As I understand it, there is no difference between what is acceptable as collateral under LTRO1 and LTRO2.
Not sure if they could put up US Treasuries as it is not denominated in euros. Even if they did they would be unlikely to do so as they would be subject to margin calls should the currency move against them (remember that this could be a highly levered trade).
My base case is a recessionary style bear, not an end-of-the-world Lehman/Creditanstalt type bear market. This would take the S&P 500 down to the 900-1000 level in 2012, which would create a superb buying opportunity.
Soon after I put up this post, we have the news of coordinated central bank intervention. Stocks have staged a rip-roaring rally. It is curious, however, that 10-year yields in Spain, Portugal, Ireland and Italy are all rising despite the news, indicating that the bond market believes that risk premiums are rising, not falling.
I agree. The bond market is already screaming HEART ATTACK, but I was writing for the benefit of stock investors and the equity market hasn't really responded to the signs of distress.
I am a long-term bull on commodities (and precious metals).
You also have to understand that precious metals and miners are part of the risk-on trade. Should a banking crisis hit the eurozone, these asset classes have not performed well. Consider, for example, how gold behaved after the Japanese earthquake. Gold and PMs went down, USD and Treasuries rallied.
I have no trouble with being long commodities longer term if you can live with drawdowns of 20-50% but I am of the opinion that you need to try to time your entry and exit points.
Price to Sales, or market cap to GDP, are not perfect metrics, but they are better than either trailing or forward P/E that many analysts use for long term equity market valuation.
Is Financial Repression The Next Step For The Eurozone? [View article]
Precisely the point, but then the current crisis will have been averted. The crisis, when it hits, will be worse in 5-15 years.
It doesn't matter, the markets will rally because the Apocalypse is delayed.
As investors, you have to learn to be agnostic about whether a policy is right or wrong, but think more about how the markets will behave. As a human being, you can have an opinion about a policy, but don't let it affect your portfolio.
Is Financial Repression The Next Step For The Eurozone? [View article]
It creates a lower cost of funding for the government.
Image that the State of California requires that CALPERS buys California debentures which pay a lower than market rate of interest because it is "prudent" to do so. Doesn't that kick the fiscal problem down the road a few years?
I did some back of the envelope calculations. If you had to replace all of the Tier 1 capital of the European banks ex-UK, Nordics, it would come to roughly EUR 700b, including the Nordics it comes to EUR 800b. See http://bit.ly/pA6LCr
Not all banks will need recapitalization and not all banks will need all of their Tier 1 capital replaced so the full number of a Swedish-style rescue will be less - probably in the EUR 400-600b range. That's very do-able.
QE3 Is Still On The Table [View article]
As I understand it, there is no difference between what is acceptable as collateral under LTRO1 and LTRO2.
Not sure if they could put up US Treasuries as it is not denominated in euros. Even if they did they would be unlikely to do so as they would be subject to margin calls should the currency move against them (remember that this could be a highly levered trade).
Buy The Dips And Sell The Rallies [View article]
The Bull Case For Stocks [View article]
An Unconvincing Rally [View article]
Tripwires To A Market Crash [View article]
Investing In Secular Bear Markets [View article]
You also have to understand that precious metals and miners are part of the risk-on trade. Should a banking crisis hit the eurozone, these asset classes have not performed well. Consider, for example, how gold behaved after the Japanese earthquake. Gold and PMs went down, USD and Treasuries rallied.
I have no trouble with being long commodities longer term if you can live with drawdowns of 20-50% but I am of the opinion that you need to try to time your entry and exit points.
Investing In Secular Bear Markets [View article]
Is This The Merkel Capitulation? [View article]
For more details see http://bit.ly/rNF7aM
Is Financial Repression The Next Step For The Eurozone? [View article]
It doesn't matter, the markets will rally because the Apocalypse is delayed.
As investors, you have to learn to be agnostic about whether a policy is right or wrong, but think more about how the markets will behave. As a human being, you can have an opinion about a policy, but don't let it affect your portfolio.
Is Financial Repression The Next Step For The Eurozone? [View article]
Image that the State of California requires that CALPERS buys California debentures which pay a lower than market rate of interest because it is "prudent" to do so. Doesn't that kick the fiscal problem down the road a few years?
Don't Be Too Eager To Get Bearish [View article]
Rally Not Confirmed By Volume [View article]
Europe Has No Way Out [View article]
Not all banks will need recapitalization and not all banks will need all of their Tier 1 capital replaced so the full number of a Swedish-style rescue will be less - probably in the EUR 400-600b range. That's very do-able.
Europe Has No Way Out [View article]
Europe Has No Way Out [View article]
If Greece devalued and left the eurozone, it could potentially take down the banking system in the periphery countries within the eurozone.
There are no good ways out.