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Fallout from Draghi: Do What is Necessary but Not Yet

August 02, 2012
Many observers seem dumbfounded by the lack of action to support official claims to do what is necessary.  The market's reaction has been swift.  European stocks reversed course.  Spanish stocks are off almost 4%, led by a 5% drop in financials.  Spain's (generic) 10-year bond yield is back above 7%.  
The fact that Draghi suggested that i…
Fallout from Draghi: Do What is Necessary but Not Yet Fallout from Draghi:  Do What is Necessary but Not Yet Reviewed by Marc Chandler on August 02, 2012 Rating: 5
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Negative Interest Rates and the Currency War

July 12, 2012
There have been some noteworthy developments on interest rates over the past week. The ECB's cut of its deposit rate to zero has pushed some short-term market rates below zero. France sold bills earlier this week with a negative yield. Denmark cut its key two-week CD rate to -20 bp. The Swiss yield curve out 5 year is below 0 (the 2-year …
Negative Interest Rates and the Currency War Negative Interest Rates and the Currency War Reviewed by Marc Chandler on July 12, 2012 Rating: 5
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Bernanke and Europe Boost Dollar

June 08, 2012
The US dollar has been boosted by expectations that Spain and Cyprus are close to requesting aid and Fed Chairman Bernanke’s reluctance to tip his hand to the US Congress yesterday. This coupled with reports that the euro area finance ministers will hold a conference call over the weekend, following on the heels of French-owned Fitch’s 3-step do…
Bernanke and Europe Boost Dollar Bernanke and Europe Boost Dollar Reviewed by Marc Chandler on June 08, 2012 Rating: 5
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Concrete Example of Potential Compromise in EMU

May 31, 2012
I have characterized my understanding of the euro zone investment climate as three no's:  No ECB backstop for sovereigns.  No joint bond.  No euro zone break-up.  That implies a prolonged period of slow growth.  It risks chronic political instability.
It also follows from this that I don't expect Greece to leave or be ejected from monetar…
Concrete Example of Potential Compromise in EMU Concrete Example of Potential Compromise in EMU Reviewed by Marc Chandler on May 31, 2012 Rating: 5
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Greece, Versailles, and the Future of EMU

May 15, 2012
No last minute miracle has the Greeks headed to new elections next month. Syriza's Tsipras appears to believe he has much to gain from a new round of elections. Polls put Syriza in first place, though the margin of error makes it look more like a dead heat with the New Democracy, led by Samaras. Samaras was a significant obstacle to reaching a…
Greece, Versailles, and the Future of EMU Greece, Versailles, and the Future of EMU Reviewed by Marc Chandler on May 15, 2012 Rating: 5
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The Comity of Europe: Ten Points

May 10, 2012
With increased talk of a country leaving the euro zone, or even of the end of the whole project, it is worth sketching out our view. Here are the main points of our view of Europe.
1. EMU itself is a culmination of two trends: 1) the integration of western Europe since the 1950s and 2) efforts to keep Germany wedded to the fortunes of Europe. The…
The Comity of Europe: Ten Points The Comity of Europe: Ten Points Reviewed by Marc Chandler on May 10, 2012 Rating: 5
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European Policy Shifting Before Key Elections

April 26, 2012
ECB President Draghi's support for a growth pact for Europe is important, perhaps under-appreciated by the market. This is not simply a tactic to deflect attention from the IMF's call that the ECB ease monetary policy further. Draghi is among the authoritative voices endorsing what some, mostly left of center, politicians, including the mo…
European Policy Shifting Before Key Elections European Policy Shifting Before Key Elections Reviewed by Marc Chandler on April 26, 2012 Rating: 5
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Six Takeaways from Fed Speak or The Real Troika

April 13, 2012
A number of Fed officials have spoken in recent days and there are a few takeaways that will likely set the general stage for the next FOMC meeting on April 24-25.
First, while there are more regional presidents than Governors on the Federal Reserve Board, the Board still drives Fed decisions. Here the three most important are Bernanke, Yellen and…
Six Takeaways from Fed Speak or The Real Troika Six Takeaways from Fed Speak or The Real Troika Reviewed by Marc Chandler on April 13, 2012 Rating: 5
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New Experiment in China: Perestroika?

March 29, 2012
The immediate focus on China is the possibility of another reduction in the required reserves. China has announced that this weekend (Saturday and Sunday) will be working days and that Mon-Wed next week are official holidays. This, coupled with the continued slide in the Chinese stock market (Shanghai Composite is off nearly 10% since March 14) an…
New Experiment in China: Perestroika? New Experiment in China:  Perestroika? Reviewed by Marc Chandler on March 29, 2012 Rating: 5
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A Look Back at the US Financial Crisis: 2008

March 19, 2012
They say that hindsight is 20-20, and never is that more true than in the financial markets.

Inspired by this great timeline from the St. Louis Federal Reserve we are looking back on my thoughts at various points throughout the US Financial Crisis  In a post last week we looked at 2007 which set the stage for the crisis with trouble in the MBS in…
A Look Back at the US Financial Crisis: 2008 A Look Back at the US Financial Crisis: 2008 Reviewed by magonomics on March 19, 2012 Rating: 5
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Great Graphic: Filling in the Monetary Blanks Great Graphic: Filling in the Monetary Blanks Reviewed by magonomics on March 08, 2012 Rating: 5
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A Crude Put?

February 27, 2012
Arguably the rise in oil prices pose a new threat to the world economy. If oil prices stay elevated, it risks a policy response. Strategic reserves could be tapped as they were last year in a coordinated fashion. In addition, the risks of a new round of Federal Reserve asset purchases would seem to increase with the price of oil. Bernanke delivers…
A Crude Put? A Crude Put? Reviewed by Marc Chandler on February 27, 2012 Rating: 5
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Monday Euro Group Yes, but March 1-2 Summit more Important

February 16, 2012
The Euro group of European finance ministers will meet on Monday. There are to important decisions for it to make. First is whether to approve the private sector involvement initiative. The second is to decide to recommend the second aid package. However, many key issues will remain and it may not be until the heads of state summit March 1-2 befor…
Monday Euro Group Yes, but March 1-2 Summit more Important Monday Euro Group Yes, but March 1-2 Summit more Important Reviewed by Marc Chandler on February 16, 2012 Rating: 5
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Ten Observations To Start the Week

February 13, 2012
1.The approval by the Greek parliament of the latest austerity package now shifts the focus to the Eurogroup meeting of finance ministers on Wednesday for their support. The new austerity proved too much for the Greek government and a cabinet reshuffle is needed. Political pressure will mount to set a date for the elections. The successful Greek v…
Ten Observations To Start the Week Ten Observations To Start the Week Reviewed by Marc Chandler on February 13, 2012 Rating: 5
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TARP Money may not be so Easy to Return

June 03, 2009
After passing the stress tests, several US banks made it clear they want to return the TARP funds post haste. However, signals from Fed officials indicate not so fast. Reports cites three institutions, JP Morgan Chase, American Express and Morgan Stanley, which were directed to boost common equity (the former two) or raise more capital (the latter…
TARP Money may not be so Easy to Return TARP Money may not be so Easy to Return Reviewed by magonomics on June 03, 2009 Rating: 5
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Which Interest Rate is Key for the Dollar?

June 02, 2009
Before the Fed's mid-March FOMC meeting it had already been engaged in purchasing mortgage-backed securities and agency bonds, yet its decision at that meeting to ramp things up and purchase Treasuries was seen by investors as a watershed. It is interesting to re-look at the relationship between the euro and yen and other asset classes with th…
Which Interest Rate is Key for the Dollar? Which Interest Rate is Key for the Dollar? Reviewed by magonomics on June 02, 2009 Rating: 5
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Questioning the Dollar

May 22, 2009
In the near-term, the stars are aligned against the US dollar. Sentiment is decidedly negative. If the news stream is good, we are told investors are less risk averse and do not need the dollar’s security. If the news stream is poor, we are told the US is in horrific shape and the budget deficit and Fed’s balance sheet will swell even more.
It is …
Questioning the Dollar Questioning the Dollar Reviewed by magonomics on May 22, 2009 Rating: 5
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If to Err is Human, is Forgiveness Really Divine

March 07, 2008
It is clear that the financial crisis that began in the US housing market and the derivatives tied to it has metastasized well beyond it, but it remains in the forefront of policy makers concerns. And for good reason, home ownership in the US reached almost 70% before the recent surge in foreclosures. An estimated 1% of homeowners were in some sta…
If to Err is Human, is Forgiveness Really Divine If to Err is Human, is Forgiveness Really Divine Reviewed by magonomics on March 07, 2008 Rating: 5
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