LyrArc Article Gist
The terms of the debt restructuring deal with the bond swap in Greece become clear on March 9, 2012. In the deal with private bondholders -using collective action clauses to force remaining bondholders into the deal- about 96% of the 206 billion euros of Greece's bonds will be exchanged. Private bondholders held out throughout most of 2011, delaying the inevitable as Greece's economic situation became increasingly hopeless. This created a logjam with the German government, which insisted on serious private sector participation and bondholder haircut as the cost of poor lending decisions of the French, German and other European banks that made loans to Greece out of proportion of the ability of Greece to payback loans. Charles Dallara of the Institute of International Finance, negotiating for European banks, offered a 10% average loss on the bonds in July 2009. It was not until German Chancellor Merkel told Dallara at a late night meeting on October 27, 2011: "this is my last offer," for a 50% loss on the face value of the bonds, was agreement reached. The Greek debt swap that now takes place will give private bondholders a loss of 53.5% from the face value of 200 billion euros of bonds that they hold. The new Greek bonds issued in place of the old bonds include short-term bonds issued by the eurozone rescue fund at 15% of the face value of the old bonds, and a series of Greek bonds with maturity ranging from 11-30 years valued at 31.5% of the face value of old bonds. That even this 53.5% bondholder loss will not be adequate, as Greece's economy looks irretrievably damaged as it spirals downwards, is shown by the value of these bonds already trading in a hypothetical "gray market." The new 30 year bond is quoted at 17 cents and the 11 year bond at 22 cents. The questions remain about the stalling by the banks in taking the losses earlier- was this the wisest move considering the losses beyond Greece as the eurozone economy as a whole has suffered from the prolonged negotiations stretching through 2011, lurching from one crisis to the next? Even if the stalling was designed to give time for banks to repair their balance sheets, was this the best strategy, considering the damage inflicted on European economic growth. John Taylor of Stanford points out that the European banks delayed the unavoidable serious debt restructuring for too long, when insolvency was the real issue not illiquidity, and exaggerated the effect of contagion from the beginning- in John Taylor, WSJ, 2/22/2012, A Better Grecian Bailout. And John Cochrane of the University of Chicago, points out that French and German governments if they bailout French and German banks should do so openly and frankly rather than cover this up as bailouts of countries, because this would lead to serious questions about the poor lending decisions of the European banks and government supervision of the banks- in Cochrane, WSJ, 12/2/2010, 'Contagion' and other Euro Myths. As early as Feb. 2010, Cochrane was suggesting the forced exchange of new bonds with long debt maturities for exisiting bonds with short debt maturities, as short term debt was the major issue here. ...

LyrArc Article Gist
Jens Weidmann, president of the Bundesbank, says central bank "independence is lost when monetary policy is tied to the wagon of fiscal policy and then loses control over prices." Weidmann and Merkel emphasize their continued opposition to euro-bonds. Merkel tells the German parliament on Dec. 14, 2011, euro-bonds "aren't suitable as a rescue measure." Italian prime minister Mario Monti, tells the Italian Senate: "the Italian government insisted heavily on euro bonds, which are not a back-door way to allow fiscal laxity but will boost growth." Monti says the euro bond proposals will be on the agenda for the EU summit in March. Italy auctioned its 5 year bonds at 6.47%, as German two year bonds had a yield of 0.29%, showing the widening divergence between the bonds of the two countries.

LyrArc Article Gist
Italy's borrowing costs increased by one percentage point one week after the July 22, 2011 eurozone debt deal for Greece. The Italian Treasury sold 2.7 billon euros of 10 year bonds with a yield of 5.77%. The yield in late June for a similiar bond issue was 4.94%. Yields on Spain's 10 year bonds increased to 6%. German bonds are getting investors with a 10 year bond yield that has decreased to 2.62%, which means the gap between the German bonds and the bonds of southern European countries is widening.

LyrArc Article Gist
ECB's German representative and chief economist Jurgen Stark resigned from the ECB's Executive Board to express his opposition to ECB bond purchases of sovereign bonds of Greece, Spain and Italy. This follows the resignation of Axel Weber as head of the Deutsche Bundesbank in June 2011, who raised similiar concerns. The concern is that the ECB is exceeding its charter by buying sovereign bonds, taking on a political role and adding new risks. Stark wrote in an op-ed in the German newspaper Handelsblatt- as government efforts so far have failed, "far-reaching reform of the mechanism for decisions and sanctions is needed... We find ourselves in a situation in which massive sustainability risks in public budgets are eroding financial stability."

LyrArc Article Gist
Dean Elgar's valiant batting with 96 not out facing an Indian seam attack from fast bowlers Bumrah and Shami. He took direct hits from fast balls along the way, standing firm to lead South Africa to a 7 wicket win over India in Johannesburg.

LyrArc Article Gist
As the ECB reduces its monthly purchases under its QE program to 60 billion euros from 80 billion euros starting in April 2017, the initial market reaction was that quantitative easing was going out. This says Barley is not the case, and markets are overreacting. The ECB is now ready to buy bonds yielding less than the deposit rate. The ECB promised to extend purchases to Dec. 2017 or further. Look deeper says Barley and ECB forecasts headline inflation at 1.7% in 2019, less than 2% target. So continued QE made sense but at a lower pace. In the end it is the flow that matters not the stock of purchases, says Barley.

LyrArc Article Gist
The Legislative Analyst's office, California's budget watchdog, estimates a budget shortfall of $25 billion through fiscal 2012, with a $6 billion shortfall for the current year. California is issuing bonds to make up the shortfall. A $10 billion offer of short term bonds generated decent demand according to fund managers. California will also issue $2 billion of Build America bonds. This is happening as the demand for municipal bonds is slowing and yields are rising.

LyrArc Article Gist
Todd Schlanger, senior investment strategist at Vanguard, is cited in this WSJ report saying the 60-40 strategy makes sense now because of lower stock valuations and higher bond yields. His forecast for Vanguard for a 60% stocks and 40% bonds globally diversified strategy is for a annualized 10 year median return of 5.4%. Schlanger says 60-40 strategy used to be a bellwether, and that strategy is an enduring strategy.

Stock valuations that Schlanger says are lower are reflected in the S&P 500 which is trading at 18.2 times its expected earnings over the next 12 months, down from 21.6 at the start of 2022. The 10 year average is 17.5.

LyrArc Article Gist
Economies in eastern europe are being hit hard by the crisis especially countries that borrowed hevily overseas and that have large amounts of debt.

LyrArc Article Gist
Risk is inherent in investing. It just needs to be understood well and grasped. There is a lesson in here that some risk is necessary, depending on one's risk horizon and it does not have to be Argentine bonds. Argentine 100 year bond and US Treasury 30 year bond returns 2017-2025 show quite a surprise.  50% return for 2017-25 on Argentine 100 year bonds vs -10% on US Treasury 30 year bonds. It shows the nature of emerging market risk says the WSJ- political risk. At one point the Argentine bonds showed a 50% loss, yet investors willing to stick through the downturn did better than expected, much better. The recovery did not start till Jan 2024 though, 7 years later. In this case the risk was the pandemic in addition to political risk of Argentine earlier defaults but the recovery took place years after the pandemic declined and with the election of Milieu as president.

LyrArc Article Gist
Germany opposes aggressive buying of the bonds of Italy and Spain by the European Central Bank. Prime Minister Zapatero of Spain calls on the ECB to take action as Spanish bond yields reach 7% on Nov. 17, 2011. Germany sees the crisis as serving a constructive purpose as forcing the fiscally unstable countries to make changes.

LyrArc Article Gist
Mikaela Shiffrin of Edwards, Colorado, and her original coach her mother Eileen, her candor, and her fighting spirit- at the Milan Olympics 2026. It shows the struggles of an American athlete before the Milan Cortina Winter Olympics in 2026. Her dads death in an accident, her fiance's accident in Wengen, and her accident at Killington, left this ski racer in turmoil and wondering with her therapist about the nuances in PTSD- everything she would wrestle with in those dark days when she even wondered whether she wanted to continue. This is told by Shiffrin with complete candor- something that endears her to her fans and to all the people around her- her ability to tell it all and tell it straight, about everything that is going on inside her, a remarkable gift. "For me, when I’m able to dig in and really understand something, for whatever reason, that allows me to be less scared of it. Less afraid.  And, thankfully, after a while, my body … it has started to remember what to do again." She runs through the race at Killington again and again trying to tell herself that it was ok hundreds of times, nothing happened, she was OK, she would be OK.  After the 100th win in Alpine ski racing downhill in Cortina in Italy in slalom racing- which requires a sharp precision of body and mind in perfect unified composure to turn within the slalom poles in fractions of a second- Mikaela feels "she can breathe again." ...

LyrArc Article Gist
Floyd Norris says the announcement by the ECB on Dec. 20, 2011, that 523 banks borrowed 489 billion euros under the newly created Long Term Financing Operation goes a long way towards giving Europe time to address the debt crisis. A major problem is recapitalization of European banks and the ECB's action helps address this problem. This is one of the achievements of the December summit of European leaders, though it was not the way markets had expected. Markets were focussed on large scale bond buying by the European Central Bank or issuance of euro bonds. ECB head, Mario Draghi, aware of widespread opposition in Germany to such proposals made it clear this was not going to happen. The Long Term Financing Operation of the ECB provides unlimited amounts of loans to European banks at 1% for 3 years, and accepts sovereign government debt as well as other types of securities as collateral. The result of this action was to lower the yield on a recent Spanish bond auction to 1.7% for three month bills from 5.1% the prior month. Spanish and Italian banks can now buy government debt of their countries and use the bonds as collateral at the ECB for three year loans at 1%. This Norris estimates will generate profits of about 37 billion euros for European banks from the difference between the ECB rate of 1% and the rate on two year bonds of Spain and Italy of 3.6% and 5.1% respectively for the bond purchases of 489 billion euros- calculated on a spread of 2.5 percentage points over three years. Another infusion of funds from the ECB will occur in February 2012. The new capital infusion gives European banks less reason to reduce lending in the eurozone as they work to meet the higher capital reserve requirements set under new Basel III rules. This is especially important given the austerity measures being implemented across the eurozone countries and Britain to reduce government deficits, and in light of the lower growth expected as a result....