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HomeDavid Roche Provides Sense on Cents
Posted by Larry Doyle on May 12th, 2010 10:22 AM |
Does the world have the political will to impose the necessary disciplines in drafting and implementing meaningful fiscal and monetary policies? Anybody? Each and every country in the world is certainly not in the dire straits of some nations within the EU, but plenty are.
David Roche, president and global strategist at Independent Strategy, addresses this very topic in a recent commentary in the Financial Times, This Is Not the Way to Solve the Euro-zone Debt Crisis:
The aim of the emergency European Union financial stabilisation package was to create “shock and awe” in financial markets. It is designed to convince markets that they cannot win in forcing any eurozone state into defaulting on its debt. (more…)
JP Morgan’s Perfect Quarter More Evidence “Game Is Fixed”
Posted by Larry Doyle on May 11th, 2010 2:15 PM |
First Goldman Sachs. Now JP Morgan.
The shop where I worked from 2000-2006 released a report highlighting the fact that it made money each and every day of the 1st quarter. Thanks again to Matt for bringing this story to my attention. Bloomberg highlights, JP Morgan Traders Match Goldman’s Quarter with No Trading Loss:
JPMorgan Chase & Co.’s traders matched those at Goldman Sachs Group Inc. in making money every day of the first quarter, a first for both companies. (more…)
The Euro Is Retreating like Napoleon from Moscow
Posted by Larry Doyle on May 11th, 2010 12:28 PM |
If those involved in the European bailout thought the trillion dollar package would quickly support the Euro and, in turn, the economies of the EU, well guess what? After a quick, short covering rally for the Euro yesterday, the common currency for the EU has turned tail and is retreating faster than Napoleon from Moscow.
The Wall Street Journal addresses the Euro’s retreat in writing, Euro Falls as Aid-Plan Euphoria Fades:
Unnerved by the euro zone’s giant bailout mechanism and the prospect of patchwork politics in the U.K., investors herded back into the safety of the dollar and yen Tuesday, sending the euro and the pound lower. (more…)
How Big Are These PIIGS?
Posted by Larry Doyle on May 11th, 2010 10:41 AM |
The bailout package provided for the EU yesterday is not quite a trillion dollars. Lot of money, right? Yes, even in this day and age a trillion is a large number, although our friends in Washington may not appreciate that.
Will the bailout be enough to buy time for the economies of the PIIGS to recover and stop the spread of contagion across the EU and then the world at large? In order to address that question, we need to assess just how big and fat these PIIGS are in terms of their outstanding debt and their fiscal deficits, as well. To this end, I thank a loyal Sense on Cents reader for sharing a chart drawn up by Bank of America which highlights the size of these PIIGS:
Will the PIIGS economies be able to generate sufficient economic growth to finance their debts and deficits at reasonable rates? Great question. We will not learn the answer to it anytime soon, but do not think that the bailout provided to the EU yesterday is an “all clear” signal. The mountain of debt and fiscal deficits within these PIIGS will provide a real drag on these countries and the EU as a whole for the foreseeable future.
The violation of moral hazard involved in this bailout will also serve as an economic drag as well. That concept is quite familiar to those of us in America who appreciate fiscal discipline.
LD
What We Learned from the May 6th Market Plunge
Posted by Larry Doyle on May 11th, 2010 7:55 AM |
Like leading sheep to the wolves, the manner in which high frequency trading activity has grown to dominate our equity markets is nothing more than a trap. How has that trap worked? Stay on message and continue to promote the premise that high frequency trading adds liquidity to the market. Time and time again, America would hear from quantitative traders and their analysts engaged in high frequency trading that these programs would provide consistent liquidity from which retail investors would benefit.
What a crock!! That said, the HFT activity itself is not to blame for the market plunge. The programs behaved as they were designed. That is, during periods of extreme volatility, those running the programs would simply shut down the machine. Is that liquidity? No, I don’t think so.
Never again should America have to listen to anybody engaged in high frequency trading and hear them say these systems provide liquidity to the market. They don’t. (more…)
Is the Federal Reserve Behind the European Bailout? Audit the Fed!! [UPDATED with video]
Posted by Larry Doyle on May 10th, 2010 12:52 PM |
Is the American taxpayer ultimately bailing out the European Union? Far fetched? Don’t be so sure.
While the focus of the European bailout has been on the European Central Bank, the European Union, and the IMF, little attention is being given to swap lines which were reopened between the Federal Reserve and the European Central Bank.
The ECB has steadfastly fought the idea of breeching the principles which formed the European common currency (the Euro) in order to fashion a bailout for the EU. Did the ECB crater to political pressure by the EU? Or, did the risks of the bailout shift from the ECB to another large central bank? Such as? The Federal Reserve! (more…)
Goldman’s Perfect Quarter Indicates Game is Fixed
Posted by Larry Doyle on May 10th, 2010 10:12 AM |
Those involved in fixing the scores of athletic events will intentionally lose every once in a while to give the appearance that the games themselves are on the up and up. For those betting on athletic contests, beating the point spread each and every time would be a strong indication that the games are fixed. Similarly, casinos are happy when players win so that other players will enter the game. If the house always wins, sooner or later fewer and fewer players will enter that casino.
The crowd at Goldman Sachs ,along with their cronies in Washington, may want to heed these lessons. Why do I write this? (more…)
Euro Crisis Merely Delayed, Not Averted
Posted by Larry Doyle on May 10th, 2010 8:39 AM |
They blinked.
The European Union and European Central Bank stole a play from the wizards in Washington to avert an immediate currency crisis in the EU and the potential ripple effect around the world. Did they do the right thing? For me, the question of addressing the fiscal crisis within the EU is not one of right or wrong; rather, when the crisis comes, how large will it be and how long will it last?
The trillion dollar package provided by the European Central Bank, the European Union itself, and the IMF is a combination of loan guarantees and quantitative easing. Shock and awe and punish those who would dare sell the Euro short, right? Clearly, the massive injection of capital will squeeze those who have shorted the Euro, but what about the long haul?
The EU is subverting the very tenets upon which the union was founded. Those tenets precluded this type of financial bailout. (more…)
No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Bill Berliner
Posted by Larry Doyle on May 8th, 2010 1:42 PM |
UPDATE: This episode of NQR’s Sense on Cents with Larry Doyle has concluded. You can listen to a recording of the episode in its entirety by clicking the play button on the audio player provided below. Once the audio begins, you can advance or rewind to any portion of the episode by clicking at any point along the play bar.
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The challenges on our economic landscape remain daunting. While employment and manufacturing may be stabilizing, the housing and mortgage markets remain mired with real issues.
The issues within housing and mortgages are at the base of our economic crisis encompassing both Wall Street and Washington. From structured transactions on Wall Street to financial regulatory reforms in Washington, the issues ultimately come back to housing and mortgages. I will discuss all these issues on Sunday evening from 8-9pm ET as No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Bill Berliner. Bill Berliner is uniquely qualified to address these topics. (more…)
May 8, 2010: Market Week in Review
Posted by Larry Doyle on May 8th, 2010 9:33 AM |
The bill comes due.
This week’s bill is in Greece. The bills right behind it are in other EU nations. The larger bills are in the UK and the US. How will they be paid?
A combination of fiscal austerity measures, debt restructuring, monetization through currency devaluations, and potentially defaults. The civil unrest playing out in Greece is likely a precursor to similar unrest in other nations. Unless and until real fiscal discipline is implemented and executed, this civil unrest will spread.
Fiscal discipline may stunt short term government stimulated economic growth, but that is the only remedy for a path to long term economic prosperity. Washington has shown no appetite nor inclination to write this prescription. Our future is and will continue to be very challenging until they write the prescription. As I wrote the other day, “Athens Today, London Tomorrow? Washington Next Week?”
Welcome to the Sense on Cents Week in Review where I provide a streamlined recap of month-to-date market returns. (more…)
