Links: 2012-09-11
There are no big stories in today’s links so I am going to leave it as is. Tomorrow at 10AM German time we get the German Constitutional Court ruling. That’s the big piece of news that we are waiting on. Most people think the court will allow the European Stability Mechanism (ESM) to remain in place and so allow ECB head Mario Draghi to move forward with his plan to monetize periphery sovereign debt. But if the court rules against the ESM, we will see a massive sell off both in stocks and bonds.
The next day is FOMC day and the expectation is for QE3 and as much as $800 billion of easing. I expect the Fed at a minimum to extend the language on its zero interest rate policy through 2015. It’s not a slam dunk for QE, especially with less than two months left before the elections in November. But again, not meeting market expectations could lead to a violent sell off in equities. It actually might cause bonds to rally as expectations of a double dip would increase.
United States
Andrew Ross Sorkin’s Bad Math on AIG « naked capitalism
“So get this: the government break even figure, which it has calculated down to the penny per share, excludes $35 billion of what Sorkin in February called “a tax benefit, er, gift, from the United States government” that goosed the stock price by at least $5. Reverse that out and even using the government’s remarkably aggressive view of the matter, the AIG bailout was and remains a turkey.”
Speculative-Grade Bond Yields Fall to Record Low 7.163% in U.S. – Bloomberg
This is exactly the kind of risk seeking return mentality that easy money engenders. It will end in defaults
Soybean Reserves Smallest in Four Decades After Drought – Bloomberg
““The U.S. will simply run out of soybeans” for exports on March 1, said Doug Jackson, an FCStone vice president in West Des Moines, Iowa, who has been a grain-industry analyst since 1974. “The supply situation is unprecedented. The theoretical maximum South American shipping capacity may fall short, leaving world buyers wanting.””
U.S. IRS awards $104 mln to UBS tax case whistleblower-lawyers | Reuters
“U.S. tax authorities have awarded $104 million to a whistleblower in a major tax fraud case against Swiss bank UBS AG that widened a government crackdown on Americans avoiding taxes in Switzerland, his lawyers said on Tuesday.”
Bruce Bartlett: Mitt Romney, Carried Interest and Capital Gains – NYTimes.com
“The issue of Mitt Romney’s taxes continues to be a political liability for him. A NBC News/Wall Street Journal poll last month found that 36 percent of registered voters have a more negative opinion of him because of the issue, up from 27 percent in January, compared with 6 percent who have a more positive view.”
Big Banks Hide Risk Transforming Collateral for Traders – Bloomberg
“Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.
The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” “
The long-term impact of low rates – FT.com
An all-encompassing rebuttal to Ben Bernanke’s policy of ultra-easy money as a panacea for what ails the economy. The unintended consequences are large.
As Low Rates Depress Savers, Governments Reap the Benefits – NYTimes.com
“Bill Taren, a retiree near Orlando, Fla., discovered in August that his credit union would pay only 0.4 percent annual interest on his saving account, even though inflation averaged 2.8 percent over the last year. So he and his wife decided to just stuff their money in the mattress, he says, because at least there “we can see the cash when we want.””
interfluidity » Rational astrologies
” A rational astrology is a set of beliefs which one rationally behaves as if were true, regardless of whether they are in fact. Rational astrologies need not be entirely fake or false. Like bullshit, the essential characteristic of a rational astrology is the indifference to truth or falsehood of the factors that compel ones behavior. Some rational astrologies may turn out to be largely true, and that happy coincidence can be a great blessing.”
As goes Maine, so goes the nation – FT.com
“Ms Snowe is retiring, disgusted with the partisan rancour in Washington and with the social extremism of her own party. Ms Collins is going to stick it out but has joined her in writing opinion pieces lamenting the current state of affairs. The only consolation is that Ms Snowe could be replaced in November by Angus King, the popular former governor, running as an independent, though he would probably caucus with the Democrats in Washington, thus costing the Republicans a vital seat.”
Europe
Madrid iniciará “de inmediato” las gestiones para privatizar Telemadrid – CincoDías.com
As the debt crisis in Spain has burdened regional governments, they too are looking to privatize. Madrid is going to offload Telemadrid according to this article.
Germany Says ‘Great Uncertainty’ About US Debt — Business News – CNBC
“In a speech to the Bundestag lower house of parliament to open a debate on the 2013 German budget, Schaeuble said worries about U.S. debt were a burden for the global economy, hitting back at Washington which has criticized Europe for failing to get a grip on its own debt crisis.
In private, German officials often express concern about U.S. debt levels and the inability of politicians there to reach a consensus on how to reduce it, but Schaeuble’s public remarks underscore the extent of the worries in Germany.”
IMF backs Mario Draghi’s bond-buying plan – Telegraph
“The International Monetary Fund has thrown its weight behind Mario Draghi’s strategy to backstop the euro with unlimited bond purchases, saying it was ready to get involved in the plan.”
SPIEGEL Interview with Helmut Schmidt and Valéry Giscard d’Estaing – SPIEGEL ONLINE
“Former German Chancellor Helmut Schmidt and former French President Valéry Giscard d’Estaing are two of the leading architects of the European Union. In a SPIEGEL interview, the veteran statesmen discuss the causes of the euro crisis and the lack of vision among today’s European politicians.”
German top court rejects delay to euro ruling | Reuters
“Germany’s Constitutional Court will go ahead with a long-awaited ruling on Wednesday on the legality of the euro zone’s new permanent bailout fund and budget rules, despite a last-minute legal challenge by a member of parliament.”
Technology
Amazon Kindle Fire HD review (7-inch) | The Verge
“There are two devices in this review. The first is something like an appliance — a window through which you casually view content, a way to listen to music, an e-reader for the train ride home. It’s a really, really good tablet for doing some very specific things.
But there’s a second tablet in the review as well. One that gets compared to the iPad and Nexus 7. One that I expect to do more than just show me movies or help me shop. One that should be a companion for all kinds of things I want to do, that doesn’t feel limited, that doesn’t respond to my touches slowly, that doesn’t make me wait.
As that device, the Fire HD still has a long way to go. I think it can get there, but it isn’t there yet.”
The Difference Between Apple & Amazon In One Chart
“Obviously, if short-term profit is all that matters, Apple is winning by a mile. Apple has generated more than $73 billion of profit over the span of this chart, while Amazon is around $2 billion. Some of that has to do with the relative size of the companies; Apple is about three times bigger, sales-wise. But Apple’s approach is still dramatically more profitable on a relative basis.”
Is The Next iPhone Already In Patent Trouble? | TechCrunch
“When it comes to 4G LTE connectivity, smartphone makers have accumulated patents over the years in order to be prepared for any patent lawsuit. As Apple has not released a 4G phone yet, it is late to the game. Competitors want to take advantage of the situation and prevent Apple from releasing a 4G LTE iPhone.”
Leaked Apple device IDs not stolen from FBI, but Florida app maker — Apple News, Tips and Reviews
“Wait, what? Anonymous, the shady hacker collective, was not truthful about the source of the UDIDs it dumped on the web last week? It turns out that a Florida company that builds mobile apps for publishers is claiming that the device identifiers belong to it.”
Other Links
The ice-berg that sunk the Titanic, 1912 | Retronaut
““(Above) Taken by the chief steward of the German ocean liner SS Prinz Adalbert, which on April 15 was sailing through the North Atlantic mere miles away from where theTitanic had sunk the night before. At the time, the chief steward hadn’t yet learned of theTitanic’s fate. He spotted a streak of red paint along the iceberg’s base, which most likely meant a ship had collided with it in the last twelve hours.””
China factory output slowest in three years – Telegraph
“Data published on Sunday by China’s National Bureau of Statistics showed that production at China’s factories, workshops and mines increased 8.9pc in August compared with the same month last year.
Compared with a 9.2pc gain in July, August’s rise in industrial output undershot market forecasts and is the weakest since May 2009.”
China’s Revolution Risk – Telegraph Blogs
“The government thought it could cool of the property boom with surgical tightening, leaving productive industry intact. That was an illusion. “They didn’t expect the market reaction to be so strong and bring down the whole economy,” he said.”
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