Contributing Editors' Blog Entries

Reggie Middleton's picture

 

In the video clip below, I explain that the rating agencies DID NOT fail to do their jobs during the credit bubble and subsequent bust of 2008-2009, nor did they fail in the ongoing pan-European sovereign debt crisis. They succeeded wildly because they served their actual constituency --- the banks!

 

Marc To Market's picture

The Next Push : France

Many investors understandably have not focused on France. The threat of scandal in Spain, the need for yet another round of government support for Italy's third largest bank and the country's upcoming election have commanded attention. What seems to have been a free ride for France may be coming to an end.

Even though the German economy contracted twice as much as the French economy in Q4, we learned this week, the implications for France are greater. Recent data suggests that the German economy has stabilized and may be expanding albeit slowly this quarter. French data continues to disappoint. This is particularly important because the French government's growth forecast for this year is optimistic, well above the consensus.

Marc To Market's picture

The resignation of the Pope was followed by a lightning strike on the Vatican. A meteor storm has killed more than 150 people in Russia. UK retail sales collapse in January, falling 0.6% increased of rising 0.5% as the consensus expected. Insult was added to injury as the November and December series were revised lower.

CalibratedConfidence's picture

Infotainment channels and slide-show CPM websites could easily mistake the data in the following charts as balance sheet stress, economic pressures, and financial industry health in Europe is improving.  To contrary, it's so bad that the vehicle used to transfer the worlds reserve currency to those sovereign regions reaching out for help that the FED is now hopelessly handing cash right over.

Marc To Market's picture

The European Commission formally endorsed the financial transaction tax agreed to by eleven of the 27 members. The tax will be set at 0.1% for stocks and bonds and 0.01% for derivatives. The tax will go into effect at the start of 2014, by which time the participating countries will give it formal approval.

There seems to be two purposes of the tax. The first is to raise revenue. The EC projects the tax will raise 30-35 bln euros annually where ever and whenever an instrument from eleven is traded. This would seem to block the ability to avoid the tax by moving transactions out of the eleven countries. It reinforces the "residence principle". This essentially means that if some one is a resident of the eleven countries, or acting on behalf of a resident, the transaction will be taxed anywhere it takes place. The other purpose is to deter the high frequency trading, which some officials see as largely unnecessary and potentially destabilizing.

Marc To Market's picture

Poor GDP Sinks Euro

After trending gently higher for the first half of the week, the euro has been sold to new three week lows in response to the disappointing Q4 GDP figures. The GDP figures are of course backward looking and more recent data, such as the PMI figures and German factory orders suggest the regional economy is stabilizing here in early Q1.

There is a middle step to go from the GDP figures to the euro and that is the interest rate channel. There has been some speculation that the passive tightening of the euro area financial conditions (including the shrinking of the ECB's balance sheet) and the strength of the euro would prompt the ECB to cut the refi rate later in Q1. The poor GDP readings bolster such expectations and this can be seen in short-term interest rates. The March Euribor futures contract is now implying 0.24% rate, having matched the lowest rate since Jan 23, or before the early repayment of LTRO I was announced.