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Europe's Looming Bust Replies |
HenryTo
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HenryTo
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 Posted: Mon May 21, 2012 12:13 am Post subject: |
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Bridgewater's latest on the peripheral Europe implosion.
| Quote: | Peripheral Europe Through the Long-Term Debt Cycle
Peripheral Europe is in the most dangerous phase of the long-term debt cycle where interest rates are rising rapidly while growth and the financial system are collapsing. Debts relative to incomes are compounding upwards despite an intolerable decline in the standard of living. The day to day events are fascinating and stakes are great, but the story isn’t new or all that unique. Peripheral Europe is going through the natural course of the long-term debt cycle. It is in the midst of what from a broader historical perspective is the depression/deleveraging phase in its long-term debt cycle. The following describes how we think about the long-term debt cycle and maps the European drama to that classic cycle. It is the understanding of this process that drives our views on what is likely to come next. |
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HenryTo
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rffrydr
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| Posted: Sat May 19, 2012 4:35 pm Post subject: |
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....And to the press it is:
http://www.ft.com/intl/cms/s/0/fef2e2be-a0d4-11e1-9fbd-00144feabdc0.html
Markets like to hide behind Germans, for this is exactly the "lesson" the bond vigilantes were supposed to be bringing. Be careful what you wish for. The tide has, if not clearly, turned. Obama will have become the accidental tipping point.
Another blow to the market-is-always-divine-right era. Damien Hirst is just not selling anymore and El Bulli has had its last supper.
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HenryTo
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| Posted: Wed May 16, 2012 9:33 pm Post subject: |
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Bridgewater's latest on Europe.
| Quote: | The Shift Away From Austerity to Stimulation in Europe is...
...classic in deleveragings and requires greater central bank printing of money to monetize debts.
Early in deleveragings, when it is obvious that too much debt is the problem and that it’s not easy to borrow more, reducing borrowings and spending less seems like the obvious thing to do. At this stage, the naïve view is that austerity will be observed by creditors, faith will be restored and the debt crisis will go away. That view is naïve because reduced borrowing leads to reduced spending, which leads to reduced incomes and greater economic stress, and the probability of default is correlated more with economic stress than with any other factor. People who believed that austerity worked to improve economic conditions and reduce risks of default simply have not studied past deleveragings. History has shown that in the end, they all print money. |
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rffrydr
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| Posted: Wed May 16, 2012 3:35 pm Post subject: |
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Hollande's plane hit by lightning on his way to lick Merkel's boot. You can't make that stuff up!
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HenryTo
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rffrydr
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| Posted: Tue May 15, 2012 10:14 am Post subject: |
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Best performer for the year? Wait for it.....the DAX:
| Quote: | | The Dax index is up 10 per cent, compared with a fall of 2 per cent for the FTSE 100 and the CAC 40. Only the S&P 500 provides any competition – up 6 per cent. |
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rffrydr
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| Posted: Mon May 14, 2012 2:43 pm Post subject: |
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Economist: "Europe's Achilles Heel"
| Quote: | ..the euro zone needs to do a lot of hard things. Our list would include at the very least: in the short term, slower fiscal adjustment, more investment, looser monetary policy to promote growth and a thicker financial firewall to protect the weaklings on the periphery from contagion (all of which the Germans dislike); in the medium term, structural reforms to Europe’s rigid markets and outsize welfare states (not popular in southern Europe), coupled with a plan to mutualise at least some of the outstanding debt and to set up a Europe-wide bank-resolution mechanism (a tricky idea for everyone). It is an ambitious agenda, but earlier this year, with the Italians, Spanish and Greeks all making some hard choices and ECB money flushing through, the politics seemed possible.
Now they have lurched into dreamland. France is the most obvious example. Mr Hollande is right that growth would transform Europe’s prospects, by making debt more manageable, restoring banks and curtailing unemployment. But that truth is undone by two falsehoods. Although he pays lip-service to fiscal consolidation, he has, above all, promised to spend and tax his way out of the crisis, leaving French voters with the fantasy that the rich can pay and that their own hardship will be limited. And he has told them that liberalism, privatisation and deregulation are to blame for Europe’s crisis: France is now committed to the idea of sheltering behind the very barriers to enterprise that have made its economy uncompetitive.
In the short term Mr Hollande should be able to find a compromise with Mrs Merkel: a growth pact could be added to the fiscal one. There is also indeed a good case for Germany doing more to boost demand. But Mr Hollande will have to countenance reform all the same, because he needs a credible medium-term plan to pay for welfare spending without resorting to borrowing. Moreover, as its neighbours embrace reform, France will have to join them or see unemployment grow and wages stagnate. How wonderful it would be if a cut in interest rates, 60,000 extra teachers and some new roads could spare the French from all this. But that growth fairy does not exist. |
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rffrydr
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| Posted: Fri May 04, 2012 7:20 am Post subject: |
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TMM on the PMIs coming out of europe:
| Quote: | | At the aggregate level eurozone composite PMI is still only implying about -0.3% Q/Q for Eurozone GDP which is obviously not great, but it's not enough to drag the rest of the world down. TMM think you'd need to see -0.5 to -0.6% QoQ for it to start having an effect. The key thing is not to be paralysed by the shock value of Spanish or Italian PMIs on a low 40-handle. These are not surveys with a particularly long history they likely have the same X-12 2008/9 crisis echo problem with their seasonality and as they only go back to mid-2005 there are not enough crisis-free points to actually figure out a seasonal adjustment factor that is "clean" (like the NAPM have done for ISM). Finally, it is worth pointing out that the "50-level" does not correspond with 0% GDP even if that is what some lazy interpreters would like us to believe. |
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HenryTo
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rffrydr
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| Posted: Thu Mar 22, 2012 9:12 am Post subject: |
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rffrydr
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| Posted: Wed Mar 21, 2012 9:38 pm Post subject: |
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Listened to that this morning....very "professorial" and aloof--old. I don't think he really knew what was being "priced in" last Fall. Black Swans and f(x) don't go together very well.
http://media.bloomberg.com/bb/avfile/News/Surveillance/vn6bTSoiPYoU.mp3
"Balance of Trade" is kinda a fiction if you're importing from your own "country." Serious? Obviously. Yet they're plugging away at it.
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HenryTo
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rffrydr
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| Posted: Tue Mar 20, 2012 2:57 pm Post subject: |
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ML Europe High Yield Constrained Index +13.5% YTD.
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