wenn-der-immobilienblase-die-luft-entweicht/ switzerland real estate

https://www.fuw.ch/article/wenn-der-immobilienblase-die-luft-entweicht/

Dadurch haben sich das Hypothekenvolumen und die Privatschulden massiv ausgeweitet. Gemessen am BIP hat sich die Verschuldung der Haushalte in Australien, Kanada und Schweden in zwanzig Jahren fast verdoppelt (vgl. Grafik 4). In der Schweiz war der Anstieg weniger dramatisch. Doch die Verschuldung der Haushalte erlangt mit 127% des BIP einen globalen Spitzenwert. 

Bitcoin echo of failed past

https://www.wsj.com/articles/is-bitcoin-the-future-or-an-echo-of-a-failed-past-1529460361

Ciudadanos peronismo

http://www.lavanguardia.com/politica/20180609/444222032922/entrevista-guillem-martinez-proces-independentismo.html

He de decir que he cambiado de opinión: ahora es mucho más dura. Se les ha llamado “pagafantas”. El Procés se ha anclado finalmente donde se tenía que haber anclado mucho antes si hubiera habido información, que es entre los populismos autoritarios nacionalistas europeos. Punto pelota. No hay más recorrido. Si hay otra opción de independencia progresista está fuera del Procés, y ahora mismo no escucho a nadie hablar de ella. Quien participa de todo esto, participa de un marco autoritario, derechista y nacionalista europeo. Muy afortunado, eh, y que se tendría que exportar. De hecho, Ciudadanos lo está exportando; el proyecto de Albert Rivera básicamente es una lectura del Procés, que costará más implantar en España por la propia naturaleza del país. Pero es fácil hacerlo, es fácil construir estas organizaciones peronistas y reducirlo todo a un discurso nacionalista con vocabulario de izquierdas y anclado en la derecha.

Con lo cual, desde luego es inverosímil acabar en una cárcel por una protesta. Pero bueno, en un país donde puedes acabar en la cárcel por un rap, pues es bastante normal y ejemplarizante acabar en la cárcel por una protesta. Pero no contaban con ello

Ni siquiera el día 27 contaban con ello. Contaban con multas, eso sí. De hecho, todo lo hicieron con la idea de recibir las multas. Se ha sabido que muchos cedieron sus patrimonios a sus esposas para limitar el trance. Había información, no obstante, de que podía haber penas. A la que abres el código penal para solucionar todo, todos acabamos en la cárcel. La vida no puede funcionar por el código penal.

..... 

Ahora el relato es sobre el sufrimiento. Afecta a un 45% de la sociedad o así y yo creo que se va a eternizar, porque existirá ese 45% durante muchos años, tal vez durante veinte años, y existirá esa capacidad de sufrir durante todo ese tiempo. Estos días, por ejemplo, he visto la noticia de que un pueblo pequeño va a organizar un concurso de balcones amarillos adornados. Pues esto se puede prolongar veinte año

.....

Es un partido, como todos los partidos españoles, muy vertical. Con lo cual, si chuleas a la jefatura, chuleas a todo el partido. Y es lo que ha pasado. La chulearon muy bien, y por marcos: “Si no te integras conmigo, pasarás a ser enemigo de la causa”. Y funcionó: se integró con Artur Mas. Y ahora está descabezado, sin líderes, e intentando hacer algo sin cabeza, que es muy difícil en un partido vertical. Tiene muy mala suerte Esquerra Republicana, es el partido con peor suerte en la Historia de la Humanidad. Es un partido gafe. El único jefe de gobierno fusilado en la II Guerra Mundial es de Esquerra Republicana.... 

Aquí, no se lo vas a escuchar a nadie en Catalunya, pero ha habido una política de comunicación tercermundista, en el sentido no democrático de la palabra. Y además, están muy orgullosos de ella; los técnicos de comunicación siguen ahí, cuando deberían alquitranarlos y emplumarlos solo por su incapacidad para hacer su trabajo. Llamaba puntualmente a algún político, tengo amigos en el exilio, mi vi autorizado a llamarles.... 

Si hubiéramos hecho un diario de las declaraciones, Catalunya no solo sería independiente sino que tendría ya una base en Marte..... 

Pero solamente existió la independencia cuando tuvieron que ir en helicóptero al parlamento y tuvieron que buscarse algún tipo de representatividad, que está solventada.... 

Esto es importante y hace hincapié en el valor sagrado del voto. “La democracia es el voto”. ¿Qué es lo que pasó en la moción de censura de Pedro Sánchez? La democracia no es la discusión, no es la coalición, no es el debate. La democracia es el voto, y esta es una característica de las derechas europeas, también la española, y el PP la mantiene. Y Hungría es así, Polonia es así…, esto es muy inquietante.... 

l primer paso es hacer periodismo macarra, chulo, plantear conflicto y que la gente hable. No que te dé la razón. Lo único de lo que estoy orgulloso de este trabajo es que un día estaba en un hospital y había tres médicos discutiendo sobre un artículo mío, al lado, en el desayuno. Dije “bueno, este es el trabajo”. Discutían, nadie

Peronismo catalán

http://www.lavanguardia.com/politica/20180609/444222032922/entrevista-guillem-martinez-proces-independentismo.html

cdo s manipulation

https://www.ft.com/content/5e23e516-5cdc-11e8-ad91-e01af256df68

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https://www.ft.com/content/5e23e516-5cdc-11e8-ad91-e01af256df68

The mystery trader who roiled Wall Street Former Blackstone executive used complex credit derivatives to become a feared hedge fund manager but left behind a trail of recriminations © FT montage; Getty Images Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Save to myFT Miles Johnson and Robert Smith in London YESTERDAY Print this page318 For hedge funds that make their money gambling on whether companies will go bust, it was an opportunity too tempting to ignore. In 2015, brokers working on behalf of a mystery client in London, offered these funds the chance to make a trade they thought was impossible to lose: betting that a teetering Norwegian paper company would imminently default on its debt. The hedge funds snapped up hundreds of millions of dollars of the derivatives contracts that would pay out in the event of a default. By the time the buyers realised who was on the other side of the trade it was too late: they had been trapped. One hedge fund manager recalls receiving a call from a sympathetic contact pleading with him to exit a trade. “It was an off-the-record warning in order to protect me,” he says. “He basically told me who was on the other side. It was him.” The “him” was Akshay Shah, at the time a managing director at the Blackstone Group’s GSO hedge fund unit, who for nearly a decade spearheaded a series of unconventional trades that made him the most feared operator in European credit markets, terrorising a string of rival hedge funds and costing them millions in trading losses. The aftermath of the complex trades Mr Shah helped pioneer have shaken the $10tn market for credit default swaps to its core, leaving a trail of at least three lawsuits and recriminations between the world’s largest private equity group and some of the most powerful names in finance. How it worked GSO buys a CDS contract on a struggling company from another hedge fund. The CDS is like an insurance contract: it pays out if the company defaults. GSO then approaches the company and offers it very attractive financing (a low interest loan for example) with an unusual condition: it has to default in a way that will trigger a payout on the CDS contract. The company carries out this proposal, for example by paying interest on a bond a few days late, causing little concern to bondholders but “triggering” the CDS contracts The hedge fund then has to pay a lump sum to GSO given that the company has defaulted The trades have also highlighted a shift in the balance of power on Wall Street since the financial crisis, where the so-called non-bank lenders such as GSO have leveraged the infrastructure and reach of parent private equity groups to become more feared than the once dominant proprietary trading desks of Goldman Sachs and the other leading investment banks. “This is symbolic of a shift in power away from banks like Goldman to non-bank institutions like Blackstone,” says a former Goldman Sachs partner. The credit default swap, a financial instrument intimately associated with the losses incurred by the banks during the US subprime mortgage crisis, is most commonly used to either hedge against a company falling into trouble and possibly not paying off its debts, or as a tool of outright speculation over whether a default will occur. Recommended Markets ‘Manufactured’ credit default called off after legal challenge The GSO unit at Blackstone where Mr Shah worked became the biggest predator in the global CDS market by going beyond merely trying to predict when companies would fail. Instead it used Blackstone’s substantial influence to directly intervene in struggling businesses, changing their fates in ways that maximised profits on GSO’s trades. The strategy allowed GSO, which has $140bn of assets under management, to radically alter the odds in its favour by inventing a trade that had never been seen before: the manufactured default. It is the debt equivalent of a controlled explosion: offering a company favourable financing, such as low interest loans, to convince it to intentionally default in a way that will trigger payouts on CDS contracts, but without bringing down the whole company. By doing this GSO pushed its trading edge on rivals to the limits of what many saw as legal. “I don’t believe it’s classified as insider trading, but it’s pretty damn close,” says one retired trader who came up against GSO and Mr Shah. “It’s quite frankly shocking that they were able to get away with doing that for so long and that no one was prepared to stand up to it.” “I compare it to sports gambling,” says Aitan Goelman, former head of the US Commodity Futures Trading Commission’s enforcement division, about manufactured defaults. “If gamblers went out and paid players to throw games, everyone would intuitively know that was fraudulent. Highly sophisticated and not particularly upstanding actors are looking for any edge they can get: if they see areas of the law that are vague or poorly defined, they see this as an opportunity.” Hovnanian was at the centre of a controversial trade which was resolved when GSO and a rival fund reached a settlement © Bloomberg While rivals and observers are shocked at GSO’s tactics, it has never been accused of breaking any regulations. GSO argues that the assistance it provides to distressed businesses in exchange for them triggering payouts on CDS contracts are welcomed by those companies as it helps them to survive, and only damages other hedge funds caught out speculating on their failure. “Our financing solutions were determined in competitive processes and provided the most favourable terms and crucial financial support to businesses with thousands of employees,” Blackstone said in a statement. “They were also wholly compliant with the market’s well-established rules and consistent with the expectations of its sophisticated market participants.” So effective and surprising was GSO’s strategy that it ensnared some of the most revered names in trading, including BlueCrest, founded by billionaire Michael Platt, and Goldman Sachs. BlueCrest declined to comment. The controversy this year filtered up to the highest echelons of Wall Street, as a controversial trade GSO orchestrated around struggling US homebuilder Hovnanian was discussed in a meeting between Goldman Sachs chief Lloyd Blankfein and Jon Gray, president and heir apparent of Blackstone. Goldman had earlier taken the unusual step of complaining in public about manufactured defaults, with the senior trader in charge of the trade telling the FT this year that “the Hovnanian situation could embolden investors to pursue manufactured credit events with other corporate issuers, which would undermine the true intention and spirit of the CDS market”. Having for years sat at the top of the trading food chain, observers said it would have been unthinkable in the past for a Goldman partner to complain in public about being bested in a trade. “It is ironic any Goldman guy would be asking in public to be protected [from GSO] like this,” says the retired Goldman partner. “Goldman always had a phrase internally, the ‘big boy letter’, the letter clients sign to show they knew what the risks were of trading with Goldman.” The trade involving the Spanish gaming company Codere in 2013 attracted the attention of the comedian Jon Stewart, who dissected it in a segment on 'The Daily Show' Rival hedge funds, investment bankers and consultants describe GSO’s success as being driven by both its traders’ attention to detail, as well as the unrivalled ability of Blackstone’s reputation and infrastructure to support its trades. When the India-born and Cambridge-educated Mr Shah joined GSO in 2008 from Lehman Brothers, few could fault his timing — the investment bank collapsed six months later. He had built a reputation as a sharp-minded analyst on Lehman’s fixed-income trading desk. And having arrived at GSO, which that year had been purchased by Blackstone, Mr Shah began working on finding ways to make money for its investment funds in the European debt market. People familiar with his trading style say he pores over hundreds of pages of bond or loan documents, trying to find tiny details that others in the market might miss. Once he identifies chinks in the wording of particular clauses he plots a way to construct trades using derivatives on whether a company will default on its debts, which would lure rivals to take the other side. Akshay Shah wasn’t some cowboy. He was reporting into the most senior people at GSO “He’s a sniper,” says one hedge fund manager. “He would call you up and say ‘Hey, what are you doing, what are you thinking on this?’ and he knows all the information already, he’s just fishing for what you know and what you think so he can work around it.” GSO would then directly approach company managements with proposals that guaranteed it would profit on the CDS. Ahead of the approach, Mr Shah would often hire external consultants for role-playing purposes, shadowboxing with them in a specific country’s law or corporate culture until the pitch was finely tuned. “You need to have a management team willing to screw people,” says one distressed debt investor. In the case of Codere, a cash-strapped Spanish gaming company, Mr Shah first used the manufactured default. GSO offered the struggling company a liquidity lifeline in 2013 with an unusual condition: Codere had to pay interest on its publicly traded bonds just a few days late, causing little concern to its bondholders but triggering CDS payouts. Despite the unwanted publicity the Codere trade attracted for Blackstone — it was dissected by comedian Jon Stewart on primetime US television in 2013 — Mr Shah grew to become one of GSO’s most senior managing directors, and sat on its European investment committee. “Akshay wasn’t some cowboy,” says a former trader. “He was reporting into the most senior people at GSO.” Lloyd Blankfein of Goldman Sachs and Jon Gray of Blackstone discussed the unusual trades after Goldman Sachs complained publically about the complex financial arrangements surrounding Hovnanian © FT montage; Bloomberg Rivals argue that GSO was uniquely placed to not only gain access to greater information than many rivals, but could also use Blackstone’s reputation to open doors to corporate management teams. “To do these sorts of trades you need the size and the money. Only GSO had the money, the influence to pull this off,” says one person active in the European debt markets. “Blackstone is a great brand to have behind you.” Mr Shah used all the levers at Blackstone’s disposal to push through one of GSO’s most controversial trades in 2015-16. The tussle over the CDS of heavily indebted Norwegian paper company Norske Skog resulted in a bitterly fought court battle in New York, as rival hedge fund BlueCrest tried in vain to block GSO’s gambit. The trade was essentially the opposite of Codere: charging other hedge funds large premiums to bet on a company’s rapid demise before doing everything possible to keep it alive for long enough to avoid having to pay anything out. For Norske Skog, GSO pooled its firepower with rival hedge fund Cyrus to buy a substantial equity stake and then lobby for changes to its board, before getting management to formally adopt a proposal tailored to maximise the profits on the funds’ CDS positions. “We believe the company will once again run into trouble after GSO and Cyrus have cleared their CDS positions and no longer have the incentive to support the company with as much determination and creativity,” Rahul Gandhi, an analyst at research firm CreditSights, said in March 2016. His prediction proved prescient. The CDS contracts were settled in June 2016 and 18 months later, in December 2017, Norske Skog filed for bankruptcy. A complex deal involving the paper manufacturer Norske Skog led to a court case in New York as a rival hedge fund tried to prevent GSO's plans from going ahead By that point, Mr Shah’s career at GSO had also met a seemingly untimely end. In the spring of 2017 the scourge of London’s traders suddenly parted ways with the firm, which liquidated a more than $3bn distressed debt fund he managed. One former employee of the division says the headlines such controversial CDS trades generate are no longer compensated for by the gains, as Blackstone’s in-house credit unit shifts its focus to the less acrimonious practice of making direct loans to private companies. “It’s not a place that loves this publicity and in 2018 it has to look like a friendly provider of capital,” he says. This more conciliatory approach was clearly seen in the surprising resolution to the Hovnanian trade last month. The homebuilder announced at the last minute that it was not going through with the manufactured default, as GSO and rival hedge fund Solus reached a settlement over the trade. The Blackstone unit has also in recent months struck a deal with Goldman where GSO bought back some of the contracts the bank lost money on. Goldman Sachs declined to comment. The Hovnanian trade was devised and executed after Mr Shah left GSO, but the senior GSO executive who made use of his former colleague’s manufactured default template has now also left the firm, joining a rival distressed debt fund at the start of the year. Mr Shah says he left to set up his own hedge fund in London to focus on smaller distressed debt opportunities. His new fund, Kyma Capital, is in the early stages of fundraising. “The reason for leaving was simple: the European stressed and distressed opportunity set is a middle-market opportunity set,” he says. “These sized companies don’t lend themselves to megafunds.” Kyma Capital said it would “welcome any regulatory changes that would improve the stability, durability and liquidity of the CDS markets”. But experts believe the damage to the market is already done, as the run of trades from GSO have exposed how easy it is for big players to alter outcomes in the very markets they are betting on. “This kind of ‘gaming’ behaviour undermines the viability of the CDS market,” says Henry Hu, a professor and expert in derivatives at the University of Texas Law School. “The CDS market has shrunk terribly since the crisis. If this kind of behaviour continues, the market will shrink even further.” “We have heard with concern reports about recent ‘manufactured’ credit events,” says a spokesperson for the Financial Conduct Authority. “Such behaviour could also amount to market manipulation.” Mr Goelman, formerly of the CFTC, says he did look at manufactured defaults before stepping down last year, but could not say who was involved. “For a number of different reasons, we decided to not act on the case.” One of the hedge fund managers who came up against Mr Shah says he expects GSO to now shy away from such trades, given the potential regulatory scrutiny. “There are still going to be other guys out there who will be more aggressive and willing to put on these trades,” he says, adding that it would be hard for others to replicate the intricacy of the trades pioneered by GSO. “Being outside the behemoth of Blackstone, I don’t see how that’s going to work.” Copyright The Financial Times Limited 2018. All rights reserved. COMMENTS (318) Sign in     + Follow Submit Comment Please keep comments respectful. By commenting, you agree to abide by our community guidelines and these terms and conditions. We encourage you to report inappropriate comments. Newest | Oldest | Most recommended Marty Edwards 5 minutes ago This wasn't a story I followed at the time. I assume that the CDS were cash-settled rather than the normal physical (bond) settlement otherwise there would be no money to make, or not much. Were they - anyone know? ReportShareRecommendReply Thomas Welting 37 minutes ago Sorry but this is a pretty weak article from the FT. How is it that the holder of a CDS can make a claim for loss when the whole scam depends on triggering a claim where the is no (of no proportional) financial loss?  Has the journalist thought about explaining this? Making this scammer out to be some sort of genius who searches the minutiae of derivatives and loan contracts for hidden flaws is simply nonsense.  He simply knows that, unlike insurance, a CDS pays out when an event happens and not if a loss is incurred - it is fundamental to the CDS market and it is a flaw. It is hard to feel too much sympathy for the hedge funds he has scammed but he is not clever or to me respected.  ReportShareRecommendReply cynic007 1 hour ago It's great to hear that financial super-players got screwed by another of their own kind. The sad part is that scam involved real companies and people who were bit players for as long there were useful for GSO and then discarded like trash. Shocking story but nothing that happens in the finance sector is a surprise anymore.  ReportShare1RecommendReply WendellMurray 2 hours ago "This kind of gaming" That is all that much of what players in paper do is. Artificially created paper constructs that involve billions of gains and losses, but have zero to do with real economic activity that employs people or that involves production of useful good or service. Disgusting world. ReportShare5RecommendReply Italian UK Taxpayer 3 hours ago This article seems to over-estimate the role Mr Shah had in all these transactions. Yes GSO was in all the trades mentioned (Norske Skog, Codere), but other funds with similar strategies were involved. Bluecrest was on the other side of the trade on Norske betting for a clean event of default in 2015 (as opposite to no event or a restructuring credit event, which was the GSO side). Cyrus was on the same GSO side. To highlight only GSO role in this transaction seems to me a journalistic device to back up the story. Norske Skog has been what people call in jargon a hedge fund hotel for the past decade.  As for Codere, GSO came up with this idea, but there were a lot of smart funds and financial advisers involved that knew about the GSO plan of devising an artificial default for months and there were articles written at the time before the thing happened. But the company needed quick liquidity, bondholders and advisers needed the CDS to be washed away and the management to be cornered for a restructuring to be achieved.  As for the insider trading allegations, on Norske the company was well aware of GSO conflict as shareholders, creditor etc but did not care much, nor did the Norwegian regulator. Also let's not forget that banks and other institutions often are in similar positions as shareholders/lenders and justify it arguing there are Chinese walls (remember EMI lawsuit of Terra Firma Vs Citigroup). On Codere, as I explained it above, everyone on the creditor side was complacent. The regulator looked into it and found no issues.  Akshay Shah is one of the smartest guys in distressed debt out there, but let's not be ingenuous, these transactions do not happen just because one guy says so.  ReportShare4RecommendReply Timber 2 hours ago @Italian UK Taxpayer I have a partner like this. If I want a 15-minute rant from him, all I have to do is call someone else clever. ReportShare1RecommendReply adamsmithfreetrader 4 hours ago One thing I don't quite understand.  Given the underlying company was tottering the CDS sold by the other hedge funds would have been very pricey.  Indeed I would have thought that other hedge funds would be very nervous of writing CDS's particularly if word got around that a mystery buyer was snapping up large quantities of CDSs for the given company. Also if other hedge funds were being rung up and offered CDSs as the article implies then wouldn't they gave gained from the company defaulted. Perhaps it's already been covered below but as I read it, it doesn't stack up... ReportShare3RecommendReply BA 5 hours ago Guys, the participants in Financial Markets are stated clear in all finance books, Hedgers and Speculators. Lets see both sides of the coin. Once you engage in CDS as seller you presumably took the risk into consideration but it's seems like information asymmetry gets into play. Not all players are well informed. Like it or not, he hasn't done something illegal. Was it ethical or moral? Maybe not. Doesn't matter what institution are you, bank, HF, PE, once you get into a risky instrument, there's always a counterparty who might speculate from it. That's the beauty of finance, you're not always winning or losing. The big problem is timing and liquidity. ReportShareRecommendReply Toronto M 2 hours ago @BA What he did amounts to taking a fire insurance on your neighbour's house and then setting it ablaze. The reason this isn't illegal is because the financial laws are silly. I really want to use another word, but 'silly' will have to do. ReportShare2RecommendReply LPC 1 hour ago @BA But if you can manipulate the outcome are you still 'speculating' and is that information asymmetry or material insight? ReportShareRecommendReply BA 1 hour ago @Toronto M I agree with you that laws are silly. But in the same time we will never have perfect laws so we will always have different or out of the box interpretations so that someone might take advantage of it. ReportShareRecommendReply 1 reply merel-an 5 hours ago Reminds me of Abacus, a CDO case, involving a bank: https://www.reuters.com/article/us-goldmansachs-abacus-factbox-idUSTRE63F5CZ20100416 The problem is not the instrument or type of company but the way the instrument is used, i.e. it's about incentives built into market structure and corporate governance. ReportShareRecommendReply I am free Capt Peacock 5 hours ago All of this from a PE that has acquired Thomson Reuters market data business. How are the users suppose to trust that? ReportShare3RecommendReply Toronto M 2 hours ago @I am free Capt Peacock Because unlike the case above, feeding trusting users false information and then betting against their obvious responses is against the law. ReportShareRecommendReply I am free Capt Peacock 2 hours ago @Toronto M  What about using data on what customers are using? and How does one know they are not tracking key customers? ReportShareRecommendReply I'd rather be sailing 6 hours ago One has to wonder, in what shape or form do these people add anything of value to the world? ReportShare6RecommendReply Tom 6 hours ago Why do you need to add value to the world? Is it not enough to earn money within the parameters of what is legal? ReportShareRecommendReply Vectorious 6 hours ago @I'd rather be sailing I was just thinking the same thing - in what way is this activity aiding the ability of the real economy to operate or adding to the information discovery of the market? in fact it appears to be doing the opposite, which undermines the case for CDSs existing at all

madman trump di maio harold james

https://www.project-syndicate.org/commentary/madman-theory-m5s-italy-by-harold-james-2018-05

ross commerce secretary ties with Russia , Trumps bankrupcy

The commerce secretary trumpeting stringent tariffsonUSalliesisa

ShawnDonnan
From his expansive wood-panelled office a short walk from the White House,MrRosshasweatheredcontroversyoverbusinesstiestoRussianoligarchsandinvestmentsintheBankof Cyprus as well as questions about the true size of a personal fortune that was once estimated in the billions. Rivalshaveleakedreportsofhimfalling asleep in meetings and being shoutedatbyMrTrump,amanwhose businesscareerheoncehelpedsalvage. Asabanker,MrRossoptednottoforce thecasinodeveloperintobankruptcy.

AregularforyearsonthePalmBeach andHamptonspartycircuits,MrRoss hasalsoemergedasavividexampleof the Gilded Age-style opulence that wealthy Trump cabinet members inhabit. He wore $600 velvet slippers embroideredwithhisdepartment’slogo toMrTrump’sfirstaddresstoCongress.

In public, Mr Ross retains a defiant poker face mastered over decades of dealmaking and high-stakes art auctions. He and his third wife, Hilary Geary Ross, own a collection of paintings by Belgian surrealist artist René Magrittethathasbeenvaluedatmore than $100m and the couple are regularly listed in ArtNews’list of the top200collectorsintheworld

the next crisis : the italian spread , the VIX and the algos

Many pinpoint the cause of such a dramatic dislocation as post-financial crisis regulations which have made it harder for banks to play their historic roleinlubricating bond trading. Higher capital costs have forced them to retreat from being active players, while the embrace of technology and rise of electronic market makers have leftmarketswithless support. “We all know the dealer community’s balance sheets aren’t what they were, and the bids aren’t as deep,” said Jim Caron, a senior portfolio manager at Morgan Stanley Investment Management. “It should absolutely be a systemicworry.” Some argue there is mounting evidence — from a series of sharp sell-offs, such as February’s volatility spike in US equities and now the Italian debt crisis — that the deteriorating health of bond market trading could exacerbate financial turmoil. “I do think that the VIX blow-up and the Italian explosion are reflective of a market structure that is flawed and where we should expect more such events rather than fewer, and that at some point, one will be larger and last longer,” said Peter Tchir, head of macro strategyatAcademySecurities.  Charles Himmelberg, a senior strategist at Goldman Sachs who formerly worked at the New York Federal Reserve, recently caused a stirby saying that “liquidityis the newleverage”. “The rising frequencyof‘flash crashes’ across many major markets may be an important earlywarning sign that something is not quite right with the current stateof tradingliquidity,”he noted. Mr Himmelberg highlighted how bank trading desks had increasingly been replaced by high-frequency traders when it came to supporting two-way market prices, especially in stocks but alsoincreasinglyin bondmarkets. That may make markets seem more efficient most of the time, but when severe shocks happen these algorithmic traders can pull back and add to the dislocations. Another factor has been the presence of central banks as big buyers of government bonds and the unwillingness of policymakers to upset markets. This has helped contain yields at extremely lowlevelsand reducedvolatility. “The long expansion accompanied by relatively low market volatility may have helped disguise an underappreciated rise in market fragility,” Mr Himmelberg warned. “Just as the rapid growth of financial innovation and leverage during the pre-crisis period contributed to the crisis in ways that were not fully anticipated, we will not really know whether markets have in fact become more fragile until after the next downturnor crisis.” Dan Ivascyn, global chief investment officer of Pimco, said that the decline in liquidity usually goes unnoticed but during periods of sharp retrenchment when investors seek to shed riskier assets, it can cause sharp price movements which are “characteristic of markets today”. In the case of Italian bonds, investors are asking how a developedworld fixedincome market buckled so quickly. The unsettling conclusion is that the regulatory inspired changes in the bond market’s ecosystem mean there is little difference between how some government debt trades compared with lower-qualityand riskierassets.

spain political reform

The change in mood has also led to the emergence of new political movements. But since the instinct for control runs deep in the Spanish system, both old and new parties continue being tight pyramidal structures with leaders who havequasi-absolutecontrol. As a result, they are failing to open up the system. Crucially, they are not attracting Spain’s able, professional middle classintopolitics. The party that manages to do so will hold the country’s futureinitshands. The Spanish establishment is already manoeuvring to end the crisis faced by Mr Rajoy. The stock exchange has suffered losses and the risk premium has shot up. In addition, the nervousness of European markets is being used as an excuse for fixing things fast. But tinkering at the margins is unlikely to do the trick. The answer to the political discontent in Spain is not quick changes, or evenmedium-termtechnocraticones. To succeed, Spain needs to think deeply and seriously about political and constitutional reform.

Miriam González Durántez