Markets
Hunt for yield reaches fever pitch | Top News | IFRe
““Loose monetary policy is driving this demand for risk and general search for yield,” said Georg Grodzki, head of credit research at L&G. “While this might not be sustainable over the long term, this should continue into next year. What helps right now is that any sign of weakness is seen as a buying opportunity.”
His view was echoed by DCM syndicate bankers who have been advising clients to go ahead with transactions now.
“Investors are playing the compression game between high-beta and low-beta credits and in senior financials,” said Eric Cherpion, global head of DCM syndicate at Societe Generale.”
Ex-Moody’s staff raise alarm over ABS ‘meltdown’ – FT.com
“A former senior executive at Moody’s has warned that credit rating agencies are using “deluded” processes to calculate the risks of asset-backed securities. He fears this could trigger another financial meltdown.
William Harrington, who spearheaded analysis on derivatives between 1999 and 2010 at Moody’s Investors Services, said rating agencies are “glossing over” risks when assigning ratings to asset-backed securities by failing to take into account adequate counterparty risk. “
Gold Drops Near Three-Week Low as Jobs Data Spur Tapering Bets – Bloomberg
North America
Richard Alford: On Grading the Bernanke Fed « naked capitalism
“”The Fed’s real dilemma is that its policy is creating a financial market bubble that is large relative to the pickup in the economy that it is producing,” Bridgewater notes”
Rob Ford saga casts shadow on Toronto Centre byelection | Toronto Star
Consumer Sentiment in U.S. Fell in November to Two-Year Low – Bloomberg
Calculated Risk: State and local government austerity is over
Should the Yellen Fed rely on optimal control models? | Gavyn Davies
“Fed’s versions of this process seem to be producing forward paths for short rates that are even lower, and for even longer, than most members of the FOMC have so far been willing to contemplate. My reading of the Fed papers is that they argue that the optimal policy would not raise short rates until 2017. Although Tim Duy draws a less dovish implication, most commentators last week agreed that optimal control is being used to fix market expectations of forward short rates at very low levels while the Fed tapers.”
A Note On Hysteresis And Monetary Policy – NYTimes.com
As I wrote last week, the Wilcox argument is one of hysteresis. Krugman extends that argument here.
Europe
Widows and widowers’ pensions could be axed under new proposals | Money | The Observer
Exclusive: German parties reach deal on banking union – sources | Reuters
ekathimerini.com | Ousted PASOK MP slams coalition after voting for SYRIZA’s censure motion
Greek coalition survives no-confidence vote | World news | theguardian.com
According to this article the ECB’s low rate policy is causing problems for German life insurance companies. Many contracts from the 1990s guarantee a minimum return of 4% in a vastly different rate environment. It’s like S&L’s in the US in the 1970s.
Ifo-Chef Sinn nach Leitzinssenkung: “EZB missbraucht das Euro-System” – KURIER.at
Hans-Werner Sinn is at the heart of a publicity campaign in Germany that is against the ECB’s easier monetary policy. He says that the ECB is “misusing the Euro system.”
OeNB-Chef Nowotny war gegen Leitzinssenkung – EZB – derStandard.at › Wirtschaft
Austria’s central bank head was against the ECB’s rate cut.
ECB split stokes German backlash fears – FT.com
“Last week, two German members of the ECB’s 23-member governing council led a six-man revolt against Thursday’s move to cut the bank’s benchmark lending rate by 25 basis points. The cut was quickly followed by public broadsides from Germany’s influential conservative economist Hans-Werner Sinn and some mainstream financial media.
Among those who voted with the two Germans on Thursday were the heads of the Dutch and Austrian central banks. One senior official said at least a quarter of the governing council is splitting from Mario Draghi, ECB president, on many major policy initiatives.”
The Plot Against France – NYTimes.com
“when people start talking about the wonders of “structural reform,” take it with a large heaping of salt. It’s mainly a code phrase for deregulation — and the evidence on the virtues of deregulation is decidedly mixed. Remember, Ireland received high praise for its structural reforms in the 1990s and 2000s; in 2006 George Osborne, now Britain’s chancellor of the Exchequer, called it a “shining example.” How did that turn out?
If all this sounds familiar to American readers, it should. U.S. fiscal scolds turn out, almost invariably, to be much more interested in slashing Medicare and Social Security than they are in actually cutting deficits.”
Draghi rolls the dice – and boosts the value of your house | David McWilliams
Angriff auf die EZB: “Kalte Enteignung der Sparer” « WirtschaftsBlatt.at
This is more on the negative reaction to the ECB rate cut in the German-speaking realm. Here, an Austrian paper’s headline reads “The ECB’s attack: cold-hearted expropriation of savers”. Zero rate policy is controversial because it robs savers of interest income that, with regard to seniors, cannot be replaced by wage income. This induces risk-seeking, rent-seeking behavior and leads to bubbles.
Reports of the survival of the eurozone may have been greatly exaggerated – Telegraph
Is this true regarding what German has done and could do? I think it is only partly true but the conclusions are still valid. The institutional structure of the eurozone also has a lot to do with this problem.
“What is needed for the eurozone is a combination of a weaker euro and stronger growth of German domestic demand, perhaps facilitated by looser fiscal policy. This would mean Germany putting up with a somewhat higher rate of inflation.
Yet there seems no sign of Germany embracing either a weak currency or a boost to demand.
And that looks unlikely. The risk of some countries defaulting, and/or leaving the euro, is still very much with us.”
François Hollande becomes most unpopular French president ever | World news | theguardian.com
Asia
Current Account Surplus Masks Japan’s Trade Woes – WSJ.com
Abenomics Hits Headwinds – WSJ.com
Technology
Facebook is trying to compete on the mobile platform by grabbing contact details from your mobile’s contact list in order for you to be able to text friend’s with Facebook’s messaging app. This change is due out Tuesday (along with other privacy-lessening changes).
amazon glacier is cheap backup
“The Nexus 5 is a superb smartphone: we like the design; it’s as powerful as they come; the screen is great; it runs the latest version of Android; and the camera – although a weak point – is capable of producing good snaps and video if you’re patient.
It’s the price, however, that really swings things in favour of this top-notch Android handset. “
Amazon Teams with US Post Office for Sunday Deliveries – Ina Fried – Commerce – AllThingsD
Twelve years ago today Apple began selling iPod
It’s official: Computer scientists pick stronger passwords | Ars Technica
Nexus 5 Review, Voltron-Style: Read Three Android Police Authors’ Takes On The Latest Nexus
Civil Liberties
NSA-Affäre rüttelt Schweizer Firmen wach – News Wirtschaft: Unternehmen – tagesanzeiger.ch
According to this article, the NSA spying scandal has caused Swiss companies to reassess the security in their information technology systems. My contention is that households will accept the spying but businesses will not.
How the NSA and GCHQ Spied on OPEC – SPIEGEL ONLINE
GHCQ Targets Engineers with Fake LinkedIn Pages – SPIEGEL ONLINE
German Government Moves to Beef Up Mobile Phone Security – SPIEGEL ONLINE
NSA and GCHQ hacked into systems of oil body OPEC, Snowden leak says — Tech News and Analysis
Deutsches Internet als NSA-Abwehr: Telekom schmiedet Pläne – n-tv.de
According to this German article, Deutsche Telekom is not alone in looking to keep Internet traffic from flowing outside of European boundaries as a response to the NSA’s spying. To cut Britain out, talk is of a Schengen agreement limited area. The threat here is a balkanization of the Internet.