Posts Tagged ‘fiscal unity’

Relief rally as Eurozone liquidity issues fade; solvency and contagion still at issue

Relief rally as Eurozone liquidity issues fade; solvency and contagion still at issue

Businessman on teeter totter with giant hand

Courtesy of Edward Harrison at Credit Writedowns 

As in 2008, when global financial institutions were under attack, we are now facing a solvency crisis. This time the issue is Eurozone sovereign governments. 

Make no bones about it, the EU’s trillion dollar gambit has worked and a melt-up is underway because near-term liquidity issues have been put to rest.  But, this is not a liquidity crisis; it is a solvency crisis. And unless meaningful reform is taken in the Eurozone, this crisis will re-appear in due course.

Overnight, the Eurozone put together the European Stabilisation Mechanism programme, a hefty plan to provide fiscal support to any Eurozone government that runs into difficulty. While details are still coming into view, the euro and equity and bond markets have recovered tremendously. Meanwhile credit default swaps have fallen (see Marc Chandler’s pre-market summary here).

But, before we start popping the cork on the champagne, we need to realize that this stabilization mechanism and the developed market (DM) central bank swap lines only resolve liquidity issues. The genesis of this crisis is not liquidity, but solvency.

As I outlined in my last post on Germany (The Soft Depression in Germany and the Rise of Euro Populism), Germany has undergone extensive labour market reforms which Greece and Spain in particular have not. This makes Greek and Spanish labour forces uncompetitive vis-a-vis other countries also locked into the currency union, most notably Germany. The result, with the Euro well above its launch rate of 1.17 to the US Dollar, is international uncompetitiveness. Combined with extremely low interest rates, the result is a gaping current account deficit.

Unless the Eurozone attempts a beggar-thy-neighbour massive devaluation in the Euro, this closes off the export escape hatch for Greece and Spain. Therefore, in order to bring down enormous budget deficits and prevent national bankruptcy, the only option left is internal devaluation – across the board wage and spending cuts.

Ireland, which has faced similar pressures, is embarking on a path of internal devaluation right now to reduce their deficit. But reducing consumption demand at a point when the primary budget deficit is already double-digits still leaves the solvency question open. And Greeks have rioted to show the resistance to those kinds of measures.

My conclusion, therefore,…
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Financial Markets and Economy

Oversold: Oil traders punish OPEC for promising too much (Reuters)

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ValueWalk

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By The Conversation. Originally published at ValueWalk.

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Zero Hedge

Believing The Russian "Hacking" Claim

Courtesy of ZeroHedge. View original post here.

Authored by David Swanson via The Strategic Culture Foundation,

Government lies are common when seducing a population to support a war, but the Russian “hacking” claims are unusual in that U.S. officials supply no evidence while the “fact” is just assumed,

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Digital Currencies

Visualizing The Expanding Universe Of Cryptocurrencies

Courtesy of Zero Hedge

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Market News

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Financial Markets and Economy

Hedge Fund Billionaire Paul Singer: If Trump Agenda Fails, a Recession Could Follow (Fortune)

Market watchers who thought the stock market would drop if Donald Trump were elected were burned following his win: markets rose to new highs instead.

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The current level of U.S. prices is noticeably lower than what it would be if the Federal Reserve had delivered on its 2-percent inflation target, St. Louis Federal Reserve President James Bullard said, calling the trend "worrisome."

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Chart School

S&P Breakout on Higher Volume Accumulation

Courtesy of Declan.

While I expected the Dow Jones to be the breakout flyer, instead it was the S&P which led the charge on higher volume accumulation.  Technicals are all in the green with a return of the MACD trigger 'buy'.



The Dow did manage to break past 21,000 with a MACD trigger 'buy' but it's still contained by all-time high resistance at 21,200. The index is still well positioned for a larger breakout, but this is the sixth day of consecutive gains for the index so some pullback can be expe...

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Members' Corner

Robert Sapolsky: The biology of our best and worst selves

Interesting discussion of what affects our behavior. 

Description: "How can humans be so compassionate and altruistic — and also so brutal and violent? To understand why we do what we do, neuroscientist Robert Sapolsky looks at extreme context, examining actions on timescales from seconds to millions of years before they occurred. In this fascinating talk, he shares his cutting edge research into the biology that drives our worst and best behaviors."

Robert Sapolsky: The biology of our best and worst selves

Filmed April 2017 at TED 2017

 

p.s. Roger (on Facebook) saw this talk and recommends the book ...



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OpTrader

Swing trading portfolio - week of May 22nd, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Biotech

Beyond just promise, CRISPR is delivering in the lab today

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Beyond just promise, CRISPR is delivering in the lab today

Courtesy of Ian HaydonUniversity of Washington

Precision editing DNA allows for some amazing applications. Ian Haydon, CC BY-ND

There’s a revolution happening in biology, and its name is CRISPR.

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

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CLICK ON CHART TO ENLARGE

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Mapping The Market

Bombing - Right or Wrong?

Courtesy of Jean-Luc

I am telling you Angel – makes no sense… BTW:

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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