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luni, 28 noiembrie 2011

Photo of the Day: What is the First Family Reading?

Your Daily Snapshot for
Monday, Nov. 28, 2011

Photo of the Day: What is the First Family Reading?

On Saturday, President Obama and his daughters, Sasha and Malia, visited a local bookstore in support of Small Business Saturday.

President Barack Obama and daughters Sasha and Malia shop at Kramerbooks & Afterwords Cafe in Washington, D.C., Saturday, Nov. 26, 2011. (Official White House Photo by Pete Souza)

Seth's Blog : Who comes on opening night?

Who comes on opening night?

I understand the folks who wait for a creative work to come out in paperback, to be free on TV, the ones that get the half-price tickets at TKTS near the end of the run. They're cheap, at least when it comes to this particular sort of art.

I understand the audience that waits to read the reviews, that wants to hear from friends and anointed critics before they spend their money. They're careful.

So who comes on opening night? No discounts, no reviews, no warning...

The patrons come. For them, part of the attraction of art is that they don't know in advance if they're going to like it. They come for a simple reason: it feels good to support something because they can, not merely because it's a good value.

And the true fans come. They come because the artist has earned their trust. "If you made it, that's good enough for me," they say. They come because to not come is to not be a true fan, with all that entails.

Opening night is vitally important, of course. The critics come, word of mouth begins, the producers find enthusiasm and the guts to start work on their next play.

I guess the real question is: who would come to your opening? And the follow up is: what would happen after that?

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duminică, 27 noiembrie 2011

Mish's Global Economic Trend Analysis

ICAP Testing Trades In Greek Drachma Against Dollar and Euro

Posted: 27 Nov 2011 04:55 PM PST

ICAP Plc, the world's largest inter-dealer broker (one that carries out transactions for financial institutions rather than private individuals), is now Testing Trades In Greek Drachma Against Dollar, Euro

ICAP Plc is preparing its electronic trading platforms for Greece's potential exit from the euro and a return to the drachma, senior executives at the inter-dealer broker said Sunday.

ICAP is the latest firm to disclose such preparations, joining the growing ranks of banks, governments and other key players in the global financial system whose officials are worried enough about the stability of the common currency to be making contingency plans for a possible break-up.

The firm has been testing systems that would allow dealer banks to trade the drachma against both the dollar and the euro, the ICAP executives said, cautioning that the measures taken in recent weeks were precautionary. They said the currency pairs would not be accessible for trading unless required by market events, and may never be used.

Certain decisions, such as how many decimal places would be used when representing the drachma's exchange rate, have not been finalized. But ICAP said the currency templates could be tweaked depending on dealer requests, and that the project could be used as a roadmap for how to prepare for an outcome involving multiple currencies leaving the euro. So far, testing has only involved the drachma, no other currencies.

ICAP has reloaded the drachma templates for spot foreign exchange and derivatives called nondeliverable forwards that were removed from the system when Greece's old currency was replaced by the euro in 2001.

A Barclays Capital research report last week showed that nearly half of 1,000 investors surveyed thought at least one country will leave the euro in 2012.

Separately, a Bank of America Merrill Lynch research report Friday titled: "Eurozone: thinking the unthinkable," said a partial union with only some countries exiting the euro was the "most probable scenario" out of all the breakup possibilities. But the researchers stressed that while the currency implications were "worth examining," a breakup of the euro was still a far-fetched event.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Still More Inane Attempts to Leverage EFSF; IMF to the Rescue?

Posted: 27 Nov 2011 09:50 AM PST

Politicians never give up on bad idea except by death or removal from office.

In spite of obvious failures to leverage the EFSF fund (still without rules as to how the fund even works), French president Nicolas Sarkozy is back at it, hoping to create a three-fold expansion of the EFSF via tradeable insurance certificates with guarantees on as much as 30 percent of the bonds.

Bloomberg reports Euro Rescue Fund May Insure 30 Percent of Bonds

The European Financial Stability Facility may insure bonds of troubled countries with guarantees of between 20 percent and 30 percent of each issue to be determined in light of market circumstances, according to EFSF guidelines to be considered by finance ministers this week.

The insurance would be in the form of tradable partial protection certificates, to be issued by an independent Luxemburg-based special purpose vehicle, the guidelines show. The step is one of several new tools including setting up private funds with investors and selling short-term debt aimed at increasing the EFSF's power to combat the debt crisis.

Euro-area finance ministers are due to meet in Brussels on Nov. 29 as governments bid to regain the confidence of financial markets.

The proposal to attach guarantees of up to 30 percent of future EFSF bond issuances' worth may create a threefold expansion of the 440 billion-euro ($583 billion) fund, according to the guidelines distributed to lawmakers in Berlin. The EFSF's pool of potential aid would also be increased by setting up so- called credit investment funds with private investors to buy the bonds of euro-region states that struggle to sell their debt.

French President Nicolas Sarkozy has said that the bailout fund might be worth $1.4 trillion after European governments agreed last month on steps to leverage existing guarantees as much as fivefold. European leaders are next due to hold a summit on Dec. 8-9.

The new instruments may need to be supplemented further, German Finance Minister Wolfgang Schaeuble told reporters in Berlin on Nov. 25 following talks with Dutch Finance Minister Jan Kees de Jager and Finnish Finance Minister Jutta Urpilainen.

Leaders will seek a "separate path" of help from the International Monetary Fund to boost the EFSF, Schaeuble said. IMF help must be "substantial enough to help Italy and Spain," de Jager told reporters, saying that talks on creating credit investment funds had run into "problems."

Given there are few details on the proposal it's difficult to say precisely how this will fail, but fail it will, more than likely within a few days of announcement.

Assuming the guarantees are separately tradeable as stated, the guarantees themselves may (or may not) trade at a reasonable valuation, but what about the underlying junk?

Also recall the bigger the leverage, the faster the EFSF will eat up its principle.

Then what?

IMF to the Rescue?

Not a single one of these clowns is taking into consideration the fact the German Supreme court has said "no more". What happens when the EFSF is quickly consumed on Portuguese, Spanish, and Italian debt?

Is that when the IMF is supposed to come to the rescue? Or before?

In Latest Rumor Sees €600 Billion Bailout Of Italy From US, Pardon IMF, ZeroHedge says Forget about it.

The European desperation is palpable ahead of the EURUSD open in a few hours, which has to deal with the aftermath of the Friday afternoon downgrade of Belgium, the junking of Portugal and Hungary, and the prospect of an imminent downgrade of AAA-stalwarts Austria and France. So what does Europe do instead of actually proposing the inevitable debt repudiation that is the only and final outcome? Why more rumors of course.

To wit: last night saw the preannouncement of Welt am Sonntag indicating that in order to bypass the lengthy process of treaty changes, Europe would instead proceed with bilateral agreements that would somehow enforce fiscal stability and convince the market that European states would follow the German leader. Well since that is sure to have absolutely no impact, overnight Italian La Stampa is out with a fresh new rumor which cites "IMF sources" according to which the US-headquartered and funded organization would provide a €600 billion loan to Italy at 4-5%. In other words, Uncle Sam, in his role as primary funding agent of the IMF would lose massive amount of money on the "market to fair value" arbitrage, only to bail out the latest European domino.

From Dow Jones:
The International Monetary Fund could offer Italy between EUR400 billion and EUR600 billion in financial support to give Italian Prime Minister Mario Monti a window of 12 to 18 months to enact reforms sufficient to restore waning market confidence in Italy's ability to repay its debt, Turin daily La Stampa reported Sunday, citing IMF sources.

The IMF "Italy package" would consist of loans at an interest rate of between 4% and 5%, compared with the 7% to 8% the country paid at its most recent bond auctions, the report says.

However, ZeroHedge also points out a Dow Jones wire from September ...

The IMF board of governors agreed in December to roughly double quotas from around $375 billion to around $750 billion. But out of the 187 member countries, only 17 have legally accepted the increase, including Japan, the U.K. and Korea. Most of the countries with the biggest quotas, such as the U.S., China and Germany, haven't yet gone through the legal process, such as parliamentary or congressional approval, need to hand over their promised dues.

Think this Congress will throw more money at the IMF? I don't.

Thus, once again, all we have for another week is more nonsensical rumors and a rehash of leverage ideas that have already failed in the market.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Seth's Blog : The Confusion of Logistics and Strategy Problem

The Confusion of Logistics and Strategy Problem

So widespread, it deserves an acronym: CLASP.

You have a clasp when people criticize your new strategy because they don't know how to execute it.

Yes, a new strategy has to be executable, or it's merely a wish. No, the logistics behind it don't have to be tried and true. It's one job to dream up a strategy and another job to execute it. Whining about how hard the logistics are is just fine, but don't conflate this with thoughtful feedback about whether your strategy makes sense.

Just about every great new project couples a brilliant strategy with impossible logistics that somehow get handled.

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sâmbătă, 26 noiembrie 2011

Mish's Global Economic Trend Analysis

House of horrors: Prices Falling in 8 of 16 Measured Countries; Is the US Undervalued?
Merkozy Proposes Quick, New, Drastic "Stability Pact" to Fight the Euro Zone Sovereign Debt Crisis; Maastricht Treaty Trashed by Committee
In Fiery Protest Against Fractional Reserve Lending, Disgruntled Ex-Employee of Chairman of Rural Bank of New Zealand Sets Car on Fire in Mall

House of horrors: Prices Falling in 8 of 16 Measured Countries; Is the US Undervalued?

Posted: 26 Nov 2011 08:02 PM PST

The Economist is frequently a mixed bag. Here is an article on the global housing market that pretty much hits the right spot. Please consider House of horrors, part 2

The bursting of the global housing bubble is only halfway through.

MANY of the world's financial and economic woes since 2008 began with the bursting of the biggest bubble in history. Never before had house prices risen so fast, for so long, in so many countries. Yet the bust has been much less widespread than the boom. Home prices tumbled by 34% in America from 2006 to their low point earlier this year; in Ireland they plunged by an even more painful 45% from their peak in 2007; and prices have fallen by around 15% in Spain and Denmark. But in most other countries they have dipped by less than 10%, as in Britain and Italy. In some countries, such as Australia, Canada and Sweden, prices wobbled but then surged to new highs. As a result, many property markets are still looking uncomfortably overvalued.

The latest update of The Economist's global house-price indicators shows that prices are now falling in eight of the 16 countries in the table, compared with five in late 2010.

Home Price Indicators

To assess the risks of a further slump, we track two measures of valuation. The first is the price-to-income ratio, a gauge of affordability. The second is the price-to-rent ratio, which is a bit like the price-to-earnings ratio used to value companies. Just as the value of a share should reflect future profits that a company is expected to earn, house prices should reflect the expected benefits from home ownership: namely the rents earned by property investors (or those saved by owner-occupiers). If both of these measures are well above their long-term average, which we have calculated since 1975 for most countries, this could signal that property is overvalued.

Based on the average of the two measures, home prices are overvalued by about 25% or more in Australia, Belgium, Canada, France, New Zealand, Britain, the Netherlands, Spain and Sweden (see table). Indeed, in the first four of those countries housing looks more overvalued than it was in America at the peak of its bubble. Despite their collapse, Irish home prices are still slightly above "fair" value—partly because they were incredibly overvalued at their peak, and partly because incomes and rents have fallen sharply. In contrast, homes in America, Japan and Germany are all significantly undervalued. In the late 1990s the average house price in Germany was twice that in France; now it is 20% cheaper.

This raises two questions. First, since American homes now look cheap, are prices set to rebound? Average house prices are 8% undervalued relative to rents, and 22% undervalued relative to income (see chart). Prices may have reached a floor, but this is no guarantee of an imminent bounce. In Britain and Sweden in the mid-1990s, prices undershot fair value by around 35%. Prices in Britain did not really start to rise for almost four years after they bottomed.

....

Jingle mail

American prices fell sharply, even though homes were less overvalued than they were in many other countries, because high-risk mortgages and a surge in unemployment caused distressed sales. In most other countries, lenders avoided the worst excesses of subprime lending, and unemployment rose by less, so there were fewer forced sales dragging prices down. America is also unusual in having non-recourse mortgages that let borrowers walk away with no liability.

An optimist could therefore argue that our gauges overstate the extent to which house prices are overvalued, and that if markets are only a bit too expensive they can adjust gradually without a sharp fall. It is important to remember, however, that lower interest rates and rising populations were used to justify higher prices in America and Ireland before their bubbles burst so spectacularly.

Another concern is that Australia, Britain, Canada, the Netherlands, New Zealand, Spain and Sweden all have even higher household-debt burdens in relation to income than America did at the peak of its bubble. Overvalued prices and large debts leave households vulnerable to a rise in unemployment or higher mortgage rates. A credit crunch or recession could cause house prices to tumble in many more countries.

Implications

That analysis is about as good as mainstream media gets. However, The Economist fails to address the global implications.

What happens if home prices plunge (and they will) in Australia, Belgium, Canada, France, New Zealand, Britain, the Netherlands, Spain and Sweden?

How will those central banks react?

Except for France which has no direct control, I will tell you how. Central banks will cut interest rates and/or launch various quantitative easing programs.

All other things being equal, that is net US dollar supportive.

Moreover, if prices and transaction volumes collapse in China (and they will), what will that do to the demand for commodities? In turn, what would falling demand for commodities in China do to the economies of Canada and Australia?

The Economist asks "Since American homes now look cheap, are prices set to rebound?"

That is a good question.

The Economist answers (correctly) "Average house prices are 8% undervalued relative to rents, and 22% undervalued relative to income (see chart). Prices may have reached a floor, but this is no guarantee of an imminent bounce."

However, The Economist fails to discuss the possibility that US rents are artificially high due to people seeking rental properties after being foreclosed on.

Moreover, income statistics are very skewed. Most of the gains in income are on the "high end", not people in financial trouble.

Still, as I said, this article is about as balanced as one can expect from mainstream media. It provides much opportunity for further commentary (both positive and negative) from bloggers.

The Economist correctly states "The bursting of the global housing bubble is only halfway through."

However, it's the non-discussed ramifications that are important.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Merkozy Proposes Quick, New, Drastic "Stability Pact" to Fight the Euro Zone Sovereign Debt Crisis; Maastricht Treaty Trashed by Committee

Posted: 26 Nov 2011 04:43 PM PST

German chancellor Angela Merkel and French President Nicolas Sarkozy proposed a "quick new stability pact" that allegedly will bypass the need for treaties. However, there is already disagreement over the role of the ECB.

Please consider Germany, France plan quick new Stability Pact

German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning more drastic means - including a quick new Stability Pact - to fight the euro zone sovereign debt crisis, Welt am Sonntag reported on Sunday.

The report, which echoed a Reuters report on Friday from Brussels, quoted German government sources as saying that the crisis fighting plan could possibly be announced by Merkel and Sarkozy in the coming week.

The report said that because it would take too long to change existing European Union treaties, euro zone countries should avoid such delays be agreeing to a new Stability Pact among themselves - possibly implemented at the start of 2012.

Desperate Logic

Excuse me! There does not need to be treaty changes because a subset of the treaty signers can agree among themselves to trash it? Exactly what kind of desperate logic is that?

Among the countries in the Stability Pact there would be a treaty spelling out strict deficit rules and control rights for national budgets.

The European Central Bank should also emerge more as a crisis fighter in the euro zone. The ECB is independent and governments cannot tell it what to do. But the expectations on the ECB are clear, Welt am Sonntag wrote.

"Based upon these measures, there should be a majority within the ECB for a stronger intervention in capital markets," Welt am Sonntag said. It quotes a central banker as saying: "If the politicians can agree to a comprehensive step, the ECB will jump in and help."

ECB to Jump in and Help?!

Excuse Me! Since when will Germany agree to that? Since when will the ECB agree to that?

The European Commission, the EU executive arm, put forward proposals on Wednesday to grant it intrusive powers of approval of euro zone budgets before they are submitted to national parliaments, which, if approved, would effectively mean ceding some national sovereignty over budgets.

This could lead to joint debt issuance for the euro zone, where countries would be liable for each others' debts.

Germany strongly opposes the joint issuance idea fearing spendthrift countries would piggyback on its low borrowing costs - meaning no gain for the virtuous and no pain for the sinners.

Maastricht Treaty Trashed by Committee

I see Germany does not agree to that. Does the ECB?

What about other countries that might not like to see the Maastricht Treaty trashed because a handful of countries agree to do just that?

This is an incredibly slippery slope, and hopefully the German Supreme Court puts an end to the idea before it gets too much further along.

As a side note, Merkel has lost her mind.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

In Fiery Protest Against Fractional Reserve Lending, Disgruntled Ex-Employee of Chairman of Rural Bank of New Zealand Sets Car on Fire in Mall

Posted: 26 Nov 2011 08:39 AM PST

The New Zealand Herald reports Fiery protest Against Fractional Reserve Lending 'Endangered Public'

A Bay of Plenty farmer who set a car alight in a protest in central Wellington this afternoon has been arrested and charged with arson.

The 40-year-old man set his car on fire in Wellinton's Cuba mall at about 1.30pm.

The man said in a video posted on Facebook that he was an ex-employee of the chairman of the Rural Bank of New Zealand.

"I've learnt a lot of stuff since then, and I've had enough. I'm gonna make this car disappear," he said.

He claimed that "fractional reserve lending is the root of all our problems" before walking to the boot of the car, which was filled with rubbish, with what appeared to be a lighter.

There were shrieks from by-standers as he was thrown backwards from the force of the explosion that followed.

He then threw flaming material back into the boot of the car before closing it.

He announced to shocked witnesses that the car was full of petrol and asked them not to put it out.

"I'm just waiting for police to turn up, I've made my statement."

Plum cafe owner David Fenwick said he heard a loud bang about 1.50pm and ran out of his cafe to see what was going on.

"Suddenly we heard an explosion, so I ran out the front and saw a red station wagon, and there was a fire behind it. I thought it was a street performance gone wrong."

Mr Fenwick ran inside to grab a fire extinguisher, and with a neighbour shop employee, put out the pile of burning rubbish.

"Unfortunately it took hold pretty fast....and the fuel tank exploded. And then it was just noxious smoke and a burning car in the mall on a lovely sunny day."

The fuel tank explosion took part of the body work off, and the car was now a charred wreck with blown-out windows, he said.

The man had spraypainted the message "what is fractional reserve banking...Google it" next to the car, he said.

The YouTube video does not show the explosion or the man's statement. This Facebook video does.

Warning: Harsh hanguage as the protester is blown backwards by the explosion he caused.

Please see "Fractional Reserve Lending is the Root of Our Problems"

I happen to agree with him. FRL is one of the root problems. However, he did not pick the best manner in which to protest, to say the least.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

India Talent Show - Warriors of Goja

Posted: 25 Nov 2011 10:02 PM PST

The 'Warriors Of Goja' blew away the audience of the Indian talent show Adhurs by chewing glass, breaking boards on each other's bodies, and smashing clay pots on their abs with axes, among other feats.

The group of Sikh men put on a stunning performance, showing remarkable endurance as they withstood beatings from wooden sticks and being run over by a car.

According to International Business Times, the Warriors of Goja won 300,000 rupees, or about $5,800 USD. However, they did not make it to the show's finals.

Ghost Town - Hashima Island, Japan

Posted: 25 Nov 2011 09:12 PM PST

The island was populated from 1887 to 1974 as a coal mining facility. It had 5,259 inhabitants and was made by the Mitsubishi Company. It was once the most crowded city in the world with 5,259 inhabitants, and then it got abandoned. Now the only life it has are small animals and some visitors.

The black and white photos add a sense of despair to the abandoned cityscape, I think the beautiful photographs in this gallery warrant a second look.

Source: buzzfeed

Banksy Shop Til You Drop Black Friday

Posted: 25 Nov 2011 08:29 PM PST

A new stencil that appears to be the work of famed street artist Banksy has been spotted in London, England. The work takes the phrase "shop till you drop" literally, depicting a shopper plunging from a high rise building.

Source: flickr

Casinos Around The World [infographic]

Posted: 25 Nov 2011 08:15 PM PST

Check out this really cool infographic about the Casino Industry. Vegas still leads the pack but it looks like it won't be long until the East takes over.

Personally, I've never signed up to an online casino but I must admit I have been tempted. Does anyone have any experience with this? Please leave your comments below."

The trends speak for themselves. Click on infographic to enlarge.

Via: Casino Top Lists

luni, 28 noiembrie 2011

Photo of the Day: What is the First Family Reading?

Seth's Blog : Who comes on opening night?

Who comes on opening night?

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duminică, 27 noiembrie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Seth's Blog : The Confusion of Logistics and Strategy Problem

The Confusion of Logistics and Strategy Problem

More Recent Articles

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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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