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Yashi

Monday, November 14, 2011

The Big Picture

The Big Picture

Link to The Big Picture

10 Monday PM Reads

Posted: 14 Nov 2011 01:30 PM PST

Here is your afternoon train reading:

• Buybacks Surge as S&P 500 Trades at Discount (Bloomberg)
• Could India Go the Way of Greece and Italy? (The Street)
• Supreme Court to hear dispute on health care law (USA Today)
• Investor anthropology and the hegemony of technical analysis (Interloper)
• Spotlight Fixed on Geithner, a Man Obama Fought to Keep (NYT) see also The Wonk Who Slays Washington (Daily Beast)
• Jeff Bezos Owns the Web in More Ways Than You Think (Wired)
• Neanderthal Neuroscience (Discover)
• The Quiz Daniel Kahneman Wants You to Fail (Vanity Fair) see also The Backfire Effect (You Are Not So Smart)
• New Documentary Says Gulf Oil Spill Crisis Isn’t Over (Forbes)
• Monoculture: How Our Era's Dominant Story Shapes Our Lives (Brain Pickings)

What are you reading?

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hat tip Demographic of One


Volume

Posted: 14 Nov 2011 01:04 PM PST

Consolidated NYSE volume today was the slowest since the Friday before the Memorial Day weekend.


A Year in New York

Posted: 14 Nov 2011 01:00 PM PST

Living in New York I’d grab my Canon 7D, or S95, and shoot footage of what was going on around me. It seemed like a never ending project and you could stay filming life in New York for a long time. But eventually I put my camera down and started to edit. Here’s the end result, it’s a bit rough and ready but that’s life in the Big Apple I guess.

A Year in New York from Andrew Clancy on Vimeo.

Update: The video has gotten an amazing response though people have rightly asked where is the footage of other aspects of New York life like the Yankees or certain neighborhoods and parts of the city. I think I should’ve called it My Year in New York! I couldn’t feature every part of the New York story, just the parts I experienced while I had my camera. If it’s not in the video it doesn’t mean I didn’t enjoy it!

Video
Turn up the volume or put your in earphones for the beautiful song ‘We Don’t Eat’ by Irishman James Vincent McMorrow. The song is available as a free download on Amazon during November for U.S. customers t.co/​gagdygsv

Hat tip Litman Live


Check out the “Technocrats” CV’s

Posted: 14 Nov 2011 12:00 PM PST

Kiron Sarkar is an investor and advisor in London. Formerly in the M&A dept of N M Rothschild in London, he was head of M&A of Rothschild (Hong Kong) and worked on their international privatisation team. He worked as privatisation adviser to the UK Governments Know How Fund. Most recently, he was European Head of Media, Tech and Telecoms at CIBC World markets. Kiron has acted as a lead adviser in respect of over US$150bn of deals and has worked globally in both developed and emerging markets.

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Japan’s economy expanded for the 1st time in 4 Q’s last Q. GDP rose by an annualised rate of 6.0% in the 3rd Q, the fastest rate in 1 1/2 years and in line with forecasts. However, GDP is expected to decline significantly this Q;

China is to allow foreign firms to raise equity in their markets, though no timetable has been set. I would expect a number of multinationals, in particular, to take advantage of this and demand from local investors should be positive, given their current alternatives;

The Chinese yield curve is widening and expected to widen further.

Suggests that the current monetary tightening will be relaxed (through lower reserve ratio requirements for banks), especially as “official”

inflation was 5.5% in October (and expected to decline further), from 6.5% in July;

President Obama is pursuing a 9 country (including the US) Trans Pacific Partnership (excluding China) within 1 year. Japan, Mexico and Canada are also expected to enter into discussions. Should be positive for trade, but numerous problems remain, especially in agriculture. A deal of this kind will extend US influence in the region, which will be welcomed by countries in the region, given their concern about increasing Chinese dominance;

Indian inflation continues to be a problem – it exceeded 9.0% for the 11th month. The wholesale price index rose to 9.73% in October YoY, sightly higher than the 9.72% in September. Whilst the BoI is not expected to raise rates further, there is no indication that will decline this year either. Forecasts are for inflation to reduce to 7.0% by March next year – unlikely;

President Obama continued to raise the issue of the undervalued Yuan – the Chinese just ignore these comments;

The EU’s Sept industrial production declined -2.0% MoM (+2.2% YoY). EU economic data continues to decline;

Amusingly, it appears that the EFSF had to buy some E300mn of the E3bn of bonds it sold last week to raise funds for the next tranche of the Irish bail out – just goes to prove what a joke the EFSF is. The market will not wait forever. However, I have no indication that the Euro Zone has a plan B;

Italian 10 year bond yield have declined by over 100bps, to 6.35%. A 5 year E3bn auction is scheduled for today. The bonds were sold at a yield of 6.29%, up from 5.3% in October, though the bid to cover ratio was marginally better at 1.469 times. Mr B resigned on Saturday, but rumours of his demise are premature, I fear. The cruise line crooner looks as if he will make a comeback. Super Mario (Mr Monti) has taken over to establish the 2nd technocrat Government in the Euro Zone.

Interestingly, the Italian bank Unicredit is rumoured to be considering raising E7.5bn in new equity;

Mrs Merkel is attending her party conference today – she is suggesting further political union, which to code for “fiscal union”. She has already proposed EU Treaty changes – will and must happen. The time for Euro Bonds is coming – sooner rather than later. However, such measures will be accompanied by tough, predetermined and verified fiscal targets being established, which Euro Zone countries will have to adhere to;

The Head of  Germany’s Bundesbank continues to object to monetary intervention by the ECB and, in particular, to enable the ECB to act as a lender of last resort. He also rejected the idea of the ECB capping interest rates for Euro Zone countries. All fine and great in theory Mr Weidmann, but complete nonsense in the rea world – there is no alternative. There is no Euro Zone institution that can intervene effectively, other than the ECB – forget the EFSF. If the ECB does not intervene and, in effect, implement QE, there will be NO EURO for the ECB to worry about, which will be seriously bad news for Germany.

Will someone please teach the Germans about financial/market issues – they really continue to be completely  dogmatic, unrealistic and, in my humble opinion, completely stupid – much better to accept that its inevitable and try and work on measures to make sure individual countries meet their fiscal obligations, rather than keep bleating nein, nein, nein. Recently, Germany has had to U turn on virtually every occasion. A German friend of mine, may I add, agrees with my view that, in general, German’s are financially illiterate. However, interestingly, Mr Weidmann did not dismiss the idea of ECB rates falling below 1.0%, a position they have held in the past – at least he’s learnt one thing;

UK data, to be released this week, is likely to confirm that the UK economy continues to underperform. GDP forecasts are expected to be reduced to just 1.0%, from nearly double that figure previously.

However, inflation is set to decline sharply. As you know, I expect QE to be increased to well above the current £275bn in early 2012;

Coming to a crunch time in the Euro Zone. Personally, I continue to believe that the ECB will conduct QE, in spite of German objections, accompanied by a tight centally controlled and constantly verified fiscal programme. Subsequenty Euro Bonds.

The rise of the technocrats in Italy and Greece has certainly amused me – were not these people intimately involved in the EU and ECB, both of whom have been raging disasters. Just goes to show how bad Euro Zone politicians are, when these Technocrats are considered to be better.

In the US, focus on the Super Committee will be the key issue. The bad news is that you have to listen to politicians.

Euro weaker today – negative for markets.

Got to rush for the airport.

Kiron Sarkar


iTunes Music Cloud Service Launches

Posted: 14 Nov 2011 11:30 AM PST

Apple released a new version of iTunes that includes iTunes Match ($24.99/year). Its part of Apple’s iCloud service. Music match will scan the content of your iTunes library and match it to the ITMS selection. Music that doesn't match is uploaded — and you end up with all of your music in the Apple cloud, playable on any iOS or Apple (or even PC) device:

Now you can download music and TV shows you've previously purchased to all your devices. When you buy from iTunes, iCloud stores your purchase history. So you can see what you've bought — no matter which device you bought it on. You can access your purchase history from the iTunes Store on your iPhone, iPad, iPod touch, Mac, PC, or Apple TV. And since you already own the songs, albums, or TV shows in your purchase history, you can tap to download them to any of your devices.

Hat tip The Loop

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What’s going on

Posted: 14 Nov 2011 09:52 AM PST

I wanted to address a few headlines that are pressuring markets today. The first one was that Merkel’s CDU party voted to give countries in the euro the option to leave if they choose. This is more formality than anything because a country can leave only on a voluntary basis and can’t be pushed out by others. The 2nd headline was from German FM that said the ESM will not happen in 2012. It was originally scheduled to begin operation in 2013 but a few weeks ago European officials had hoped to bring it forward to 2012. I say, they can’t even agree on the EFSF let along add another mechanism to their bailout arsenal. The 3rd headline was Moody’s putting Credit Suisse on review for a downgrade following their earnings release a few weeks ago. Irrespective of these headlines, the market is behaving as it should based on the poor action in European bond markets today, particularly from Spain.


A Global View of the Housing Bubble

Posted: 14 Nov 2011 08:00 AM PST

Interesting chart from (of all places) McKinsey, circa October 2009:

“From 2000 through 2007, a remarkable run-up in global home prices occurred (see chart). But that trend has reversed abruptly. In 2008, the value of US residential real estate fell 10 percent; the global average fared only somewhat better, declining by almost 4 percent. We estimate that falling home prices erased more than $3.4 trillion of household wealth in 2008.”

The chart below reads to me as having regular cycles, oscillating within a range. But something happened in the early 2000s to have that range explode upwards.

(Please note the title is from McKinsey, I have long stated this was a credit bubble –not a housing bubble)

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Source: McKinsey Quarterly

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Question: How did Europe and Asia and Canada all have a simultaneous housing boom as big if not bigger than that of the US?

Were the Australians compelled to follow the CRA? Did Barney Frank influence the Belgians? Were the US GSEs effecting policy in the UK?

Or might some other factors — like ultra-low rates, excess leverage, demand for junk AAA-rated paper, misaligned incentives, and/or derivatives have been at play?

Discuss…


Warren Buffet Says Euro Zone Has “Fundamental Flaw”

Posted: 14 Nov 2011 07:30 AM PST


Source:
Warren Buffet Says Euro Zone Has "Fundamental Flaw"
Credit Writedowns, November 14, 2011


ECB purchases/next week will include step up

Posted: 14 Nov 2011 07:17 AM PST

For purchases settled as of Friday Nov 11th, the ECB bought 4.478b euros of sovereign bonds, down from 9.52b for the week prior. Because this is only measuring actual settlement of the transactions, it doesn’t include the aggressive buying last Thursday and Friday following the spike in yields on Wednesday. Thus, we have to wait until next Monday to see what will likely be a large step in the amount of their purchases. All will be sterilized though and the ECB will remain as being seen as a non money printing central bank institution, in contrast to their friends at the Fed, SNB, BOE and BoJ.


10 Monday AM Reads

Posted: 14 Nov 2011 06:35 AM PST

Here are your morning reads to start the week :

• Gold Traders Most Bullish Since 2004 on Debt Crisis (Bloomberg)
• Is Europe On The Verge Of Another Great Depression – Or A Great Inflation? (Baseline Scenario)
• Governments Using Swaps Emulate Subprime Borrowers as Wall Street Victims (Bloomberg) see also Cities Hit as Funds From Bonds Pay Other Bills (WSJ)
• Shanghai Gets Supersized (Smithsonian Magazine)
• Google's Lab of Wildest Dreams (NYT) see also Tech Firms Find It’s Not Easy Holding Green (WSJ)
• This 28-Year-Old’s Startup Is Moving $350 Million And Wants To Completely Kill Credit Cards (Business Insider)
• Newspapers' Digital Apostle (NYT) see also Ad Spending Loses Steam (WSJ)
• Lampert's Fix for Sears Becomes Not Your Parents' Department Store: Retail (Bloomberg)
• Lawrence Lessig: Reclaiming the Republic (Boston Review)
• A Gold Rush of Subsidies in Clean Energy Search (NYT)

What are you reading?
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