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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Don’t worry about Europe, it’s all taken care of…

Yesterday’s headline on Reuters was “World leaders back Greece, vow to combat financial turmoil“. Oh that’s nice. So it’s all taken care of then…

The bottom line, however, was the agreement of the G8 that Greece should stay in the eurozoneCameronvoiced his support of a stronger role of the ECB in form of quantitative easing. Obama also tried to get Merkel out of her super austerity position, leading to an agree-to-disagree kind of situation with an official statement reading “the right measures are not the same for each of us.” And then they all watched soccer togetherread article

On Wednesday, an unofficial EU summit will be held (not sure what makes it unofficial, it looks a lot like all the other ones…) to discuss a lot of whens and ifs regarding the size of the European bailout fund (old issue), eurobonds(really old issue) and a lender-of-last-resort kind of role for the ECB (sort of an old issue). Hollande is the one who brought up eurobonds again. Before, Mario Monti of Italy, Mariano Rajoy of Spain and Jose Barroso, president of the European Commission had backed the idea, but had been shot down by Angela Merkel. This might change soon, turning Germany into the odd one outread article

Meanwhile, Alexis Tsipras, leader of Syriza, played the rationality card in an interview with Reuters, saying

Yes we do want Europe’s support and funding, but we don’t want the money of European taxpayers to be wasted. Two bailouts in a row went into the dustbin, into a bottomless barrel. If this continues we would need a third package in six months. European and their leaders must realise this.

I feel like they do.

It’s all not going so well for Facebook. Yes sure, the company raised $16bn in Friday’s IPO, pushing thecompany’s valuation to $105bn, but the share price only gained 0.6% on the first day, far less than expected. Now, different media sources are debating: was it a failure, or are we getting this all wrong?

And while Mitt Romney is campaigning around the US, his former business partner and biggest campaign donor Edward Conard is busy revolutionizing economic thought: the case for income inequality – from the 0.1% to the 99.9%… read article

So long.

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Apparently Cyprus is the new Greece

After Mariano Rajoy, Spanish prime minister, proclaimed that Spain wouldn’t need to be rescued the way that Greece was (ever!), Luiz de Guindos, economics minister, said it would require “a budget defined by an external bailout program,” if proposed budget cuts wouldn’t be executed effectively. [FYI: It is a bit unclear if he means regional bailouts or a national bailout.] This is following continuous arguments between the Spanish government and regional administrations. Rajoy has already lost a lot of support in the south, and Catalonia isn’t exactly known for its good relations with the government or its sense of unity. read article

CMA Global ranks sovereigns by risk and who comes out on top? Cyprus. What? read article

Call for or Londoners looking to move in the near future: a handful of apartments in the Shard will go for £30-50m (more than 10 times the average price per sq ft around London Bridge) and thereby create the most unequal renting environment in the UK. Maybe we could think about a roommate situation? Meanwhile, UNESCO is worried about the Shard’s impact on the visual integrity of the Tower of London, which is a world heritage landmark. read article

Pros and cons of the German business model: strong manufacturing, strong SMEs, good at things, liberalized labor market, vocational eduction vs. terrible at investing in anything foreign (particularly US mortgage-backed securities), declining services sector, poorly dressed head of state, low birth rate. read article

Same topics, but a more extensive discussion here.

Alphaville wrote some pretty interesting stuff on regulation (yes, I’m serious…), including a very simple, yet artistic image that captures what it’s all about: view image

Finally, Sarkozy is bashing the FT in the French press. He says it’s about and Anglo-Saxon paper covering a non-Anglo-Saxon country, but who is he kidding, it’s really about this.

Have a good weekend.

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The trick is to keep spending

Ahead of tomorrow’s budget, UK headline inflation fell to 3.4% in February due to decreasing gas and electricity prices. And with every bit inflation lowers, hopes that the British will finally start spending some money again go up. In line with that: the Office for Budget Responsibility (OBR) has upped its economic growth forecast for the year. read article (inflation) read article (OBR)

France, on behalf of the EU, is giving Google a hard time regarding the piles of user data compiled since the company changed its privacy policy in early March. CNIL (Commission Nationale de l’Informatique) doubts the new rules will comply with EU privacy and data protection laws. This includes, for example, tracking people and compiling data stored on smartphones. read article

Otherwise, Mario Monti has an awkward meeting with Italian trade unions today, and India is nudging its airlines to disregard the EU emissions trading scheme. The scheme will impose a toll for carbon emissions on inbound and within Europe. In case the EU would ban Indian airlines from flying to its European destinations, India would blatantly overcharge European carriers for flying over India:

“If things continue like this, then European airlines will be forced to avoid flying over India and go over the Indian Ocean and the Bay of Bengal,” the official said. “That’s not viable for them. They won’t have fuel to do that.”

Most sophisticated policy dispute ever. Next thing you know, someone starts crying. read article

Are you dreaming of becoming an undercover agent, but you’re stuck in finance? Go work for BlackRock, they have code names and everything. read article

Infographic for all Londoners: here’s a map of how many hours of minimum wage you would need to pay the median rent in your area. So it’s expensive (and awesome) to live in zone 1… what else is new?

So long.

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D-Day for Greece

There won’t be a news brief tomorrow, 09 March 2012.

Stolen from WSJ MarketBeat(‘s conversation with Kathy Lien, director of global research and analysis at GFT):

The focal point today will be the rate of voluntary participation by bondholders in a Greek sovereign bond swap. Therange of outcomes is wide: If enough bondholders step up to swap 90% of the bonds, you can more or less take a credit event off the table; stocks and the euro will soar, and we’ll see just how much Greek default fears have weighed on the recent market rally.

On the other hand, if the massive debt swap fails to attract 75% of the participants, we’re much more likely to see a credit event declared; in that case, look out below. Anywhere in between, Ms. Lien says, is a bit of a gray zone.

Meanwhile in Italy: Wolfgang Schäuble, German minister of finance, followed to lead of Dutch politician Mark Harbers, and made a ‘Greece’s problems are Greece’s fault’ kind of statement. There is no official record so far, but the pig-mask-wearing audience didn’t seem to be amused. read article

But despite the shitty economy, slump after slump after slump and austerity fun all over the place, the really bad kind of poverty in the world has declined consistently since 2005. The utilitarian is happy, the egalitarian is pissed off at the 1%. read article

Otherwise, it’s International Women’s Day, thank God there’s an infographic for that: view chart

Also, this is kind of fun [not to mention useful]: a philanthropy jargon generator. (personal favorite: ‘redefine integrated impact investing’. I think I might want to do that for living)

So long.

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WWAED

Lloyds, the bank with the hands down best office building in London, had a reported loss of £3.5bn last year (NYTimes Dealbook reports a £2.8bn loss, just FYI). Of course it had to do with the economy. But there was also the £3.2bn hit the bank had to take for mis-selling payment protection insurancesread article

WWAED (what would an economist do): Ken Rogoff on austerity, wages and numerous crises in an interview with spiegel.de. read article

Joris Luyendijk took a break from interviewing anonymous bankers (et.al) in the City and travelled to Tokyo and talked to a corporate banker. read article

And then a venture capitalist turns into a raging feminist on the topic of gender ratios in boards of Fortune500 companies. As for the “higher collective intelligence” claim, where exactly is the evidence for that? I’m still waiting on an article that reads “Your next CEO should be a woman if she’s the best candidate for the job.” read article

Information Is Beautiful released the shortlist with 12 infographics of its Hollywood Dataviz challenge. Personal favorite: What Movie Should We Watch Tonight.

Have a good weekend.

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Wait, who are the bad guys?

Yesterday’s negotiations with Greece didn’t yield any results, as generally expected. Greek finance minister Evangelos Venizelos even said the meetings weren’t exactly going well. Last night, Greece was still trying to find €600m to make the €3.2bn spending cuts that lender demand. As part of those cuts, 15,000 public sector jobs were cut. read article In the words of Zero Hedge:

Greece will hire 16,000 people to hand out the pink slips to the 15,000

We also have a new acronym on our hands: “Grexit” (apparently also a gmail app), courtesy of William Buiter, chief economist at Citi, who thinks its double as likely for Greece to leave the eurozone at some point throughout the coming 18 months (estimate of likelihood up from 25-30% to 50%). read article

In other news, Lloyd Blankfein, CEO of Goldman Sachs, made headlines by supporting same-sex marriage yesterday, which shouldn’t be a big deal… you all know the argument. But just to add on to yesterday’s news brief, don’t think you know anything about the world [you Apple-using vegetarian hipster], when Google is in bed with the Tea Party and Goldman Sachs is the proclaimed liberal front (my exaggeration). read article

But it only starts with Goldman, other banks have a human side to them as well. Here’s what Bloomberg wrote aboutJames Gorman, chief exec of Morgan Stanley:

Gorman doesn’t fit the image of a Wall Street titan. Notwithstanding his $10.5 million pay package, he shows up at black-tie events in a rumpled tuxedo he bought as a business- school student in the 1980s. He keeps supplies of Vegemite — a favorite Australian food that’s made from yeast extract — in the executive kitchen and eats it on toast.

He often walks home from his Times Square office to his Upper East Side townhouse and was spotted on one weekend in a track suit and sneakers waiting in line at the post office.

Read the full article here (hat tip FT Alphaville)

Finally, why getting hitched is the new status symbol: NYT Economix on the correlation between income and marriage and how that is ultimately bad for social mobility. read article

So long.

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Of procrastination and the 1%

Rumor has it, Greece might not blow up in our faces (yeah, right…). Olli Rehn, European Economic and Monetary Affairs Commissioner, said that a deal is close. “If not today then over the weekend.” So now this is aboutprocrastination… read article

Meanwhile, SocGen economist James Nixon is running around declaring a eurozone credit crunch, after ECB loans to the private sector came in at 1.1% less than estimated. read article

Arianna Huffington and Felix Salmon advocate moving the World Economic Forum to Greece (“Maybe an island…”), while sitting in what looks like the storage closet of a board game-fanatic. watch video

Salmon also has an idea why Davos delegates don’t care about the Occupy “movements” (and yes, I’m still putting that in quotation marks, because if we talk about inchoate things, Occupy X is pretty high up on my list). read article

Stratford, primarily known to me because it’s not in zone 1, will shortly become the hub of athletic excellence when the 2012 Olympics come to London. This is what the shopping list for Occupy Stratford and its 16,000 ripped attendeeslooks like: read article

Why loving Apple and hating Goldman Sachs is an example of inconsistent preferencesread article

And finally, in case you have been educated in economics and biology, a chart showing why the 1% end up becoming investment bankersview chart (read full article)

Have a good weekend.

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Occupy Davos

Angela Merkel gave the opening keynote of the annual meeting of the World Economic Forum in pretty Davos yesterday. In her speech, she advocated the European fiscal pact (cap on budget deficits) and the importance of [Europe’s] competitiveness besides the whole cohesion business. She also took a passive swing at the likes of S&P [but also the IMF], saying that Europe [and Germany in particular] tried to live up to demands regarding the bailout funds, but whatever was agreed on on one day, would be torn apart on the next. The German Handelsblatt criticized everything about the speech in this morning’s paper, using arguments that were not very well formulated either. George Soros, grandpa-financier (legit to say, he’s 81), who was quoted in many articles discussing the keynote, said that structural reforms in Europe will not be enough, stressing the need for eurobonds, which Merkel [still] doesn’t support. This tweet summarizes it pretty well.

But the question of everyone’s minds: Is it okay to talk about income inequality if you’re a billionaire? read article

Maybe we should just choose one financial institution to blame for capitalism’s poor street cred: Bank of Americaread article [alternative caption: dysfunctional panels in Davos]

And more from Bank of America, this time related to its definition of ‘cash’, as in ‘cash bonus’. Dealbreaker comments on BoA’s stock bonuses saying it’s either a PR thing or a back-door capital raising thing. read article

Greece update: a new proposal for a coupon rate of 3.8% conditional upon the participation of the European Central Bank, which is unwilling to deviate from its current coupon of up to 7%. Hat tip Zero Hedge. read article

In other news, Nokia sold 20 million smartphones in Q4. Three words: 37 million iPhones.

So long.

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Thursday, #44: Merry Christmas

Note: This is the last news brief of the year, unless Europe explodes over the holidays.

Hungary is not feeling the festive vibe and is on collision course with Brussels. The FT got hold of a letter exchange between Jose Manuel Barosso, president of the European Commission and Viktor Orban, Hungarian prime minister. The debate concerns financial support for Hungary, whose borrowing costs have risen above those of Italy and Greece. But the country is overly protective of its independence and thus very sensitive to Barosso’s demand for compliance with EU laws. Yet, Hungary, which joined the EU in 2004, is asking Brussels [and the IMF] for unconditional financial support. read article

Come 2012, airlines will increase their prices for flights within or into Europe: As of January 1st, a new EU regulation introduces charges for carbon emissions [which is different from the fuel surcharge that is already accounted for in plane tickets]. The bankruptcy of American Airlines was a reminder that the airline business is not exactly profitable (here’s Planet Money’s explanation), so some of the costs will have to be passed on to the passengersread article

I grew up in a country in which the middle class is widely perceived as the backbone of a thriving economy and a functioning state. Now, I happen to live in a country in which the middle class is mistaken to be the rich upper class, the working class perceived as the standard, and the actual middle [class] essentially left out [or so it seems]. How did that difference come about? Maybe all the talk about the 99% and the 1% just distracted from a question much closer to home: Who is the middle class? read article

From a while back, but nonetheless fantastic, JP Morgan explains who the key eurozone players are with legoread article

And finally, in the spirit of holiday gluttony, the Economist’s big mac index, which shows that the purchasing power of the dollar and the yuan has never been closerview graphic

Merry Christmas!

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Monday, #41

Premise: Fitch said “‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach“. This is following a statement by the ECB from December 8th, when it became a secret lender of last resort, with low interest rates for banks and high interest rates for countries. You do the math.

Argument against: Felix Salmon on why that might be a good idea from a public choice theory point of view, but why it might not work out in the endread article

Argument in favor: Steve Randy Waldman on why we should prefer the ECB to have less powerread article

Let’s play the fun income-gap game again and take a look at some unfortunately US-specific numbers. The Economist shows real net income broken down into four groups (top 1%, 81st-99th percentiles, 21st-80th percentiles, lowest quintile). What’s that? Things got better for everyone? The richest take the biggest slump in income during recessions? I can’t hear you, there’s a protester screaming in my ear. view graphic

Okay, okay, fine. The income-gap is more than significant. It’s massive… on paper. But what makes a person rich in the eyes of others? What is the public perception of ‘rich’? (By the way, that is still not a tax bracket.) Research consultancy Gallup went out to find some answers. read article

Facebook is being sued for unfair-practice. Since January 2011, the “sponsored” ads on the right margin of the page name the friends who already like a product. I don’t really mind, nor do I find it disturbing to be statistically twice as likely to click on a link if one of my friends liked it before. But some people do and they sued. Their reasoning is that they couldn’t opt out from participating in the sponsored ads and that it takes privacy control away from the consumer. In other words, it’s a call to keep people’s information on their profiles, and on the profiles alone, which goes against the very concept of the newsfeed. read article

Here a little reminder that apart from building the “big bazooka”, i.e. the EFSF and its little sister the ESM, Europe, or rather European banks, also need to find €115bn to meet the new capital requirements imposed on them. view graphic

So long.

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