“Tail
risk has now been taken away.”
Anshu Jain
(Deutsche Bank) – January 23, 2014
Let's assume you spend
the last three months on an island in the Pacific Ocean without
access to the outside world. Tomorrow, you will be back in the
office. Here are the key topics that you need to know something
about:
Monetary policy –
tapering vs. asset purchases
The U.S. FED continues
its tapering policy and disrespects criticism from emerging markets.
In Europe, the ECB sticks to its loose monetary policy and even
evaluates asset purchase programs. Germany doubts whether the ECB can
do that.
Bank scandals –
Madoff, LIBOR, and FOREX
Madoff, LIBOR, and FOREX
are still with us. By the way, Goldman Sachs has found what was
responsible for these scandals: It's the computer messaging services
that traders use... BNP Paribas adds international embargo violation
to the list of scandals.
Banks' earnings –
trading volumes down.
Banks' earnings suffer in
Q1. Many suffer from decreasing trading volumes, namely in commodity,
fixed income, and FOREX markets.
European debt
crisis was yesterday. Deflation is today?
As Ireland issues its
first post-bailout bond, Greece obtains another bailout tranche, and
sovereign bond yields in Europe decline, we hear less about sovereign
debt. Politicians, beware of complacency! Deflation fills the news
gap and becomes the new hot macro topic in Europe.
For those who
didn't know yet: AQR means asset quality review.
The European Central Bank
reviews the quality of banks' assets and this starts making people
nervous. Are German shipping loan portfolios worse than expected?
Will the European banking sector consolidate?
Is Bitcoin good or
bad?
The U.S. and Russia take
action to welcome the new currency (if ever it is a currency).
Germany, as always, criticizes.
Is securitization
back?
In the U.S., auto-loan
securitization, namely of sub-prime loans, is in vogue again. In
Europe, the ECB also takes action to revitalize its securitization
market. How does that fit with fears in Europe about covenant lite
loans and new credit bubbles?
Bonus up / Staff
down
Barclays learns that
timing is important in communication: It raises bonus payments by 10
% and, at the same time, cuts 10,000 staff. The financial press is
more than willing to take up the story.
19 BUSD for a
smart-phone application!
Facebook buys WhatApp for
19 BUSD. Did you try to explain that to your grandparents?
Is China's credit
market dangerous?
The People's Bank of
China tries to decrease lending by retaining liquidity from the
market. We also learn about a bank run in the country; the PBC
ensures that deposits are safe. Finally, China allows private
companies to default.
European Banking
Union
At the beginning of the
year, politicians disagree about the decision-making mechanisms in
case of winding up European banks and about how to fund the bailout
mechanism. By the end of the Q1, they reach an agreement and Europe
celebrates its banking union. Will it work?
As time goes by...
The German constitutional
court again rejects plaints against the European ESM. The French Cour
de Cassation confirms Société Générale's ex-trader's Jérôme
Kerviel's condemnation in last resort.
These topics were
ground-breaking news some time ago. Today, they are worth a small
newspaper article, at most.
