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Monday, March 26

26th Mar - Death Star vs. Bank Runs

After Saturday's post, plenty of interesting articles. I recommend taking a deep look at three key drivers for now: 
  1. 'Death Star' announcement game - or bailing out the Spanish banksters with taxpayer money
  2. Shadow bank runs: how, what, when and who.
  3. The core meltdown: the only remaining country with an effective AAA is now Germany - and this means the game is up soon.
The other issues like Greece (everyone knows they're bust, all the bonds will be marked to zero, will be kicked out of the euro etc), austerity hurting growth, major real policy summits in couple of month's time to finally decide what to do with the crisis, are not surprises and maybe or maybe not are priced in. But the above three points will provide the major surprises and wealth transfers
.
Then to the articles, but just a quick reminder of past weekend's postings: 

Best of The Week: from my this week's posts 
Weekly Support: weekly reviews and previews
Crisis & Views: crisis and asset class views
Economics: articles and journal papers from recent months
Trading: trading- and markets-related articles 

Keep in touch with me through Twitter, Facebook, email, paper.li.

News And Market Re-Cap – RanSquawk / ZH
The Lunch Wrap – alphaville / FT
Emerging N.Y. headlines beyondbrics / FT
Morning MarketBeat
MarketBeat / WSJ
Morning Take-Out DealBook / NYT
EZ Crisis Daily Press Summary – Open Europe
Previewing Week's Events – Goldman Sachs / ZH

EURO CRISIS
The euro zone todayMacroScope / Reuters
In euro zone terms, two themes will dominate the week: Spain and the size of the euro zone rescue fund (Italy’s labour reforms will play a supporting role).

The ECB swallowed the marketGolem XIV
My guess is that as this year progresses banks will quietly bring rubbish back on to their balance sheets from off-balance sheet vehicles just so they can be slipped into the ECB. These would be assets that were declared worthless and written off for a tax rebate in the country of origin, before being moved to an SIV in Ireland where they would be declared at face value so as to be written down again and then pledged to the ECB at far above their real market value in return for an ECB bond which can be used to speculate against various nations and their debts.

Citigroup Expels The Netherlands From Europe's "Core"ZH
While we do not expect the Netherlands to lose its AAA rating in the near-term we expect that at least S&P will put the rating on negative outlook and that spreads to Bunds will widen.

The new Greek yield curveSober Look
This is a unique sovereign curve even for a distressed name because it starts in 2024, with nothing actively quoted prior to that.

The monetary policy of the European Central BankECB
Speech by Benoît Cœuré, Member of the Executive Board of the ECB at Barclays’ European Conference Tokyo, 26 March 2012

Trichet Warns of "Behavioral Contagion" and Nontraditional Steps That He Personally StartedMish’s
Who was it that started ECB bond buying? Why it was none other than Jean-Claude Trichet, acting against the advice of Axel Weber, German central bank president who resigned in protest rather than be part of the operation.

Taxing unicornsOpen Europe
Commission continues to spend a huge amount of taxpayers’ time and money pushing around its proposal for an EU financial transaction tax (FTT), despite it by all accounts looking like a complete non-starter – something which even the German government, one of the instigators, has now implicitly admitted.

EURO CRISIS: THE ‘DEATH STAR
S&P revises EFSF outlook to negative – Reuters
Merkel set to allow firewall to rise – FT
Germany 'must let bailout fund grow' – The Telegraph
Euro-countries seek compromise on bail-out funds – euobserver.com
EFSF urges higher lending capacity for rescue fund – Reuters
Italy PM says the higher the firewall the better-Nikkei – Reuters
Monti Signals Spanish Euro Risk as EU to Bolster Firewall – BB
What’s behind door 2?alphaville / FT

ASSET CLASS VIEWS
STOCKS: Gold Miners BottomingThe Short Side of Long

STOCKS: Sunday Spectacle CLXVIICan Turtles Fly?
Long-term valuation charts, very nice look.

STOCKS: Weekly equity roundup: Markets hit on global growth fearsSaxo Bank
http://www.tradingfloor.com/posts/markets-hit-on-global-growth-fears-from-china-315874064

STOCKS: The Case for Remaining Long RiskEconomic Musings
JP Morgan argues the positive drivers have been used up, and there are only potential negatives left.

BONDS: So go treasuries so go bundsPragmatic Capitalism
High positive correlation.

BONDS: Shadow Banking, Bubbles and Government DebtModeled Behavior
The more likely explanation is that the demand for safe liquid assets is so high that investors are willing to accept a negative term premium. Will this continue? The answer is almost assuredly, no.

FX: The Yen’s Looming Day of ReckoningThe Big Picture
Japan is on an unsustainable path of a strong yen and deflation.

OTHER
Dallas Fed: Choosing the Road to ProsperityThe Big Picture
From the 2011 annual report: Why We Must End Too Big to Fail—Now

A Random Walk Through the Data MinefieldsJohn Mauldin / The Big Picture
Sweden, the Socialist Mecca · What the US Needs Is a Good Swedish Socialist  ·Europe Short of Magic Wands” · What Will Be the US Unemployment Rate Prior to the Election? · Baby Needs a New Pair of Shoes

The Age of the Shadow Bank RunNYT
The modern bank run means a rush to withdraw from money market funds, the disappearance of reliable collateral for overnight loans between banks or the sudden pulling of short-term credit to a troubled financial institution. h/t Alea. Additional thoughts on author’s blog post

Things That Make You Go Hmmm...  – Grant Williams via The Trader
"Fiscally Credible" UK And Its Upcoming 100 Year Gilts and other commentary, full pdf-link

The global financial crisis – What caused the build-up?voxeu.org
Five years into the global crisis there is still little agreement on its root causes. Had central banks kept policy rates too low for too long? Or were rising global imbalances the underlying cause of the crisis? This column suggests that the strength of net capital inflows, rather than the monetary-policy stance, emerges as the key determinant of differences in the growth of financial imbalances across OECD countries over the pre-crisis period.

The Fed Is Losing The "Race To Debase"ZH
Citi’s recent charts of central banks’ balance sheets

Ex-MF Global official: Corzine approved money transfer BBReutersalphaville / FTnaked capitalismThe Reformed BrokerDealBook / NYTalphaville / FTTIME


Can Asian-Style Capitalism Save the West?TIME
In other words, it is difficult, in my opinion, to credit
Asia’s recent success with the heavier hand of the state… Perhaps the West can be saved by Asian capitalism – if that means dropping the political bickering and ideological grandstanding and doing whatever is necessary to create prosperity.

OFF-TOPIC
How to Think Like a Mad Man, Find your Edge & Risk Little for LotsGresham’s Law
So with the assumption that you seek creativeness and intrigue — here’s how to think eccentrically, find your edge and risk little for lots.

Head of structuring equity derivatives: 'Structurers are like snakes'The Guardian
Joris Luyendijk speaks to a former structurer who got ground down by the ethics of the job, but remains pro-free market

Why Blodget Gets a PassThe Reformed Broker
Henry's a good guy, was overly blamed for a scam that involved tens of thousands of people and has more than paid his debt, so to speak, in the ensuing decade.  So he gets a pass from me even as the entire Wall Street sell-side analyst complex is fed crotch-first into a buzzsaw.

Top 10 Lessons of the Iraq WarForeign Policy
Now that the war is officially over and most U.S. forces have withdrawn, what are the most important takeaways?

Book Bits For SaturdayThe Capital Spectator

A Curated Linkfest For The Smartest People On The WebSimoleon Sense