Good morning

The headlines:

  1. The Americans are trying to avoid a fiscal cliff. Link: Nothing like a bipartisan piece of rope in an election year.A reminder: at the end of the year, the tax cuts enacted by President Bush* come to an end. Also, because the republicans and the democrats have failed to agree on a fiscal program for deficit reduction, about $1 trillion of automatic spending cuts will be triggered. The scientific term for this is “OMG”**.

    In response, the so-called “Gang of Six”, a bipartisan group of senators that have held discussions in the past but never presented a plan, have “agreed on a broad set of principles” that has resulted in a draft of something. And I quote:

    “We have a draft. It’s not agreed to. It’s not signed off on, but we have a draft”

    How fortunate.

    America appears to be barreling toward the precipice with their only hope being a general agreement that everyone should agree on a design for a hand-brake lasso.


  2. Spain downgraded to BBB by Fitch. Link: Indeed.Does anyone even pay attention to Credit Ratings these days?
  3. Spain exceeds auction target. Link: Apparently not.Two days after Señor Rajoy’s government announced that Spain’s access to debt markets was closed, the Treasury exceeded its €2 billion target at auction. The Treasury was selling 10 year bonds, which yielded 6.044%. Demand was 3.29 times the amount sold – which is crazy!

    Which leaves me wondering how factual this all is – or what is actually happening on the ground. And to be honest, after some searching (about 15 minutes worth, admittedly), I still can’t find the volume data for Spanish bond trades.

    Why am I interested in volumes? Because the demand appetites of institutional and speculative investors are different. While the high daily yields may be symptomatic of a small number of retail investors trying to get out of Spanish bonds at any price***, the demand at auction would be set by large institutions looking to place money in terms of their investment mandates.

    It’s the argument in favour of fundamental analysis, after all. Forget the market – you don’t know who the market is at any point****.

    I’m just saying that the discrepancy between primary (initial auction) and secondary (subsequent trading) market yields are not necessarily a sign of renewed confidence.

  4. Greek politicians come to blows on air. Link: Oh the awesome.You should watch this. The Far Right (Gold Dawn) versus the Left (Syriza), where the guy from Golden Dawn slaps people on air. Classic!

    But also a sad and depressive commentary on Greek politics. I think that policy (and life in general) begins to go awry when your opinion is a matter of personal pride, rather than being a dispassionate viewpoint. The second is open to debate and improvement. The first is rife with emotion, fundamentalism, taking criticism personally, and slapping people on live TV.

    Collectively, the Human Race could probably do with a little more repressed emotion. It’s just more civilised.

  5. China cuts its interest rates. Link: Finally.The one-year lending rate will drop from 6.56% to 6.31% from today, and the deposit rate from 3.5% to 3.25%. This is ahead of key economic data expected to be announced this weekend.

    There were also some changes to permissible discount-to-lending-rate levels and deposit-ceilings.

    As they say, for China to liberalise this much in one day… How bad must the data be?!

  6. Vicodin-type pain medication may face stricter US regulation. Link: I’m only mentioning this because I like watching House.
  7. The Venezuelan bolivar tumbles. Link: Bye bye Benjamin.As Venezuelan inflation continues to top 20% per year, and with the Bolivar pegged to the dollar, the unofficial market rate is falling. This is in spite of capital controls.

    When you look at governments that enforce capital controls, you have to wonder why. Because capital controls never work. For example, in France, just after the French Revolution, the new government enforced the death penalty for violation of capital controls*****, and they still failed to stop it from happening.

  8. Facebook launched its app store today. Link: I can’t find it.I looked. I tried. I found something that looked like a collection of apps that I apparently own (four apps, to be specific – no idea where they came from).

    On the other hand, playing Words With Friends over FB could be fun.

    Except that I probably won’t.

That’s all for now.

Have a good day.

*The f**kwit

**Accepted variations include “The Grinch is properly going to steal Christmas” and “Look there – a cliff!”

***After all, the yield of a bond, or the price of a stock, are generally the last price/yield at which a trade took place – regardless of the volume of that trade.

****It could be you versus the world. Or it could be you versus Joe Bloggs round the corner, who just sold out because he desperately needed the cash to pay off a gambling debt. 

*****The french government imposed price freezes, which are a form of capital control.