Just Another Manic Monday

Thought we’d share a few links to some well-written commentary we’ve come across in recent weeks, while we are wrapping up this quarter’s Broyhill Letter, which should be published shortly.  It’s just another Manic Monday in Broyhill Land:

Reflections on the Sovereign Debt Crisis

Investors have been lectured about the Sovereign Debt Crisis (SDC) ad nausea in the past six months.  That said, we are still not sure consensus fully appreciates the investment implications.  Edward Chancellor at GMO recently weighted in on the subject.  We had an opportunity to join him for dinner in Boston while at the CFA Institute Annual Conference and would strongly encourage our friends to take a few minutes to review his thoughts here, as Ed has a tremendous appreciation of economic history.

Ten Commandments for Fiscal Adjustment in Advanced Economies

This brief piece from IMF Direct offers ten suggestions for addressing the fiscal challenges outlined by Chancellor.  Unfortunately, not many appear to be listening, as we have yet to see clear evidence of structural reform, reductions in unfunded liabilities or policies aimed at boosting economic growth.

Crisis & The Euro

A must read article by George Soros who outlines the severe issues facing the Eurozone today.  As we have previously discussed, the situation across the pond is eerily reminiscent of the 30s, when doubts about sovereign credit forced reductions in budget deficits at a time when the banking system and the economy were not strong enough to do without stimulus.  Coming at a time when the Chinese have also put on the brakes, this is liable to push the global economy into a slowdown or a double dip.

This is a lengthy piece but well worth the time to understand the consequences.  In the Postscript, Soros points out that Germany went into the G-20 in Toronto with President Obama pleading with Angela Merkel to change her policies.  But the G-20 ultimately endorsed a halving of budget deficits in three years, almost guaranteeing a global deflationary spiral and making the experience of the 30s even more relevant.

Euro Fetters Are An Agonising Bind

Brief FT article summarizing the issues facing the EUs common currency.

Bank Balance Sheets Could Torpedo Recovery

German views of the ongoing European Stress Tests.  What the markets fear most of all is that government bonds held on bank balance sheets could plummet in value — that these countries could declare bankruptcy and their debts would need to be refinanced. But this horror scenario is not taken into consideration in the current stress test.  Not much of a stress I suppose?

The Euro Mutiny Begins

Just in case you haven’t seen enough, one last piece by Ambrose Evans-Pritchard on risks to the EU.

To Fix Sour Property Deals

We didn’t want to leave those at home out of all the fun entirely, so here are some thoughts from the WSJ on the risks around Extend and Pretend.

Biggest Defaulters on Mortgages Are The Rich

Not exactly encouraging signs for home-owners in the states.  We are not out of the woods yet.