Death Star Economics



Adverse QE reactions: VIX vs business


There won’t be a news brief tomorrow, Friday, 21 September 2012.

The collective monetary easing exercise that the US, the EU and Japan have engaged in recently [and the UK has alluded to], seems to have done some good. Via MarketBeat:

The Chicago Board Options Exchange’s Volatility index, or VIXis back below 14 and pushing against five-year lows (annotation: this only happened three times in the past five years). More global monetary easing appears to have been the best medicine to cure investor anxiety.

Five years! That’s all the way back to 2007, a year before Lehman, almost to the date. But of course, this is no reason to relax:

Earlier this month Bank of America Merrill Lynch noted that when the VIX has been this low, it has risen over the next 12 months about two-thirds of the time.

Yet, the eurozone PMI shows that the ECB’s bond-purchasing plan hasn’t really made that promised difference just yet, and Japanese exports have slipped 6% YOY.

Meanwhile, the EU is preparing for Wen Jiaboa’s visit and abolished an investigation into the Chinese telecommunications companies Huawai and ZTE Corp. The two were under scrutiny over illegal state subsidies. Of course, EU officials deny that it has anything to do with China’s visit to the west. Another investigation regarding solar panel manufacturer was launched earlier this month. So for the US engaging in trade wars with China is one thing. It’s been kind of an issue for ages, plus there’s the whole world domination angle to it. But for the EU, the picture looks pretty different. Just minutes after they tried to get into the books of Gazprom (the Russians? Really?), they now want to screw the Chinese over. Something tells me Europe is not in the position to criticize anyone right now, particularly those who are still sitting on money (or resources = money). read article

The fun fact of the day: Bruce Willis’ loss-making France-based vodka manufacturer (he’s a minority shareholder, 2.6%, but still) that needs restructuring of its €441m debt mountain. read article

[Some early] Weekend reading:

– Men and cooking: haute macho, read article

– the global brand that Occupy would like to be, read article

 Hayek on China (not personally), read article

So long.



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Looking like an idiot, looking like George Osborne

The Eurogroup met in Brussels yesterday to discuss a proposed Capital Requirements Directive for European banksDenmark, whose banks are doing pretty poorly at the moment, suggested a compromise that would re-transfer responsibility for capital rules to member states. These European requirements would be on top of those prescribed by Basel III. But after much negotiation, there was one country, out of the 27 EU member states, which refused to sign the deal. Let’s think about who that might have been… a piece of legislation that taken power from Brussels and redistributes it to the nation states. Hmm. Germany? No. The UK, of all countries… George Osborne‘s prime reason for refusal was that the deal would have “look[ed] like and idiot. Poor man, he already does.

According to the WSJ

[…] Osborne had insisted on including new “macroprudential” regulatory instruments into the discussion on how much power member states should have in setting the rules for their respective financial sectors. Ironically, the government was unable to say what macroprudential powers it wants, as it says this is a matter for the new and independent Financial Policy Committee.

In FranceHollande and Sarkozy fought for the hearts of French voters on national television, calling each other liars and ‘unpleasant. Overall, the debate doesn’t seem to have done much damage to either candidate though, i.e. Hollande is still leading the polls. read article

Otherwise, today is World Press Freedom Day, the ECB is meeting in Barcelona to discuss policy and HSBC has a bit of money laundering scandal on its hands.

More on Occupy as the new labor movement here.

Finally, Felix Salmon dissects the FT’s subscription pricing policy, which, at least in the US, seems to depend on the browser you’re using… Overall, however, the FT is priced way above other business papers, making it the absolute 1%er paperread article

So long.

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Protectionism vs. globalization, round 65

Recap of yesterday’s May Day protests:

Spain saw more than 80 protests, most of which were motivated by the country’s ridiculous unemployment figures. InGermanymore than 400,000 unionists went on the streets showing their discontent with the government’s austerity measures. Obviously, there were demonstrations in Greece and France as well, but since that’s pretty much the norm now, it doesn’t seem worth mentioning. read article

In the US, most expected Occupy protests were peaceful, except for an “anarchist faction.” (Also, great picture, Reuters…)

A very fitting comment from an FT reporter on the interweb:

A thought: shouldn’t the “austerity vs growth” debate in Europe have been settled before austerity was hardwired into EU law?

In the NetherlandsGeert Wilders, leader of the far-right freedom party, has announced that his campaign for the general elections in September will advocate a Dutch exit from the EU. In an interview with new broadcaster NOS, he said

“We can be a member of the European Economic Area just as Norwayor of the European Free Trade Association, as Switzerland.”

This is really upsetting for a whole truckload of reasons. First and foremost, the only thing that keeps Europe from [continuously] falling into pieces is the interconnectedness of its countries. Arguably, a contract that forces nations into a union is worth more than alliances of independent parties. What is more, it’s like we’ve left the peak of globalization and the appreciation thereof far behind us and all that’s left is Occupy, a broken EU and protectionist policies.

On Project Syndicate, former LSE director Howard Davies, argues why protectionism is bad.

Tonight will see the last stand [off] between Nicolas Sarkozy and Francois Hollande. The 2.5hr debate, which I expect to be filled with contradictions and anti-European statements and which the French expect to be watched by 20 million people.

Otherwise, Germany has added a bureaucratic layer for oil companies by forcing operators Germany’s 14,700 gas stations to register their purchases and prices to harmonize [consumer] prices across the country. Needless to say, the industry is little amused. Also, now that it’s May, it’s time to have a look at how the world was doing in April. The answer is pretty consistently ‘shit’… read article

So long.

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Europe gets stuck in philosophy

It’s a terribly slow news day today, nothing is blowing up, no summits are being held and no presidents leave or enter office. Hmpf.

Ireland is looking at tax increases totalling €400m to meet its 2012 deficit targets. It is unclear if the countries corporate tax rate, which is one of the lowest in Europe and the lowest of the eurozone, will be touched by the new austerity measures, though many advocate that it should be. The Irish economy is expected to grow 0.5% this year. read article

Meanwhile, a philosophic debate about the legitimacy of austerity measures seems to be arising among other European nations. Italy’s industry minister Corrado Passera proclaimed that cuts won’t help Europe grow its way out of the crisis; this is backed by Christine Lagarde of the IMF, who called for more business friendly policies in the EU, where regulators are going wild at the moment. Others, most notably Germany, are holding on to strict budget plans to meet the deficit targets imposed by the new EU fiscal pact. Back, forth, back, forth… read article

More euro-philosophy in Reuters analysisread article

By the way, Greece is still dealing with those bondholders who refuse to take a 800% haircut (no, this is not the actual number…). Yesterday, Dutch bank ABN Amro decided to reject the deal last minute. The bank holds €1.3bn of Greek debt. Another deadline for bondholders to decide whether they will participate in the notorious bond swap is tonight, 8 pm GMT. read article

Do you remember people saying Occupy London [or Cardiff…] won’t have an impact? (Hint: I was one of those people.) Well, they were wrong. While the happy campers living in front of St Paul’s, sales of local shops and cafes slumped, some say by 40-50%. Well done. And for the police to look at the whole thing, more than £900,000 [of innocent tax payers’ money] was spent. The Finsbury Park camp side has already cost £10,000 in surveillanceread article

The Economist on the pursuit of happiness money: a graphic on whether striving for wealth [and saying so] is okay in your countryread article

So long.

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It’s budget day!

The Daily News Brief is going on a short spring holiday and will be back at the end of next week!

So it’s budget day in sunny Britain. The day George Osborne takes his little red lunch box to work and talks business. The plan is, unsurprisingly, to stimulate growth, get rid of that deficit and make everybody better off. Unfortunately, it’s not the thought that counts. An increase in real estate tax (stamp duty) is expected, as well as adecrease of corporate tax to 24% and the cut of top tax rate from 50% to 45%. So far, the UK public borrowing decreased by around £9bn from 2010/2011; however, public debt in February was up by around £6bn from last year. Hmm. read article

Update: The most important thing has already been said:

It’s the determined policy of this government that we keep Wallace and Gromit exactly where they are.”

(regarding film tax credit)

Occupy London is still around, even after the protesters have been evicted from their holy camping grounds around St Paul’s. Here’s their statement (from the FT’s budget live blog):

In the shadow of Canary Wharf, set along the path of workers from the local financial services industry, Occupy Limehouse (corner of Branch Road and Horseferry Road, E14) has been chosen as an ideal location from which to carry on the Occupy movement’s critique of global capital. It is the first of a number of new autonomous tented sites expected to pop up around the capital in the coming months.

always thought Limehouse needed to be gentrified

How do we feel about journalists being paid for giving speeches at events of banks and all other financial institutions of the rainbow? read article

And finally, the case for philosophy in finance and why the UN should be more like a trading floor.

So long.

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Let’s boycott tzatziki

Yesterday, Ireland announced to hold a referendum regarding the EU fiscal pact. In an act of gratitude, I think they could have let this one slide, but that’s just me…

The Dutch voted in favor of the bailout package for Greece, but reserved the right to publicly bash them. Mark Harbers, Dutch liberal politician, said it loud and clear:

“… it can still go wrong in Greece, because there are Greek people living there. No one can blame us for not having any trust in them anymore.”

About a week ago, the Greek consumer protection organization Inka called for a boycott of all German and Dutch products. Why? Because it helps against austerity and default, stupid. read article

In the night from Monday to Tuesday, the Occupy London camp in front of St Paul’s was cleared by the police (really like the headline in the Sydney Morning Herald: London peels off occupiers). Today, the Guardian reads this:

 “I was sorry that the City of London tore down an oasis of political speech.”

Mark Greif, the author, writes this while is is not actually in London. He hasn’t been to the happy camp side ever since it popped up and generally seems to prefer writing about the US ‘occupations’. Kind of funny. read article

Planet Money asked three LSE economists why middle class jobs are disappearing and what that means (never mind their solution, it’s not exactly a breakthrough). read article

Otherwise, Microsoft has released Windows 8 for public testing and Apple has announced a new iPad for March.

So long.

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The roller coaster that is Europe

It was all going so well, and then the services and manufacturing shrank… While Germany and France actually didn’t do too bad, the likes of Spain and Portugal dragged down the average. At least it seems like the consensus moved from ‘a year of recession’, to ‘a quarter of recession‘. Thinking positive. read article

Not so positive is that Fitch downgraded Greece [and we still haven’t hit rock bottom] from CCC to C. See page 10 in this document for reference.

Occupy London actually really has to break camp now. The City of London Corporation has been suing the … ‘situation’ for literally being in the way [among other factors like hygiene]. Very expected response from one of the protestors: “Authorities are untouchable.” Right. Your. Tent. Is. In. My. Way. read article

A while ago, I posted a study from the University of Texas at Austin, finding a high degree of correspondence between Facebook profiles and actual personality traits of people. Now there is another study, this time from the University of Northern Illinois, Evansville and Auburn University, saying that there is a correlation between profiles and work performance, even GPAs. And no, party pictures wouldn’t render you unemployable… read article

(Having said all that, some of you may know that when you apply for a job at Facebook, you can choose to apply with your profile…)

Is your job making the world a worse place? In other words, are you working in the fast food or fashion industry? (Yes, the financial services, petroleum and tobacco industries are on the list as well.) read article

So long.

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Eurocrisis – the musical. Seriously.

The CBOE volatility index, designating the fear in the market, hit the lowest mark since July yesterday. At the same time, the Kauffman Foundation released a report pooling economics bloggers’ opinions regarding the US economy. Most used words: ‘uncertain’ and ‘fragile’read report

But really, all I have been waiting for is this: EuroCrash! – the musical. It reminds me of “Occupy Wall Street – the musical”, but this time around it is an actual musical, with a stage and actors and songs about sovereign bonds. It started in Frankfurt, but will come to London in February. If I go, I promise a detailed critique afterwards. read article

In other news, Belgium’s recession was confirmed yesterday. The country’s economy contracted in the last six months of 2011. read article

And Facebook actually filed the papers to go public; Marc Zuckerberg even put on a suit for the whole charade (see homepage of FT). He remains to hold 28.4% of the company, which is a whole lot of money. But now that everything is out in the open, we also know that Facebook made exactly $1bn in profits in 2011. Now, and this is only funny if you’ve seen The Social Network (which I’m sure you have), TechCrunch reminds us of the scene in the movie where Sean Parker’s character says “A million dollars isn’t cool. You know what’s cool? A BILLION dollars.” Admittedly, a badass PR gagread article

Finally, as the deadline to save what there’s left to save in Greece keeps approaching, somebody might want to send Papademos a copy of Jonathan Tepper’s how-to manual on exiting the euro… a scenario in which ‘bank holiday’ actually means what it says. read article

So long.

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Hooray, let’s all change our constitutions!

Every other newspaper you open today says that yesterday’s summit was a win for Angela Merkel, meaning she got 25 out of 27 EU member states to agree to her beloved fiscal pact: the EU’s control over national budgets needs to be written into each constitution. The odd ones out are the Czech Republic and of course the UK (maybe the lack of a constitution is the issue…). Furthermore, the setting up the €500bn European Stability Mechanism (ESM) as a permanent rescue fund was agreed upon. Unsurprisingly, David Cameron couldn’t make statements to the press without pointing the finger at others, calling for them to deal with “the mess that is the euro” according to Reuters. Only reason that’s still amusing is because the UK is not exactly the fastest growing country on the planet right now, and actually hasn’t been for a long while. read article or read Philip Stephens column on it in the FT read article

While the majority of developed countries can’t convince women to sit down and have [a thought about] children, things look quite different in London. Apparently, the city is drowning in babies… The Economist says that can be attributed to the crisis that made everything so goddamn sticky: labor markets, mortgage markets, etc. Because of the never-ending downturn, nobody moves out to the suburbs anymore when the stork comes knocking. But London’s schools and health system can’t cope, so if the urban planners in charge don’t come up with a solution, they might become the next hated profession (yesterday: lawyers, today: bankers…). read article

But for the moment, it is still the City that has to suffer from popular hatred. On that note, did you know that, 1. there are still Occupy London people around, and 2. that they lived up to their name and actually occupied a building? Good call, you may think, considering the low temperatures outside. But more importantly, the building these approximately 60 people are squatting in now is owned by UBS, who never got around to renovating it… read article

Meanwhile, the OECD‘s latest report is prepping us for the brave new world that lies ahead of us. The title reads “Machine-to-Machine Communication: Connecting Billions of Devices” and the summary is here.

Finally, a chart: Graphic Detail shows why growing out of the crisis is going to be harder than EU leaders like to thing. view chart

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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