Succinct Summation Of Week’s Events (10/28/2011)
Succinct summation of week’s events:
Positives:
1) EU officials finally have framework for debt crisis control, stay tuned for details. While not nearly enough, cut to Greek debt the only long term positive, all else just buys time and that time is getting more and more expensive
2) China’s HSBC preliminary mfr’g # at 51.1, 1st time above 50 since June
3) US Durable Goods orders surprise to upside, only a few months left for 100% accelerated depreciation tax benefit
4) US New Home sales in Sept a touch better than expected but still bouncing along bottom and we need to sell more existing homes
5) Q3 GDP grows 2.5% led by personal consumption
6) UoM confidence almost 3 pts higher than estimates and up 1.5 pts from Sept
7) India raises rates, fighting inflation and RBI hints done for now
Negatives:
1) Notwithstanding EU deal, markets losing faith in Italian politicians will to liberate their economy and cut spending, 5 yr yield rises to highest since 1997, Spanish yields spike too
2) Italian consumer confidence falls to lowest since 1982
3) EU’s insistence on sticking it to CDS buyers may end the sovereign market and its hedging benefits
4) Euro region mfr’g and services composite index falls to lowest since July ’09
5) US Savings Rate falls to 3.6%, lowest since July ’08. Contrary to US fiscal and monetary policy, we need more savings and investment and less borrowing and spending
6) Conference Bd Consumer Confidence falls to lowest since Mar ’09
7) CS home price index down to just shy of lowest since ’03
8) India again raises rates, will they over do it?
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October 28th, 2011 at 3:11 pm
“… all else just buys time and that time is getting more and more expensive…”
No, buying time is the ONLY way to extricate the subsystem from myriad failures.
October 28th, 2011 at 3:56 pm
FYI BR – Your favorite OWS protest sign holder was fired
http://gawker.com/5854118/how-occupy-wall-street-cost-me-my-job
October 28th, 2011 at 4:54 pm
“3) EU’s insistence on sticking it to CDS buyers may end the sovereign market and its hedging benefits”
Occupy Wall St
October 28th, 2011 at 5:11 pm
“3) EU’s insistence on sticking it to CDS buyers may end the sovereign market and its hedging benefits”
Hedging debt is part of the problem. The banks need to assess and take the risk. If they can’t afford the risk, that means no one can and that no one should make that loan. It’s absurd to think that multibillion dollar banks can layoff billions of dollars of risk onto speculators who are just looking for the next free ride. Investing isn’t a pay-your-fee-get-a-B situation. Poor investments mean losses.
October 28th, 2011 at 7:13 pm
“3) EU’s insistence on sticking it to CDS buyers may end the sovereign market and its hedging benefits”
Benefits to for who? I see their ending as a big plus. It is a BS product created by the criminal banking cartel that always rewards them regardless of outcome.
October 28th, 2011 at 8:14 pm
GDP came in where I expected but one should not get cocky about yesterday’s figures. The TRENDLines
Recession Indicator gauges October GDP @ 2.2% and leading data suggests the pace will continue to dip and trough @ o.5% in February. There are many weeks of troubling economic releases ahead…
TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm
October 28th, 2011 at 8:46 pm
Regarding the first negative: “markets losing faith in Italian politicians will to liberate their economy and cut spending”
That’s only a negative because the Europeans appear unable to even understand the benefit of agreeing on an approach that doesn’t involve near-term austerity.
If Italian intransigence made it likely that Europe will set austerity aside until economies are on sound footing, then it would be a big positive in my eyes.
October 28th, 2011 at 8:52 pm
3) EU’s insistence on sticking it to CDS buyers may end the sovereign market and its hedging benefits
If the EU allowed the CDSs to trigger, would the counterparties have been able to meet obligations? I think it quite possible that the EU is just killing something that was largely fantasy.
The CDS market became a sham when AIG treated premiums as free money and CDS buyers viewed them as an end to risk. The existence of naked CDSs means that the sham continues.
October 29th, 2011 at 9:53 am
3) EU’s insistence on sticking it to CDS buyers may end the sovereign market and its hedging benefits
reply:
———-
With respect to the synthetic CDS buyers and sellers … those that are only side bets and have no skin in the game … screw them. Who cares. They’re only parasites. This might make them more likely to invest where jobs are involved. Cry your eyes out, bitch.
With respect to CDS risk and end of world events and it is legitimate debt insurance … sorry, but your priorities are beneath everyone else’s when the equivalent of world bankruptcy is involved. As they would say at the Quickee Mart … Thank you, please come again. Maybe the EFSF will someday become a leveraged guarantor of CDS debt for the rest of Europe, providing you feel lucky.
Anyway, I see this as a long term world wide positive. Over the long run, lenders might start actually analyzing credit risk associated with borrowers. Some people, and apparently countries, should not be allowed to borrow money. I know this is shocking news, but, yes, it is true. The ability to repay might start being considered as a lending criteria. Anything is possible. It appears to be starting in individual credit markets. Maybe sovereigns will have fiscal responsibility forced upon them from this event.
October 29th, 2011 at 1:21 pm
Love your intro.
If large purchasers of sovereign debt can’t hedge their bets, won’t that push up the cost of sovereign borrowing?
October 30th, 2011 at 2:47 pm
[...] that a guarantee? Clearly not. The European debt crisis is still not really solved, as the details have not been worked out. [...]