If Anyone's Interested

[R K]

Are BIS trying to transfer risk for the entire derivatives market onto the taxpayer via the Central Banks?

http://www.bloomberg.com/apps/news?pid=206...id=a5C6ARW_tSW0

Sept. 14 (Bloomberg) -- Central banks must coordinate global supervision of derivatives clearinghouses and consider offering them access to emergency funds to limit systemic risk, according to the Bank for International Settlements.

Regulators are pushing for much of the $592 trillion market in over-the-counter derivatives trades to be moved to clearinghouses which act as the buyer to every seller and seller to every buyer, reducing the risk to the financial system from defaults. The drive was spurred by the collapse of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., two of the biggest credit-default swaps traders.

“The crisis has exposed the need for international coordination of the oversight of systemically important†clearinghouses, BIS analysts Stephen Cecchetti, Jacob Gyntelberg and Marc Hollanders wrote in a report published late yesterday. An important and unresolved question is whether clearinghouses “should have access to central bank credit facilities and, if so, when,†they wrote

.

We know that 'Central Bank' is a euphemism for you and me - the taxpayer. The bankster bailouts have proved that to be the case.

Edited September 14, 2009 by Red Karma

[R K]

Oh dear is it just me today? Never mind.......

Giant Squid's O'Neill says selling dollars/sterling for Yen is 'ridiculous'

http://www.bloomberg.com/apps/news?pid=206...id=abvf8tiNFG74

Sept. 14 (Bloomberg) -- Foreign-exchange markets have embarked on a “silly September†as traders focus too much on government debt in the U.S. and U.K. while pushing up the value of the yen, said Goldman Sachs Group Inc.’s Jim O’Neill.

“There is a very popular notion that you’ve got to sell the pound and the dollar because of the rising government debt, whereas the one that everyone’s seemingly buying is the yen,†O’Neill, head of global economic research at Goldman, said in a Bloomberg Television interview in London today. “It’s ridiculous†and “I think of it as ‘silly September.’â€

Currency strategists are trying to calculate which economies will benefit most from signs of a global economic recovery. While the dollar has dropped 11 percent in the past months on a trade-weighted basis, the yen has appreciated 9 percent against the U.S. currency and 6 percent against the pound since April.

“If I look at the underlying fundamentals, virtually everything that drove the yen stronger in its floating exchange history isn’t there anymore,†O’Neill said. “The yen doesn’t deserve to be anywhere near this, and I don’t see it lasting.â€

I would suggest that for O'Neill to come out with this position means they're already well positioned for it.

[Crash Buyer]

Do you follow this guy. Always interesting. Great at debunking.

This post shows how easy it is to make money (apparently - don't know enough about his trading costs but he seems pretty honest and spot on).

http://quantifiableedges.blogspot.com/2009...year-later.html

On a similar note, a friend has just started trading, with no previous knowledge of financial markets. Has done rather well using a 'dumb' long-only policy on risky stocks (RBS, property small-caps etc).

Friend thinks this whole trading thing is easy money. Has no concept of shorting, hedging, managing risk etc. Just riding the bull, but not prepared for a return of the bear.

I think this is commonplace, especially in the recent low base rate era ("I'm not earning any interest so why not take a chance on stocks?").

[R K]

How are we doing ham?

Week 10?

Ftse up/sterling down = ratio around 30.7

http://stockcharts.com/h-sc/ui?s=$FTS...id=p40762848441

Must be close by now eh?

Edit: Oh yeah, and Simon Johnson mentions the dollar carry trade now underway in Injun's article on the main forum.

Edited September 15, 2009 by Red Karma

[R K]

Thanks as always - Still looks like G20 meeting may be the catalyst or close to it.

Found the Simon Johnson quote

Emerging markets, in particular in Asia, are increasingly viewed as having “decoupled†from the U.S./European malaise. Increasingly, we hear that Asia’s fundamentals allow strong growth irrespective of what is happening in the rest of the world. This idea was wrong in early 2008, when it gained consensus status; this time around, it is probably setting us up for a new round of financial speculation--based in part on a “carry trade†that now runs out of the U.S. Most Asian currencies are a one-way bet against the U.S. dollar over the medium-term, as they are already considerably undervalued and their central banks actively intervene to prevent significant appreciation. The appetite for this kind of risk among investors is up sharply.

Edit: Yours is easier on the eye indeed. I'll have to do something about that. Interestingly there are very few times on the FTSE:XBP chart where stochastics stays above the 80 or below the 20 and 'runs along'. Last time appears to be May '07 and only for a couple of weeks. We're in that 'zone' now it seems.

Edit:

Close - but poss. couple more weeks though. The tops seem to be more variable than the bottoms. Boring this 17ish week cycle we're looking at isn't it? It is teaching me patience gradually. But I just want to do something.

Just noticed you put this - Man, you have no idea!! My weakness is that I do do something - too soon usually. If only fund managers were as smart as us this would be so much easier.

Edited September 15, 2009 by Red Karma

[R K]

3-parter interview with Marc Faber down the page here

http://marcfaberchannel.blogspot.com/

Interestingly he's talking about a correction in equities. Perhaps another 10% upside for now, if at all - sees Asian nominal lows as already in and if the SPX falls to 900 or 800s, then Timmy and Ben will support it with more free money. Re-iterates his 'total collapse' coming at some point over the next 5-10 years, and again mentions the endgame as war and ultimately the confiscation of gold. (I'm paraphrasing but I think worth a listen - the specifics are in the part 3).

I guess investments gaining or losing is one thing - but this endgame of a major war within a few years is something else entirely. Taking measures to protect oneself and one's family for that outcome requires a different mindset all together I think. I'm not prepared for that in any way at all.

Edit: Just noticed your edit3 - I had missed that - thanks again. It does seem entirely counter-productive to be raising capital ratios on the downswing rather than waiting for the upswing with the effect I guess of further driving down the value of the assets they hold. Surely it cannot be but intentional?

Edited September 15, 2009 by Red Karma

[Joey Buttafueco Jr]

Do you follow this guy. Always interesting. Great at debunking.

This post shows how easy it is to make money (apparently - don't know enough about his trading costs but he seems pretty honest and spot on).

http://quantifiableedges.blogspot.com/2009...year-later.html

This post also shows you how to make money. Until it stops working

http://www.noelwatson.com/blog/PermaLink,g...21ba550bd4.aspx

[R K]

Re your dollar carry trade rk. It is only just dawning on me how important this is...important that it is happenning to the reserve currency.

Previously people have said that the dollar fell as investors were happy to invest in risk assets around the world following its sharp appreciation as a result of fear.

Now the concept of a dollar carry trade has taken hold this will act as an accelerant to this process driving the dollar weaker and all dollar denominated assets higher, overseas markets higher. Is this how you see it playing out in the immediate future?

Are they trying to break the Chinese peg?

I believe so, yes! They appear to be trying to shake the Dragon off their back. But I haven't really thought through the consequences beyond that broad idea. (I'm not sure I'm capable of doing so either to be frank). In essence I think we're probably already at 'war'.

But I am also (rather schizophrenically I guess) cogniscent of Prechter's technical dollar bounce theory.

Edit: I think there is a potential 'swan' here and that is if China revalues of in some other way floats or talks about floating etc.......That could be a game changer.

Edited September 16, 2009 by Red Karma

[Joey Buttafueco Jr]

lol

I hope you noticed the tongue in cheek nature of my post? Not sure.

Indeed. Looks like an interesting blog.

[R K]

Indeed. Looks like an interesting blog.

Noel, if you're going to start trolling on this thread then I'm off.

There's more than enough main forum threads for you to do that on.

If that's your intention please let me know now and I'll save my breath.

Ta.

[R K]

31.01

Closer Clarice.......closserrrrrr.........

[R K]

Does this also mean that there will be a growing trend flying to foreign assets because they appreciate as the dollar weakens - difficult to tell the difference between that and capital flight out of a currency tbh. Maybe one could transmogrify into the other.

And what would be the implication for the relative performance of overseas stock markets versus dollar denominated ones?

Some suggested that as Sterling became weak that foreigners would snap up bargains.

Is this not an argument for a self-reinforcing carry trade cycle because it is the dollar/reserve currency?

I guess this is why the impact also of it reversing suddenly could be a tad nasty as we discussed a few pages back.

So I guess the question is whether the US really want to weaken the dollar for strategic political reasons i.e. f*ck over the Chinese or whether they perhaps go the other way by collapsing external markets/assets? I wish I could adequately figure out these different scenarios and their impacts.

We also have this thing with China apparently talking about potentially defaulting on commodity derivative contracts. I read somewhere that the bulk of these are held by 5 banks - JPM, GS, Citi, BoA and HSBC I think........So it's like they've both got their fingers poised over the red button just waiting for the other party to blink. This is where I get a little confused by Denninger - His line clearly is that the administration is running the risk of dollar/debt collapse but seems not to have considered that perhaps this is exactly what they're either intending to do or make the Chinese believe they're prepared to do (perhaps he has) - Sort of Cuban Missile Crisis with dollar bills and Treasury notes. I may be over-thinking though and it is just a simple ****-up that it beginning to run out of control.

Edit: Dollar seemed to be bouncing a little earlier but it's getting twotted again. Can't help but feel this is all going to end very badly at some point.

Edited September 16, 2009 by Red Karma

[R K]

http://www.zerohedge.com/article/bonds-spo...-fed-hike-rumor

FED 'hike' rumour.........

Perhaps they're not overly happy with this carry trade/'flight'

[R K]

lol - remember my chart on Euro and Yen? (vainly trying to match your carry trade coup - turns out they are linked)

http://blogs.ft.com/money-supply/2009/09/1...ing-round-up-5/

Correlations between USD/JPY and risk are breaking down as the yen hits a seven-month high against the dollar. Much talk of the dollar replacing the yen as the world⦣8364;™s carry currency, in which low-yielding currencies are sold to finance the purchase of riskier, higher-yielding assets. And no complaints from the Japanese: the incoming finance minister shows signs of being less interventionist in the currency than his predecessor and has said a strong yen may benefit the economy.

I would suggest the usd/jpy breakdown is similar to the Euro/Jpy breakdown. No more Jpy carry trade?

I mostly am thinking aloud and often there's more aloud than there is thinking - I just got lucky on the dollar carry trade idea and I'm struggling to understand what the consequences of that might be - lower dollar, comms, equities, overseas assets all rising, China jumping up and down, pressure to unwind stimulus/raise rates etc.

To be honest my brain is pretty much fried with all this stuff.........No wonder economists are mostly bonkers

[Pearshape]

For what its worth - theres a poster on HPC who lists the sequence of events of the economy, where at present his sig is waiting to post off/colour red, the global bond collapse and rush to assets - i think its happening, just in slow motion - the fed is buying its own bonds (monetization, something he swore to con gress he wouldnt do), and the contiued rise in the indicies as we see a flight to assets.

The PnF on the ftse is ridiculous, its now saying 7000 - thats a whole new high!!!????

Meanwhile the dollar still has a spot target of 67 - currently around 76 - pretty clear to me we are seeing a flight to assets.

[R K]

For what its worth - theres a poster on HPC who lists the sequence of events of the economy, where at present his sig is waiting to post off/colour red, the global bond collapse and rush to assets - i think its happening, just in slow motion - the fed is buying its own bonds (monetization, something he swore to con gress he wouldnt do), and the contiued rise in the indicies as we see a flight to assets.

The PnF on the ftse is ridiculous, its now saying 7000 - thats a whole new high!!!????

Meanwhile the dollar still has a spot target of 67 - currently around 76 - pretty clear to me we are seeing a flight to assets.

Could be.......(although 2yr rate swaps - in a link in ham's FT article are flat - and 10yr treasury yields aren't jumping)

or a flight to yield?

[Pearshape]

From another site i read - wont post it - apparently its week 38 or 39 - havent got a calender to hand for that - but on my charts i still dont see any reversal pattern.

edit weeks 38-39 are 20th sept - to 2 oct

edit edit - on my charts that would put a top at 5400 - 5406 on the weekly close

Edited September 16, 2009 by Pearshape

[Number79]

deleted

Edited September 16, 2009 by richyc

[R K]

Platforms and bell-bottoms it is then.

Oh, and I'm going to see The Godfather (1972) at the cinema next week with my son who has never seen it. It's definately the 70s.

But, if it's 03/04 then the Nas topped out at 2153 in Jan 04 before swinging to a low of 1750 in the August.

Edit: Bdev doesn't appear to have been getting drunk at this latest equity fest. Are we close to a lunar development?

http://bigcharts.marketwatch.com/quickchar...eq=7&time=3

Edit: Did silver just put in a high close in sterlings?

http://stockcharts.com/h-sc/ui?s=$SIL...id=p60421153314

Edited September 17, 2009 by Red Karma

[R K]

Albert Edwards comments on US bank lending data....

http://www.investmentpostcards.com/2009/09...-camp%E2%80%9D/

I note too the uk lending data released today showing a fall in lending to uk business.

Oh dear.

So.........

Dis-contractionary deflata-bubbles it is then! (copyright RK 2009).

I'm on fire...........

[R K]

Do you like the new name for it I put in my sig. I'm sure there's a killer name out there though that could make us famous and win the Nobel Prize for home economics.

EDIT: Or how about "Volaflation"?

Definition: Volatile consumer price inflation resulting from serial bubbles and busts in investables engendered in a loose monetary policy framework implemented to combat the deflationary pressures coming from ever cheaper of goods and services sufficient to keep cpi at a very low level.

In a pre-heated oven at 220 degrees for 20 minutes until browned on top.

Do you think Volaflation is an improvement on discontractionary deflatabubbles then? I'm not so sure, but I think we've pretty much nailed it.

Do we get to go somewhere nice to collect our Nobel Home Economics prize? I'm thinking Oslo would be good...........but I'm happy to let you choose.

(There's a superflous 'of' in your sig btw)

Edited September 18, 2009 by Red Karma

[R K]

http://seekingalpha.com/article/158954-ban...blowing-bubbles

Pah! - Amateurs frankly. They're not in our league.

Btw, has anyone thought to ask how these high yielding funds are generating high yields?

Edit: Re your institutional acc/distribution chart - Selling has been lower during Aug/Sep than just before the sell off in '08 and the sell off in Jan. Granted acc. isn't anywhere near extreme, but does it not look highly vulnerable to selling pressure if there is a mood swing?

Edit2: 31.90 - Week 10

Edited September 18, 2009 by Red Karma

[Number79]

It is still not time to sell my remaining stock holdings yet (I'm 55% cash though) until the next down leg...hoping to go all in come beginning Nov thru to Xmas.

all in as in short? how do you plan to do this? or are you looking to buy 'all in' from a low?

This dollar carry trade business - how do you see it affecting sterling and how could one position best for it?

Would be good if rk, if he is still rk, could answer aswell. Sorry for only appearing with questions, if I ever get to a point that I have something useful for you guys then I promise to share

[Number79]

At the moment I'm planning to buy all in from a low up until Xmas - I will reassess again in the New Year. If I were shorting, I would use my contracts for difference account (cfd) with Hargreaves Lansdowne (really City Index). I could also do it via igindex spreadbetting or cfd accounts I have.

I personally see our stock markets continuing to go up on $ weakness. There is a Sterling carry too they say...weakness is what I see tbh versus Euro etc.

I'm not a great gold person - too manipulated, no yield, too great a cost to invest in. I will consider buying Dax denominated in Euro's for instance. Or the Nikkei given their new Prime Minister's recent comments about letting the currency find its level. The Swiss on the other hand seem to have a stated objective of keeping the chf down.

It's come to the point where I feel like a pratt talking about gold now but am not a 'to the mooner' and fully understand the ins and outs of it. I do have a small tfh but it is safely stored away with my beans . Do you mention gold because you know my position on it or because there are few alternatives and you don't like it much?

I thought you were longterm bearish, how can you expect markets to continue north in the face of the situation or are you targetting specific stock?

$ weakness, you don't expect the £ to be forced down along side?

what do you mean by buying dax denominated in euros? via a euro account? long story short move cash from sterling?

gold/silver have done pretty poorly compared with many other metals over recent years, any opinions or knowledge about copper or lead or anything else?

[R K]

However, the opinion that the market can and will continue to rise is becoming ever more widespread, and ironically the bulls ALL say the same thing, namely "everybody else is bearish".

Mutual fund (MuFu) managers are not bearish, that much is certain. At 4.2%, the the MuFu cash-to-assets ratio is one of the lowest in history, in fact lower than at the 2000 top, and only a hair above the 2007 low. Those stats (from a friend) are from July. Given the continued rally, MuFu cash on hand has probably decreased even more in August.

From Mish's link in your article above (I'm being selective, obviously).

http://globaleconomicanalysis.blogspot.com...op-of-12th.html

Richyc - I'm still looking for clues on the dollar/sterling potential carry trade. I'm more of a chart watcher than a macro person - I prefer nice simple to understand pictures. But if dollar is being sold to invest elsewhere then it would suggest what it is being sold against is likely to go up - until it doesn't. Remember, the more everyone crowds onto one end of the see-saw, the more violent the rebound when they jump off - So, the question which I have is:- how long will a dollar carry last and do the FED (and the banksters) want it or not? Can/will they keep short rates suppressed for a protracted period? I'm hopeless on the why , but I am genuinely puzzled where rates will go given that we have all this QE to unwind plus fiscal tightening in the pipeline, which (in my simple picture world) suggest rates could stay lower for longer, absent a currency crash event of course. We seem to be on the crack cocaine of that stimulus now - I don't see how they get off, let alone get back to monetary tightening. Surely we are in for a long period of low rates aren't we? Dis-contractionary deflatabubbles in fact, volaflation if you prefer. But I wish I had the answer (I'm still waiting for Prechter's dollar re-bound so it seems I don't).