Bill Gross thinks conditions are ripe for a liquidity crisis, and he points a finger at his old firm for its potential to be at the center of the storm.» Read More
The decision by the European Union last week to create a permanent bailout fund may not end the sovereign-debt crisis but it will—eventually—end the European Union as we know it.
The idea behind a common currency was to allow free trade and investment between European countries without the risk of competitive currency devaulations. It was supposed to make Europe more inviting to global capital and credit investment. It was an attempt to create monetary stability without the imposition of a centralized fiscal and political regime.
All of these were noble goals. But the attempt has failed.
The permanent bailout fund will create moral hazard, inviting euro zone members to engage in budgetary brinksmanship and free-riding that will make bailouts more likely. To ameliorate the moral hazard—and to satisfy the demands of the Germans—the Europeans promise that the bailouts will come with “strict conditionality.”
Quantitative Easing at Least Modestly Successful, Says Fed's Bullard (CNBC) "US economic growth will be stronger than previously expected in 2011 and quantitative easing has been "at least modestly successful so far," James Bullard, President of the Federal Reserve Bank of St. Louis said on Monday. 'I do think GDP will be stronger in 2011 than people thought ...60 days ago,' Bullard told CNBC. Squawk Box is live at FedEx's main hub in Memphis, which falls under the St. Louis district. 'The holiday season is looking good, retail sales are good. That bodes well for the current quarter and the coming quarters,' he said."
Tensions Rising on Korean Peninsula (Wall Street Journal) "South Korea on Monday afternoon test-fired artillery from an island North Korea attacked last month, defying North Korean threats of another attack and asserting its rights in a maritime area it has controlled since the Korean War of the 1950s. North Korea called Monday's drills, which began at 2:30 p.m. local time (12:30 a.m. Eastern time) at a marine outpost on Yeonpyeong Island, a 'reckless military provocation.' But North Korea said after the drills ended that it was holding its fire because Seoul had changed its firing zones. The two Koreas have been drawn to the brink of open fighting by North Korea's apparent effort to redraw the maritime boundary near the island and four others controlled by South Korea in the Yellow Sea off the countries' west coast."
Defining Employment Down: Temps Become Larger Share of Labor Market (CNBC via New York Times) "Despite a surge this year in short-term hiring, many American businesses are still skittish about making those jobs permanent, raising concerns among workers and some labor experts that temporary employees will become a larger, more entrenched part of the work force. This is bad news for the nation’s workers, who are already facing one of the bleakest labor markets in recent history. Temporary employees generally receive fewer benefits or none at all, and have virtually no job security. It is harder for them to save. And it is much more difficult for them to develop a career arc while hopping from boss to boss."
CNBC's Jeff Cox Reports on Pimco's Shift into Preferred Stock (CNBC) "Bond king Bill Gross' move into preferred stocks could act as a catalyst for an investment class struggling to regain its luster after the financial system collapse. Pimco's somewhat surprising disclosure this week in a regulatory filing that it would be moving as much as 10 percent of its assets from the Pimco Total Return Fund into preferreds and convertibles is a relatively strong indictment against the bond market's prospects."
Incoming House Infrastructure Committee Chair Sees Build America Bond 'Reincarnation' (Bloomberg) “I can almost guarantee a reiteration of the Build America Bond program,” Mica, a Florida Republican, said in an interview in Washington today. “We’re working to find a reincarnation.”
Huge $7.2 Billion Settlement in Madoff Trust Case \(Wall Street Journal\) "The estate of Jeffry Picower, a major investor in Bernard Madoff's Ponzi scheme, has agreed to repay $7.2 billion to victims of the fraud in a settlement with the trustee overseeing the investment firm's bankruptcy and federal prosecutors in Manhattan, according to people familiar with the situation. The settlement is by far the largest related to the Ponzi scheme, and would quadruple the amount of money recovered for victims to date. Preet Bharara, the U.S. Attorney in Manhattan, called the settlement a "truly staggering sum, which was really always other people's money."
The Bank of England and the European Central Bank announced a new swap line agreement today. But Portugal, Greece, and Spain need not apply—it only benefits the Emerald Isle.
Specifically, the BoE/ECB agreement creates a facility for providing Ireland with up £10 billion in sterling liquidity, should the need arise.
A swap line is a mechanism for central banks to exchange currency.
The technical name—a central bank liquidity swap—makes the concept sound more difficult than it is. The idea is pretty straightforward: Two central banks agree to exchange a fixed amount of currency, while simultaneously arranging a future date to swap the currencies back, effectively unwinding the position. The central bank on the receiving end can then inject the foreign currency into its own economy. This is useful, because private firms often have payables in foreign currencies. \(In this example, firms in Ireland may owe payments in British pounds.\) You can read more about swap lines on The Federal Reserve Bank of Atlanta's blog .
Nicole Lapin, of CNBC's Worldwide Exchange, explains what she's long and what she's short this week.
It was a big week on Capitol Hill. First the Bush Tax Cuts were extended and the swine flu infected omnibus was pulled off the table in the Senate.
So now that Congress is wrapping up its session, what three-ring circus will Americans be watching next year?
Let's see, tax reform, fiscal reform and don't forget health care. Three huge issues that will surely be making headlines in 2011. I decided to catch up with incoming House Financial Services Chairman Spencer Bachus.
Get ready to be blown away.
You know how in a lot of science fiction characters use a “universal translator” that instantly changes words from alien languages into their own.
Well, now that is read. Word Lens is an app for your iPhone that translates any Spanish or English text your camera can see. Instantly.
Here’s an amazing video showing how it works.
Here’s how LifeHacker , which discovered this for us, describes the experience:
Yesterday, I wrote about U.S. exposure —or the broad lack of U.S. exposure—to Spanish sovereign debt.
(I picked up on Tracy Alloway's piece in the Financial Times Alphaville blog, which commented on a new report out from Goldman Sachs , regarding the national distribution of eurozone debt among investors.)
From my piece yesterday: "According to the Goldman report: 'US holdings of Spanish debt securities were particularly small, accounting only for about $26 billion or 2.5 percent of all foreign holdings.' To put that number in perspective, 'That’s about a tenth of France’s holdings, which stood at 24.5 percent or $252 billion.' Calculated by GDP, the French economy is only about 20 percent as large as the U.S. economy. So that means, on a GDP basis, France has invested in Spanish debt at a rate fifty times higher than the U.S."
Google has just quietly introduced a paradigm shattering technology —called Ngram—that graphs how frequently words are used in books over the course of time.
But back to Sex & Death .
If you click on the link above, you see a graph. That graph shows how often those two words —sex and death—appear in print between the years 1908 and 2008.
The data source driving the graph is massive: The 15 million publications Google Books has scanned since 2004.
The Financial Crisis Primer published by the four Republican members of the Financial Crisis Inquiry Commission is pretty damn good.
Liberal critics of the Primer will be upset that it doesn’t mention their usual hobby-horses: no lambasting of pay structures, no tut-tutting about deregulation, no wailing about predatory lending, none of the tin-foil hat crowd’s worries about “shadow banking.”
Instead, the Primer gets right down to answering a few very basic—and very important—questions. The main questions are:
Greece and China bear watching but will have limited on the U.S. economy or markets, strategist Tom Lee says.
No matter which way the Greek vote goes, the European Central Bank on Monday will face a series of agonizing decisions.
Greek banks are preparing contingency plans for a possible "bail-in" of depositors, sources said. The FT reports.