Interesting Links - 20/09/2010

Sovereign issues are raising their head again as the Irish are under pressure and now FT Alphaville suggests that Greek bank stress tests are to be delayed. Europe is a slow burn issue that has not gone away. http://www.ft.com/cms/s/0/1d650d1a-c410-11df-b827-00144feab49a.html?ftcamp=rss

On this Alphaville also has a guest post by "Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, argues that this week will show Europe’s debt crisis and the global configuration of currencies returning to the fore." We think it is going to be very difficult for policy makers to resist the siren song of the easy political rhetoric that this latest currency debate provides. Europe also continues to worry us greatly. http://ftalphaville.ft.com/blog/2010/09/19/346446/guest-post-el-erian-on-an-interesting-week-ahead/

On the currency wars Bloomberg picked up comments from BOK Governor over the weekend that Japan can not go it alone in defending the Yen's rise. We think there is little appetite for this at present so this is doomed to failure or more likely more bouts of the lone hand. http://www.bloomberg.com/news/2010-09-19/japan-can-t-curb-yen-s-gains-by-acting-alone-bank-of-korea-governor-says.html

Is the AUD over valued? According to Bloomberg, strategists and PPP it is. One thing we know for sure...if everyone says its going down its not. We are increasingly thinking that you can forget parity the AUD is going to head to 1.10 against the USD at some point. Perhaps not stright away but the Australian economy is a stand out, the RBA believes the China/India miracle has years to run. Next time risk goes off we'd expect the AUD to win but it should outperform against EUR, GBP et al. http://www.bloomberg.com/news/2010-09-19/gillard-dollar-is-peaking-as-mining-tax-proves-aussie-is-overvalued-by-27-.html 

We'll Blog this later today but unintended consequences of low rates, link the Junk Bond Bubble, can be very powerful. http://www.economist.com/node/17043652?story_id=17043652&fsrc=scn/tw/te/rss/pe

This is a joke. Low interest rates distort the performance of lower rated corporate credits because theree is an almost costless and unlimited ability to get finance. This means they tend not to default. Bubbles beget bubbles. here is the latest one. http://www.ft.com/cms/s/0/dd2f4000-c421-11df-b827-00144feab49a.html


In the US the tax cut debate is raging. Here is a link to who gets what from the NYT over the weekend via Barry Ritholtz's "Big Picture" Blog. http://www.ritholtz.com/blog/2010/09/who-gets-what-tax-cuts/