Market Talk

Irish eyes are not smiling this morning.

So equities traders here in the old USA aren’t worried about European debt today, it seems judging by stock futures, whereas yesterday they were all in a tizzy about it. Does that make sense? No, it doesn’t, so you should ignore the stock moves (unless, of course, you’re actively trading, in which case, all that matters are the numbers,) and focus on, you know, the news. And the news is still coming out of Europe.

The cost of credit default swaps on Irish debt hit a record today on increasing worries over the state of Irish banks. This after the government extended its blanket guarantee of private banking debt (was supposed to run out the end of this month, now they’re extending it to the end of the year. Just seems like nobody can get those exit strategies kicking in, can they?)

Neil Shah reports over at MarketBeat:

Ireland, which is grappling with an increasingly costly bailout for troubled lender Anglo Irish Bank, isn’t alone. Concerns about the health of Europe’s banking system have unleashed a wave of risk aversion that is engulfing other countries on Europe’s fringe too. Portugal’s credit-insurance costs have jumped to $342,000 from $330,000, while Greece’s costs have hit $916,000 from $895,000.

It’s not just Irish CDS, either. Spreads on bond yields between Germany and some of the so-called periphery countries are rising. The spread between Greek bonds and German bonds is at a four-month high of 948 basis points, very close to the record 973 it was sitting at before the Europeans unveiled their grand bailout plan.

That tells you that despite the near trillion dollar safety net the Europeans threw at their collective economies, investors are still worried. It’s not at panic levels, but beads of sweat of forming on the collective European brow.

- The smart phone market is “a waltz of elephants,” making it hard for standalone players, like Palm, to succeed, Henry Blodget says. “In order to have a chance, Palm’s products had to be so obviously superior to all available alternatives that people would hear about them and seek them out,” he says. “Alas, they aren’t.”

- For AIG, a $9 billion quarterly loss looks almost graceful. “”Depending on your perspective, the results were either a significant improvement compared with the same period a year ago or quite irksome indeed, given the $100m in bonuses paid to 200 AIG staff,” FT’s Alphaville says.

- Twitter’s ad platform may come sooner than you expect, MediaMemo blogger Peter Kafka reports.

- Paul Krugman discusses core inflation.

- Jeremy Grantham’s early calls prove to be right, but also costly.’

- Lawmakers question the GMAC rescue. Gee, I wonder why. Three bailouts later, GMAC’s still the only bank where the government now owns a majority stake.

- Former BofA CEO Ken Lewis left with about $83 million in pension and insurance benefits, stock and other compensation, WSJ reports, citing a securities filing.

- “Rather than demonize the CDS market and blame it for Greece’s current woes, let’s place the blame firmly where it belongs — with Greece itself, and its profligate ways.” Reuters blogger Felix Salmon says.

- Madoff whistleblower book: Harry Markopolos claims he uncovered State Street fraud, had thoughts about killing Madoff

- This may be the best show on television.

I’m starting to see more references to the situation in European markets being almost a replay of the the situation here back when Lehman was on the verge (and AIG, and the American financial system, and our way of life, and the Mets’ playoff hopes…well, you get the picture.) FT’s Alphaville has written about this several times this week.

FT started on this last Friday, noting some funky moves in the CDS markets over there. They noted on Tuesday that the difference between the iTraxx Main and Financials Senior CDS indexes were getting close to their levels from September 2008. (I won’t even pretend to be familiar with these indexes, but keep reading. We’ll get there.)

They followed that up today, with this from Deutsche Bank’s Jim Reid:

The situation is increasingly reminding us of August/September 2008 when the credit market was sending out a strong sell signal to the equity market. Failing a quick sovereign bail-out, the credit markets (through peripherals) are sending out a similar sell signal.

So what’s all this mean for, you know, America? Well, as UBS’ Art Cashin points out, a rush for the exits in Europe could mean a rush for the relative safety of the US dollar. And that could lead to an unwinding of the dollar carry trade, which has been a cheap and easy source of fuel for the massive 2009 rally.

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