Archive - Aug 15, 2011 - Story

Why did Google just pay a 60% premium for MMI? One word: iPhone - "Motorola Mobility's total commitment to Android has created a natural fit for our two companies. Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers....We expect that this combination will enable us to break new ground for the Android ecosystem. However, our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices."

Sov:

• BERLUSCONI: -17
• ZAPETERO: -13
• COELHO: -15
• G-PAP: unch
• LETERME: -16
• SARKOSY: -2
• FAYMAN: -7
• CAMERON: -3
• GUINNESS: -40

A day after the US downgrade to AA+, Warren Buffett (who elsewhere continues his op-ed uber-campaign in hypocrisy by writing in the NYT that the government should "Stop Coddling the Super-Rich") said that in his book the US is AAAA. Amusingly, hours later S&P downgraded Berkshire to pari with the US. Judging by the record near surge in volatility in the ensuing days, the market was not too convinced with the octogenarian of Omaha's latest orations. What it was more convinced by, judging by market results, was the fact that Bank of America upgraded something totally different to an AAAA rating: gold, with a $2000 12 month target. To wit: "High commodity prices have now created a terms-of-trade shock for importers, feeding into current accounts, the financial sector and, ultimately, sovereign debt. How will these imbalances unwind? Physical gold is the ultimate collateral because it has no credit risk, so EM Central Banks have been diversifying their foreign exchange reserves into gold and other non-dollar, non-euro assets in recent quarters. Looking ahead, the deterioration in credit quality in Europe and the US coupled with an increased probability of QE3 means these pressures will continue. As a result, we revise our 12-month gold target to $2000/oz." Basically everything that Zero Hedge has been saying for about two and a half years now. Naturally, this coming from Bank of America, should set of contrarian call alarm bells everywhere. Regardless, here is BofA's Michael Widmer explaining his call, as well as the full upgrade report from BAC, which lately has far, far greater problems than getting its commodities call right or wrong.

Some time ago we predicted that for Germany the calculus on the bailout of Europe is simple: at some point the costs, in the form of contingent liabilities as a % of GDP, from backstopping an insolvent Europe will become simply too high and offset the benefit of keeping the EUR (a currency which more than anything boosts the German export sector courtesy of a peg that equates German "strength" with that of the weakest members of the Eurozone). Granted, should the EFSF be launched in its peak formation at €3.5 trillion, and be coupled with a eurobond, the direct and indirect Europe bailout costs to Germany become simply so high to where they will be politically untenable. Yesterday we also said that we anticipate any talk of support for a Eurobond would be promptly refuted by German government officials. Both of these happened late yesterday, when German Finance Minister told Spiegel that Germany is willing to help out... to a point. And yes, the report by Die Welt which said that the German authorities are actually considering the implementation of a Eurobond, that received so much press and was noted on Zero Hedge, was immediately denied by officials. Here is Goldman's Dirk Schumacher with a complete summary of the rapidly changing events.

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.