Archive - May 15, 2010

What do you think those bankers with perfect trading days in Q1 did with all the money they made? As Eli Broad said, "No one wants paper money — they want art.” This is the Fed's gift to these bankers.

"Last weekend, European policymakers finally moved decisively to contain increasing sovereign liquidity risks. However, the Euro remains under pressure as the focus shifts towards the FX implications of fiscal tightening and potential monetary expansion. After weighing up the growth and interest rate implications, as well as positioning, fair value and external balances, we decided to keep our EUR/$ forecasts at 1.35 flat in 3, 6 and 12 months. Beyond EUR/$ we discuss how to position in FX for continued strong cyclical activity across the world." Goldman Sachs

Amid last week's whirlwind media tour, in which the PIMCO dynamic duo of Gross and El-Erian were jointly talking up their book and providing useful insights on contagion, was this clip with the former Harvard investment officer from an interview with Bloomberg's Tom Keene. It is by far the most informative of all of El-Erian's recent media guest spots. Below are the highlights.

With the euro collapsing, all of Europe is on the brink, and as a result, every European country has now instituted some form of austerity measures. Hereby, we summarize what these look like to date. Unfortunately, we are confident the current batch of austerity will be materially insufficient with many more rounds of cutbacks to come. Looking across the Atlantic, the US has yet to initiate any reductions in its gargantuan budget deficit or governmental spending. And as can be seen its metrics are just as bad if not worse than most of Europe. Use this chart to get a sense of what the initial round of US austerity, when it strikes, will look like.

Yeah, yeah, yeah....

Finally

Straight from the pages of "How to utilize a good crisis"; a manual written by Rahm Emanuel

Presenting the weekly market chart summary. And the now standard head in the sand language from David Kostin: "Despite a week of dramatic moves, S&P 500 is on pace to finish the week roughly flat. Short covering helped drive the market higher to start the week before Eurozone concerns resurfaced. In US and European equity markets, relative views on GDP and FX have favored US vs. European exposures. US corporate and macro fundamentals remain strong, which should support stocks once macro headwinds fade."