Global Macro

7

Yes or no to Eurobonds?

Billionaire US investor George Soros gave an interview  to German Magazine Der Speigel yesterday in which he outlined his thoughts on the European Crisis. I have included the full interview transcript at the bottom of this post. In the interview Soros was scathing about the lack of leadership across Europe claiming that: “The politicians have not really tried

5

Is recession priced in?

Nope. Not even a bit. Sorry. That doesn’t mean that whatever it is that’s coming for Western growth isn’t priced in, but it definitely is not recession.  Needless to say, then, if you think a recession is coming then ipso facto markets are going much lower as well. The Economist has a very useful take on

9

Europe’s austerity GDP

A couple of updates for Europe over the weekend. The Italian parliament ratified the first stages of a larger austerity plan to speed up budget cuts. Italy’s cabinet has adopted sweeping austerity measures to cut the fiscal deficit by 45.5 billion euros ($64.8 billion) and balance the budget in 2013, a year ahead of its previous

18

French & Japanese GDP crash

Not a great week for the French to report that Q2 GDP was 0.0% against expectations of 0.3% and from 0.9% in Q1 2011. But that’s just what happened as the the screenshot from my Bloomberg above shows. The year on year data was equally disappointing coming in at 1.6% against market expectations of 2%

6

Shorting ban on Euro banks

The merry-go round of Europe continued last night. The CDS spreads on banks were up and down: French bank credit default swaps have recovered from early morning wides on Thursday but Societe Generale is still much wider than the previous session’s closing levels. BNP Paribas five-year credit default swaps reversed early losses to trade 7.5bp

6

Eyes back to Europe

As I said on August 1st: With the economic world firmly focused on the US debt debacle this week it is likely that Europe will slip off the radar a little. I suspect, as many people do, that for the US there will be an eleventh hour resolution followed by a short lived bounce in

5

Hunting France

Sentiment is an ephemeral beast and yesterday’s hopeful market bounce turned back into carnage overnight, not too strong a word, as markets decided that it is the looming global economic weakness that is the more important driver not the Fed’s friendly words. At the close of play the FTSE’s 3% fall looks good compared to 5% falls

25

Limits to growth

And so, I was right and wrong. Or perhaps, it is wrong and right. The FOMC has decided against a new round of QE. However, it has also signaled that it will do something, presumably another round of QE. Global equities bounced anyway from their extremely oversold condition and enjoyed a melt-up into the close.

5

The Ice Age rolls on

Societe Generale’s Albert Edwards has provided an insightful, but bearish, view of the state of the global economy. Here are some key extracts (full report below): As we see a short-lived economic recovery failing only two years into the cycle and a plunge back into recession, we remind investors that this was exactly the Ice

12

Trichet’s bazooka

The ECB’s bond market intervention did its job for Italy and Spain last night, but as I expected we also saw some risk shipping. While periphery bonds fell off, French bonds started wearing the risk and we saw French sovereign credit default swaps hit a record high of 160 basis points overnight. As I have

7

Europe flails

I thought I would provide some updates on Europe given that the response to the current turmoil is moving quite quickly, and there have been some major announcements  since I wrote my previous post late last night. Firstly we saw a statement from some EU leaders re-iterating …. well, everything. President Sarkozy and Chancellor Merkel

21

G7 spouts twaddle

Here is the full statement of the G7 released recently: In the face of renewed strains on financial markets, we, the Finance Ministers and Central Bank Governors of the G-7, affirm our commitment to take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence. We are committed

72

Crisis of the West

In one very important sense, the Standard & Poors downgrade of the United States credit rating is spot on. The debt ceiling debacle that preceded the ratings action showed an extraordinarily destructive political culture at work in Washington. To take the Federal Government within inches of default for no apparent reason was beyond infantile and

11

Europe’s end game

Last week there was a hint that the Europeans may have been finally grasping at a real resolution to their long running economic crisis. The speed at which the EFSF guarantee of the smaller periphery nations had led to contagion in Italy and Spain came as a surprise to the Euro-elite and under pressure from the

2

Data Vault

Australian Data At was another big week in Australia with the a number of the key monthly releases showing further deterioration in the non-mining sectors of the economy while the trade balance was a shinning light with another strong performance. The RBA also updated their medium term forecasts which are looking increasingly optimistic relative to reality.

20

Anatomy of a Crash

The mainstream media (MSM) have repeated verbatim their headlines of drastic downturns in stockmarkets, but what’s really going on around the world? In this post I want to illustrate the anatomy behind worldwide market ructions, placing them in context to the 2007/08 crash using some macro charts, and how its not just stock markets “suffering”.

31

Another Crisis – Live

It looks as if European crises have now become a bi-monthly event with the previous one just 2 weeks ago. Once again the Daily Telegraph UK has supplied insomniac Schadenfreudalists with some riveting entertainment with another semi-live blog of the unfolding drama. Latest update 10.00 Italy‘s GDP figures are out, and they’ve come in as expected. Official

34

The centre cannot hold

It’s quaint you know. Analysts faith in the system, I mean. There are a couple of really smart articles out this morning from really smart people about really smart things. And they’re making reassuring noises that there is no recession coming and that you should stay in your trades, that yesterday’s money making strategy is

18

Europe’s dominos

There is a now a well-worn path beaten out by European nations as they approach the alter of the markets to plead that they “are different” from the previous cast that have just made the same trek. The speech given to market gods  is always the same, “we are different”, “the market underestimates us”, “we

4

The OECD has had one too many ouzos

As I have stated many times the current plan of pushing austerity onto the indebted periphery of Europe is not a sustainable solution because the current macroeconomic environment of the EMU cannot provide an auto-stabilising mechanism that will compensate them for the lack of credit being issued into their economies. While Europe continues on this

39

Turning a soft landing hard

Sigh. I apologise for the ceaseless battery of bearish outlooks this morning but damn, that’s the way the world is going, and I’m not going to “pull a Yardney” and pretend it isn’t so that yours and my hard earned capital goes up in smoke. This morning we have two excellent pieces on the debt-ceiling

14

Europe plans its next crisis

With the economic world firmly focussed on the US debt debacle this week it is likely that Europe will slip off the radar a little. I suspect, as many people do, that for the US there will be an eleventh hour resolution followed by a short lived bounce in the world markets. Once that bounce

6

Data Vault – The data that mattered this week

Australian Data A big week in Australia with the PPI and CPI data probably scaring the heck out of RBA staffers mid-week but House Price data and RBA Credit Aggregates at week’s end reminded us all that whatever you think of the mining boom and its long-term impact, the reality is that Australian households remain in

9

Out of time

While markets remain fixated with the debt ceiling debacle in America, I am more concerned with Europe. We’ve had just two days of gains in European sovereign bonds and already the yield blowout has resumed. Both short term and long term Italian bonds were under pressure overnight: The same for Spain: It was the same

24

Uncle Sam’s self sabotage

I like to think of myself first and foremost as a behavioural economist – someone who tries to understand how our “humanness” impacts on our economic decisions and intereacts to create the economy in which we live. So I’m always thinking not as people as rational actors but as emotional beings who have biases and aversions

38

Peak everything

Below find Jeremy Grantham’s latest quarterly newsletter. In it he draws out his thesis that the world stands at the edge of peak everything. Here is his executive summary on likely outcomes: Summary We humans have the brains and the means to reach real planetary sustainability. The problem is with us and our focus on

17

Sane meets insane

It did not get a lot of attention (other than H&H), but there were two very significant plays by our bigger mining companies last week. Fortescue Metals announced it would be looking at raising Dim Sum bonds, i.e. debt denominated in yuan, and would sell in yuan. This would remove currency risk and reduce transactional costs.