Global Macro Trading Journal

Quote from Martinghoul:

Most of the stuff that has been bought by the German/French banks in the roaring noughties was bought at par, trust me... I was there and traded some :).

Moreover, we know that everything that's in the "accrual", "hold-to-maturity" books (and that's where the majority of the paper sits, according to balance sheet statements and stress test disclosures) is marked at par.

Therefore, no matter how you slice it, the French plan is punitive for the banks (my estimate is that it's equivalent to about a 20% haircut, implemented through an increased capital requirement). Whether 20% contingent h/c is a high enough number is a value judgement and I don't really have view.
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The rally in bank shares on the news of the French plan says differently.

Banks that loaded up on Greek paper in the 90s have already profited handsomely (and the bankers received their bonuses for such a long time ago) as that stuff was trading at a wide spread to German then.
 
Quote from ralph00:
Good essay.

http://equityhelpdesk.com/node/45109/related_links

Banks the winner in the French plan. EU taxpayers and Greece the loser.
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This is not a good essay... Firstly, it's horribly written (did anyone ever tell them there's such a thing as punctuation and paragraphs), which makes it hard to understand. Secondly, even at first glance it contains a whole lot of pure factual errors that suggest to me that the author doesn't have a clue what they're talking about.
 
The best bloggers I read have horrible punctuation. 2 reasons: they write the way guys at trading desks talk and their English is often spotty.

I think the essay raises excellent points, and the reaction by Euro banking shares says many things about the French plan. What is doesn't say is that the plan is punitive towards banks that hold greek paper. That's just an ignorant statement.
 
It may raise interesting points, but some of their premises are factually incorrect.

As to punctuation, I would have to disagree with you. You gotta be able to express yourself clearly, no matter what setting. Spelling and punctuation are a part of it.
 
Martin, if I may ask you a question...

If one was to say German banks are among the highest leveraged and by that vulnerable in the Euro zone how would you feel about such a statement?

Much appreciated.
 
Quote from Debaser82:
Martin, if I may ask you a question...

If one was to say German banks are among the highest leveraged and by that vulnerable in the Euro zone how would you feel about such a statement?

Much appreciated.
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In my view, like many other such generalizations, your statement isn't accurate. Certainly, some German banks are very leveraged and vulnerable (although most of those have been nationalized by now; e.g. Hypo Re, etc). Other German banks (most Landesbanken) simply have a dead business model and will wither away naturally. Others are gonna be just fine.

Caveat: I am not a bank analyst, so this is more of a general view of mine, rather than anything thoroughly researched from the bottom up.
 
A good point raised by Gary Shilling

"Similarly, the Chinese government sets yearly limits on bank loans in advance, but leaves it up to the banks and demand to determine the monthly lending pattern.

So the banks rush to make loans early in the year for fear that the government will reduce the limit in a midcourse correction.
I suspect that such a hybrid market system is too unwieldy to allow the Chinese government to manage a soft landing for its economy.

By my reckoning, the Federal Reserve has tried 12 times in the post-World War II era to cool an overheating economy without precipitating a recession. It succeeded only once. Can the politically controlled Chinese central bank, and the government leaders who really call the shots, be more successful than the independent Fed?
That seems unlikely. And the consequences, for China and the world economy, could be unfortunate."

http://www.bloomberg.com/news/2011-...or-a-hard-landing-part-4-a-gary-shilling.html
 
For you golfers out there, I got to play Merion late yesterday, site of the 2013 US Open and one of the golfing wonders of the word. I played there often back in my competitive days, but haven't been there for years. Course has been lengthened considerably for the Open. Used to be 6500 from the tips, now close to 7000.

What a spot. The architect built one of the world's top 10 courses on just an ordinary piece of parkland. Will be a nice change from this year's open at Congressional - a course I also often played in my youth and one of the more overrated tracks on the planet.

Tiger is in town for his tournament down the road at Aronomink (he's not playing). Rumor was he was going to swing by Merion to have a look, but he didn't show while I was there.
 
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