Contagion: Default Probabilities Blow Out Right Across Europe

Look at this chart of the sovereign credit default swap wideners today. Every single name is European. The only one with a sub-10% default possibility is Sweden, and they are not in the euro zone. That tells you something, doesn’t it? I think Warren Buffett is on to something. I like CDS as a gauge […]

India: A (WTF) Downgrade

It was a bad day at the office for the Indian economy on the 9th of November, even if it was not one for the Indian cricketers at the Delhi Feroz Shah Kotla Maidan. Automobile sales plunged. Actually, that is not a bad thing actually. Check out Niranjan’s piece in MINT today (9th Nov.) on […]

This Is Why People Are Buying Gold Now

Europe is approaching the end game. Credit markets and other governments know what the continent’s leaders won’t admit: The euro is failing. Gold, more than the dollar, is set to rocket in value as the crisis unfolds. In addition to looser monetary policy (generous European Central Bank purchases of member country bonds) and austerity (higher […]

‘Italians Buy Italian Debt?’

In an commendable effort to contribute to solve the Nation’s crisis, Mr Melani, a private Italian citizen, bought some space on the Corriere della Sera to launch a national appeal “for Italians to buy Italian government bonds”. In order to evaluate the patriotic appeal, it is useful to remember a few facts. According to the […]

Italy! Italy! Italy!

The euro zone periphery was a sideshow. This stuff with Italy is the real deal. With yields at 6.7% and rising, it’s game over for the euro zone. The extend and pretend stuff ain’t gonna work. And if you are an investor, this is the moment of truth. Everything – every asset class – depends […]

Why Investors Will Buy Italian Bonds After ECB Monetisation

Disclaimer: These last three pieces on the impact of Italy’s potential insolvency on the sovereign debt crisis are not advocacy pieces. They are analysis – predictions of what I see as likely to occur. Yesterday I wrote why questioning Italy’s solvency leads inevitably to monetisation. The long and short of it is that Italy is […]

Bonds Beat Stocks: 1981-2011

Got Bonds? Since 1981, long-term government bonds have gained an average of 11.5% per year, handily besting equities. The S&P 500 index gained the 10.8% per year over the same period, with much more risk and greater volatility (data from Jim Bianco, president of Bianco Research in Chicago). Here’s Bloomberg: “The biggest bond gains in […]

Credibility Is Not Everything

Many have argued in recent months that the Eurozone’s emergency meetings should be about restoring credibility, with a ‘big bazooka’ or otherwise. This column looks at Italy, a country financiers are fast turning their back on. It argues however that the problem is Italy’s fundamentals – not its credibility. Many observers of the European debt […]

Floating Rate Treasuries

Reports circulated yesterday that the US Treasury is considering a new type of debt.  From Bloomberg: The U.S., seeking to attract investors who might otherwise avoid Treasuries amid a $1.3 trillion budget deficit, is considering the sale of floating- rate notes in what would be its first new security since it began offering inflation-linked debt […]