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Why bank bonds are sitting ducks in the next downturn
Two years ago I developed a thesis about the negative effect of the Federal Reserve's interest rate policies on bank balance sheets based on my understanding about the history of zero rates in Japan. For bank bond investors, this should be…
Daily:On a bullish Empire State Survey within the synchronised global slowdown
The Empire State Manufacturing numbers showed greater growth for both production and employment than in the previous survey. These are the kind of numbers that are supportive of recovery. Nevertheless, the peak in disposable personal income…
US income and spending growth peaked in 2011, will lead to recession
Just to put some meat on the bones around the cyclical downturn turning into recession, the personal income data paint a negative picture absent debt accumulation. What we see in recessions is that personal income leads the cycle and when…
Auto inventory restocking only thing between US and recession now
Retail sales are at recessionary levels right now, having dropped for a third consecutive month. I need to flag the inventories data that came out this morning in the US as the only thing between us and outright recession.
On euro weakness and capital flight out of the euro zone
The large increases in Target2 imbalances at the heart of the euro zone's banking system are widely considered not just a risk to national governments in the event of a eurozone breakup, but also a sign of capital flight. We have seen the…
Following the US bailout model will create losses for Spanish bank preferred and sub debt
In Spain, it is well-known that many of the financial institutions need more capital. However, the question is how much capital. Spain has run dubious quality stress tests that say the banks need less than 40 billion euros. Others believe…
Why the Spanish Memorandum of Understanding is a disaster for Spain and Europe
We now know that Spain has received a standard bailout package like Greece, Portugal and Ireland before it despite attempts by the Spanish government to dress this bailout up as something different. Below is a quick analysis of just what…
Rajoy’s humiliating defeat to Merkel narrows options to sovereign bailout, monetisation or…
German Chancellor Angela Merkel is a brilliant political tactician. After the latest EU Summit, it seemed she had capitulated after being rounded on by France's Hollande in an effort by Italy's Monti and Spain's Rajoy to prevent the market…
Air coming out of Canadian house prices
Last month, the Teranet-National Bank National Composite House Price Index showed that Canadian house price gains while moderating across the board are still robust. Combined with recent evidence of a precipitous drop in transaction volume,…
Ireland is the biggest winner from last European summit
Last week's newsletter focused on Monti and Rajoy forcing Europe into true EuroTARP as the chief headline coming out of the latest European summit. A lot of other commentary focused on the agreement to let the ESM/EFSF buy up sovereign…