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Thread: EUCOM Economic Analysis - Part I

  1. #421
    Council Member Fuchs's Avatar
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  2. #422
    Council Member Firn's Avatar
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    Interesting. Thanks for the links.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  3. #423
    Council Member Surferbeetle's Avatar
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    Default Variables impacting euro economic growth...

    Energiewende, spare economic capacity, what the heck is FRED, linkages between soft & economic power, Japan, trillion dollar coins, France's economy...

    Der zweifelhafte Erfolg der deutschen Stromexporte, Matthias Benz, Berlin, 13.1.2013, NZZ, http://www.nzz.ch/aktuell/wirtschaft...rte-1.17937315

    Deutschland hat im vergangenen Jahr so viel Strom ins Ausland geleitet wie nie zuvor. Dies geht aus einer neuen Schtzung des Bundesverbandes der Energie- und Wasserwirtschaft (BDEW) hervor. Demnach exportierte Deutschland 2012 Strom im Umfang von 23 Mrd. kWh. Im Vorjahr war dieser Wert auf 6 Mrd. kWh gesunken. Als Hauptgrund fr das Exportwachstum wird der starke Ausbau der erneuerbaren Energien, vor allem von Windkraft- und Solaranlagen, angefhrt.
    Der Chef des deutschen Energiekonzerns E.On, Johannes Teyssen, betont etwa schon seit lngerem, dass man in Polen und Tschechien die Stabilitt des Netzes gefhrdet sehe, wenn die deutschen Windkraftwerke im Norden zu viel Strom lieferten. Beide Lnder wollen deshalb ihre Netze mit sogenannten Phasenschiebern zeitweise abschotten. Dies luft freilich der Idee eines integrierten europischen Binnenmarkts fr Strom entgegen.
    How much spare capacity does the world have left?, January 13, 2013 5:12 pm by Gavyn Davies, Financial Times, http://blogs.ft.com/gavyndavies/2013...rld-have-left/

    What does all this imply for the future? In the short term, it suggests that any rise in nominal demand, stemming from expansionary policy or a recovery in private spending, is much more likely to be reflected in rising real output than in higher inflation. Demand management policy can be expansionary.

    However, in the longer term, it does not support the view that the developed economies can easily return to their pre-2008 trendlines for GDP through demand expansion alone. Perhaps they can never get there, or perhaps there is a speed limit which cannot be safely exceeded [2]. In either case, supply constraints would not be as remote as the use of linear trendlines would imply.
    Federal Reserve Economic Data, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Federal..._Economic_Data

    British tin ears leave EU deaf to demands, By Tony Barber in London, January 13, 2013 4:46 pm, Financial Times, www.ft.com

    On January 22 Angela Merkel and Franois Hollande, the German chancellor and French president, will lead celebrations marking the 50th anniversary of the Elyse treaty of postwar Franco-German reconciliation. Only tin diplomatic ears, or minds closed by arrogance, can explain why British policy makers fail to care that Paris and Berlin might be offended if David Cameron, the UK prime minister, were to choose this almost sacred date for his long-awaited speech on Europe.
    Notes on Japanese Numbers (Boring), Paul Krugman, January 13, 2013, 11:28 am, NYT Blog, http://krugman.blogs.nytimes.com/201...umbers-boring/

    In a way, recent developments can be seen as a demonstration of a point I’ve tried to make about bond vigilantes: even if they show up, they won’t drive interest rates up, they’ll drive the dollar down, which is a good thing. In Japan’s case, you can think of what’s happening as a growing belief on the part of investors that Japan will end up inflating away part of its debt. This has led to a currency drop; it has *not* led to an interest rate spike:
    Debt Limit Showdown Spurs Debate On Trillion-Dollar Coin, By Ian Katz - Jan 8, 2013 11:33 AM MT, http://www.bloomberg.com/news/2013-0...llar-coin.html

    The proposal for the Treasury Department to mint a platinum coin worth $1 trillion and deposit it at the Federal Reserve to give the U.S. enough money to pay its debts...
    The Treasury will run out of funds to pay its bills between Feb. 15 and March 1, the Washington-based Bipartisan Policy Center said in a report yesterday.
    IMF Concerned With the Pace of France’s Economic Reform, By: Domenico Lombardi, January 8, 2013, Brookings, http://www.brookings.edu/research/op...onomy-lombardi

    While the IMF had hoped for a “competitiveness shock” reform package, Paris has responded with selective and incremental measures to be put in place gradually. On the whole, the Hollande presidency has yet to put forward a convincing reform agenda. And yet, experience teaches us that the first months of government are the most fruitful in terms of reform.
    Bloomberg Risk Brief, 01.11.13, http://www.bloombergbriefs.com/files/RiskP1_011113.pdf

    The 10 largest U.S. money-market funds’ holdings of French bank securities overtook their British counterparts for the first time in at least 16 months on growing confidence in the euro region and cheap U.K. state funding that lessened the need to issue short-term debt.

    The funds’ French bank holdings increased by $9.6 billion to $42.8 billion in December, while British banks were cut by $11.2 billion to $29.4 billion, according to a survey of the funds’ bank holdings by Bloomberg Brief: Risk Newsletter. The bank with the largest increase was Natixis SA, the investment-banking unit of Groupe BPCE, France’s second- largest lender by branches.
    Sapere Aude

  4. #424
    Council Member Firn's Avatar
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    Quote Originally Posted by Surferbeetle View Post
    Energiewende, spare economic capacity, what the heck is FRED, linkages between soft & economic power, Japan, trillion dollar coins, France's economy...

    Der zweifelhafte Erfolg der deutschen Stromexporte, Matthias Benz, Berlin, 13.1.2013, NZZ, http://www.nzz.ch/aktuell/wirtschaft...rte-1.17937315
    I will have to drop a couple of questions to my uncle, an engineer, who manages a couple of hydro power plants on this issue which is highly interesting. (Water being a hot topic as a source of potential kinetic energy storage). I personally understand all too little about the issue. It seems to me that an old and quite proven interplay of entities is heavily unbalanced by the influx of this renewable energy revolution. Adaption is necessary to overcome this, but how to do it and who pays for it?

    Of course, and needless to say E.on is also one of the players and suffered heavily by the Merkel switch which was partly an expropriation for the owner of it's stock which saw their value go down a great deal. (I invested quite recently in E.On IIRC I also wrote so in this thread) So we have to take everything they say with a pinch of salt. Still the basic problem is, I guess, quite clear: The demand does often not match the (forced) supply.

    With wind and solar energy the supply side does get of course determined by exogenous variables which can partly be planned for but not positively influenced. A better interBund infrastructure could spread the shocks better, but much more so a European one. As usual the solution will best come at many levels. For example energy-intensive industries might be attracted by a plain lower price to consume more on sunny and windy hours. This will mean some head-scratching and some € invested but may give a good return on it. Or for example boilers might get increasingly get switched on during the day.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  5. #425
    Council Member Surferbeetle's Avatar
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    Firn,

    I owe you a thought out reply regarding the energiewende.... perhaps there are some worthwhile comparisons with the economics of hydropower rich countries?

    In the meantime, here is a link to an extraordinary article by Herr. Dr. Schauble in the FAZ:

    Institutioneller Wandel und Europische Einigung, Wofgang Schaulble, 11.01.2013, FAZ, http://www.faz.net/aktuell/wirtschaf...-12021794.html

    Um weitere Integrationsschritte in Europa zu schaffen, werden wir auf pragmatische - also suboptimale, aber derzeit erreichbare - Schritte in Richtung weiterer Integration und damit auch auf Flexibilitt angewiesen bleiben. Das ist in der realen Welt besser als Stillstand und hufig auch Wegbereiter fr knftige systemgerechtere Lsungen
    Gotta go do some chores....no rest for the wicked.
    Sapere Aude

  6. #426
    Council Member Fuchs's Avatar
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    EON and RWE suffer because they're fossilized.


    Energy storage with potential energy stores is very limited for geographic reasons and inefficient anyway.
    The real promise lies AFAIK in electrified individual traffic.

    Ten million electric cars by 2020 could soak up electric power at night and since the family cars are idle almost all the time they could be plugged into electrical grid and serve as millions of batteries. An electrical grid which can make use of millions of batteries as buffers could be a substantial improvement. The ability to absorb electrical energy at a low price (when there's a lot of wind in the north and sun in the south) and possibly even give it back at a high price (in competition with natural gas powerplants which usually run only at peak demand times) would be attractive to owners.

    OK, this was but an example of the kind of non-traditional thinking about energy that fossilised corporations are capable of using for PR and presentations, but not capable of actually exploiting economically.
    They're even bad at properly setting up the largest wind power investment projects, the offshore wind parks.

    We have asimilar fossilised corporation problem in the automotive sector. German car makers (the big OEM brands) pretend to be innovative, but the French ones have been more innovative since the 1930's.
    The real capability to develop novelties other than in internal combustion powerpacks has moved to the tier one suppliers anyway, and the OEMs are too timid in making use of their innovations, pressing for ever lower costs instead (FU Lopez!).

    The result is the rise of companies such as Fisker, Tesla.
    The Tier Ones could build an electric car easily (they completed functional conventional concept cars at ease), but fear that such a move up the value added chain will incur a boycott by the OEMs. It's basically a rarely described form of market failure.

  7. #427
    Council Member Surferbeetle's Avatar
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    Quote Originally Posted by Fuchs View Post
    Ten million electric cars by 2020 could soak up electric power at night and since the family cars are idle almost all the time they could be plugged into electrical grid and serve as millions of batteries. An electrical grid which can make use of millions of batteries as buffers could be a substantial improvement. The ability to absorb electrical energy at a low price (when there's a lot of wind in the north and sun in the south) and possibly even give it back at a high price (in competition with natural gas powerplants which usually run only at peak demand times) would be attractive to owners
    Israel's Shai Aggassi* is someone to watch on this topic. He has been covered in HBR from time to time and it appears that his incremental rollout of a network of battery changing stations is moving forward:

    Better Place, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Better_Place

    Better Place is a venture-backed international company. It is formally based in Palo Alto, California, but the bulk of its planning and operations has been steered from Israel, where both its founder Shai Agassi and its chief investors reside. Better Place develops and sells battery-charging and battery-switching services for electric vehicles. Israel is also the location of the company's first large-scale commercial pilot for battery-switching services, launched to the public in early 2012.
    Renault Fluence Z.E., From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Renault_Fluence_Z.E.

    Energy CEO Shai Agassi on recognizing a “sliding-doors” moment, A Conversation with Shai Agassi by Josette Akresh-Gonzales, May 2009, HBR, http://hbr.org/2009/05/energy-ceo-sh...rs-moment/ar/1

    Speeding Ahead to a Better Place, by Elie Ofek, Alison Berkley Wagonfeld, Harvard Business School , Publication date: Jan 19, 2012, http://hbr.org/product/speeding-ahea...512056-PDF-ENG

    Better Place Plans Electric-Car IPO Within 2 Years, Agassi Says, By Gwen Ackerman & Jonathan Ferziger - Jan 25, 2012 7:34 AM MT, http://www.bloomberg.com/news/2012-0...assi-says.html

    Better Place LLC, a U.S. startup developing charging stations for electric vehicles that started putting cars on the road this week, expects to go public in the next two years, Chief Executive Officer Shai Agassi said.

    “We’re probably not going to go for another private round between now and the initial public offering,” Agassi, 43, who founded the business, said yesterday at Better Place’s test track and showroom north of Tel Aviv. “We have enough capital to go all the way until then.”
    Startup to Capture Lithium from Geothermal Plants, FRIDAY, NOVEMBER 18, 2011, Science, http://science-wired.blogspot.com/20...hium-from.html

    As portable electronics get more popular and the market for electric vehicles takes off, demand for lithium—a critical element in rechargeable lithium-ion batteries—could soar. Yet just two countries, Chile and Australia, dominate global lithium production.
    The Lithium Rush, By Antonio Regalado on December 21, 2009, Technology Review, http://www.technologyreview.com/phot...-lithium-rush/

    In the Bolivian Andes lies a vast salt flat that may shape the future of transportation.
    ----

    *Hmm it seems Shai Agassi is no longer the CEO or on the board of Better Place...

    http://www.betterplace.com/Our-Story
    Last edited by Surferbeetle; 01-14-2013 at 12:55 AM.
    Sapere Aude

  8. #428
    Council Member Firn's Avatar
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    The big question is when the economies of scale and networks will kick in with a vengeance on the side fo this revolution. Time seems certainly on it's side, it being not question of if, but when.

    Notthetreasuryview discusses the 'excellent' catalogue Employment and Social Developments in Europe 2012 (08/01/2013).

    I have so far not read a single line of it, but may give the abstract, the introduction and may a chapter or so a quick view as the time is limited but the pages are many.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  9. #429
    Council Member Surferbeetle's Avatar
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    Default Let's drop back and look at the macro...

    ...strategic macro through the prism at Brookings (Hat tip to Ned McDonnell III who shared a link:
    http://www.brookings.edu/research/in...ts-black-swans ):

    Eurozoned Out, By: Justin Vasse and Thomas Wright, January 17, 2013, Brookings, http://www.brookings.edu/research/pa.../eurozoned-out

    The Eurocrisis has been ongoing for three years and the European Union is beginning to get its act together to build a sustainable monetary union. But, the euro is not out of the woods yet. Real dangers remain. The underlying causes of the crisis have not been addressed. The politics are pulling in a different direction from that required for a solution. Populations on the periphery are suffering from austerity measures and see no end in sight. Those in the so-called core (Germany, Northern Europe) feel exploited. The Eurozone is building new structures but they may not be sufficient to protect it against a future major crisis.

    As long as an optimal solution remains elusive, the risks of failure will remain. If failure occurs, it could be devastating to the U.S. economy, surpassing the crisis of 2008. Some estimates project that the collapse of the euro would cause an immediate 10 percent loss of GDP for the global economy, with unemployment in the European Union reaching 20 percent and spiraling inflation on the EUs periphery. The United States and European Union are the two largest economies in the world and they are inextricably linked with each other through trade, foreign direct investment (FDI), and financial markets. For instance, 50 percent of U.S. FDI abroad goes to the European Union while 62 percent of FDI into the United States originates in the European Union. The rest of the world would also be adversely affected, particularly the Middle East and China, the worlds second largest national economy, both of which require robust growth to maintain domestic political stability.

    A secondary but related danger is that the construction of a new Eurozone could lead to the fracturing of the European Union through a British withdrawal. The United Kingdom is extremely concerned that further integration in the Eurozone will damage its interests as an E.U. member. Public opinion also favors a renegotiation of the United Kingdoms terms of membership even though such a renegotiation would be strewn with difficulty and would likely fail. In this scenario, the Eurocrisis would remove Americas most reliable European ally from the EU and lead to a weakening of Europes capacity to act as a coherent unit in world affairs.
    Free Trade Game Changer, By: Mireya Sols and Justin Vasse, January 17, 2013, http://www.brookings.edu/research/pa...e-game-changer

    Pursuing and signing free trade agreements (FTAs) with both the Asia-Pacific region and Europe during your second administration will yield considerable economic and political benefits. World trade is expected to have stalled at a mere 2.5 percent growth in 2012, down from 13.8 percent in 2010. Protectionism is on the rise everywhere, especially in the form of non-tariff barriers. The Doha Round is essentially dead. At the same time, the United States and Europe need to stimulate their economies without resorting to fiscal spending. Furthermore, the United States needs to establish a broader and deeper economic presence in Asia, the worlds most dynamic economic region. Achieving both a Trans-Pacific Partnership (TPP) and a Trans-Atlantic Free Trade Agreement (TAFTA) is the most realistic way to reclaim U.S. economic leadership and make progress towards your promised goal of doubling U.S. exports. Moreover, signing both the TPP and TAFTA would have deep strategic implications. Both deals would reaffirm liberal norms and a leading U.S. role in setting the global rules of the road. The TPP would help define the standard for economic integration in Asia, without necessarily antagonizing China. TAFTA would give American and European businesses an edge in setting industrial standards for tomorrows global economy.
    ...and, arguably, tactical macro:

    Are we seeing the great rotation from bonds to stocks?, January 20, 2013 5:07 pm by Gavyn Davies, Financial Times, http://blogs.ft.com/gavyndavies/2013...nds-to-stocks/

    The past few weeks have seen a surge of inflows into US equity mutual funds, following many years in which investors have preferred allocating money to bonds rather than stocks. The week ended 9 January saw the fourth largest weekly cash flow into equity mutual funds since 1992, and large investment companies like BlackRock have spoken of a sea change in the opinion of small investors towards equities. Some analysts see this as the start of a great rotation from bonds into stocks, thus reversing the pattern of the last decade.

    Others, however, point out that cash inflows from small investors tend to be contrarian indicators, since they are often driven by recent market behaviour, rather than by fundamental valuation, which is what actually determines market returns in the long run.
    My conclusions from all this? Recent investor flows into equities, and improving sentiment, are driven mainly by price momentum, which works over short horizons, but says nothing about a longer term rotation from bonds to stocks. In judging medium term returns, we have nothing better to rely upon than fundamental valuation, which also fits better with the theory of finance. At present, valuation indicates that US stocks (though not European stocks) are fairly expensive compared to their own history, while bonds are extremely expensive. Based on valuation, US stocks should therefore out-perform bonds in the medium term, but overall real returns on both assets in the US may be fairly low.
    Sapere Aude

  10. #430
    Council Member Surferbeetle's Avatar
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    Default Cherry picking...

    David Cameron's EU speech - full text, Guardian.co.uk, Wednesday 23 January 2013 03.45 EST, http://www.guardian.co.uk/politics/2...ech-referendum

    Seventy years ago, Europe was being torn apart by its second catastrophic conflict in a generation. A war which saw the streets of European cities strewn with rubble. The skies of London lit by flames night after night. And millions dead across the world in the battle for peace and liberty.

    As we remember their sacrifice, so we should also remember how the shift in Europe from war to sustained peace came about. It did not happen like a change in the weather. It happened because of determined work over generations. A commitment to friendship and a resolve never to revisit that dark past – a commitment epitomised by the Elysee treaty signed 50 years ago this week.
    What Churchill described as the twin marauders of war and tyranny have been almost entirely banished from our continent. Today, hundreds of millions dwell in freedom, from the Baltic to the Adriatic, from the Western Approaches to the Aegean.

    And while we must never take this for granted, the first purpose of the European Union – to secure peace – has been achieved and we should pay tribute to all those in the EU, alongside Nato, who made that happen.

    But today the main, overriding purpose of the European Union is different: not to win peace, but to secure prosperity.
    As Chancellor Merkel has said, if Europe today accounts for just over 7% of the world's population, produces around 25% of global GDP and has to finance 50% of global social spending, then it's obvious that it will have to work very hard to maintain its prosperity and way of life.

    Third, there is a growing frustration that the EU is seen as something that is done to people rather than acting on their behalf. And this is being intensified by the very solutions required to resolve the economic problems.
    And my point is this. More of the same will not secure a long-term future for the eurozone. More of the same will not see the European Union keeping pace with the new powerhouse economies. More of the same will not bring the European Union any closer to its citizens. More of the same will just produce more of the same: less competitiveness, less growth, fewer jobs.

    And that will make our countries weaker not stronger.

    That is why we need fundamental, far-reaching change.
    We believe in a flexible union of free member states who share treaties and institutions and pursue together the ideal of co-operation. To represent and promote the values of European civilisation in the world. To advance our shared interests by using our collective power to open markets. And to build a strong economic base across the whole of Europe.

    And we believe in our nations working together to protect the security and diversity of our energy supplies. To tackle climate change and global poverty. To work together against terrorism and organised crime. And to continue to welcome new countries into the EU.
    For an EU without Britain, without one of Europe's strongest powers, a country which in many ways invented the single market, and which brings real heft to Europe's influence on the world stage, which plays by the rules and which is a force for liberal economic reform would be a very different kind of European Union.
    And when the referendum comes let me say now that if we can negotiate such an arrangement, I will campaign for it with all my heart and soul.
    Sapere Aude

  11. #431
    Council Member Surferbeetle's Avatar
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    A government rescue of the world's oldest bank may substantially impact the Italian political sphere...

    Paschi Pressed to Disclose Derivative Losses as Vote Looms, By Sonia Sirletti & Elisa Martinuzzi - Jan 23, 2013 10:06 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-0...ote-looms.html

    Former Monte Paschi Chairman Giuseppe Mussari resigned yesterday as head of the Italian Banking Association lobby group. The world’s oldest lender is under pressure to disclose the full extent of its use of derivatives after saying in November that it needed an additional 500 million euros of government money to bolster capital because of the contracts. Shareholders meet this week to approve two capital raisings required by the Treasury for the lender to get that aid.

    “We will ask for full transparency,” Guido Antolini, a member of Associazione di Piccoli Azionisti Azione Banca Monte dei Paschi di Siena, an association of the lender’s individual investors, said in a telephone interview. “We will want to know what was inherited from previous executives and the actions that the bank is taking to repair the damage.”
    Wirbel um Derivate bei Monte dei Paschi, Wirtschaftsnachrichten Gestern, 22:21 (23.01.2013), NZZ, http://www.nzz.ch/aktuell/wirtschaft...chi-1.17958485

    Der Wirbel um Mussari, der vorerst widerrechtliche Handlungen kategorisch bestritt, und vor allem auch die Unsicherheit bezüglich der finanziellen Folgen des Skandals führten am Mittwoch vorübergehend zu einem schweren Einbruch des MPS-Aktienkurses von bis zu 11%. Das älteste Geldhaus der Welt, das seit letztem Sommer vom früheren Unicredit-Chef Alessandro Profumo präsidiert wird, hatte Ende vergangenen November bereits mitgeteilt, dass es wegen in Vorjahren eingefädelter Derivatetransaktionen vorsorglich 3,9 Mrd. € statt der bis dahin geplanten 3,5 Mrd. € Staatshilfe in Form sogenannter Monti-Bonds beanspruchen werde.
    Sapere Aude

  12. #432
    Council Member Firn's Avatar
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    The count against the miner, better known as Schwarzenberg against Zeman will have at least one certain outcome: a big eurosceptic will no longer be the president of the Czech Republic.

    A runoff on January 25th and 26th will decide the winner. While Mr Zeman largely met expectations from pre-election polling, Mr Schwarzenberg more than doubled his anticipated share in what was the first direct presidential election in the history of the country. Some 61.3 % of voters cast ballots after a constitutional change earlier this year did away with a formerly convoluted parliamentary process that was rife with backroom dealing. The head of state has limited powers, but is influential in driving public opinion and appoints members of the Constitutional Court, among other tasks.

    Voting patterns were sharply divided geographically and socio-economically, with the left-leaning populist Mr Zeman dominating the eastern part of the country, Moravia, as well as the economically distressed North Bohemian region. Mr Schwarzenberg, an irreverent conservative, held sway in a central swath of the country, trending towards urban and wealthy, as well as from ballots cast by Czech citizens living abroad.
    A hot discussion about the (in)famous Benes decrees did fire up additionally the last days of the election.

    From an economic point of view the developed central and western parts of the Republic are well intergrated into the European (think German) economy.

    ---

    The Sole 24 ore has focused on the MPS affair. It is of course sad and a bit unsettling to hear talk about la sicurezza dei depositi again and see informations pages for savers. It is interesting to note that much of the basic stuff has been among the most read on that site.
    Last edited by Firn; 01-25-2013 at 07:32 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  13. #433
    Council Member Surferbeetle's Avatar
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    Default Is the financial party really trying to restart?

    Appreciate the Czech links, from there it was a short walk to the Chalga videos on youtube...that damn globalization.

    TAFTA is back, approximately 50% of global trade may be impacted if the negotiators can pull it off. The time table for implementation of Basel III has been relaxed, the LTRO is being paid off (kinda ), there is talk of a Great Rotation from bonds to stocks, interest rates are indeed fluctuating, currency wars are a topic of discussion...hmmm...we are at technical boundaries (52 week highs are regularly being broken) and fundamental valuation boundaries on the stocks that I follow...the phrase 'the market can remain irrational longer than one can remain solvent comes to mind.' I have taken to buying ETFs early in the week and bailing out by the end of the week...

    Transatlantic Free Trade Area, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Transat...ree_Trade_Area

    From ideas to implementation, Remarks by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, at the 8th High Level Meeting organised by the Basel Committee on Banking Supervision and the Financial Stability Institute and hosted by the South African Reserve Bank, Cape Town, 24 January 2013, http://www.bis.org/review/r130124a.pdf?frames=0

    Of course, there are plenty of other big ideas being floated on how the banking industry should be restructured in the aftermath of the crisis, particularly those related to varying models of structural separation (eg the ideas of Volker, Vickers and Liikanen). But for those that fall within the mandate of the Basel Committee, we believe that the ideas produced by Basel Committee thinking – translated into the Basel III reforms, and subsequently endorsed by the G20 and Financial Stability Board – provide a substantial foundation on which the banking system can be rebuilt to be much more robust and resilient in the future.
    ECB Website, Open market operations, http://www.ecb.int/mopo/implement/om...ex.en.html#com

    ECB Says Banks to Repay More Than Forecast of 3-Year Loan, By Stefan Riecher - Jan 25, 2013 5:56 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-0...next-week.html

    Some 278 financial institutions will return 137.2 billion euros ($184.4 billion) on Jan. 30, the first opportunity for early repayment of the initial three-year loan, the Frankfurt- based ECB said in a statement today. That compares with the median forecast of 84 billion euros in a Bloomberg News survey of economists. The ECB’s first loan totalled 489 billion euros and banks can continue to make early repayments in coming weeks.
    The ECB still allows banks to borrow as much money as they want against eligible collateral for periods of one week, one month and three months. Some economists say this reduces the importance of the three-year loans being repaid.
    Government Bond Yields, Bloomberg, http://www.bloomberg.com/markets/rates-bonds/

    China’s Yi Warns on Currency Wars as Yuan Close to ‘Equilibrium’, By Jeff Black & Zoe Schneeweis - Jan 27, 2013 11:00 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-0...ilibrium-.html

    Japanese Economy Minister Akira Amari said in Davos that his nation aims to defeat deflation rather than weaken the yen, after Prime Minister Shinzo Abe’s push for laxer monetary policy sparked a slide in the currency. His comments on Jan. 26 followed a week in which German and Canadian policy makers joined a worldwide chorus highlighting a recent plunge in the yen as a worry.

    “A currency war, a series of ###-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong who previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.”
    Reasons to feel bullish as political clouds fade, January 25, 2013 8:29 pm, John Authers, Financial Times, www.ft.com

    What could possibly go wrong? Stock markets have had a great start to the year. The talk about a “Great Rotation” from bonds into stocks, and of a new Bull Market in equities, is deafening.
    As the US fund manager John Hussman points out, the following combination currently holds: the S&P is more than 8 per cent above its average of the preceding 52 weeks, more than 50 per cent above its four-year low, and trades well above its historic average cyclically adjusted earnings multiple; while treasury yields have risen over the past six months, and investor bullishness far outweighs bearishness. This combination has been seen nine times in the past four decades, and in all but one a correction ensued.
    Last edited by Surferbeetle; 01-28-2013 at 12:14 AM.
    Sapere Aude

  14. #434
    Council Member Firn's Avatar
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    Thanks for the links and the comments.

    Sounds like the cannons have fallen silent for now, the markets certainly had a great run and thankfully the Italian (and Spanish) state doesn't have to pay so much to get money on the financial markets. There is more then just talk about huge flows from (IMHO very expensive) bonds into stocks. And exactly this worries me more then just a bit.

    As I have written before I had over the whole last year 75% in stocks for the simple reasons that I thought the value was lower then the price by some margin of security and that decent bonds were overpriced. Now the gains look nice but I almost feel like there are no really good options around to invest money I take out of stocks.

    What is to be done?, asked Lenin, although I wouldn't like his answer
    Last edited by Firn; 01-29-2013 at 09:01 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

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    Quote Originally Posted by Firn View Post
    What is to be done?
    I was always under the impression that people who actively manage their savings are in large part doing so for fun.

    The crowdsourced credit/investment thing should be quite a playground to such people.

  16. #436
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    Quote Originally Posted by Fuchs View Post
    I was always under the impression that people who actively manage their savings are in large part doing so for fun.

    The crowdsourced credit/investment thing should be quite a playground to such people.
    With fun might express it better.

    As a generally pragmatic/ignorant person I stay away from crowdsourcing, it seems to me to be too much effort for too little capital with too little return for the risk.


    The mainstream has now run some articles about the prince oft bonds, something of which I have written for quite some time.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

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    What is to be done?

    Fishing, surfing, and exploring out away from the urban world reveals natural law, 'red in tooth and claw'. Our 'friend' the lawyer/philosopher/revolutionary was tough enough to track and ride the shark but nonetheless blind to it's true nature. The attempts to shackle and cage it were very unhealthy for all involved...China/The Great Leap(s) Forward, Yugoslavia, Czechoslovakia, Iraq, and of course the USSR...the oppressive architecture, the lack of opportunity, the repugnant police state/Mukhābarāt, and the marrow deep fear of the citizenry made for a toxic and bitter experience. All are noteworthy examples of what happens when the State loses it's way.

    WSJ.de...nice catch, was not aware of it until now. The Anleihemarkt Zetibombe is interested in us even if we are not interested in it. So, are Jens Weidmann and Dylan Grice modern day Cassandras? Can Ben Bernanke, Janet Yellen, Mark Carney, Stanley Fisher, and others guide the policy makers out of the wilderness?

    For fun and with fun.

    Alt J, An Awesome Wave, Intro, youtube, http://www.youtube.com/watch?v=EAC9Ecf1Xgc
    Sapere Aude

  18. #438
    Council Member Firn's Avatar
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    Quote Originally Posted by Surferbeetle View Post
    What is to be done?

    Fishing, surfing, and exploring out away from the urban world reveals natural law, 'red in tooth and claw'. Our 'friend' the lawyer/philosopher/revolutionary was tough enough to track and ride the shark but nonetheless blind to it's true nature. The attempts to shackle and cage it were very unhealthy for all involved...China/The Great Leap(s) Forward, Yugoslavia, Czechoslovakia, Iraq, and of course the USSR...the oppressive architecture, the lack of opportunity, the repugnant police state/Mukhābarāt, and the marrow deep fear of the citizenry made for a toxic and bitter experience. All are noteworthy examples of what happens when the State loses it's way.
    Indeed. The very human qualities which allowed us to become billions on this beautiful planet can cut both ways - and all too powerfully.


    WSJ.de...nice catch, was not aware of it until now. The Anleihemarkt Zetibombe is interested in us even if we are not interested in it. So, are Jens Weidmann and Dylan Grice modern day Cassandras? Can Ben Bernanke, Janet Yellen, Mark Carney, Stanley Fisher, and others guide the policy makers out of the wilderness?

    For fun and with fun.
    Indeed, we are part of a big whole, as much as we many sometimes not like it. In this case the actions, which actually I support for the most part, have created a dilemma for many savers, be at the individual or pension fund level. Pragmatism founded on science should (hopefully) act on the policy side, we poor just react or ignore accordingly.

    And it does make sometimes fun.

    Alt J, An Awesome Wave, Intro, youtube, http://www.youtube.com/watch?v=EAC9Ecf1Xgc
    Nice link, liked this Alt J song as well.

    BTW: An older article about crowdsourcing which hits the nail pretty much on its head. I think it is always, always important to keep the basics well-ordered in mind. The problem is often acting accordingly, just like the guy in my quote found out.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  19. #439
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    There has been some political turbulence in Spain and Italy of late. This turbulence may have translated into interest rate increases in 10 year government bonds today, with a one day 23 and 14 basis point move (23/10,000 and 14/10,000) respectively. This results in annual yields of 5.44% and 4.47%, again respectively, and can be compared to yields of 0.76% in Switzerland and 10.92% in Greece. Preparatory work continues on European and Asian Free Trade Agreements however, so I am keeping the faith.

    Meanwhile, on this side of the pond/back at the ranch, ISM and January BLS Non Farm Payroll numbers have been of interest as has the DOJ lawsuit against the S&P.

    Sapere Aude

  20. #440
    Council Member Firn's Avatar
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    A couple of links:

    Dude where is my cheap oil?

    It's obvious from the above price charts that it makes no economic sense to add gallons of ethane or propane to gallons of crude oil to try to summarize global oil supply. But growth of natural gas liquids has been a key factor in the reported increases in "world oil supply" over the last few years and is also a key component of recent optimistic assessments of future oil production by Leonardo Maugeri and the IEA.

    There is no question that the boom in production of natural gas liquids is providing a great benefit to industrial users of ethylene. But if you're waiting for it to lower the price you pay for gasoline at the pump, you may have to wait a while longer.
    I enjoyed this nice short blog entry. So far it doesn't make much sense to see ethane or propane as good enough substitutes. They should become such goods if we see enough cars running on them with the proper network aka pump support.

    ---

    From Krugmans blog I posted an important argument about a topic which has made headline thanks to story in which more is at stake then an Apple and an Ei(nhorn). [Sorry for the bad pun which only a few will understand ]

    In short it is what to do with all that cash on the balance sheet of sometimes highly profitable companies? My personal take is (unsurprisingly) heavily influenced by Buffet and Graham. If the company is not able to find something with a high enough ROI it should check first if it is sensible to buy back stock if the price is higher then it's value. (Highly efficient and no taxman involved). If it isn't it should start to pay out more dividends.

    The macro view:

    Still Say’s Law After All These Years

    When John Maynard Keynes wrote The General Theory, three generations ago, he structured his argument as a refutation of what he called “classical economics”, and in particular of Say’s Law, the proposition that income must be spent and hence that there can never be an overall deficiency of demand. Ever since, historians of thought have argued about whether this was a fair characterization of what the classical economists, or at any rate his own intellectual opponents, really believed.

    Not being an intellectual historian myself, I won’t venture an opinion on that subject. What I will say, however, is that Say’s Law (Say’s false law? Say’s fallacy?) is something that opponents of Keynesian economics consistently invoke to this day, falling into exactly the same fallacies Keynes identified back in 1936.

    In the past I’ve caught Brian Riedl and John Cochrane doing it; now Peter Dorman finds Tyler Cowen in their company.

    Cowen can’t see why corporate hoarding is a problem. Like Riedl and Cochrane, he concedes that there might be some problem if corporations literally piled up stacks of green paper; but he argues that it’s completely different if they put the money in a bank, which will lend it out, or use it to buy securities, which can be used to finance someone else’s spending.

    But of course there isn’t any difference. If you put money in a bank, the bank might just accumulate excess reserves. If you buy securities from someone else, the seller might put the cash in his mattress, or put it in a bank that just adds it to its reserves, etc., etc.. The point is that buying goods and services is one thing, adding directly to aggregate demand; buying assets isn’t at all the same thing, especially when we’re at the zero lower bound.

    What’s depressing about all this is that Say’s Law is a primitive fallacy – so primitive that Keynes has been accused of attacking a straw man. Yet this primitive fallacy, decisively refuted three quarters of a century ago, continues to play a central role in distorting economic discussion and crippling our policy response to depression.
    In simple terms 1€ spent on an investment means 1€ of increased demand while 1€ spent on an asset means that only a part of that dollar creates demand - especially if the rates are so low due to the liquidity trap.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

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