Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1239.4 | -33.8 | -2.65% |
| Eurostoxx Index | 2247.4 | -55.810 | -2.42% |
| Oil (WTI) | 94.65 | -2.150 | -2.22% |
| US Dollar Index (DXY) | 77.587 | 0.922 | 1.20% |
| US 10 Year Yield | 1.97% | -0.10% | |
| Italy 10 Year Yield | 7.33% | 0.56% |
Added a new vital statistic – the Italian 10 year government bond yield.
S&P futures are getting crushed as investors focus on Italy and the rise in Italian government bond yields. Overnight, LCH Clearinghouse increased the margin requirements on Italian government debt by 75%, triggering a sell-off in Italian bonds. Spanish and Irish yields are wider as well. Both EURIBOR / OIS and LIBOR / OIS are signaling stress in the financial system. One problem for the banking system is that government bonds form the basis of Tier 1 (risk-free) capital. So if the “safe stuff” is suspect, all of the banks are suspect.
Luckily the US credit markets (with the exception of the mortgage space) have been largely insulated from the problems emanating out of Europe. US banks raised a lot of capital during the crisis and have been de-levering for years. Two big corporate issues priced yesterday and hedge funds are raising money for distressed debt vehicles. The US government bond is back under a 2% yield.
The European experience is instructive for the US. Slow-moving train wrecks can lull investors into a false sense of security. Simply because investors are not focusing on a well-advertised problem at the moment doesn’t mean things are fine. These sorts of things typically coalesce in a short period of time. In other words, it doesn’t matter until it matters, and then it is the only thing that matters.
Filed under: Uncategorized |
All Things in Moderation 
Sobering, Brent.
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Brent:Luckily the US credit markets (with the exception of the mortgage space) have been largely insulated from the problems emanating out of Europe.How long is this likely to last? Is it possible that the US credit markets will remain insulated?
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@ Mike,I should have put "so far" at the end of that sentence. I don't think US banks have much direct exposure to Euro sovereign debt, though they do have exposure to the Euro banks because they do business with them. My guess is that the ECB will eventually relent and start the printing presses. If you are a government, inflation is easier to stomach than austerity.
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"The European experience is instructive for the US. Slow-moving train wrecks can lull investors into a false sense of security. Simply because investors are not focusing on a well-advertised problem at the moment doesn't mean things are fine. These sorts of things typically coalesce in a short period of time. In other words, it doesn't matter until it matters, and then it is the only thing that matters. "This is probably the clearest explanation of recent market behavior I've read yet.
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One general post election note:When I went to vote last night, three of the offices (State Senator, Delegate, and Sheriff) had only one candidate running for the office.Given the significant structural advantages the two main parties enjoy in the United States, one would think that they could field candidates in the various local races.
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Okay, Brent. But you're still optimistic. Right? Right??
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i'm swamped but wanted to pass this along. http://www.theatlantic.com/politics/archive/2011/11/want-real-change-occupy-the-republican-party-orp/247977/
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Okay, Brent. But you're still optimistic. Right? Right?? Sure, long term. I love the cheap energy story, and I think it is a game changer on so many levels.That said, Europe and the collapsing property bubble in China could send some shrapnel our way.
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geez… fire in the hole!i got a networking letter from a college student today asking about advice about entering the hedge fund business. i am tempted to reply "run screaming"
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I used to read the WSJ pretty religiously, they've given me good advice on occasion, but this is a little scary. A live-blog on the Italian debt crisis, if that's what they're calling it. I can't get to all of it because of the paywall, but here's a sample.Investors are turning to the currency market for protection against a feared economic disaster in Italy that risks shocking global financial markets. Appetite for disaster insurance has grown as Italy's political chaos has sparked a run on Italian government bonds that threatens to make it prohibitively expensive for the country to borrow."Risk reversal," a gauge of investor fear in the currency market that tracks bearish and bullish prices on the euro for the next year, rose Wednesday to 4.5, more than double the level seen after the Lehman Brothers in late 2008.The Dow is now right at its worst levels of the day, down about 430 points, the VIX is up 31%, and Treasury yields are back below 2% despite an earlier sloppy auction.What gives?Nothing less than the end of the euro zone as we know it. Or at least a lot of rumors thereof.Good riddance, you might be saying by this point, but this could get a little messy, if that’s where we’re headed.There’s a report that Angela Merkel’s Christian Democratic Union is looking for ways to make it easier to bolt from the euro, according to an unconfirmed report from Handelsblatt (via Bloomberg).Meanwhile, Reuters has a story about how Germany and France are looking into the idea of creating a super-secret euro zone that would be more tightly integrated and smaller — meaning, ostensibly, without all of these losers that can’t get their fiscal acts together.The euro is off 2% today, a fairly rare big move for the currency, to $1.35 at last check.The Reuters story certainly puts a new light on Merkel’s comments earlier today about the need for a “new Europe:”“It is time for a breakthrough to a new Europe,” Merkel said. “A community that says, regardless of what happens in the rest of the world, that it can never again change its ground rules, that community simply can’t survive.”
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Brent:In other words, it doesn't matter until it matters, and then it is the only thing that matters.This is so very, very true. The reaction of the market to the Berlesconi news yesterday was just inexplicable to me. Berlesconi resigns and so all is going to be OK? Huh? Ooops. Dow down 371, and bonds down 10 bps on yield. Guess things won't be all OK. All in less than 24 hours.
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So, I hope it's okay I left Johnbannedagain a link to ATiM over at Ezra's. It was kind of a dead comment thread so I don't know if he'll see it or not, or be interested, but I tried.
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All for trying to hit up John to come over. I think he'd like it here. Can't blame a girl for trying, anyhoo. 😉
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Did somebody call for a plumber?
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Not to beat a dead horse, but I found this quote today, I won't say from where. I left one word out but thought it might be interesting to see if it generates any discussion. Scott?The American creed is the keystone of American national identity, but it requires a culture to sustain it. The task is to recognize the creed's primacy, the culture's indispensability, and the challenge, which political wisdom alone can answer, to shape a people that can live up to its principles.
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FYI — VA GOP is declaring victory and a majority in the state senate. current majority leader D issued a response that acknowledged things aren't looking good for them.
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Hi John, welcome. Here's the thread I was telling you about but look around and you'll see we're a "serious" group (mostly). And if you want we'll make you an author and you can generate your own posts. Try it you'll like it. There are a few people here you won't know but they're amazingly intelligent and thoughtful, mike, nathan, dave! are new to you but brent is sold2u.
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John, great comments on Klein's post about the Cash for Clunkers failure.
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Congrats, I guess, NoVA. It's what you wanted I presume.
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i was actually fairly indifferent. GOP already had the house and the governor. probably better if the D's had the senate.
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NoVA: FYI — VA GOP is declaring victory and a majority in the state senate. current majority leader D issued a response that acknowledged things aren't looking good for them.I'm not an expert, but if you want to gerrymander, you need the state senate, correct? Welcome, John. Please stay. Agreed, Brent posts are top notch. I see great stuff here from these folks that it's hard to make room for elsewhere. The shared blog environment seems really solid, to me.
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kevinDo you think the quote I posted above is relevant at all to our discussion earlier, the one I bailed out on, with scott and qb? Maybe I'm barking up the wrong tree.
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mike has a new post up. I have to leave for a bit, but I'll be back.
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KW — yes, but VA is one of those voting rights act states, so anything they do has to be approved by a federal court. i'm headed out, but i've been mulling the idea that a voting rights act challenge should be leveled against any gerrymandered seat. what was once discrimination based on race (lines were drawn to dilute minority votes) is now discrimination based on ideas. a pool of voters is being systematically disenfranchised. or something like that. anyway, see you tomorrow.
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"John, great comments on Klein's post about the Cash for Clunkers failure. "Is there a handy link for this?
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Not handy. It was a post kleind did a day or two ago.
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http://www.washingtonpost.com/blogs/ezra-klein/post/was-cash-for-clunkers-a-clunker/2011/11/04/gIQA42EhpM_blog.html
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lms:Scott?I'm not sure what you are asking me. Can you be more explicit?
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NoVA:i've been mulling the idea that a voting rights act challenge should be leveled against any gerrymandered seatI'd like to see that suit. CJ Roberts had an interesting question during orals of NAMUDNO about how long VRA Section 5 should still be in effect, even if Congress keeps renewing it. Can't remember it exactly, but he was clearly concerned about the longevity of Section 5.
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No big deal scott. I just thought it sounded like something along the lines of what I was talking about. That there is something collective about the population that is either more or different than the sum of its parts. It's something I learned from my father, who was very conservative, and I thought the quote made sense in that light. It's certainly not a quote from a left leaning publication.
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I have an economic question that maybe one of you could answer, there's no one here so maybe tomorrow. Wouldn't the best way to resolve the current Euro Crisis be for the ECB to announce that it will buy or back any and all Italian et al bonds. Is there enough confidence left in the ECB that it would stop the panic and that all important 7% number would go back down? They wouldn't have to actually do it if confidence returned. Or is all this just inevitable anyway?
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