Toto deVeer

My view is that China is not yet ready to cut loose from the dollar, neither is there a pressing need. That's a few years away, but not as many as one would expect. But buying Euros weakens her main competitor Germany. That makes sense doesn't it? I'm not completely clear on this, but how would Gerrmany/ECB counter Chinese buying Euros? They cannot buy Yuan, so they have to buy dollars, no? But the US has indirectly implied in the last FOMC meeting that she will do everything in her power to counter actions like that of Japan. The ECB is in a bit of a pickle, it seems, if China misbehaves in this way.

Quite complicated. China launched a strategy to increase the Yen by buying Samurai Bonds. Japan countered by intervening on the currency market. This upset the US (but China is the culprit). So the US has countered by sayihg to the whole world "Don't even think about what Japan just did, ours is bigger than yours and you will get squashed". Meanwhile China hangs on to the dollar like a leach to a dying patient, and the US trade deficit continues to increase. It does not matter how low the dollar goes, the trade deficit is still increasing and China is the export beneficiary. China is the problem here. There are enormous geopolitical strains building in the South Asia region. China has just deployed warship(s) to Myanmar. Japan has just seized Chinese fishing vessels near disputed islands between the two countries. The US is working with Taiwan on a more aggressive strategy to counter China. And remember that South Korea recently found one of their ships has been sunk by a North Korean torpedo (NK being a puppet state of China). Meanwhile China has just deployed missiles with the capability to sink US aircraft carriers (for which reportedly the US Navy has no counter). And China has a new fully operational nuclear submarine base on Hainan Island (complete secret to the world until very recently). I believe that China is waging war on the United States indirectly through the currency markets. She is cleverly trying to put wedges between the US and her ASEAN allies and will soon be probing for signs of weakness. It would not surprise me to wake up tomorrow and hear that a US or Japanese ship had been sunk in the seas off the coast of China. What is the US going to do with no money left and currency turmoil? Invade China? These will be the tests that the ASEAN group will be watching. As much as they fear China, they will migrate to the stronger power, in the end. It's going to be a tit-for-tat situation until sides are aligned. The problem now for the US is that the whole world is like a bee hive, and China is the Queen Bee. Everywhere the US goes she gets stung. No individual sting will bring her down, but in total the ultimate effect will be fatal, if she continues on this course. China is happy to watch this play out, seeing the victim slowly die. While this is happening China is building up sophisticated finance capability in Hong Kong. When the dollar dies, the Yuan will be cut loose and floated, and the job will be done. And that, my friends, will be the end of Anglo and Euro centric finance dominance, and usher in the new age of Asian finance dominance. You will know this is true when the Gulf oil lanes open up to Chinese naval power. EDIT: I will just add that the parasitic interplay between China and the US (where China is benefiting by having a currency pegged to a very weak host) is also being identically replicated by Germany and the PIIGS of Europe. Both the worlds manufacturing export powers are playing the same game. Perhaps it is China that is trying to push up the Euro, to fend off Germany. After all, Germany (or the ECB) cannot buy Yuan to retaliate, can they?

Merkel's reaction:

Short covering? Does the market expect QE2 from the US and UK but not the ECB? Principles of quantum physics at play? Speculators occupying two states at the same time?

"The site of the development lies around the boathouse of the Mumbles Lifeboat and is overlooked by the home of actress Catherine Zeta-Jones and her husband Michael Douglas." That's a good reason to buy a property. The siren call of the EA becons: "Beautiful seafront location, in the same neighbourhood as Hollywood royalty." (If you use a pair of binoculars)

Amen to that. I've put two kids through Uni, one starting GSCEs next year. The first, after 3 years of biochemistry, decided he wasn't interested and left. He's got a good job overseas. The second, after a first in Business Management from one of the best schools in the UK, can't find work. Every opportunity meets with at least 500 candidates (usually more). Then applications. Telephone interviews. Online literacy and numeracy tests. Psychometric evaluation. Further face to face interviews. And in the end one candidate is selected (I wonder if sometimes they don't select anyone). I've spoken to some of the professions, like senior executives from big accounting firms, and they say that they prefer to take kids with good math skills straight from A levels. Then I spoke to a youngster hired to work for the Insolvency Service. He said he started his degree in business, but changed it to Philosophy. So a degree in Philosophy gets you into the Insolvency Service, but a degree in Business won't. Go figure. You work your butt off only to see someone get the job in a field completely unrelated to the requirements. And the government wonders why no one wants to crack their head open in the sciences and maths. And of course it costs around 30 grand to pay for a degree these days. We always thought that a good degree was a passport to a good start. But I've changed my view. We are undecided about the 3rd child. We may advise him that the cost just isn't worth it.

The low rates are simply helping to spread the pain to everyone except the banks. There, fixed it. The entire purpose of low rates (which are more a result of Ben 'Helicopter' Bernanke than anything the UK has done) is to make sure those Bankers are happy. After all isn't that Ben's true remit, as the apex of the pyramid scheme? Now Benny says he's going to increase inflation. Well never mind that this is against his charter and fiduciary duties, but it makes his banker friends in New York and London really really happy. They can buy that pleasure craft for the wifey for Christmas. Wouldn't want to deprive them now would we? I've been to the French Riviera, a cursory examination indicates that about 60% of the boats there are owned by City bankers. I can't wait until the whole thing collapses and burns, and then Interpol tracks Banana Ben to Fiji and does this to his hut..

No mistake. The best thing that Germany ever did. Keeps the Euro down, while Germany prospers. Of course the rest of Europe is f*cked. PS: And eventually, Germany gets all that lovely Greek waterfront real estate too...

Denninger was right leading up to 2008, which gave him a bit of street cred, for a while, but since then he's been wrong, wrong, wrong. I stopped reading his blog months ago. Of course the market is going to decline. Even a stopped clock is right twice a day. The question is when?

On another board this afternoon (still trying to locate the link) , a poster used the term 'Full Mugabe'. Well that is inspiring! Seems that the US and all fiat currencies are heading that way in the race to the bottom. The US FOMC has just said to the rest of the world: "Don't try it, ours is bigger than yours". Anyway, in a similar spirit, I've prepared a graphic to illustrate what it's really like to turn on the presses, with some photos from Zimbabwe: Enjoy! Found it! Credit to Dorkins for the term 'Full Mugabe' on this post...

A few years ago I would have agreed with that statement. But Buffet's credentials are gone, in my view. since his only reason for existence since October 2008 is government bailouts (follow his actions personally lobbying Congress and discover that his 10 largest investments required government bailouts to survive) and as for Munger: From Mish: "You know what? It would have been a damn good thing if the culture died and assholes like Munger got wiped out. Munger just proved beyond a shadow of a doubt Wall Street's culture was not worth saving." Munger's comments here. Buffet and Munger are no more than a part of the parasitic swarm that are bleeding the system dry and adding absolutely nothing of value. It is alleged that Buffet tried to corner the silver market via industrial players in the late 90's and that he was asked to back off for the sake of the US economy. He could have brought it to it's knees. Nice guys.

How did this guy get his money in the first place? He's not the same one who sold off the Travel House, is he?

OK I'll put in my 2c worth. 1. Taxes are high in most metro areas. Mish (for example) pays $12000/yr in smaller Illinois metro, I saw a property profiled on the Business Insider that had dropped 50% in value, but the tax was $60,000/yr. Not unusual to pay $15,000/yr or more most metro locations for an average property. 2. House prices are simply not as sticky in the US as they are in the rest of the world. The reason is that mortgages in the US are written against the property, not the buyer (thank you Franklin Roosevelt). In the rest of the world, like the UK, the bank writes the mortgage against the buyer and against the property. So you can expect the property market to clear faster in the US than most other places will. 3. Even though the properties will reach bottom within the near future, I just don't think there is a lot of upside (generally) for a long time yet. That's because the property taxes+maintenance fees (in some cases) will have to be gutted. These monthly service costs are more than monthly cost of finance in many locations. This means that many metro areas are going to have to completely restructure. I think this could take more than 10 years to work through. 4. Many properties built during the last 5 to 10 years are not of a high standard. I designed an extension for a property in North Carolina 10 years ago and was appalled at the material that was used to construct it. Off cuts of lumber, patched together. The floor had to be underpinned to stop it bouncing. All these factors make the US property market quite treacherous for the time being. This is not to say that there wont be individual instances where good investments can be made, I'm only describing the more general case. Beware and take care.

Yes. I am on your side too. I've posted the story below on other forums only to be roundly criticized by certain posters of a more 'monetarist' bent. At the risk of running across this again, I'll tell this history one more time, about debt: More than 150 years ago, Bahrain was noted for it's natural pearls, and this industry became the mainstay of the economy. It was run by a few wealthy merchants and was a prime source of employment. The divers were paid a pittance though, and in order to make ends meet were enticed to take advances on their pay. They soon found that they could not pay this back. No problem for the merchants, they just passed it on the the diver's child, to pay back after the father's death. Of course, the child couldn't pay it back either, so they had to be a pearl diver too, and this went on as a perpetual cycle for generations. It was, in effect, another form of slavery, for the purpose of enriching the merchants. This is true and was eventually abolished. When I declared that this is exactly what happens with sovereign debt, and that, in principle, there is no difference, I was told that I didn't know what I was talking about. Well, I stand by this. And in my view the American middle class is nothing more than perpetual debt slaves, with declining income, increasing debt, in order to enrich the merchants (like Buffet and Munger) just like the pearl divers did.

F**k'n 'ell. I can't believe this gets into the Telegraph. There's no hope. Bring back Conrad Black.

I think that you can look back to Feb-March 2009 for the answer to this. Sterling collapsed, and interest rates did not rise. I just cannot see any base rate rise on the horizon. The consequences are just too dire (this is not to say that the banking sector won't try to increase their rates/spreads though, to extract as much as they can from anyone who can be forced to pay).

Don't agree with the strong sterling part (over the mid to longer term)... I'll add: UK property is entering a serious and prolonged leg down. Banking sector gets decimated. Finances at all levels (including Sovereign) are get squashed. Unemployment continues to increase. No chance for college grads to gain employment, Coalition comes unglued. The British economy depends upon banking and property. Meredith Whitney has turned very bearish on the banks now. Some have predicted layoffs of 80,000 in the City. I tend to side more with Tamara De Lempicka on the future of Sterling.

I've been to a few of these auctions and man are they scam. Really they should be made illegal. From my experience, property auctions a way for a property seller to extract that cash really fast. And if they don't get their reserve then they'll just put it back on the market. I've seen that happen so many times, I stopped going. Two new regulations would really help the property market here: (1) A verbal offer made and accepted should be binding (like Scotland). No gazumping or gazundering. (2) Auctioneers should be required to publish the reserve price of a property; if the owner chooses not to put in a reserve then the highest bid gets the property, even if it is only 50 pence. That would stop all the nonsense.

I tried to find some forex noise charts to post so that it could be visualized easily. But I've not had any luck finding them on the 'net. 'Walk characteristics' as in random walk (and random flight). Here's a Gaussian Walk. See how regularly distanced the steps are? Here's a Levy Walk (heavy tailed). See how often big jumps occur? OK. These are general charts, but they could be prices, for example. Another way to visualize this is to plot the price values per day (or some other regular interval) in sequence. Normal (Gaussian) behaviour has a fairly dense price pattern with undulating peaks and trending or 'drifiting' mean values. A sudden large price jump would typically be considered an outlier in this situation. This is (or used to be until recently) the basis of risk models for most trading desks. If the relationship is not normal (Gaussian) and becomes heavy-tailed (meaning the tail of the probability density more gently approaches zero) a much higher incidence of big jumps in price can occur. This becomes a very dangerous situation, if the distribution has double tails, as occurs in the Levy distribution. Gold/Fiat crosses have been jumping all over the place during the last 2 months or so. Perhaps more than usual. Hourly, daily, on almost any scale. This can be said to be self similar, and heavy tailed, classical features of a process that is underlain by chaos (at least Mandelbrot would see it that way). That's why I think that anyone who tries to predict the relative valuation of fiat currencies is a bit barkers at the moment.

Wowwowigeebee...these guys have a lot more confidence than I do. I wouldn't even begin to try to value any fiat against another considering the ponzi dynamics that are at play... They (or their clients) are going to get creamed if they really think that things are that simple... IMO noise levels alone can cause a +/- 5% difference... Gold/fiat crosses are exhibiting walk characteristics that are definitely heavy-tailed. That should be enough to scare anyone in the FX markets...

No doubt the true stats are probably worse. This is big news if all over the UK because there is a direct line between business activity and shipping, no matter what the gdp figures report, the true drop in (real) gdp is probably something closer to the drop in shipping/trucking figures.

I've noted that there is a large contingent from Wales on the forum and I thought this might be of interest. Today I noted the print edition of the Western Mail with big bold headlines along the lines of something like "Severn toll income drops 20% last 2 years". Funny though that the online version has sanitised things a little bit: (ed: what a great way to obscure really bad news!) Link: Western Mail Well this is just more confirmation of what we all suspected, that Wales' economy has fallen into the crapper. Waiting to see what this does to house prices. It won't be pretty. Anyway, there's only one way to deal with this: "I'm gonna buy me a Mercury and cruise it up and down the road...". Enjoy the "Mercury Blues"... http://www.youtube.com/watch?v=CFj0fARgdSo

The only outcome that can benefit the middle class paradoxically is a complete financial collapse. Only then will enough people be willing to bring out the pitch forks and get the perps. After that the system can be rebuilt. But there'll be a lot of pain involved.

These goldbug dudes talk their book and ramp even more than the share and property market does, except the goldbug ramping kinda parallels UFOLOGY, if you know what I mean. In my book none of them can be trusted...

Amen to that. But I think the problem goes much deeper. They need to restructure the entire economy and the legal system. Wealth is created by the middle, not the top or bottom and right now the middle is being gutted.