , tah ....
I have been thinking about something I read this morning, where the writing was pondering why we have just had the greatest one month rally in the SPX ever. Reason for pondering being that the markets don't normally make big moves up, fear is usually the motivation for big moves and that is normally fear of loss. ie: a bear market.
Makes you wonder what is driving it.
Perhaps lots of people were short and a small rally caught them off guard?
I'm guessing, a) there was a headline said 1 Trillion + b) headline said no cds explosion + c) 50% haircut for those dumb enough to hold greek debt + d) short covering squeeze = dancing in the street.
Makes no difference long term, the ESFS did a blitzkreige on CDS and Governement bonds in one hit. It allowed governement bonds to fail, and insurance to fail. Confidence will be shattered in both, leading to either reduced risk through higher interest rates, or a sell off in govenrment bonds, both are bad for growth. Take note incumbent politicians, your lies of a growth fulled future will be exposed.
Even 1 trillion sounds like a small number now, snowball it up to 5 in a couple of months. I saw a quadrillion today, potential notinal outstanding derivitives. Wasn't that long ago that a million bucks was a massive amount of money and I'd never heard of a billion. Now 1 trillion sounds pitiful. Worlds going mad, forget the end is near, the end is now.
Re: #8
Probably the impact of the maui outage (and some warm weather). With are large number of industrial gas consumers unable run due to a lack of gas then their electrical consumption is reduced. E.g. the dairy factories have no gas for process steam so all the electrical motors for pumping water, milk and sundry other fluids aren't used as well. On Campbell live they were showing the Chelsea sugar factory with its production line shut down. This is aftecting the top half of the NI so there will be a substantial reduction in demand.
""An implosion of the sovereign CDS market could lead investors to buy fewer government bonds because they feel they cannot protect themselves, and risks pushing up borrowing costs for governments, especially in the euro zone."
http://www.reuters.com/article/2011/10/29/us-cds-greece-idUSTRE79S1FN20111029
"Key Details of ESM Accord
•Article 8 says "Authorized Capital stock 700 billion Euros"
•Article 9 says "ESM members irrevocably and unconditionally undertake to pay capital calls on them within 7 days"
•Article 10 allows the ESM board of governors to "change the authorized capital and amend article 8 accordingly"
•Article 27 says ESM shall enjoy "immunity from every form of judicial process". Thus the ESM can sue member countries but no one can challenge it. No governments, parliament or any other body or laws apply to the ESM or its organization.
•Article 30 says "Governors, alternate governors, directors, alternate directors, the managing director and staff shall be immune from legal process with respect to acts performed by them (...) and shall enjoy inviolability in respect of their official papers and documents"
There are no independent reviewers and no existing laws apply. Thus Europe's national budgets will be in the hands of one single, unelected body that is accountable to no one and immune from all legal actions.
Is this the future of the EU or will the German supreme court and other governments put an end to it?
It's the new world order Wolly, financial tyranny. ECB, unelected, yet attempts to run the EMU, the European Commision, unelected yet creates the laws for the EMU. Take Greece for example, went broke bailing out it's banks, now the pension funds get reamed. Why doe's noone seem to care about the working class? It's always all about the biggest banks, save them and make the people pay.
"It's the new world order Wolly, financial tyranny. ECB, unelected, yet attempts to run the EMU, the European Commision, unelected yet creates the laws for the EMU."
skiduv, its not a new world order at all. Since the establishment of the Bank of England in 1694, The Banking Fraternity and the Nation-State have been a monstrous hybrid. You can't have one without the other. The banks rely upon the State to provides their currency with legitamacy and its decrees which require their payments to be made in bank money, and the State relies upon the Bank's credit creation and finance clearance processes to supply it with the means to uphold and enforce its territorial sovereignty (bureaucratic machinary, weaponry, payment of troops, and State ceremonies etc). They've worked hand in hand ever since.
"The reader might have noticed one puzzling aspect of the equation: the IOU can operate as money only as long as Henry never pays his debt. In fact this is precisely the logic on which the Bank of England—the first successful modern central bank—was originally founded. In 1694, a consortium of English bankers made a loan of £1,200,000 to the king. In return they received a royal monopoly on the issuance of banknotes. What this meant in practice was they had the right to advance IOUs for a portion of the money the king now owed them to any inhabitant of the kingdom willing to borrow from them, or willing to deposit their own money in the bank—in effect, to circulate or “monetize” the newly created royal debt."
http://p2pfoundation.net/State_Theory_of_Money
"So I suddenly realized that a lot of nineteenth century history, the classical diplomatic history that I'd been raised on, reading A.J.P. Taylor as a student, was missing a key actor. It was almost completely invisible from the scene, if you look through the diplomatic documents. But if you look through the archives at the Rothschild Bank, you discovered that the likes of Bismarck or Metternich, these great, towering political figures, were at times in their careers entirely in hock to this financial institution, really very dependent on its financial power, indeed."
http://globetrotter.berkeley.edu/people3/Ferguson/ferguson-con5.html
The banking system has been around for a long time and its tentacles go deep. Bankers own the world, and as long as they have the power to create money they will always do so. I'm not talking about people at westpack or ANZ but the world bankers, the rothchilds, warburgs, morgans, etc. A banking cartel, that owns the fed, the BOE, the ECB, IMF, World Bank, Goldmans Sachs etc etc. You can see who they are when they get the bailouts. The sad thing is by the time people realise that money is just a great confidence trick, they will be that far in debt, and austerity, and heavily taxed that they will own nothing, yet owe everything.
The Giant Vampire Squid cometh. After working for Goldman Sachs, the Italian treasury, and the FSF Mario Draghi is the new face of the ECB. The tentacles are growing, "all for me and none for you".
http://www.zerohedge.com/news/guest-post-mario-draghi-hawk-whom
S&P gives most countries non investment grade ratings in year 2040, just before I retire. This is why I will never invest in paper. We are all Greece now, by Societie General is a great read, the PDF is on zerohedge
http://www.zerohedge.com/news/we-are-all-greeks-socgen-presents-new-world-order
Out of controll governements, "the paradox of thrift" believe that whats good for a household and a business is not true when you apply it to government. This is how you spell debt slave. Get a house, and some chooks, and some silver.
Americas GDP up I wonder how? WASHINGTON (AP) -- Americans are making a little more money and spending a lot more.
Under normal circumstances, that would be a troubling sign for the economy. But a closer look at some new government figures suggests another possibility: People are saving less money because they're earning next to nothing in interest.
Consumer spending is closely watched because it accounts for about 70 percent of economic activity. A sharp rise in spending over the summer helped the overall economy grow in July, August and September at the fastest pace in a year.
Here We Go Again
European leaders reach an agreement; markets are enthusiastic. Then reality sets in. The agreement is at best inadequate, and possibly makes no sense at all. Spreads stay high, and maybe even start widening again.
http://krugman.blogs.nytimes.com/2011/10/28/here-we-go-again/
http://www.voxeu.org/index.php?q=node/7168
So yet another load of hot air...
regards
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