Archive - Dec 19, 2012 - Blog entry

"Microsoft in 2000 was an unsustainable bubble, whereas Apple today looks much more solidly valued" - Felix Salmon 9/17/12

An abysmal indicator for Europe

I’m going to lay out everything you need to know about the fiscal cliff negotiations. After reading this, you can ignore all of the media’s coverage of this topic as well as various politicians’ announcements pertaining to this subject. All you need to know consists of just one sentence. Politicians are in charge of this issue.

Think consumers paid enough from higher interest Libor rate rigged by banks?  Small case compared to the rigging in the oil and gasoline markets.  

Treasuries have sold off aggressively over the past 2 weeks.  Is it time for that trade to reverse to New Years??

Our Interests Are - Of Course - STRICTLY Academic

Today, Spain barely functions as a country. Basic services have shut down. The entire banking system is on life support. And yet banks and the stock market are ralling.

EU confidence sparks a Euro bull run. Both the EU’s strongest and weakest economies are positively shifting. The S&P has lifted Greece’s credit rating by 5 notches to a “B minus”, and Germany’s IFO survey came in strong for the second month running indicating that business sentiment is on the rise.

Another one for posterior...

This is one of the most revealing graphs we have posted. This Great Graphic comes from the Washington Post's Wonk blog. First, it shows that a step toward fiscal adjustment is coming to the US. The difference between Obama's plan and Boehner's is how the burden of the adjustment should be distributed. Second, chest thumping and the hand wringing that has surround the negotiations seems dramatically out of proportion on the differences. This is a case of the hubris of small differences.

This week's pattern remains intact. The US dollar continues to trend lower against the European currencies, but is firmer within the dollar-bloc and against the yen. Spanish and Italian bond yields are lower, while the long-end of the Japanese curve is heavy. Equity markets are finishing the year with a firm note, with board gains in Asian, with the notable exception of Shanghai and Jakarta, and in Europe, with the exception of Stockholm. The euro is at 7-month highs today, pushing toward $1.3300. The next target is near $1.3385. Sterling has been bid to near the year's high set in late September just above $1.6300. There is little chart resistance until closer to $1.6500. The dollar's slide against the Swiss franc has extended to CHF0.91 and appears headed for CHF0.9000. The dollar-bloc is not participating in this move against the greenback. This week, for example, the New Zealand dollar has fallen as almost as much as the yen (1.03% and 1.08% respectively). The Australian and Canadian dollars are off 0.04% and 0.57% respectively. There are a few macro-developments to note:

Investors in the TBTF banks need to understand that the business model for this industry has changed.  Thank Liz Warren