Good morning

The headlines:

1. Facebook buys face.com.

   Link: And not just for the naming rights.

   Face.com is all about facial recognition in photographs. This follows a wave of acquisitions by Facebook: first Instagram, then Glancee* and Karma**.

   Grow, baby, grow.

   And the share price is back above 30 bucks even!

2. The dollar shortage.

   Link: in the $2 trillion gap.

   It seems that Central Banks are hustling to restore foreign-exchange reserves. And in their haste, they’re crowding out the private sector.

   The dollar’s share of global reserves has risen from 60.5% this time last year, to 62.1% as of December***. Now I’ll be honest, I don’t really know what that translates to in actual dollars and cents – but 1.6% of global reserves is probably one of those numbers with a fairly mythical number of zeros.

   In any case, Morgan Stanley has studied the flows, and concluded that there is a $2 trillion shortfall gap, as a result of global recession and the Euro debt crisis. This is achieved by: the US net position with foreign lenders (-$2.4 trillion) plus US assets held by Central Banks ($4.8 trillion) less foreign official assets held by the US ($0.5 trillion). So just under $2 trillion sitting externally, on balance. And according to MS, this figure was sitting at $0.4 trillion four years ago.

   This is all pointing to the fact that the US dollar is a good buy. Is that true?

   Probably. It’s like the “running from the lion” story. America doesn’t have to be faster than the debt lion. It just has to be faster than Europe.

3. Fiscal cliff pathway paved.

   Link: by the guys that brought you to within two hours of a government shutdown.

   The 112th Congress. The mud-slinging has commenced: about the plenty of crisis and the no decisions. In some ways, it really is the dark side of democracy. Crisis becomes the field of political capital.

   Economic game theory. It’s real.

   My favourite quote thus far, in reference to the short window between November 6th and December 31st for Congress to pass advanced fiscal legislation:

   “It’s a huge dive into a small pail of water, straight out of the Looney Tunes cartoons****”.

4. The ECB can bring the debt crisis to an end “almost immediately”.

   Link: according to someone in Mexico.

   Guillermo Ortiz, head of a spanish-sounding bank***** and Mexico’s former central bank governor. According to him, the ECB can do this by activating a “massive sovereign repurchase program”.

   To fix debt, you need more debt. Clearly.

5. Buffett extends real-estate bet.

   Link: by buying more, well, houses.

   Or, more accurately, by putting in a $3.85 billion bid for a mortgage loan book from the now-bankrupt Residential Capital LLC.

6. Samaras still forming government.

   Link: race against time (or July).

   Stay posted.

7. Hollande begins the back pedal.

   Link: the campaign promise versus the tightening belt.

   Now that the elections are done and the socialists control everything, the world is awaiting the Hollande back-track. France looks to be going back into recession, so the budget cuts may have to be biggerr than previously anticipated in order to reach deficit targets.

   Disillusionment: it may well happen.

That’s all for now.

Have a good day.

*a “mobile app that helps you discover and connect with new interesting people around you”, according to their website.

**a mobile social-gifting app. Which, by the sound of it, could be awesome. 

***those are the latest IMF figures available.

****that’s Jim Nussle, former Republican chairman of the House Budget Committee. He left Congress at the end of 2006. Just in time!

*****Grupo Financiero Banorte SAB