Thursday, 9 Dec 2010 | 4:32 PM ET

EU Report: CDS Didn't Cause Sovereign Sell-Off

Posted By: Ash Bennington

New developments on the EU debt trading speculation front.

In his latest post , Felix Salmon has excerpted a report that was commissioned by the EU, addressing some of the issues that he wrote about yesterday , and that I later picked up on earlier today :

"First, the results show that there is no evidence of any obvious mis-pricing in the sovereign bond and CDS markets. Second, the CDS spreads for the more troubled countries seem to be low relative to the corresponding bond yield spreads, which implies that CDS spreads can hardly be considered to cause the high bond yields for these countries. Finally, the correlation analysis shows that changes in spreads in the two markets are mainly contemporaneous. The vast majority of countries show now lead or lag behaviour, and when series are not changing contemporaneously, CDS and bond markets are basically equally likely to lead or lag the other. Furthermore, these relationships have been broadly stable over time."


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  Thursday, 9 Dec 2010 | 4:25 PM ET

Bond Insurer Sues Morgan Stanley—What Are the Ramifications?

Posted By: Ash Bennington

Bond insurer MBIA is suing Morgan Stanley over claims made by the bank regarding mortgage backed securities.

Morgan Stanley
Gregory Bull
Morgan Stanley

Specifically, the case involves MBIA claims that Morgan Stanley "made false representations regarding the underwriting standards" of bonds it later insured.

It's not difficult to become a little blasé about lawsuits against banks involving the alleged misrepresentation of underwriting standards on mortgage backed securities.

Mortgage repurchase exposure stories have been swirling for some time. At NetNet, we've covered that storyline before.

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  Thursday, 9 Dec 2010 | 4:11 PM ET

Insider Monkey Responds to Pershing Capital Dust-Up

Posted By: Insider Monkey

Insider Monkey responds to Carney's piece Pershing Square's Amazing Returns Cause an Internet Dust-Up .

Insider Monkey responds:

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  Thursday, 9 Dec 2010 | 3:49 PM ET

It's Good to be Billy Joel

Posted By: Ash Bennington
Billy Joel
Getty Images
Billy Joel

It's good to be Billy Joel: The 61 year old has a stunning new girlfriend.

At 29, Alexis Roderick is 31 years his junior. She's also smart: She works for Morgan Stanley , in their Garden City office, as a senior risk officer.

New York Newsday reports: "Roderick graduated from Stony Brook University, where she focused on political science, economics and Latin American studies. She has been with Morgan Stanley since April 2005." Little else seems known about her.

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  Thursday, 9 Dec 2010 | 3:28 PM ET

Bonds, Speculators—and Philosophers

Posted By: Ash Bennington

Occam's Razor seems to be slicing through the financial blogosphere.

Joe Weisenthal wrote about it this morning . Perhaps, based on the time stamps of the posts, he was inspired by Felix Salmon —who had used the concept in a post about the alleged 'speculation' in eurozone debt.

Felix Salmon jumps off from an article in The New York Times about the 'fight' between financiers and central bankers.

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  Thursday, 9 Dec 2010 | 2:21 PM ET

Consumer Set To Retreat In New Year?

Posted By: Stephanie Landsman
Source: Getty Images

Clear the racks! Consumers could be poised for a retreat.

That's according to a new study that is expected to be officially released tomorrow by WSL Strategic Retail, a retail marketing and consulting firm.

"It's very possible the consumer will retreat in January and we've been talking about this," said WSL CEO Wendy Liebmann. "Our data indicates that most people don't believe their personal finances will get better for another three years."

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  Thursday, 9 Dec 2010 | 1:36 PM ET

Krugman: We Can’t Jump Start The Economy With More Spending

Posted By: John Carney
US Capitol Building with cash
US Capitol Building with cash

I’m always surprised—pleasantly surprised—when I find myself agreeing with Paul Krugman. Today is one of those surprising days.

Here’s what Krugman writes:

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  Thursday, 9 Dec 2010 | 12:41 PM ET

Could The Payroll Tax Cut Become Permanent?

Posted By: John Carney

The payroll tax cut is designed to be temporary—which is one of it’s biggest defects. But Mike Konczal at Rortybomb points out that politics may cure this defect :

“It’s clear that it would be an ugly battle to raise this payroll tax in 2012 when unemployment will likely be 8%+,” Konczal writes. (Note: this is leading Konczal and other liberals to worry that the payroll tax cut might be a bad idea.)

This is a point I haven’t taken into account yet. It raises the possibility that the payroll tax actually could lead to more spending—if the public believes that it will be made permanent and therefore create a permanent increase in income. I’m still not convinced this would happen, however, because I suspect the appetite for savings and develeraging exceeds the actual ability of cash-strapped households to save.

There’s a deep irony here. The payroll tax cut might work as intended—encouraging spending—but only if the public believes that it won’t be as limited as the Obama administration plans.

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  Thursday, 9 Dec 2010 | 12:07 PM ET

Why The Payroll Tax Cut Is a Good Idea Even if it Won’t Create Much Stimulus

Posted By: John Carney

The volume of pixels I’ve spilled arguing that the cut in payroll taxes will not create much economic stimulus has apparently created the impression that I’m against the cut.

Lars Klove | The Image Bank | Getty Images

So let me clear that up right now—I’m not against the tax cut.

My critique has always aimed at the assumption that Americans will spend most of the slight and temporary increase in take-home pay that results from a 2% cut in payroll taxes. The central planners in the Obama administration may wish that Americans could be counted on to respond so mechanically to turning the tax dial this way or that—but wishing doesn’t make it so.

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  Thursday, 9 Dec 2010 | 11:34 AM ET

What's Really Going on With The English Economy?

Posted By: Ash Bennington

On Thursday, The Bank of England didn't change its key interest rate or modify its monetary easing related to asset purchases.

A steady course from the central bank may sound like a vote of confidence for the economy— but the reality may be more complex.

Here is the rub: Inflation in England seems to be picking up—and, on the growth side of the equation, the future of the British recovery remains uncertain.

The language describing inflation in today's Wall Street Journal is rather restrained:

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