“Greece is spiraling into the kind of decline the U.S. and Germany endured during the Great Depression, showing the scale of the challenge involved in attempting to regain competitiveness through austerity.

The economy shrank 18.4 percent in the past four years and the International Monetary Fund forecasts it will contract another 4 percent in 2013 as Greece struggles to reduce debt in exchange for its $300 billion rescue programs. That’s the biggest cumulative loss of output of a developed-country economy in at least three decades, coming within spitting distance of the 27 percent drop in the U.S. economy between 1929 and 1933, according to the Bureau of Economic Analysisin Washington.

“Austerity has been destroying tax revenue and therefore thwarting the intended effect,” said Charles Dumas, chairman of Lombard Street Research, a London-based consulting firm. “There’s no avoiding austerity, though, because these people have no borrowing power. The deficits are there.”

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Roy Niederhoffer has been a hedge fund manager for almost 20 years — but the nerdy investor is probably just as well known in Manhattan social circles for his love of music.

A patron of the arts and an accomplished musician, the 46-year-old investor is scheduled to play violin next Saturday with the Park Avenue Chamber Symphony.

He might want to buff up his musical resumé — the hedge fund he is running hasn’t made a dime since 2008 when it had a spectacular 51 percent gain.

Since then, roughly $1.1 billion has been lost to poor investments.

Read the rest here.

Hoplite Capital, the long-short hedge fund managed by the Tiger Cub John Lykouretzos, released its third quarter Letter to Shareholders.

(One of our avid readers and fan, who “spends at least 30 minutes a day reading” our hedge fund profiles, pointed us to this letter – many thanks and keep them coming at [email protected] )

While many analysts and websites follow the long side of the very reticent Mr. Lykouretzo’s portfolio through regulatory 13 F filings, the letter provides a glimpse into his short portfolio.

Read the rest here.

“European leaders committed to their goal of establishing a euro-area bank supervisor by year-end, opening the prospect of direct aid to Spain’s banks.

The European Union will seek to agree on a framework that makes the European Central Bank the main supervisor by Jan. 1, according to conclusions released early today after leaders met at a summit in Brussels. The new system, intended to break the link between banks and governments at the root of the region’s financial crisis, will phase in over the next year and could cover all 6,000 euro-area banks by Jan. 1, 2014.”

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“(MoneyWatch) Who among us has not made a costly financial blunder? Come on; admit it — we all make some dumb moves for which we have to pay a pretty penny.Research by the Consumer Federation of America and Primerica found that two out of three Americans say they have made at least one “really bad decision,” and almost half of those questioned (47 percent) acknowledged that they had made more than one financial bad decision. The median cost of these bad decisions was $5,000, but the average cost was $23,000.

That we make financial boo-boos is not surprising, but the report also found that a large majority of those surveyed believe their ability to make financial decisions is “good” or “excellent,” despite having made costly financial mistakes in the past. “Considering their past mistakes and the complexity of the financial services marketplace, we were surprised at how highly most middle class Americans rate their ability to make a variety of financial decisions,” said CFA Executive Director Stephen Brobeck.

Call it the “Lake Wobegon Effect,” named after the fictional town where author Garrison Keillor noted that “the women are strong, all the men are good looking, and all the children are above average.” The “Lake Wobegon Effect” has come to mean the tendency to overestimate one’s capabilities. In social psychology, it’s called “illusory superiority”.

Of course, if we are all so smart and confident in the world of finance, why are we shelling out thousands of dollars to cover our bad decisions? Even if you are from Lake Wobegon, you may be interested in these mistakes that I saw frequently when I was an investment advisor:”

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EU leaders gathered today in Brussels to make good on promises made this past June. As usual the 27 nations have a hard time agreeing upon a clear course of action.

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For the last few years, the stock market has been a race among high-speed traders. The game was simple: The fastest traders won the most profits. Since speed was all that mattered, trading got exponentially faster. In the last five years, the time it takes to trade a stock went from being measured in milliseconds to microseconds. The fastest firms can now execute a trade in under 10 microseconds. It takes 350,000 microseconds just to blink your eye.

Now it appears the advantages of speed are starting to dissipate, and being the fastest trader isn’t worth what it once was. High-frequency trading profits are expected to fall 35 percent this year, 74 percent below their peak in 2009. In an ironic twist, high-frequency traders have gotten so fast, they seem to have outrun their own profitability.

Read the rest here.

ThinkEquity LLC is closing its stock-trading business today amid a market slump and preparing to transfer its remaining investment-banking unit to another firm, Chief Executive Officer Greg Wright said.

ThinkEquity, which employs a total of about 100 people, is determining how many jobs will be cut, he said in a telephone interview. Wright said another firm, which he declined to identify, has offered to take over San Francisco-based ThinkEquity’s investment-banking business and hire some workers. Details may be announced as soon as tomorrow, he said.

Read the rest here.

Behavioral science suggests investors are normal and not rational. A new study takes a look at why we lose money in the markets from a behavioral standpoint.

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“MILAN/MADRID (Reuters) – The International Monetary Fundcalled on the eve of a European Union summit for both Spain and Italy to seek euro zone assistance to draw a line under the bloc’s debt crisis, but Rome has rebuffed the idea and Madrid seems likely to apply alone.

The two-day Brussels summit will debate steps towards a single banking supervisor and proposals for closer euro zone integration, including German Finance Minister Wolfgang Schaeuble’s idea of a super-commissioner with veto powers over national budgets.

No decisions are expected this week and there is no certainty as to when Spain will come off the fence.

Spain dodged a bullet on Tuesday when Moody’s maintained its credit rating at investment grade, with a negative outlook, on the assumption that Madrid will trigger European Central Bankintervention soon to lower its borrowing costs.”

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“Austria is forbidding insurers from selling credit-default swap debt protection because the derivative contracts circumvent industry rules.

“CDSs are usually meant to cover a certain economic risk of a third party,” the nation’s Finanzmarktaufsicht regulator said in a circular sent to insurers in the Alpine country that was published today. “But they intentionally aim to reach that goal with other means than insurance, because the regulations applicable to the insurance business are to be avoided.”

Austrian insurers have written only a “limited amount” of credit protection through swaps, FMA spokesman Klaus Grubelnik said by phone from Vienna. The circular clarifies existing laws prompted by an isolated violation, he said. He declined to elaborate.”

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“Thailand’s central bank unexpectedly cut its benchmark interest rate for the first time since January as a faltering global economy damps exports, days after the governor said there was no need to ease policy.

The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2.75 percent, it said in Bangkok today. The decision was predicted by three of 23 economists in a Bloomberg News survey, while the rest expected no change. The monetary policy committee voted 5-2 in favor of a cut, it said in a statement, without disclosing names.

Thailand’s move today contrasts with Governor Prasarn Trairatvorakul’s stance in an Oct. 13 interview that there was no need for a rate cut, even after Finance Minister Kittiratt Na-Ranong called for lower borrowing costs and a weaker baht to help exporters. The central bank said today there was no political interference in the decision, as it joined South Korea and Brazil in reducing borrowing costs to shield growth.”

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“Japan’s government plans to tap discretionary budget funds to counter an economic slowdown as a legislative stalemate threatens to leave the Noda administration running out of cash as soon as next month.

Prime Minister Yoshihiko Noda today ordered his Cabinet to draw up economic stimulus measures by November, Chief Cabinet Secretary Osamu Fujimura said. With Finance Minister Koriki Jojima telling reporters that the idea of a supplementary budget would be considered later, the government can use around 1.3 trillion yen ($17 billion) in reserves from this year’s budget.”

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Thank you for your patronage!

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“TOKYO—A weekend gathering of the world’s top finance officials deepened conflicts among some of the largest economies, raising fresh doubts about their ability to find big steps quickly to boost the flagging global recovery.

At the annual meetings here of the International Monetary Fund and World Bank, European officials bickered about the damage caused by austerity; this week they head into a major euro-zone summit with no clear rescue plan for Greece. A territorial row between China and Japan, the world’s second- and third-largest economies, bled into the conference with no sign of resolution, highlighting a new risk to growth. And many top finance officials pointed fingers at the U.S. for casting a new cloud over global markets by failing to make progress on the budget mess in the world’s largest economy”

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“(Reuters) – The largest 100 public pension funds have around $1.2 trillion of unfunded liabilities, about $300 billion above the nearly $900 billion they reported themselves, according to a new actuarial study to be released on Monday.

The pension systems reported a median funding level of 75.1 percent. The study by the actuarial firmMilliman, which used different ways to value assets and measure liabilities, finds an aggregate level of funding of 67.8 percent.

But Milliman, one of the world largest actuarial firms took a close look at U.S. public pension funding for the first time, and said the multibillion-dollar difference was good news.

Rebecca Sielman, the report’s author, said results should reassure the public that America’s public pensions in general are accurately reporting their funding shortfalls.”

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“Some Group of Seven nations raised the possibility of extra fiscal measures if the global recovery weakens, Canadian Finance Minister Jim Flaherty said after a G-7 meeting in Tokyoyesterday.

“There has been some discussion by some of the participants along those lines, generally relating to the European situation,” Flaherty said on a conference call with reporters today. “The continent is in recession and there’s rising unemployment.” ”

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“Italy’s borrowing costs rose at an auction of three-year debt today on concern that Spain’s reluctance to request a bailout will weigh on Italian bonds.

The Rome-based Treasury sold 3.75 billion euros ($4.8 billion) of its benchmark three-year bond to yield 2.86 percent, more than the 2.75 percent at the last auction of the same securities on Sept. 13. Investors bid for 1.67 times the amount offered, up from 1.49 times last month.”

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“South Korea cut interest rates hours after Brazil as economies around the world shield themselves from the risk of a deeper slowdown driven by weakness in China and austerity measures in Europe.”

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“Brazil’s central bank signaled it will keep borrowing costs at a record low for an extended period as President Dilma Rousseff’s administration struggles to revive the economy amid slowing global growth.

In a split decision yesterday, the bank’s eight-member board cut the Selic rate by a quarter point to 7.25 percent, as forecast by 35 of 73 economists surveyed by Bloomberg. The bank said keeping monetary conditions stable for a “sufficiently prolonged period” was the best strategy for balancing inflation risks stemming from a recovery in domestic activity with continued “complexity” in the global economy. Three dissenting members favored leaving borrowing costs unchanged.”

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