Thursday, October 27, 2011


Boy Genius has some info on the launch of the new Apple TV.

Last program standing today?

Gotta be on the buy side!

Run, don't walk, to read "Is It Time for a Trading Tax?" -- Knowledge@Wharton's latest missive.

It's a most interesting read!

The pending home sales number dropped by nearly 5% (month over month) compared to an expectation for a small increase. All regions in the country experienced a drop in sales.

This series tends to lead existing-home sales by about a quarter, and it portends weakness ahead.

While there is little focus on concerns this morning, the third-quarter 2011 GDP release disclosed some cautionary signs for the consumer, a continuing concern of mine.

Specifically, real disposable income was very weak, declining by 1.7% (SAAR) and essentially flat year over year.

Retail sales have been buoyed by a reduction in the personal savings rate. This can’t sustain retail sales; what is needed is growth in hours worked and a better jobs market.

Here are some headlines about the Eurozone solution from Weidmann, the head of the Bundesbank:

* Weidmann: Still Unclear How to View Greece Measures
* Weidmann: Unclear How Greece Haircut Will Be Implemented
* Weidmann: Haircut Can't Be Seen as Comfortable Escape for Greece
* Weidmann: Warns Sees Risks in Leveraging EFSF

Last night, the European leaders took a series of steps to stem the debt contagion crisis:

1. a voluntary 50% haircut on Greek debt, which will not trigger a credit default event (in line with expectations, but, quite frankly, it's ridiculous that the insurance is not triggered);
2. the EFSF will be leveraged 4x-5x, increasing the lending capacity to as much as 1.5 trillion euros, which is probably enough to defend Italy and Spain (higher than expected but a bit squishy as the structural details are to be announced over the next few months);
3. 106 billion euros in bank capital are to be raised over the next eight months by Europe's banks (a bit below expectations); and
4. IMF will give Greece another 100 billion euros.

While the moves are, in the aggregate, only slightly ahead of expectations, the market has reacted in an ebullient manner.

I had thought that the opposite would occur -- namely, that the Eurozone decision would live down to expectations, that the writedown in debt was a CDS event (with unknown financial ramifications) and would encourage other sovereign restructurings, that the bank capital raise would be problematic and reduce the availability of overall credit, that the economic impact on the European debt restructuring would be growth-deflating and that the markets around the world would pause/move lower on the news.