My view: U.S. corporate profits are increasingly driven by good demand in emerging markets. While the previous modus was U.S. reliance on housing bubble and consumer consumption, driven by external financing, now everybody seems to have their hopes on BRICs buying developed sov bonds and drinking cola. Just like the previous feedback cycles, this will burst in time. Hire me.
Quote of the day:
The EFSF's latest newsletter shows that the fund is deeply reliant on China, Japan and the Mid-East to buy its bonds. Central banks and sovereign wealth funds bought 54pc of the last issue in June. This offers stability, but leaves EMU prey to geopolitics. – The Telegraph July 25th
EURO CRISIS
Very good article concentrates on the credibility of ECB, futility of the current game plan
Greece: Two Bail-outs and a Funeral – Lighthouse Investment Management
How the outcome of the Greek restructuring depends on the voluntary participation rate of existing bond holders
Greek Games – Rajiv Sethi
Two must-reads for today:
Angela Merkel faces revolt in Germany over rescue deal – The Telegraph
Bunds Lose to Treasuries as Swaps Count Costs of Rescue – Businessweek
FINANCIAL CRISIS
Interesting blog site I only recently noticed: “financial crisis can be viewed as a traditional bank run on the shadow banking system”
Good overview of how household debt is holding back recovery.
The Persistent Issues in Over Leveraged Balance Sheets - EconoMonitor
EMERGING
China Real Estate: Unsold Inventories Continue To Rise – Also Sprach Analyst
OPERATORS
John Mack speaks of trying to save MS in Sep 2008 on Wharton Leadership Lecture
(video) Megalomania - My Investing Notebook
Huge Loss For $32 Billion Hedge Fund Brevan Howard As Founder And COO Quits The Firm – Business Insider
DIVERSION
*once you know the answer
Review of “Everything is Obvious*” by Duncan Watts