Monday, February 9, 2015

Lots of news, all of which you need to read in full

Left news alone for the weekend, it was mostly bull and there was snow to shovel.

But here's what was worth reading:

IKN - Bobby Genovese wants to friend me on facebook! Aaaand that's why I'm not on facebook.

New Deal Demoncrat - weekly indicators. Again, quit piddling yourselves, everyone! I personally am amazed that Wall Street Whitey doesn't understand that a strong US dollar is fantastic for the domestic consumer side of the US economy, low rates are fantastic for housing, and low oil prices are good for everyone generally. You're going to feel awfully stupid when the S&P closes out this year at 2300!

Bespoke - labour market positives. Consumers are feeling more optimistic.

ICIJ - exposing HSBC's files on secret Swiss accounts. Here's the mother article that the news wires are stripping down. Oh, and remember Sarah McLachlan's best buddy Frank Giustra? Even he gets a mention:
The records show Giustra is the only person listed in an HSBC account holding more than $10 million in 2006/2007, although his role in the account is not specified

The New York Times reported in 2008 that Giustra donated to the Clinton Foundation shortly after Bill Clinton accompanied Giustra on a trip to Kazakhstan in 2005. When they landed, Nursultan A. Nazarbayev, who has served for decades as Kazakhstan’s president, met his two visitors over a sumptuous midnight banquet.

The Times reported that Clinton made a public declaration of support for Nazarbayev that was at odds with the stance of the U.S. government and of Clinton’s wife, then-Senator Hillary Rodham Clinton, who had criticized Kazakhstan’s record on human rights. Two days later, corporate records showed, Giustra’s company won the right to buy into three state-owned uranium projects in Kazakhstan.
Hey Sarah, this is what you get when you abandon the sad puppies and lesbian separatists and start hanging out with junior mining people. Ah, well... I guess you're too old to give a shit about kleptocratic neocolonialism. Besides, Kazakhs hate puppies and lesbians.

Coppola Comment - what is the ECB up to? This gained a lot of traction this weekend in the part of the blogosphere that has brain cells: the ECB's Greek waiver move was actually a warning to the Germans, not to the Greeks. Quote:
Varoufakis is gambling that the Eurozone, and more particularly Germany, will not dare to push him off the cliff because of the consequences for international political relations. If Germany was seen to force Greece out of the Euro by refusing to negotiate, it would become an international pariah. There are already voices reminding Germany of its own debt forgiveness in 1953, and anti-austerity movements in many other Eurozone countries would only be encouraged by Germany and/or the ECB looking like bullies. Forcing Greece out of the Euro could result in the disorderly unravelling of the whole thing.

I may be completely wrong, but this looks far more plausible to me than a simple explanation that fails to take account of the signals given by both Varoufakis and Draghi. In which case, Schäuble should beware. His position is nowhere near as strong as he thinks. He is dangerously close to the cliff edge himself.
Read the entire article, you'll get an idea of what Eurozone analysis looks like when done by someone who knows what they're talking about instead of someone who simply rattles off racial stereotypes and discredited supply-side economic theory.

FT Alphaville - Michael Pettis explains the Eurozone crisis. Again another piece of stellar analysis from someone who doesn't have their head up their ass. Quote:
It was not the German people who lent money to the Spanish people. The policies implemented by Berlin that resulted in the huge swing in Germany’s current account from deficit in the 1990s to surplus in the 2000s were imposed at a cost to German workers, and have been at least partly responsible for Germany’s extremely low productivity growth — most of Germany’s growth before the crisis can be explained by the change in its current account — rather than by rising productivity.

Moreover because German capital flows to Spain ensured that Spanish inflation exceeded German inflation, lending rates that may have been “reasonable” in Germany were extremely low in Spain, perhaps even negative in real terms. With German, Spanish, and other banks offering nearly unlimited amounts of extremely cheap credit to all takers in Spain, the fact that some of these borrowers were terribly irresponsible was not a Spanish “choice.”

I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other.
It would be an astonishing coincidence that so many countries decided to embark on consumption sprees at exactly the same time. It would be even more remarkable, had they done so, that they could have all sucked money out of a reluctant Germany while driving interest rates down. It is very hard to believe, in other words, that the enormous shift in the internal European balance of payments was driven by anything other than a domestic shift in the German economy that suddenly saw total savings soar relative to total investment.
Another gem of an article that you owe yourself to read several times until you understand it. The problem I have with finding a hopeful solution to this, by the way, is that Schauble and Merkel have already proven themselves pig-ignorant about economic theory, the rest of Europe's leadership have proven themselves to be willing and passionate collaborators in the German Fourth Reich, and the financial elite identified above is going to win because they already own the EU.

der Spargel - what Tsipras has been doing this past week. Again: instead of listening to racist commentary from American talking heads who know nothing about Europe, how's about you read the actual news? For example:
Minister of Administrative Reform Georgios Katrougalos sits cheerfully in his new office and rejoices about his little revolution. He has just announced that soon the first 3,500 public-sector employees can return to work, including the famous cleaning ladies who led the protest against job cuts. With their rubber-glove-clad clenched fists, they embodied a feeling shared by many Greeks -- that they had been mistreated by Europe. Now the cleaning ladies were becoming the symbol of the new beginning.

According to the administrative reform minister, these aren't new hires -- they are the reversal of unfair layoffs. "The cleaning ladies were the weakest, and the troika needed numbers." He claims this is primarily a redress for the absurdity of the austerity measures. After they were let go, the financial authority's 595 cleaning ladies -- who had to be fired in September 2013 in order to fulfill the requirements of the savings plan -- continued to receive 75 percent of their earnings. Their work was then done by private cleaning companies -- in the end, the whole thing was more expensive than it had been before. It was these kinds of decisions by the previous government that had made the Greeks furious -- and led them to vote for Syriza.
Really? An "austerity program" that exterminates the working class, gives more money to big business, and ends up costing more? How many times have we heard of that before? But Tsipras is a "wacky socialist", right? I mean The Economist knows what they're talking about, right?
On the day of his election, he had already picked his cabinet -- pared down to just 10 ministers and 30 deputy ministers, including a few dozen independents or members of other parties. Tsipras focused on expertise in assembling his cabinet --largely relegating leftist ideologues to insignificant positions.
So even The Economist is nothing but an ideological rag, ignorantly dispensing the kleptocratic elite's disinformation and propaganda? Gee, how many times have we seen that before?

Gavyn Davies - EZ and Japan are already recovering. Whoops! That's what happens when you listen to white-ass honkies instead of people who know what they're talking about: you don't hear about the good economic data coming out of the EZ and Japan til it's too late.

Oh and by the way: the EZ is trading at a 15x forward P/E, is it? And the S&P is at 17? So therefore the EZ is a better deal?

No, not really. I've been reading Piketty, and just got to the point (around page 150) where he notes that Europe (even Germany, especially Germany) is a stakeholder economy and not a shareholder economy. So European firms always deserve a much lower P/E, just as a matter of basic valuation theory. So I'm not buying Europe right now, or even after the Greek problem is solved.

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