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“Eurobulls would say it that the stress tests gave the banking system a clean bill of health. Perhaps. It also seems likely that having once once stood at the edge of the abyss, we now now what Euro leaders/ECB will do (perform a bailout). That theory is not airtight, since it would seem reasonable to counter-argue that if the market were totally under the spell of moral hazard, then the PIIG bond yields wouldn’t be blowing out.
Maybe. But it’s clear that while the freakout is coming back to Greek and Irish debt, the contagion fears appear minimal.”
Read more on The Business Insider here.
Greek debt via PragCap.
Yet, Deutshe Bank say: No risk of a recession just yet:
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“A new international study investigating the correlation between the Islamic holy month of Ramadan — which begins next week (August 11/12) — and stock markets has discovered that the average stock market returns in predominantly Muslim countries were historically almost nine times higher during Ramadan compared to other months of the lunar calendar.”
Get the details: Fasting ‘Feelgood’ Factor: Holy Month of Ramadan Reduces Volatility in Markets, Research Finds.
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“A traffic jam stretching more than 60 miles in China has entered its ninth day with no end in sight, state media reported.”
Read more: Worst traffic jam ever? Gridlock spans 60 miles.
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“First watch the video below. The dark haired guy, Booth, has just made a big bet. He is claiming to have three-of-a-kind (fours). If he does he would win the hand, but he might be bluffing. The other guy, Lingren, has to decide whether to call the bet and he does something unexpected: he asks Booth to show him one of his cards:”
“The strategic subtext is this: if Booth has the third four then he wants Lingren to call. If not, he wants him to fold. Implicitly, Lingren is offering the following mechanism: if you do have the third four then you won’t want me to know it because I would then fold. So show me a card, and if it’s not a four I will call you.”
Read the rest on Cheap Talk here.
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“The trailing dividend yield for both Europe and the UK has moved back above the relevant government bond yield in the last few months; however, this phenomenon is even spreading to the US – the Dow Jones index now offers a higher yield than 10Y USTs.
Even in Japan between 1990-2007 it was very rare for the dividend yield to exceed the bond yield – and on the two occasions when it did, equities subsequently rallied by an average of 100%.”
Go to The Business Insider for the details.
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“Existing home sales for July (Tuesday), durable goods for July and new home sales for July (Wednesday), weekly jobless claims (Thursday); and the first revision of second-quarter gross domestic product and the Thomson Reuters/University of Michigan consumer sentiment index for August (Friday).
Corporate Earnings: Companies reporting earnings will include Barnes & Noble, Burger King and Medtronic (Tuesday), Toll Brothers and TiVo (Wednesday), J. Crew (Thursday), and Tiffany (Friday).”
More information here.
“Nobody can tell you for sure what’s going to happen next in the stock market. But thanks to the nice data set collected and maintained by Yale Professor Robert Shiller we can speak with authority about what it’s been doing for the last 140 years.”
-Via James D. Hamilton – Professor of Economics at the University of California, San Diego
“Figure 1. Green line: Ratio of real value (in 2010 dollars) of S&P composite index to the arithmetic average value of real earnings over the previous decade, January 1880 to Aug 2010. Red line: historical average (16). Data source: Robert Shiller.”
“Figure 2. Green line: Ratio of real value (in 2010 dollars) of S&P composite index to the arithmetic average value of real earnings over the previous decade, January 1880 to Aug 2010. Red line: historical average (16). Blue line: average compounded nominal rate of return on stocks purchased at the indicated date and held for ten years from that date. Data source: Robert Shiller.”
“Figure 3. Black line: Ratio of nominal dividend paid on aggregate stock index two months earlier to current nominal stock price index. Orange line: yield on 10-year bond. Data source: Robert Shiller.”
Read the full story and find more charts on Econbrowser: Long-term perspective on the stock market.