TRES FAUX MORNING REPORT 7/27/12

Vital Statistics:

Last Change Percent
S&P 500
1,371.56
+11.54 +01.75%
Eurostoxx Index
2,290.49
+39.44 +1.91%
Oil (WTI) 90.01 0.62 0.69%
LIBOR 0.45 -0.002 -0.41%
US Dollar Index (DXY) 82.51 -0.31 -0.37%
10 Year Govt Bond Yield 1.51% +0.076%

WaPo:

ECB chief Mario Draghi said the words that many worried European officials had longed to hear: ‘Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. . . . Believe me, it will be enough,’ he said.

I apologize for the brevity – I barely had time for this.


Ezra Klein has been substituting on The Rachel Maddow Show this week and has been doing a series of short video explanations of some of the financial stuff going on lately.  Here’s his one on LIBOR:

#48311494

Between this and Scott’s series I think I actually understand LIBOR and why it’s a problem if the rates were actually manipulated now.


Here’s his explanation for how and why to break up the big banks:

#48329251


And here’s his translation of this sentence from the Bloomberg site: Draghi: Yields disrupting policy transmission are in ECB remit

#48347263


Ezra has gotten better and better on-camera, and I’ve enjoyed the way he’s able to boil complex concepts down verbally now as well as “on paper.”

Michigoose’s contribution to our collective financial expertise

18 Responses

  1. Thanks again Mark, you’ve been a real trooper filling in for Brent. I moved this link over here from yesterday’s MR. It’s an interesting list of names.

    Click here for a list of all the bankers, economists and financial experts who are now calling for the break up of the big banks.

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  2. I wish I could figure out why sometimes the video links embed as a video and sometimes as a link, but oh well. . .

    Thanks for starting us off, Mark!

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  3. Thanks, ‘goose, for lots of links I cannot get to until I am in my motel in Houston tonight, if then!

    George, we are visiting our daughter who is at TMC. Turns out that between her and her roommate they have too much furniture, so I will be hauling stuff to Austin to put into storage. Rosanne and I will have dinner with her tonight, then late brunch tomorrow. We are planning a visit to the Holocaust Museum near Hermann Park in the afternoon, then hauling furniture back to Austin tomorrow night. If it were not so “fun filled”, I would be looking to buy you a drink. Ah, one of these days.

    She made it in just fine last week using the Sam Houston and the South Freeway, but she took 90 from Rosenberg to the SH. She found out that the huge jam on 10 just east of Columbus was because 4 exits in Houston were closed, so she would have been in sub-30 MPH traffic for 50+ mi. Apparently she missed her cut-off to 59 in Rosenberg, but 90 moved pretty freely.

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  4. Mark,glad to hear she got home OK, Houston traffic and all that. Though I will say, as a resident here for almost 10 years, that Houston traffic is not that bad. In fact, I’ll wager that If you take the top 10 cities in the country (Houston is generally ranked 4th) we have the best traffic flow.

    Have fun and drive safe.

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  5. Lms,

    Here’s a counter to Meryerson’s LaTimes lament.

    http://neighborhoodeffects.mercatus.org/2012/07/26/is-the-mortgage-crisis-to-blame-for-san-bernardinos-bankruptcy/#.UBFcJspH31E.twitter

    It focuses more on Stockton that ‘Berdoo, but does touch on it. I think it’s a pretty fair assessment. One interesting tidbit:

    “Public sector compensation is a big and growing part of many municipal budgets. What can be said is that the cost of San Bernardino’s police and firefighters represent three-quarters of the city’s expenditures and revenues are flat.”

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  6. Thanks McWing, I wasn’t necessarily buying all of Meyerson’s “lament” but I thought it at least showed a side of the coin that doesn’t get expressed enough in the news. Unfortunately, a lot of future retirees, not just public servants, hung their hats on an illusory rate of return based on a bubble that was doomed to bust.

    Update: And health care costs have risen astronomically for all of us as well.

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    • No time to really comment, unfortunately, but wild day in the markets. ECB just made some announcements about steps to save Europe…huge sell-off in bonds, big rally in stocks. Dow up over 200, 10yr note yield up 12 bps.

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    • McWing…my quick take…he’s right. This bond sell-off won’t last. I’d guess we’re back below 1.50% on the 10year some time next week.

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  7. The bigger problem with Meyerson’s lament is the “so what factor”. You can’t base your expenditures on revenue levels inflated from a real estate bubble.

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  8. You can’t base your expenditures on revenue levels inflated from a real estate bubble

    Except they did. Obviously they shouldn’t have. I don’t know too many people in the public sector but I am familiar with our firefighters here and these guys put in as much as $300-$500 per month into their retirements and they’ve been paying a lot of shared health care costs as well. They don’t get SS like the rest of us. I just think there’s been a lot of blame at the worker level when it’s really the top dogs who’ve screwed the pooch. There’s also been a lot of corruption uncovered in a lot of CA cities which adds to the budget woes.

    Having said that, I don’t think Meyerson’s piece gets all of it right obviously. But the other piece that McWing linked has problems with it as well. One of which is the pay scale comparisons, based on SAT scores……………..really? I didn’t read all the linked pieces but that seems sort of unusual to me.

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  9. From the other board:

    “lmsinca
    7/27/2012 9:45 PM EDT
    John/Hamm

    jnc says Obama screwed it up

    I must have missed those links…………maybe he’ll put them up somewhere or other again. ”

    “Obama vs. Boehner: Who Killed the Debt Deal?

    By MATT BAI
    Published: March 28, 2012”

    http://www.nytimes.com/2012/04/01/magazine/obama-vs-boehner-who-killed-the-debt-deal.html?pagewanted=all

    See also:

    http://www.washingtonpost.com/politics/obamas-evolution-behind-the-failed-grand-bargain-on-the-debt/2012/03/15/gIQAHyyfJS_story.html

    Short version, Obama and Boehner had an agreement in principle on the revenue level, then the Gang of Six in the Senate released their outlines of a deal which included more revenue than Obama and Boehner agreed to, never mind that it would never pass the House.

    Obama went back and asked for more revenue from Boehner because he thought he wouldn’t be able to sell the Democrats on a level of revenue that was lower than the Gang of Six figure. Boehner and Cantor decided that Obama wasn’t serious and wouldn’t stick to the deals he had previously agreed to and the whole thing tanked.

    Note also that when asked if that deal was still on the table, the administration specifically rejected it.

    “Obama-Boehner Debt Deal Not On Table, Administration Officials Say
    Posted: 03/20/2012 3:57 pm Updated: 03/20/2012 4:17 pm

    WASHINGTON — Top officials in President Barack Obama’s administration pushed back Tuesday on a report that they would still support a debt-reduction deal nearly reached this past August with House Speaker John Boehner (R-Ohio).

    The administration officials addressed reporters in a background briefing conducted on the condition that what they said could be reported but not directly quoted. They were asked specifically about a Washington Post report that said an agreement between the president and the speaker — in which major reforms and cuts to entitlement programs would be exchanged for $800 billion in additional revenues — was “still on the table.” One of the top officials called the report inaccurate.

    What remained on the table, the official clarified, was the notion that there could be a deal.”

    http://www.huffingtonpost.com/2012/03/20/obama-boehner-debt-deal_n_1367955.html

    The first thing the Democrats need to do is decide who is doing the negotiating for their side.

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  10. David Frum has a good piece on “You Didn’t Build That” as contrasting whether or not success is primarily earned or due to luck.

    http://www.thedailybeast.com/articles/2012/07/27/you-didnt-build-that.html

    See also Andrew Sullivan.

    “And look: my own view is that, sure, government helps the individual in a market economy. Without a strong government, there is no effective market economy. Unlike some contemporary conservatives, apparently, I have read Adam Smith. I had a government-paid education through college that was among the best in the world. My healthcare as a kid was socialized. The fact that I have managed to make a living through writing was undoubtedly helped, nourished and sustained by public sector investment – not least of which was the Internet itself, made possible by defense spending.

    But whatever success I have had is also due to my own efforts. I was the first in my family to go to college and became a classic American immigrant – arriving with a scholarship and now living my own small version of the American Dream. Six other people now have jobs because I spent six years blogging for nothing. Producing the kind of output on the Dish for twelve years is something you have to be devoted to. It takes real elbow grease. I’m ok with paying half my income to various levels of government as the price of having this opportunity, but I’d rather not be told I’m lucky not to pay much more. Or that I somehow owe much of it to someone else I don’t know.

    That quote, in other words, is going to be used and used and used to foment a story-line that is as dangerous to Obama as Romney’s massive tax-sheltering is to him.”

    http://andrewsullivan.thedailybeast.com/2012/07/obamas-biggest-blunder-yet.html

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  11. Thanks for the links jnc. I’ll check them out this weekend and get back to you. I put up a mystery post.

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  12. Wow jnc, that Matt Bai piece was fascinating. I think that if Obama and Boehner had been left alone to hammer it out they probably could have, but neither side would have been happy with the results. I think there’s a quotation about that somewhere along the lines of the best compromise being one that neither side likes. I believe after reading it that Cantor was the most obstructive.

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  13. I disagree on Cantor. Cantor had a sense of where the votes were and was representing that, for better or for worse. He also made some progress in the original talks with Biden.

    In the end, I believe it was Obama who backed out of the deal. Politics, especially when you are negotiating something like this behind closed doors is ultimately about trust and you can’t have the principles shake hands on a number and then want to change the deal the next day.

    The telling point for me is that when asked about the original deal after the reports got out, the administration said specifically it was no longer on the table.

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  14. jnc

    The telling point for me is that when asked about the original deal after the reports got out, the administration said specifically it was no longer on the table.

    Maybe, but Obama faced the same hurdles from his Dems as Cantor faced, but I still believe he was willing to go further into the compromised position than Republicans were. I think Boehner and Obama were both negotiating in good faith but neither were able to bring their side along with them and then the spinning begins as usual.

    It’s too bad because I believe Obama may have been the only one on the Dem side willing to go so far and if Republicans would have given him a little more in revenue he probably could have gotten Pelosi and Reid to get the job done.

    Like

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