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BIG FAT SPANISH THREAD

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http://www.telegraph.co.uk/finance/economics/8207710/European-Central-Bank-arms-itself-for-Spanish-crisis.html

Economics
European Central Bank arms itself for
Spanish crisis
The European Central Bank (ECB) is to double its capital base to cope with "credit risk" stemming from the eurozone debt crisis, paving the way for direct action to shore up the Spanish debt markets if necessary..../
"Basically they are insuring themselves in case they have to step up bond purchases, and that probably implies Spain," said Julian Callow from Barclays Capital. "They have to be ready to dig the fire-break early on this because
Spain is too large to handle
, and there is risk of contagion to Italy."
The ECB's move came as Spain braved the debt markets following a downgrade alert by Moody's. Madrid paid the highest interest rates for a decade with yields on 10-year bonds rising to 5.45pc, compared with 4.63pc in November.

Funny how the Euro is still intact. The sovereign debt crisis is clearly eating away at the EU at a dangerous rate of knots and it does seem that we are talking days rather than months when it all flares up again as a panic driven headless chicken episode.

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This is the EUs most recent and by far the most serious nightmare and I just checked the FX and see the Euro is up vs. the $ and the £.

This despite what is a going on and Ireland being downgraded again. What forces are at work to spike a currency in the face of financial meltdown and confusion? Computer alogrhythms no doubt.

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It is getting real ugly out there. I'm surprised anyone takes the Euro seriously any more, but when you look at the Dollar and Sterling then it's hard to pick a winner in this Miss Ugly competition.

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http://www.bloomberg.com/news/2010-12-16/spain-s-banks-face-revenue-drain-in-2011-on-higher-funding-costs.html

Spain's Banks Face Revenue Drain in 2011 on Funding Costs
By Charles Penty - Dec 16, 2010 11:01 PM GMT
Spain’s banks, burdened this year by
rising defaults
and flagging credit demand, will face further pressure in 2011 as funding costs eat away at the returns on their stock of
home loans
.

Looks like they are in for some fun times in 2011. Given the truncated process in ROI from the first alert to bail out Spain may only have a few days before the bond markets taken them over the edge. Who is going to just wait and do nothing while it unravels--the sort of thing our Muppets do when they are in "vigilant" mode.

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The Euro is up half a cent this morning so all must be well. Maybe someone found a nickel behind the sofa? :lol:

This Euro cracks me up, but what cracks me up more is the fact Sterling cannot get past 1.20 against it. Just shows how badly we are viewed against this tinpot collection of nations!

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I wonder how they will paper over the cracks in Spain.

So far they've done a wonderful job of papering over the cracks in Greece and Ireland.

This is the big one. The only thing I think that might work for a while is direct purchases of Spanish debt by the ECB.

Or they could just balance their budget, that is the best way to put down bond vigilantes. I am sure that will happen.

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This is the big one. The only thing I think that might work for a while is direct purchases of Spanish debt by the ECB.

Or they could just balance their budget, that is the best way to put down bond vigilantes. I am sure that will happen.

The Spanish banks could just unload some of the wonderful, high quality properties they have on their books at the valuations given (after all, I'm sure the valuations are correct!), to generate plenty of cash to invest in government bonds at a great return.

Trebles all round, I say.

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EUR is largely reacting to the fairly predictable paralysis at the Brussels summit (that, and the ongoing liquidation in EUR denominateds).

Gap-filling, if you will - the risk that the EC would finally recognise that they are indeed responsible for existing issuance (hence need to launder bad sovereign paper and make it good) is falsified overnight (wrong, by virtue of early).

On the plus side it makes the vega play on the gilts even more profitable.

Talking about GBP in this context is roughly equivalent to describing Everest's similarity to a pebble found at base camp.

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EUR is largely reacting to the fairly predictable paralysis at the Brussels summit (that, and the ongoing liquidation in EUR denominateds).

Gap-filling, if you will - the risk that the EC would finally recognise that they are indeed responsible for existing issuance (hence need to launder bad sovereign paper and make it good) is falsified overnight (wrong, by virtue of early).

On the plus side it makes the vega play on the gilts even more profitable.

Talking about GBP in this context is roughly equivalent to describing Everest's similarity to a pebble found at base camp.

Does anyone have access to a babel fish?

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This is the EUs most recent and by far the most serious nightmare and I just checked the FX and see the Euro is up vs. the $ and the £.

This despite what is a going on and Ireland being downgraded again. What forces are at work to spike a currency in the face of financial meltdown and confusion? Computer alogrhythms no doubt.

nothing is at work, there is no more issues in EU than in US and UK, it is all a game and movements are needed for gains to be made.

if you can explain to me why EU is in worst shape than US or UK then I am all ears, but I suspect if you think about it long and hard you won't really find an rationale.

EUR is allegedly nearing collapse yet it is still trading 25% higher against GBP than 2 years ago. USD is supposed to disappear soon together with US hegemony yet it still trades 20% higher against GBP than 2 years ago. all these currencies (EUR, USD, GBP) are trash courtesy of fiat, so none is going to blow up against the other.

if you want to see for yourself just take a look at how they are ALL doing against CHF and how they have ALL done in recent years. CHF was up until very recently, 2000, backed by Gold and is one of the very few meaningful currencies still around.

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At the risk of putting some value into this thread, if you want a good long duration currency play try petrocurrencies verses the pure commodities plays (so say NOK vs ZAR, BRL, or AUD).

Yup--I suggested Norwegian Kr a couple of years back along with the Swissie and US $--that was when £ was over 2.00 and the Euro was headed above 1.60.

Too soon we grow old and too late we grow bold. OWTTE

Edited by Realistbear

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YUp--I suggested Norwegian Kr a couple of years back along with the Swissie and US $--that was when £ was over 2.00 and the Euro was headed above 1.60.

You're still thinking of them like football teams.

Spot is mostly about momentum and technicals at very short durations and about relative value at very long durations (and politics, newsflow and related insanity reserve induced or otherwise in between).

Either way you're rattling the cage of the liquidity gods by netting things across Sterling all the time (and when you poke them enough, they'll get very, very angry and tear your arms off and feed you the wet end).

A case in point - AUDUSD has raced ahead of its sailing partner USDNOK over the last year or so and there's no macro reason at all why that might be.

If you have big brass ones you can take a view as to which is right and which isn't (ie will the cross diverge or converge).

Being more humble and somewhat more affine to Brave Sir Robin, I'll just take a view that the relative value will change in one way or the other (a vega play in other words).

And Sterling is a very, very dull currency at the moment (although if Euro yields and politics keep doing what they are we'll become a funding currency for the mother of all carry trades).

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If anyone's looking for a detailed description of the structure of the spot market I'd start here...

51VrlNp-aXL._BO2,204,203,200_PIsitb-sticker-arrow-click,TopRight,35,-76_AA300_SH20_OU01_.jpg

(the book is also the perfect cure for insomnia, but at least reading parts two and three will let you understand why asking for crosses like say GBPNOK or other exotics is a spectacularly idiotic thing to do - assuming your end goal is trading, rather than delivery)

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If anyone's looking for a detailed description of the structure of the spot market I'd start here...

51VrlNp-aXL._BO2,204,203,200_PIsitb-sticker-arrow-click,TopRight,35,-76_AA300_SH20_OU01_.jpg

(the book is also the perfect cure for insomnia, but at least reading parts two and three will let you understand why asking for crosses like say GBPNOK or other exotics is a spectacularly idiotic thing to do - assuming your end goal is trading, rather than delivery)

A very dangerous game FX trading. I am massively short on the £ (CABLE bet) simply because I have held $ since about 1992 and am planning to buy property in the UK although I have recently begun thinking in terms of buying elsewhere as this country is rapidly becoming unfit to live in.

End goal: delivery of a massive profit. My original goal was a "double whammy" coming back from the US--a 40% decline in houses together with a 40% decline in the £ relative to the $. So far, the pound is down about 25% vs. the dollar of you take 2.00 as your starting point. Houses are probably down 20% from peak in my area. 2011 may be delivery year on both counts--another 20% on houses and another 15% on £ to about 1.30 ish. PNB suggested 1.30 ish earlier this year but began to backtrack more recently when they saw the utter resileince of the UK to troubles elsewhere. That seems to be eroding now as confidenc in the UK and its abilihy to stand alne vanishes.

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I am massively short on the £ (CABLE bet) simply because I have held $ since about 1992

:

End goal: delivery of a massive profit. My original goal was a "double whammy" coming back from the US--a 40% decline in houses together with a 40% decline in the £ relative to the $.

nb: your cost of carry on similar positions in future will be smaller if you transact as a long dated swap; in this instance a simultaneous purchase and sale of sterling (buying your intended exposure at your intended duration and selling the same notional at spot all those years ago) would've cost you less in the interim (and allowed you to take profits along the way)

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nb: your cost of carry on similar positions in future will be smaller if you transact as a long dated swap; in this instance a simultaneous purchase and sale of sterling (buying your intended exposure at your intended duration and selling the same notional at spot all those years ago) would've cost you less in the interim (and allowed you to take profits along the way)

Wouldn't know how to do this--some advise doing the trade through an FX trader as they give a better rate than the banksters. EXE.com for example.

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It is getting real ugly out there. I'm surprised anyone takes the Euro seriously any more, but when you look at the Dollar and Sterling then it's hard to pick a winner in this Miss Ugly competition.

Very well put.

Edit: Actually the Eurozone is the only one with balanced foreign accounts. The other 2 have huge deficits, which usually indicate currencies unsustainably high.

20101023_INT400.gif

Edited by Tired of Waiting

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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