"A generous man will prosper; he who refreshes others will himself be refreshed"
by dlry on Thu May 06, 2010 10:33 pm
Breaking Interview: On a day when the DOW closed down 430 points after falling 1,000 points and gold closed up $33 to roughly $1,210, Jim Sinclair was kind enough to spend some time making sense out of what is happening in the gold and equity markets for King World News listeners.
by dlry on Sat May 08, 2010 10:33 am
Bang, Indeed!
I had a discussion today with Jonathan Tepper of Variant Perception in London. We agree that the risk that no one talks about is the level of foreign investment in some of these countries and the consequent rollover risk. By this we mean that when a bond comes due, you have to roll over that bond into another bond. If the party that bought the original bond wants cash to invest in something else, or just does not want your bond risk anymore, you have to find someone to buy the new bond. Greece has a large number of bonds coming due this year. It is not just the new debt; they have to find someone to buy the old debt. And that is why they need so much money.
But it is not just a Greek problem. About 45% of Spain’s debt is owned by non-Spanish, and they need to roll over old debt and new debt of 225 billion euros this year alone. That is bigger than the entire GDP of Portugal. Spain cannot finance this internally. But will foreigners buy 100 billion euros and, if so, at what price if they are not convinced that Spain will enact serious austerity measures?
As Reinhart and Rogoff wrote: “Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang! - confidence collapses, lenders disappear, and a crisis hits.”
Bang is the right word. It is the nature of human beings to assume that the current trend will work out, that things can’t really be that bad. The trend is your friend until it ends. Look at the bond markets just a few months before World War I. There was no sign of an impending war. Everyone “knew” that cooler heads would prevail.
The Minsky Journey is where investment goes from what Minsky called a hedge unit, where the investment is its own source of repayment; to a speculative unit, where the investment only pays the interest; to a Ponzi unit, where the only way to repay the debt is for the value of the investment to rise.
by sowhat on Mon May 10, 2010 3:16 pm
E.U. LENDS TO ITSELF TO BAIL ITSELF OUT
http://tinyurl.com/2uro3qx
Why the Eurozone Is Doomed
http://tinyurl.com/2ww3gwr
by Entendance on Sat May 15, 2010 6:07 am
IT'S GOING TO GET NUTShttp://tinyurl.com/33dw6rs
http://tinyurl.com/36vxrqj
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by Entendance on Mon May 17, 2010 6:21 am
...the time to ride the bear is here again, and in a fashion that many do not appreciate for I fear the Sovereign Debt Crisis may make the Asset Securitization Crisis look like a mini-bull rally in and of itself, dwarfing the capital destroying potential of the latter in both size and scope. This brings us to the analysis below.
The PIIGS at the Center of the Global Sovereign Debt Crisis
Greece, Portugal, Ireland, Spain and Italy, collectively referred as PIIGS, are a reflection of how the developed countries, the credibility of whom have been endorsed over the years by high credit ratings and low credit spreads, are turning out to be the epicenter of sovereign risk in Europe. Huge fiscal deficit and unimaginably high levels of public debt, dragged these nations to the verge of default when the markets refused to lend money at prevailing rates against their fragile fiscal situation and structurally decaying economies. Greece, the weakest of all, has effectively defaulted on its debt obligations when it approached EU/IMF for funds (see How the US Has Perfected the Use of Economic Imperialism Through the European Union!). The support extended by the European Union was primarily to contain the contagion effect (resulting from common currency as well huge inter-country claims) which would have done greater damage and would have cost more. However, the aid extended by EU and IMF is quite insufficient as it will solve only a fraction of the liquidity problem, and even then for a short term, while the major solvency and liquidity issues over the medium-to-long term remain. Thus, the only inevitable outcome which can bring sustainability to the public finances of these countries is the restructuring of their sovereign debt...
http://tinyurl.com/3yffmlr
You may add <active topics> to your favourite links search.php?search_id=active_topicsby dlry on Tue May 18, 2010 9:41 pm
Seth Klarman was speaking at the CFA Institute earlier, and in typical
fashion cut to the chase: in summarizing the current market, the
Baupost founder said he "sees few bargains in the current environment
and predicted on Tuesday that the stock market could suffer another
lost decade without any gains." And the punchline: his description of
market conditions which he compared to "a Hostess Twinkie snack cake
because everything is being manipulated by the government and appears
artificial." Such facility with words, there is a reason the man runs
a $22 billion fund and his book "Margin of Safety" has been out of
print for years, and sells for a $1000 on ebay.
by dlry on Wed May 19, 2010 9:53 pm
by dlry on Sat May 22, 2010 7:14 pm
At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed. In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewellery for the public treasury; while the clergy’s immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation’s economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection. At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast.
by dlry on Fri May 28, 2010 7:10 pm
There’s nothing wrong with throwing a little money at a problem to make it go away. There’s equally nothing wrong with throwing a little borrowed money at a problem to make it disappear, as long as you have the means to pay that borrowed money back.
But what happens if you throw a lot of borrowed money at a problem, and the problem doesn’t go away? If you’ve ever experienced a situation like that you can probably understand how Europe feels right now. It just unleashed a magnificent $1 trillion euro bailout and the market responded with a selloff by the end of the week! So what happened? That money was supposed to make the problem go away, after all. And it was a lot of money. Why did the market respond to it with such disdain?
We believe the market’s reaction is confirming what we have long suspected: that these bailouts provide next to no long-term value. They don’t produce real jobs. They don’t improve productivity. They just prolong the precarious leverage game played by the financial sector, and do so at tremendous cost to taxpayers. "Bailout and Stimulate" has been the rallying call for governments and central banks since the beginning of this financial crisis – and it has certainly had its impact over the last two years, but not the type of impact we need to propel real, sustainable growth.
by Entendance on Tue Jun 01, 2010 5:37 am
viewtopic.php?f=7&t=568&p=10902#p10901Felix Zulauf gilt als Querdenker mit Hang zu strategischen
Analysen. Er zählt auf der internationalen Bühne zu den
bekanntesten unabhängigen Geldverwaltern.
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