28/7/2014: Western Banks Exposures to Russia

Last week I posted two charts detailing largest FDI exposures to Russia. Here is a chart, courtesy of Bloomberg, showing banks exposure to Russia by country:

14/6/2014: BlackRock Institute Survey: N. America & W. Europe, June 2014

In the previous post (http://trueeconomics.blogspot.ie/2014/06/1462014-blackrock-institute-survey-emea.html) I covered EMEA results from the BlackRock Investment Institute latest Economic Cycle Survey. Here, a quick snapshot of results for North America and Western Europe

Per BI:

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 67% of 86 economists expecting the world economy will get stronger over the next year, compared to net 84% figure in last month’s report. The consensus of economists project mid-cycle expansion over the next 6 months for the global economy.

Note: Note: Red dot denotes Austria, Canada, Germany, Norway and Switzerland.

At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen with exception of Switzerland which is expected to stay the same.

Eurozone is described to be in an expansionary phase of the cycle and expected to remain so over the next 2 quarters. Within the bloc, most respondents described Greece and Italy to be in a recessionary state, with the even split between contraction or recession for Portugal, Belgium and Ireland.

Over the next 6 months, the consensus shifts toward expansion for Greece and Italy.

Over the Atlantic, the consensus view is firmly that North America as a whole is in mid-cycle expansion and is to remain so over the next 6 months."


Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

14/2/2014: BlackRock Institute Survey: N. America & W. Europe, February

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region was covered here http://trueeconomics.blogspot.ie/2014/02/822014-blackrock-institute-survey-emea.html

Now, on to survey results for North America and Western Europe region. Emphasis is, as always, mine.

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 65% of 110 economists expecting the world economy will get stronger over the next year, (18% lower than within January report).

The consensus of economists project mid-cycle expansion over the next 6 months for the global economy."

First, 12 months ahead outlook: "At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen except Norway and Denmark, which are expected to remain the same."

Note that Ireland has moved closer to Eurozone average, away from 1st position in the chart it occupied in 2013.

Now, for 6 months outlook: "Eurozone is described to be in an expansionary phase of the cycle and expected to remain so over the next 2 quarters. Within the bloc, most respondents expect only Greece to remain in a recessionary phase at the 6 month horizon. Over the Atlantic, the consensus view is firmly that North America as a whole is in mid-cycle expansion and is to remain so over the next 6 months."

Note: Red dot denotes Austria, Norway and Switzerland.

Notable changes on previous: Greece position is much improved compared to 2013 when it occupied the North-Eastern most corner. Denmark is now in a weaker outlook position than Greece with higher expectations of a recessionary phase 6 months out. Ireland is bang-on on 10 percent assessing current state of economy as recessionary and same percentage of analysts expecting economy to be in a recession over the next 6 months. Coverage for Ireland is pretty solid in terms of number of analysts surveyed, so the above, in my opinion, shows that analysts consensus expects economy to strengthen over the next 6-12 months with strong support for a modest uplift.


Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

17/1/2014: BlackRock Institute Survey: N. America & W. Europe, January

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region was covered here: http://trueeconomics.blogspot.ie/2014/01/1712014-blackrock-institute-survey-emea.html.

Now, on to survey results for North America and Western Europe region. emphasis is always, mine.

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 83% of 109 economists expecting the world economy will get stronger over the next year, marginally higher than 81% reported in December. The consensus of economists project mid-cycle expansion over the next 6 months for the global economy."

"At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen except Portugal, which is expected to remain the same."

Of note:

• Ireland is now moved into the middle of 'growth distribution' from previous position firmly ahead of the entire region. Italy and Spain are now posting stronger expectations than Ireland.
• Eurozone expansion expectations are still lagging those of the UK and the US.
• Germany continues to lead the Eurozone expectations.

Out to 6 months horizon: "Eurozone is described to be in an expansionary phase of the cycle and expected to remain so over the next 2 quarters. Within the bloc, most respondents expect only Greece to remain in a recessionary phase at the 6 month horizon."

"Over the Atlantic, the consensus view is firmly that North America as a whole is in mid-cycle expansion and is to remain so over the next 6 months."

Red dot denotes Austria, Germany, Norway and Switzerland



Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

12/12/2013: BlackRock Institute Survey: N. America & W. Europe, December 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region was covered here: http://trueeconomics.blogspot.ie/2013/12/12122013-blackrock-institute-survey.html.

Now, on to survey results for North America and Western Europe region:

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 71% of 115 economists expecting the world economy will get stronger over the next year, (6% higher than within the October report)."

Forward outlook:

• "The consensus of economists project a shift from early cycle to mid-cycle expansionary over the next 6 months."
• "At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen except Norway, where we currently have a low participation rate."

Euro area: "The consensus outlook for the Eurozone continued to improve, where the 6 month forward outlook shifted from 87% to 90% expecting the currency-bloc to move to an expansionary phase. Within the bloc, most respondents expect only Greece to remain in a recessionary phase at the 6 month horizon."

North America: "Over the Atlantic, the consensus view is firmly that North America as a whole is in mid-cycle expansion and is to remain so over the next 6 months."

Note Ireland's position: vis-à-vis euro area (weaker) in the first chart and overall (strong) in the second chart.

 Note: Red dot denotes Austria, Canada, Germany, Norway and Switzerland.

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

11/10/2013: BlackRock Institute survey: N. America & W. Europe: October 2013

BlackRock Investment Institute Economic Cycle survey for North America and Western Europe is out and here are core results (emphasis is mine):

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 65% of 113 economists expecting the global economy will get stronger over the next year. (6% lower than within the September report).

At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen or remain the same except Sweden. 

The consensus outlook for the Eurozone was also strong, with 87% of economists expecting the currency-bloc to move to an expansionary phase over next six months. The picture within the bloc was not uniform however, with most respondents expecting only Greece to remain in a recessionary phase and an even mix of economists expecting Portugal and Belgium to be in an expansionary or recessionary phase at the 6 month horizon (and similarly so for Sweden, outside of the currency-bloc). 

With regards to North America, the consensus view was firmly that the USA and Canada are in mid-cycle expansion and are expected to remain so through H2 2013."

Note that this correlates well with my own outlook: http://trueeconomics.blogspot.ie/2013/10/9102014-businessinsider-most-important.html

Also note: the above views do not reflect BlackRock own views or advice. 

Two charts as usual:

Note that in the chart above, Ireland now firmly converged with the Euro area. This is a very strong move compared to September survey: http://trueeconomics.blogspot.ie/2013/09/1292013-blackrock-institute-survey-n.html And the above is confirmed by the overall comparative expectations forward:

So on the net - good result for Ireland and positive outlook for Euro area as a whole.

12/9/2013: BlackRock Institute survey: N. America & W. Europe: September 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for North America and Western Europe region for September 2013.

Per summary: "This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 71% of 119 economists expecting the global economy will get stronger over the next year. (1% higher than within the August report). 

At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen or remain the same. 

The consensus outlook for the Eurozone continued to improve, where the 6 month forward outlook shifted from 75% to 86% expecting the currency-bloc to move to an expansionary phase. The picture within the bloc was not uniform however, with most respondents expecting Portugal, Greece, Belgium and the Netherlands to remain in a recessionary phase over the next 2 quarters. 

With regards to the US, the consensus view firmly that North America as a whole is in mid-cycle expansion and remaining so through H2 2013."

September improvement for the global outlook was much shallower than a 10 point jump in August. Ditto for Eurozone outlook: this rose from 57% in July to 75% in August to 87% in September. Italy outlook seemed to have improved quite markedly, however.

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

Two charts as usual:

Ireland continues to lead expectations, just as it did in previous 3 months.

In global expectations there were some notable movements in analysts' replies. 6% of analysts expected global economy to get a lot stronger over the next 12 months back in August, and this declined to 2% in the current survey. 69% expected it to get a little stronger in August and this proportion rose to 76% in September. 5% expected the global economy to get a little weaker in the next 12 months back in August, which in September rose to 6%. 

In Ireland's case, in August zero percent of analysts expected the economy to get a lot stronger over the next 12 months and this remained unchanged in September survey. All analysts (100%) expected the Irish economy to get a little stronger over the next 12 months in September survey - same as in August. 57% of analysts expected the economy to be in an early-cycle recovery over the next 6 months back in August, and this fell to 50% for September survey. There was significant rise (from 0% to 17% between August and September surveys) in the proportion of analysts expecting Irish economy to be in mid-cycle expansion over the next 6 months period. The number of analysts expecting the economy to be in a late-recession over the next 6 months dropped from 43% in August to 33% in September.

6/9/2013: BlackRock Institute survey: North America & Western Europe: August 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for North America and Western Europe region.

Per summary: "This month’s North America and Western Europe Economic Cycle Survey presented an improvement in the outlook for global growth over the next 12 months – the net proportion of respondents with a positive outlook increased to 70% from 60% last month. 

The consensus outlook for the Eurozone was particularly positive, where the 6 month forward outlook shifted from 57% to 75% expecting the currency-bloc to move to an expansionary phase. 

The picture within the bloc was not uniform however, with most respondents expecting Portugal, Greece, Belgium and the Netherlands to remain in a recessionary phase, while the consensus has shifted to expect expansion for France, Spain, Finland and Ireland over the next 2 quarters. An even mix of economists expect Italy to be expansionary or recessionary at the 6 month horizon (and similarly so for Norway, outside of the currency-block). 

With regards to the US, the proportion of respondents expecting recession over the next 6 months remain low, with the consensus view firmly that North America as a whole is in mid-cycle expansion and remaining so through H2 2013."

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

Here are two summary charts:

16/6/2013: Euromoney Country Risk Scores Update

Some updates from Euromoney Country Risk (ECR) reports. First a summary of latest credit risk assessment scores moves:

And on foot of Russia's score move, a related story on Russian government delaying issuance of much expected sovereign bond. Via Euroweek:


"Russia is likely to wait until autumn before bringing its mandated sovereign bond, said analysts. Forcing through a $7bn bond in one deal might also be unwise, but demand is deep and the sovereign could spread its funding plan out across separate transactions, said bankers... Investors have already priced in a large sovereign issue and Russia would not struggle to drum up demand, he added. But the problem is price."Everything is 100bp wider than a month ago and so the sovereign will hope things calm down and allow them to issue closer to the historic tights they were looking at just a few weeks ago," said another syndicate banker."

12/2/2012: A road map to a cooperative solution for Greek crisis

Papandreou: 'this is a battle between the markets and democracy'.

Greek political discourse - mirroring the received wisdom of the crowds has been reduced to a blatant, and populist lie.

The battles in Greece today are between democracy and European/ECB dogma of preserving the status quo of existent statist system, of which patronage by the State of some markets participants is just an element. Here's why:

1. The markets did not impose ANY conditions on Greece - EU/ECB did. The markets simply refuse to be conned any longer into subsidizing the Greek state through cheap credit. This is the basic right of any participant in the markets - to refuse investing or lending to anyone, just as it is the right of any baker to refuse selling bread to someone with no money and no desire to pay on credit.
2. The markets investors are the injured party - excluding the bottom-fishing hedge funds who bought Greek bonds very recently at hefty discounts. The investors are the only ones who were first deceived by the Greek Governments cooking books and fudging numbers in official statistics. The investors should have known better, but that is not a valid defense of the case against them - they were deceived by fraudulent data reporting by the Greek State (yes, right - politicians, Governments, civil servants). The markets/investors are also the only ones who have to take any writedowns. The ECB and the European Union are taking no writedowns on Greek bonds, and are, in fact, lending Greece 'rescue funds' at a profit. 

I am pointing this not to prevent imposition of losses on Greek bonds investors. They deserve to lose and they should lose more than 70-75% of the face value of their investments in Greek bonds.

I am writing this to point that the battle we are facing in Athens today is between people pushed to a breaking point by the policies of the Governments past, and the EU/ECB.

And there is a way out, folks. Here's what should be done:

1. Impose full losses on Greek bondholders to bring debt/GDP ratio in Greece to 75%. Do same for banks bondholders in Ireland and Spain, and combine these sovereign and banking measures to achieve the same in Portugal and Belgium. Seniority under these arrangements should be as follows: private sector debt holders take the first hit, followed by the public debt holders.
2. All PIIGS bonds held by the ECB are to be transferred into a separate holding fund. This fund is to run between 2012 and 2021. Bonds are to be held in the fund not at face value, but at purchase value to instantaneously reduce debt overhang in these countries. Note: this imposes no loss on ECB until the fund is wound up.
3. The ECB Special Fund (outlined in (2) above) is to monitor the conditions of compliance with real (not the currently identified) reforms aiming to restructure PIIGS economies to put them on the path of private sector-driven growth and fiscal sustainability over 10 years horizon.
4. No coupon payments or principal repayments to be accepted by the ECB on these bonds between 2012 and 2021 to reduce debt overhang drag on the participating economies and improving their fiscal capacity to implement reforms.
5. The bonds held in the ECB fund are to be automatically written down to zero face value in 2021 as long as the participating country meets conditions of implementing the reforms.

The above proposal will eliminate or severely restrict the problem of moral hazard, as countries participating in the programme will be subject to strict reforms programme implementation. The plan will also reduce the burden of repayment of debt on the countries that do stick to the conditions of the reforms. The plan will also bring, gradually, these countries economies to more competitive institutional, fiscal and regulatory environment. In other words, the proposal contains both the sticks (under items (2), (3) and conditionality) and the carrots (items (4) and (5)).

In other words, the fund, as outlined above, would satisfy core objectives of the crisis resolution framework:

• Allow for meaningful change and reforms
• Create an incentive to participate actively in reforms for the countries engaged with the fund
• Reduce moral hazard problem
• Help to establish popular support for reforms by providing real, tangible improvement in the economies ability to sustain reforms

We can't keep fighting battles driven by noble objectives, but based on faulty logic that simply serves the very same elites that have created this crisis. We need to find a cooperative solution to the problems we face.

31/10/2011: Bailout-3: The Gremlins Rising premiers

What a day this Monday was, folks. What a day. Just 4 days ago I predicted that the latest 'Bailout-3: The Gremlins Rising' package by the EU won't last past January-February 2012. And the markets once again cabooshed my perfectly laid out arguments squashing my prediction.

As of today we had:

• Italian bonds auctioned last week at 6.06% yield for 10 year paper, the most since 1999. The yield was up from 5.86% at the auction a month ago which marked the previous record high. For Italy, given its growth potential and debt overhang, yields North of 5.25-5.3% would be a long-term disaster. Yields close to 6.1% are a disaster! But things were worse than that last Friday: the Italian Treasury failed to fullfil its borrowing target of €8.5bn to be sold. Instead, the IT sold only €7.9bn worth of new paper. Boom - one big PIIGSy gets it in the 'off-limits' region!
• Also on Friday, Fitch issued a note saying that 'voluntary' haircuts of 50% on Greek debt will constitute... eh... a default / credit event (see report here). Which kinda puts a boot into the softer side of the 'Bailout-3' deal. Boom - Greece gets it in the gut!
• Today, Belgians went to the bond markets and got rude awakening: Belgium placed €2.155bn worth of bonds along 3 maturities: 2014, 2017 and 2021. The country wanted to raise €1.7-2.7bn (with upper side being more desirable), so there was a shortfall on allocation. 10 year bond yields for September 2021 maturity are at 4.372% against 3.751% for those issued in September 2011. Belgium is yet to raise full €39bn planned for 2011 as it has so far covered €37.517bn in issuances to-date. it will be a tough slog for the country with revised deficit of 5.3% of GDP in 2012 (assuming no new austerity measures) and debt/GDP ratio of 94.3% expected in 2012. Boom - a non-PIGSy gets a kick too.
• Also today, Germany marched to the markets with €1.933 billion in new 12-month bubills at a weighted average yield of 0.346% and the highest accepted yield of 0.354%. On September 26th, Germany sold same paper at an average yield of 0.2418%. Today, Germans failed to allocate €67mln of bills despite an increase of 40% in yields in just 5 weeks. Big Boom - the largest Euro area economy gets smacked!
• And for the last one - per reports (HT to @zerohedge : see post here): Europe, hoped to issue €5 billion in 15 year EFSF bonds. Lacking orders, it cut issuance volume by 40% to €3bn and the maturity by 33% to 10 years. As @zerohedge put it: "But so we have this straight, Europe plans to fund a total of €1 trillion in EFSF passthrough securities.... yet it can't raise €5 billion?" Massive Boom, folks - mushroom cloud-like.

So here we have it, a nice start for the first week post-'Bailout-3: The Gremlins Rising'...