Sunday, August 25, 2013

Greece's Decision To Kill Its Version Of PBS Was Catastrophic

ert greece REUTERS/Yannis Behrakis

Last week, the Greek government shut down public broadcasting station ERT to prove it was serious about austerity.

This was the equivalent of Washington finally acting out on its threat to cut funding to PBS or NPR.

But in Greece, the move has brought the masses to the streets.

And it now it appears to have mortally wounded Greek PM Antonis Samaras. 

It's another classic example of how small incidents can spiral into much larger crises (we are seeing this play out in Turkey). 

It's hard to argue that ERT didn't need some reform: its 2,600 employees, three domestic television channels as well as radio stations cost Greek taxpayers 300 million euros ($400 million) a year, according to Reuters. By comparison, PBS operates every single one of its affiliates with just a bit more money (along with viewer support). A government spokesman said it had become a "typical case of ... incredible waste".

What has the country up in arms was the manner in which the decision came down. The move did not require legislative approval, but Samaras appears to have consulted no one else in his coalition. The leaders of the coalition's junior parties said it would not abide by "faits accomplis" and called seizure "a coup."

Guardian correspondent Helena Smith says Samaras' decision instantly caused the goodwill he'd built up over the past year or so to vaporize:

His shock decision to close ERT has been met with as much criticism from conservatives and challenges to his rule from within his own New Democracy party cannot be ruled out.

Smith spoke with one analyst who predicted that while the coalition will survive for now, it won't make it through another test, and likely won't survive to see the end of 2014.

The government is totally dysfunctional. There are just too many accumulated problems, the deficit, the real economy, the recession, privatisations, restructuring of the public sector, for any government to solve," says the political analyst Giorgos Kyrtsos. "The scenario of snap elections happening is no more than 10-15 percent. But whether the government will survive the next six months is another issue. Some other problem will emerge that it can't deal with. I give it an 80 percent chance of collapsing over the winter of 2013-14.

Greek bond yields had already been trending higher in the past few weeks. This did not help:


We told you about how the same guys who put on the Eurovision song contest had helped Greek public broadcaster ERT broadcast a guerrilla signal to keep it going while its fate was decided.

Today, a court ruled a rump-ERT must be able to broadcast until a new public station is established.


View the original article here

ANALYST: Now That The Cheap Money Is Coming To An End, We Can See The Bubble To End All Bubbles


You are using an outdated version of Internet Explorer. For security reasons you should upgrade your browser. Please go to Windows Updates and install the latest version. Continue to Business Insider »

You will be redirected in seconds.


View the original article here

It's Hard To Look At These Photos From Indonesia And Brazil And Not Worry About A Much Bigger Emerging Market Blowup

The protests in Turkey continue to dominate the attention of media, but today there were two other protests in red-hot emerging markets that warrant your attention, especially since the basic narratives are fairly similar.

In Indonesia and Brazil — where governments are hoping to pursue fiscal consolidation — protests have turned violent.

In Indonesia the issue is the initial driver of protests is the removal of a fuel subsidy.

In Brazil, it's over an increase in bus fares, as well as general frustration over inequality, and the money being spent on next year's World Cup.

Both — along with other emerging markets — are experiencing slowing economies, sharply weakening currencies, rising interest rates, and generally a squeeze related to both financial and structural conditions.

The following four images, and descriptions, are from the AP.

The first two are from Indonesia:

A student protester fires a firework at the riot police during a rally against the government's plan to raise fuel prices outside the parliament building in Jakarta, Indonesia, Monday, June 17, 2013. Indonesia's parliament is expected to approve a budget that will slash government fuel subsidies, a move that will save the government billions of dollars but has already sparked angry protests opposing increased gasoline prices.

Student protesters hurl rocks at the riot police during a rally against the government's plan to raise fuel prices outside the parliament building in Jakarta, Indonesia, Monday, June 17, 2013. Indonesia's parliament is expected to approve a budget that will slash government fuel subsidies, a move that will save the government billions of dollars but has already sparked angry protests opposing increased gasoline prices.

And from Brazil:

Protestors march in Rio de Janeiro, Brazil, Monday, June 17, 2013. Protests in Sao Paulo, Rio de Janeiro and other Brazilian cities, set off by a 10-cent hike in public transport fares, have clearly moved beyond that issue to tap into widespread frustration in Brazil about a heavy tax burden, politicians widely viewed as corrupt and woeful public education, health and transport systems and come as the nation hosts the Confederations Cup soccer tournament and prepares for next month's papal visit.

A policeman lies injured on the ground after clashing with demonstrators during a protest in Rio de Janeiro, Brazil, Monday, June 17, 2013. Officers in Rio fired tear gas and rubber bullets when a group of protesters invaded the state legislative assembly and threw rocks and flares at police as protesters massed in at least seven Brazilian cities Monday for another round of demonstrations voicing disgruntlement about life in the country, raising questions about security during big events like the current Confederations Cup and a papal visit next month.



View the original article here

Markets Are Rising In The Calm Before The Storm


You are using an outdated version of Internet Explorer. For security reasons you should upgrade your browser. Please go to Windows Updates and install the latest version. Continue to Business Insider »

You will be redirected in seconds.


View the original article here

Markets Are Confused And Stupid, And Apparently People Don't Know How To Read

Price action in the stock market today tells you everything you need to know about the cognitive dissonance investors are experiencing right now.

Since around 2 p.m. ET, when the FT published a preview of this week's FOMC monetary policy meeting by the pink paper's Federal Reserve correspondent, Robin Harding, U.S. stocks have taken a sharp turn lower. The headline was "Fed likely to signal tapering move," and the knee-jerk reaction was to sell stocks.

What is amazing about the market's reaction to the article is the lack of market-moving news actually presented to it.

Here's the lede: "Ben Bernanke is likely to signal that the US Federal Reserve is close to tapering down its $85bn-a-month in asset purchases when he holds a press conference on Wednesday, but balance that by saying subsequent moves depend on what happens to the economy."

Now, anyone who follows the Federal Reserve (which in the investment community is pretty much everyone) will recognize both of these likelihoods as eventualities that have more or less already occurred. The Fed has been candid about the possibility of tapering back stimulus this year, but has also firmly stated that the outlook for tapering is completely dependent on the economic data.

This is thanks to the introduction of the Evans Rule in December, which ties the outlook for Fed monetary policy directly to specific numerical thresholds in labor market and inflation indicators.

Yet, just as they did last week when WSJ reporter Jon Hilsenrath suggested in a short blog post that Ben Bernanke would strike a dovish tone at the upcoming FOMC press conference, markets reacted forcefully to the Harding headline today.

With Hilsenrath's blog post, the problem is the same: no news, no quotes, no anonymous sources – nothing of interest, really, to anyone in the market who's been keeping up with the Fed.

Hilsenrath's post is more akin to "stating the obvious" – all he says is that when the Federal Reserve does decide to taper back the bond purchases it makes under its quantitative easing program, that won't mean that the central bank is anywhere near raising interest rates.

Again, anyone who was around in December when the Federal Reserve introduced the Evans Rule should already understand that this is simply codified into U.S. monetary policy.

Yet stocks and bonds, which have faced weakness over the past few weeks as taper fears have seeped into the market, both used the opportunity presented by the Hilsenrath blog post to rally.

Arguably, the Federal Reserve had a lot more use for leaking information to journalists just a few years ago, but that was before it launched a new communications regime focused on increasing transparency in monetary policy decision-making.

Now, with the introduction of the Evans Rule, investors should be focused on the data, not the musings of Jon Hilsenrath and Robin Harding.

(Of course, Hilsenrath and Harding remain must-reads for anyone serious about following the Fed. But it's strange to think that they are still moving markets in the way that they are.)

Harding said as much in a tweet after his article went up today and markets reacted:

Where does that leave us? As Pawel Morski put it in a tweet:


View the original article here

The Brazilian Market Has Had A Horrendous Year

Riots have broken out in Brazil. Notionally they have to do with an increase in bus fares, but they have to do with bigger issues related to inequality, and how much the government is spending on things like hosting the World Cup.

The Brazilian economy is not well.

All you have to do is look at a chart of the Brazilian stock market (the Bovespa) and see what a horrendous year it's had. It literally had its year peak on the first day of trading, and since then has fallen about 20%.

From Bloomberg

What's going wrong in Brazil?

Basically inflation is still sky high, growth is slowing, employment is sputtering, and the country's' Balance of Payments is deteriorating, which is eating into its foreign exchange reserves, imperiling the Brazilian Real (the currency) which like other emerging market currencies has done badly.

In a note that came out yesterday, Barclays predicted a Brazilian sovereign downgrade in early 2014.

From the note:

Brazilian policymakers have changed gears again this year. The backdrop is set by an economic recovery that is not taking off and inflation that remains high. The trade-off between inflation and activity has been deteriorating since 2010, but now the problem is that high inflation is beginning to erode real wages and is taking a larger-than-expected toll on consumption. Even if presidential elections are still 16 months away, politics is gradually taking centre stage. And in our view, it is the fear that the erosion of real income will continue to dampen President Dilma’s popularity (between March and May, it fell 8pp, to a still-high 57%, according to Datafolha) ahead of the 2014 presidential elections that elevated controlling inflation to the government’s top priority.

For more on the Brazil protests, see here -->


View the original article here