ECB still in debt extraction mode, I see.
Insisting NAMA pay down 7.5 bn by end 2013.
Where do they think the cash comes from.
Remember that NAMA paying backs bonds = other capital being invested in property, often other Irish capital. Absolutely crazy, but great for the ECB / Target2.
With partners like these, we don’t need enemies.
fyi
Emigration of educated people a ‘brain drain’ – study
UCC survey shows 62 per cent of emigrants aged 25 to 34 have a third-level qualification
Find full results of the survey and a live stream of today’s conference on ucc.ie/en/emigre
@UCC Émigré project
Good stuff!
Net Debt now at €170 billion and still increasing. Still running primary deficit of around 2%. We call this progress and putting national finances on road to recovery?
This is can-kicking on an almighty scale by all concerned. Somebody somewhere must have some sort of plan to avoid armageddon when the can hits a brick wall.
Troika imposes new conditions to fast-track property repossessions
Government to consider new conditions to speed up proceedings against distressed buy-to-lets
The Government has acquiesced to pressure from the EU-ECB-IMF troika to accelerate property repossessions by agreeing to a raft of new conditions in the latest Memorandum of Understanding including Commercial Court-type fast-track proceedings .
“As a going away present – we will give you the entire Irish Financial Sector … as a “Gift”. Enjoy. We will be content with the 90% debt that remains .. our own.”
@ Thomas Paine
“Net Debt now at €170 billion and still increasing.”
You are supposed to marvel at the bond yields. QE magic .
Everything is grand so long as the financial markets are detached from the real economy.
3. “We are near regaining sustainable and durable market access”
Hmmmn… it depends on how long the QE magic works on the markets. There was much talk of a “great rotation” from bonds into equities this time last year. In January the Swiss were expecting the CHF to unwind against the Euro as the general panic receded. Neither happened.
And then the level of the debt and the deficit. I don’t think you can read much into the current bond yield.
Seafooid,
By my calcs European equities have beaten Bunds by 15% ytd with the ISEQ outperforming by 27%.
Someone better sue those doom porn actuaries who were peddling switches from equities to bonds in recent years
@ Tull
The whole thing is very shaky, I reckon. Those equity sales people predicting a 10 year run of equities are nuts as well. Where is the growth going to come from?
Euro equities are up but so is any crap with a yield and a pulse. I’m with the Continental hard money guys on this. There’s a massive bubble in most assets and it hasn’t dragged the real economy with it.
Equity prices are based on forward profits and if the business doesn’t grow the valuation falls.
This is from January and is very interesting to read now
A very difficult job, advising pension funds in the current stage of the story. Equities are up but where do things go from here? There have been so many momentum driven episodes that subsequently crashed. Did you ever get into Apple ?
Buying and holding can be treacherous and while there is plenty of conviction, credibility is so hard to come by.
Seafoiid,
Never bought AAPL, it stable cash flows with long duration for me…JNJ or Roche or GD,
“The US is hurtling towards successive budget crises after Democrats and Republicans failed on Friday to bridge their deep divide over conservative demands that Barack Obama’s signature health law be stripped of government funding.”
Funny that the Iranians will talk to him but the GOP won’t.
Probably explains why the tapering is on hold. But the market hates uncertainty…
@Seafoid/Tull
Lloyd’s of London investment returns fell 60% in the first half….
“Lloyd’s Chairman, John Nelson, said that apart from the lack of major catastrophe claims, the most notable feature of the 2013 half year results is the fall in investment income returns from 1.2% to 0.5%.
“All large investors – including major insurers – have found it hard to secure meaningful returns in the continuing low interest rate environment,” he said. “Yields at longer maturities have begun to rise in anticipation of tighter monetary policy, but short-term interest rates are likely to remain very low in the near term.”
Sure is hard to get any sort of return on reasonably safe assets these days.
It will be revised over and over, I suspect.
The solution has been adopted before, but it seems Hungary is now pursuing it? Not borrowing. Building an autobahn network. The Snowy Mountain scheme. Creating value with a multiplier of 1+?
Banking is no source of value and never was. It merely shifted debt into funds that belong to others and enriched them as done it, Guvnor! Ask Germany. You will, when the banks fall over again.
Very good point by Michael Burke in the Guardian re the UK (and US etc)
The investment strike remains the driving force of the slump. For a genuine recovery, government must increase its investment where the private sector refuses to. This includes transport, infrastructure, housing and energy production.”
Companies sitting on wads of cash should be hit with a investment for growth tax as well. It’s great to have the markets so chirpy but it isn’t helping the real economy.
Seafoid,
Good luck with the last para. Renationalisation of the commanding heights of the economy or a pillaging of private sector pension funds via dividend cuts.
Not even the Red Eds are that stupid.
That is the wonderful thing about recessions, the looney left get a run out.
The system is structurally banjaxed, Tull
Even rightwingers need growth.
“Bain & Co, the consultancy, forecasts a “superabundance of capital” between now and 2020. In a recent report, it argued that markets would be distorted by surpluses in Asian and Middle Eastern countries and private investment funds.
It estimates that the world’s financial assets will outbalance its gross domestic product by 10 to one – it will have $900tn of financial assets compared with $90tn of GDP by 2020. The result will be “a world that is structurally awash in capital” chasing few opportunities.”
I bet the end result will be a repudiation of the mega rich.
@ Tull
I have a pension fund as well so I share your concerns.
The thing is that returns are going to be very low if there is no investment in the real economy.
“The academics’ new estimate, based on their exhaustive research, is that the risk premium is only about 3.5 per cent. As volatility is low at present, while stocks have been on a good run, there is no reason to assume that investors are feeling risk averse and so there is no reason to think that the risk premium should be higher. Add this low risk premium on to the piffling returns available from short-term bonds, and you get an expected annual return on equities of about 3 to 3.5 per cent. That is far less than many pension plans assume they will earn. ”
“As Oxford university’s Simon Wren Lewis notes, “after the panic of 2010 was over, when it became clear that the debt crisis was really a eurozone crisis and UK long-term interest rates declined with the fortunes of the economy, we should have had a major change of policy”.
What would that change of policy consist of? The answer is simple. First, serious attention needs to be paid to why the UK non-financial corporate sector is running what seem to be structural financial surpluses, as Andrew Smithers of London-based economic advisers Smithers & Co points out. Second, the austerity on current spending needs to be made explicitly contingent on the economy: more when the economy grows faster and less when the economy grows more slowly. Third, every effort must be made to accelerate any structural reforms thatmight encourage higher investment by the private sector. Fourth, the banking sector must come clean on losses and accept needed recapitalisation so that it starts lending again. Finally, the government must recognise that current rates of interest provide a once in a lifetime opportunity for higher public investment. “
Seafoid,
Price controls on energy and caps on dividend payouts do not seem calculated to improvement investment by the private sector. They seem calculated to reduce capital investment.
Forcing capital ratios up towards 20% as suggested by some will result in a credit crunch as banks will try to delever to hit the target . Also if you go down the road of forcing banks to raise capital, who would invest in a bank with a return on equity below 10% – RoA of 1% levered 5x.
Inflation is beginning to be discussed in the US corporate world as CFOs and treasurers worry about what to do with their “walls of cash” if it begins to unfold. If that money moves (on emergence of inflation), the Fed’s predicament with QE taper will be exacerbated….to say the least.
Anyone with good investment product could do very well. Solid, larger cap equities could do much better as all the cash tries to find a home. Gold, commodities, etc…also likely to get hiked as cash runs for cover.
It’s all very complicated, truly. However, asset liquidity will remain key (valuation /true value will be far more problematic).
Anything can happen…..
To be more specific about my last post. The recent failed attempt by the Fed at QE taper has put the US corp world on notice that the era of cheap funding may not last much longer….Much discussion about getting into the markets to borrow /raise more longer term funds cheaply. At the same time, they are concerned what to do with all the cash, etc.
What a strange world!
Paul W,
Get ready for large scale m&a and purchases of distressed index linked assets such as property. CAPEX is going up as well as some of the assets are worn out. That probably applies more to rationally run economies such as the US and UK.
23 replies on “Revised Troika MOU”
ECB still in debt extraction mode, I see.
Insisting NAMA pay down 7.5 bn by end 2013.
Where do they think the cash comes from.
Remember that NAMA paying backs bonds = other capital being invested in property, often other Irish capital. Absolutely crazy, but great for the ECB / Target2.
With partners like these, we don’t need enemies.
fyi
Emigration of educated people a ‘brain drain’ – study
UCC survey shows 62 per cent of emigrants aged 25 to 34 have a third-level qualification
http://www.irishtimes.com/news/social-affairs/emigration-of-educated-people-a-brain-drain-study-1.1541741
Find full results of the survey and a live stream of today’s conference on ucc.ie/en/emigre
@UCC Émigré project
Good stuff!
Net Debt now at €170 billion and still increasing. Still running primary deficit of around 2%. We call this progress and putting national finances on road to recovery?
This is can-kicking on an almighty scale by all concerned. Somebody somewhere must have some sort of plan to avoid armageddon when the can hits a brick wall.
Troika imposes new conditions to fast-track property repossessions
Government to consider new conditions to speed up proceedings against distressed buy-to-lets
The Government has acquiesced to pressure from the EU-ECB-IMF troika to accelerate property repossessions by agreeing to a raft of new conditions in the latest Memorandum of Understanding including Commercial Court-type fast-track proceedings .
http://www.irishtimes.com/news/politics/troika-imposes-new-conditions-to-fast-track-property-repossessions-1.1541481
@The Troika
Text from Blind Biddy in Beirut
“As a going away present – we will give you the entire Irish Financial Sector … as a “Gift”. Enjoy. We will be content with the 90% debt that remains .. our own.”
@ Thomas Paine
“Net Debt now at €170 billion and still increasing.”
You are supposed to marvel at the bond yields. QE magic .
Everything is grand so long as the financial markets are detached from the real economy.
3. “We are near regaining sustainable and durable market access”
Hmmmn… it depends on how long the QE magic works on the markets. There was much talk of a “great rotation” from bonds into equities this time last year. In January the Swiss were expecting the CHF to unwind against the Euro as the general panic receded. Neither happened.
And then the level of the debt and the deficit. I don’t think you can read much into the current bond yield.
Seafooid,
By my calcs European equities have beaten Bunds by 15% ytd with the ISEQ outperforming by 27%.
Someone better sue those doom porn actuaries who were peddling switches from equities to bonds in recent years
@ Tull
The whole thing is very shaky, I reckon. Those equity sales people predicting a 10 year run of equities are nuts as well. Where is the growth going to come from?
Euro equities are up but so is any crap with a yield and a pulse. I’m with the Continental hard money guys on this. There’s a massive bubble in most assets and it hasn’t dragged the real economy with it.
Equity prices are based on forward profits and if the business doesn’t grow the valuation falls.
This is from January and is very interesting to read now
http://www.ft.com/intl/cms/s/0/db35f994-66f7-11e2-a83f-00144feab49a.html
Seafoid.
I hope you are not a pension consultant. Anybody who put their clients into bunds in 2011-12 deserves to be I) sued & ii) jailed.
fyi
Emigre Conference & Report here:
http://www.ucc.ie/en/emigre/emigreconferencereport/
The ‘Hope Deficit’.
@ Tull
A very difficult job, advising pension funds in the current stage of the story. Equities are up but where do things go from here? There have been so many momentum driven episodes that subsequently crashed. Did you ever get into Apple ?
Buying and holding can be treacherous and while there is plenty of conviction, credibility is so hard to come by.
Seafoiid,
Never bought AAPL, it stable cash flows with long duration for me…JNJ or Roche or GD,
The Americans are at it again.
http://www.ft.com/cms/s/0/f4a911d8-2793-11e3-8feb-00144feab7de.html#ixzz2gBcekccK
“The US is hurtling towards successive budget crises after Democrats and Republicans failed on Friday to bridge their deep divide over conservative demands that Barack Obama’s signature health law be stripped of government funding.”
Funny that the Iranians will talk to him but the GOP won’t.
Probably explains why the tapering is on hold. But the market hates uncertainty…
@Seafoid/Tull
Lloyd’s of London investment returns fell 60% in the first half….
“Lloyd’s Chairman, John Nelson, said that apart from the lack of major catastrophe claims, the most notable feature of the 2013 half year results is the fall in investment income returns from 1.2% to 0.5%.
“All large investors – including major insurers – have found it hard to secure meaningful returns in the continuing low interest rate environment,” he said. “Yields at longer maturities have begun to rise in anticipation of tighter monetary policy, but short-term interest rates are likely to remain very low in the near term.”
Sure is hard to get any sort of return on reasonably safe assets these days.
It will be revised over and over, I suspect.
The solution has been adopted before, but it seems Hungary is now pursuing it? Not borrowing. Building an autobahn network. The Snowy Mountain scheme. Creating value with a multiplier of 1+?
Banking is no source of value and never was. It merely shifted debt into funds that belong to others and enriched them as done it, Guvnor! Ask Germany. You will, when the banks fall over again.
Very good point by Michael Burke in the Guardian re the UK (and US etc)
http://www.theguardian.com/commentisfree/2013/sep/29/george-osborne-austerity-gdp”
The investment strike remains the driving force of the slump. For a genuine recovery, government must increase its investment where the private sector refuses to. This includes transport, infrastructure, housing and energy production.”
Companies sitting on wads of cash should be hit with a investment for growth tax as well. It’s great to have the markets so chirpy but it isn’t helping the real economy.
Seafoid,
Good luck with the last para. Renationalisation of the commanding heights of the economy or a pillaging of private sector pension funds via dividend cuts.
Not even the Red Eds are that stupid.
That is the wonderful thing about recessions, the looney left get a run out.
The system is structurally banjaxed, Tull
Even rightwingers need growth.
http://www.ft.com/intl/cms/s/0/e41f4534-7119-11e2-9d5c-00144feab49a.html
“Bain & Co, the consultancy, forecasts a “superabundance of capital” between now and 2020. In a recent report, it argued that markets would be distorted by surpluses in Asian and Middle Eastern countries and private investment funds.
It estimates that the world’s financial assets will outbalance its gross domestic product by 10 to one – it will have $900tn of financial assets compared with $90tn of GDP by 2020. The result will be “a world that is structurally awash in capital” chasing few opportunities.”
I bet the end result will be a repudiation of the mega rich.
@ Tull
I have a pension fund as well so I share your concerns.
The thing is that returns are going to be very low if there is no investment in the real economy.
ie
http://www.ft.com/intl/cms/s/0/7602afd4-720c-11e2-896a-00144feab49a.html
“The academics’ new estimate, based on their exhaustive research, is that the risk premium is only about 3.5 per cent. As volatility is low at present, while stocks have been on a good run, there is no reason to assume that investors are feeling risk averse and so there is no reason to think that the risk premium should be higher. Add this low risk premium on to the piffling returns available from short-term bonds, and you get an expected annual return on equities of about 3 to 3.5 per cent. That is far less than many pension plans assume they will earn. ”
And what about this ?
http://www.ft.com/cms/s/0/73219452-7f49-11e2-89ed-00144feabdc0.html
“As Oxford university’s Simon Wren Lewis notes, “after the panic of 2010 was over, when it became clear that the debt crisis was really a eurozone crisis and UK long-term interest rates declined with the fortunes of the economy, we should have had a major change of policy”.
What would that change of policy consist of? The answer is simple. First, serious attention needs to be paid to why the UK non-financial corporate sector is running what seem to be structural financial surpluses, as Andrew Smithers of London-based economic advisers Smithers & Co points out. Second, the austerity on current spending needs to be made explicitly contingent on the economy: more when the economy grows faster and less when the economy grows more slowly. Third, every effort must be made to accelerate any structural reforms thatmight encourage higher investment by the private sector. Fourth, the banking sector must come clean on losses and accept needed recapitalisation so that it starts lending again. Finally, the government must recognise that current rates of interest provide a once in a lifetime opportunity for higher public investment. “
Seafoid,
Price controls on energy and caps on dividend payouts do not seem calculated to improvement investment by the private sector. They seem calculated to reduce capital investment.
Forcing capital ratios up towards 20% as suggested by some will result in a credit crunch as banks will try to delever to hit the target . Also if you go down the road of forcing banks to raise capital, who would invest in a bank with a return on equity below 10% – RoA of 1% levered 5x.
Inflation is beginning to be discussed in the US corporate world as CFOs and treasurers worry about what to do with their “walls of cash” if it begins to unfold. If that money moves (on emergence of inflation), the Fed’s predicament with QE taper will be exacerbated….to say the least.
Anyone with good investment product could do very well. Solid, larger cap equities could do much better as all the cash tries to find a home. Gold, commodities, etc…also likely to get hiked as cash runs for cover.
It’s all very complicated, truly. However, asset liquidity will remain key (valuation /true value will be far more problematic).
Anything can happen…..
To be more specific about my last post. The recent failed attempt by the Fed at QE taper has put the US corp world on notice that the era of cheap funding may not last much longer….Much discussion about getting into the markets to borrow /raise more longer term funds cheaply. At the same time, they are concerned what to do with all the cash, etc.
What a strange world!
Paul W,
Get ready for large scale m&a and purchases of distressed index linked assets such as property. CAPEX is going up as well as some of the assets are worn out. That probably applies more to rationally run economies such as the US and UK.