Tuesday, June 29, 2010

Mrs Watanabe's are buying the AUD on dips. Brave but foolish



Observe: Note the sell (mega bank funds, marked with line) and then note the slight volume and buy (next bar), you could make the comparison that this is a kinda 'gap buy' which brutally is then sent hurtling into a sell.

A classic Mrs Watanabe buy, click here to find our who she is.

Dow sell points June 2010

As discussed in Markets are stabilizing into a volatile trading range - downside pressure mounting, we try and estimate the range trade days against volume (thinning out) and also against the On Balance Volume indicator and Money Flow Indicator. This was seen on the 16th April 2010 to the 26th April 2010 when the Dow traded in a range with downside pressure and began selling on the 26th April 2010. The similar range trade on the Dow started on the 15th June 2010 and ended on the 21st June 2010, as the previous posted indicated a sell using the 10 days (as a averaged based period of range trading) via diminished volumes, divergence in volume indicators such as the OBV and MFI; so therefor the major pressure sells started on the 24th/25th June 2010.

So the warning signs were there refer to the last range trade points (blue and red vertical lines) of the 10 days (16th/26th April 2010), the overall indication is that when the Dow (and other indices) trade in a range, selling pressure occurs with a 7-10 day period (analyzing volume increases and deceases and using money flow and divergence indicators). What also shows is that markets are trading in a downward trend which may indicate that we have a slow burn corrective pressure which, at times, is exacerbated by sudden economic/financial shocks (such as the sell on the 29th June 2010).

Please refer to chart:

Monday, June 28, 2010

US double dip recession being priced in 2010 (US Treasuries)

10 year US Treasury smashes though psychological 3.00% to 13-month lows of 2.9885% as at 29 June 2010

refer back to December 2008 (before massive stimulus rallies in 2009) Dow was at 8,691 and the 10 yr was at 2.64%

The debt restructuring on Islamic non interest bonds (debt) - Dubai: still problematic

A 29 billion dollar order from state-controlled Dubai Aerospace Enterprise split being Boeing and Airbus is about to be canceled. In other words anything connecting with indebted Dubai is still FUBAR

From WSJ

"DUBAI—The future of a $29 billion jetliner order that state-controlled Dubai Aerospace Enterprise placed with Airbus and Boeing Co. is uncertain amid the aircraft-leasing company's growing financial concerns, people familiar with the matter said.

The company has an outstanding three-year-old order for 200 aircraft evenly divided between Airbus and Boeing. But it is looking at potentially deferring or canceling the purchases, these people said.

Alternatively, the company's owners in the Dubai government may seek to shift the contracts to state-controlled Emirates Airline and flyDubai, the people said.

"It's all part of sorting out Dubai Inc.," said one of the people familiar with the situation."

Tumultonomics - (update 3) Zenith Men's 96.0529.4035/51.M Defy Xtreme Tourbillon Titanium Chronograph Watch



I think Amazon is a great company, yes they have been trumped by Apple with the Ipad (Amazon's Kindle just doesn't cut the mustard against the Ipad), still they are a powerhouse distributor that has a solid business structure and service.

But as the global ecomomy is now looking at another financial crisis (and it aint looking good) some things just catch your eye and you go "What the Fuck?" Amazon have an outsourced watch distribution, where companies/ shops use the Amazon carrier to sell their products. Great concept and works well, but this watch caught my eye (sold through Amazon).

Zenith are high end watches (loverly watches too I might add), that sit in the price range of $5,000.00 to $10,000.00 which essentially are correct prices for a high end watch with a splash of price deflation (i.e recession). Except the above baby will set you back a cool $87,709.99 (however reduced from $145,000.00)!

The absurdity is not so much the watch it's self, it's the expectation that someone would order this online at that price. Alas the reviews of non buyers which is testament to that absurdity.

Click here to follow some of customer reviews, very funny with nice amounts of sardonic humour, good stuff! : Amazon 'Zenith' review/s

sardonic example...funny:

"The Zenith Men's Defy Xtreme Tourbillon Titanium Chronograph Watch or Z.M.D.X.T.B.T.C.M. as I like to call it, is by far the most awesome watch. Chuck Norris riding into the Super Bowl on the back of Godzilla and round house kicking the crowd is no where near as awesome as this priceless poon magnet. When I was just moments from sending my $100k to some needy neo-hippie help group, I stumbled onto this gem. It was like the heavens opened and Jesus himself appeared with this same watch on. I mean how can you not follow Jesus when he's rocking a watch of this caliber. So I asked "What would Jesus do?" Jesus pimp smacked me and said "Forget those hippies, buy the watch!" I was like "HECK YEAH." I busted out my Discover card and bought this rocking piece of art. I mean its art but its also practical too. Like when I take my summer trips to the Marianas Trench, I have no more worries that I am going to miss Tea Time back on the yacht, because water ruined my watch again. It can withstand the immense pressures of the deep due to the wicked awesome titanium. Deep seas, cant beat this. Bullets cant beat this. Heck, I can deflect cruise missiles and the apocalypse. With a watch like this you don't need to tell time, you tell people what time it is"

EU liquidity crunch on July 1st 2010 (update 1)

On Thursday the 1st July 2010 European banks will have to pay 440billion (EUR) of 1yr funds back to the European Central Bank, with slight extensions (possibly a week); so on the 1/7/2010 440billion euro will be sucked out of the European interbank system.

With EU banks all ready started to be locked out of liquidity with slowing economies shrinking lending rates and bad loans getting worst. Europe is 100% going to stay (or go back, which ever way you calculate recessions) in a recession. With no light at the end of the tunnel.

This is when FX traders, speculators and Hedge Funds 'will go for the jugular' of the EUR.

This also when the forces of the market will overwhelm the ECB propping up of the EUR and sink it.

*update G8 rumour: European taxpayers will offer liquidity to EU banks. They have been (banks) zombies for over two years (lending rates were at the 1.00% range) and now the ECB/IMF may ask the G8 countries to create a massive bank bailout package (temp liquidity)!

You can just hear those riots.

Sunday, June 27, 2010

Oil on a 25mth cyclical bull run. Update 8 - an Iran military strike at somepoint in July 2010?

Which is not a good thing of course, but oil being a hedge; are we seeing longs moving in at $79?




US battleships cross the Suez Canal enter Red Sea June 20th 2010

and refer to Israel warships pass through the Suez canal posted 14th July 2009

Don't underestimate the public's disdain for deficits and further stimulus.

I have no problem with debt pe se, for business it's forward buying to build inventory and expansion, for consumer it is measured purchasing power to but those snazzy new Gucci shoes or the new LED 3D TV (actually maybe not 3D though...what with those $200.00 + silly glasses!). But as long as you are credit worthy, meaning you are not building a further debt hole for your self. So is it easy to do that (creating a debt hole)? Of course it is, the trap is interest rates moving upward and repayment costs increasing as you become risky (further indebtedness). The hope? For a business they are able to continue repayments whilst restructure and increased or sustainable probability. That is the stress test for business, can you survive whilst your creditors want to get paid? A smart business can do this a 'dumb' business can't and they go bankrupt. For consumers he/she can just through their maxed out credit card in the bin and declare bankruptcy thus fueling a contagious credit crunch (which is all part of the boom/bust cycle).

The arrogance of western countries is that they believe they can (you can thank the Keynesian economics model for this) increase deficits fuel demand via maintaining low inflation and wait for production output to increase. Sure the US in the 1930's was a emerging superpower that could (although that can disputed) could maintain a large deficit (at the time a mere 16.2billion) and then reemerge into surplus (inflation adjusted) as private demand picked up (also disputed in the sense that some economists believe that World War 2 actually drew the world out of recession). The argument today is that developed economies such as most western countries have actually peaked in industrial output, in other words their 200+ yr old expansion is coming to end. So the deficits are an impending problem that will never be solved with increased production (peaked). In other worlds it is the beginning of the end of western economic dominance.

The people know this hence the recent G20 riots (Toronto, Canada), UK new government (austerity overdrive), German people (Merkel power hanging in a balance), France (whisper away from civil unrest), Australia dismissing a primister within 12hrs.

The US can print to finance deficits, but the inflationary factor will be oil, as I believe that a spike in oil is due; which could slap down the Obama administration smugness that it can operate huge deficits to stimulate a depressed economy.

Social unrest won't be based on recessionary/or depression sentiment, it will be on how is the country going to pay for the massive debt hole that goverments have created. The stake is higher taxes, inflation and a long term uncertainty for future generations.

The pain should be taken with a sharp jolt recession or depression, then we see what humans can do under stress; innovation, community activism/s, creativity and productivity. It is hard wired into our brains too survive, that is what we do. Yet leaders discount this and believe they can 'save us, yet they have made our future a more prolific disaster . This is to their (global leaders) detriment.

Thursday, June 24, 2010

EU liquidity crunch on July 1st 2010

A 3 month Longer Term Refinance operation or LTRO (love these abbreviated 'butnut' terms) rolls off on the 1 July 2010. The fear is that poor quality collateral held at the European Central Bank may not appeal to EU banks to actually withdraw security with the ECB (a counter-party credit risk = fear). Thus forcing liquidity in the Euro Zone to freeze up, as the offset of collateral held will not be sufficient when a 'rolloff' of the 3mth LTRO takes place; as cheaper funding may be sought elsewhere.

Basically in summary, EU banks may using the ECB as a safe deposit box for crappy quality assets, in tune with market rates still high such as the US$ LIBOR (interbank rate), would mean that the ECB may struggle to refinance in commercial paper which it holds on behalf of EU banks = liquidity crunch if the ECB can't swing a refinance job on the 1st July 2010

There is a great article on Zero Hedge, link here.

Also Asian banks particularly Japanese and Korea central banks such as the BoJ and BoK, have both followed similar paths to the ECB in collecting poor quality commercial paper for refinancing operations. Clip here

Wednesday, June 23, 2010

MEC.RESEARCH mini reviews (update 8)



Fear 2 (PS3 game)

Fun. Well put together and enthralling game, horror mixed with blowing things away.



Army of 2 (PS3 game)

A third person shooter' buddy game', your buddy helps you survive and you help your buddy survive, male bonding and violence; the guys that hang at the 'Exchange Bar' (if you live in Melbourne/Australia) would love this game.




Flor De Cana 4 yrs aged Rum

Excellent rum, good mixed and good drunk neat or on the rocks. Perfect for a Daiquirí or Dark and Stormy cocktail



Casprini Chair (Tiffany Lounge)

Happy with this one (mine is black).

Monday, June 21, 2010

The PBoC are....(update 1)

still fucking with the market. sets fix at 6.81 (v's USD), China state owned banks bought USD and knocked the Yuan back down to 6.79

Added volatility to FX market, which extended to stocks and commodity markets.

Shows how serious China is at strengthening it's currency

Markets are stabilizing into a volatile trading range - downside pressure mounting

Using the dow as the example chart (stocks), the Dow began to range trade from the 16th April 2010 at 11018 which followed through on the 26th April 2010 at 11205. Volumes started to thin out and the market was cautiously reacting to technical and fundamental trading signals. The subsequent correction took place on the 7th June as the dow fell to 9816. It has since regained momentum and now has begun a similar range trade patten starting from the 15th June 2010 at 10404. Although currently we are now starting to see long position/s scaling back and trading volumes thinning out.

At this point the dow looks supported with pivot point supports at 10360, 10279, 10162, the rally range top is 10757.

Downside pressure is there with a possible corrective move (sell) with the next 3 trading days (end week 25th June 2010)

Refer to the vertical lines for the 16th April 2010 at 11018 and 26th April 2010 at 11205 (10 days of range trading)
(refer to chart)



A similar patten has occurred from the 15th June 2010 at 10404, we can see the range trade beginning (8 days) with a possible downside correction on the 24th/25th June 2010 (refer to chart)

Sunday, June 20, 2010

The PBoC are....

fucking with the markets, excuse the swear word, de-pegging (USD/Yuan) news got some China watching economist/s all hot and horny that China were finally going to allow appreciation of their currency. Although the funnest thing happened on Monday morning (June 21st 2010) trading (Australasia), the USD was sold, every-other currency was bought then China released their midpoint rate which was, guess? Same as Friday's before the talk of a de-pegging and market re-evaluation (now 6.80), or appreciation of the Chinese currency. Traders were short squeezed and the USD was bought back.

It has been on and off (since the news of Yuan appreciation) now back on as the USD is sell.

Central banks are out of control at the moment, more so with innuendo and rhetoric (all they got left?).

'Predators' Produced by Robert Rodriguez, directed By Nimród Antal



First up I think the Predator 1 ( movie) made back in 1985 is a popular culture masterpiece, the whole human condition under tension theme, nature against man, rather than man against nature. With the metaphors of nature, being the beings that blend in with nature, I guess you could say if animals could hunt and kill like we do (in a premeditated 'blood lust'), which is a represention via popular culture that the 'hillbilly' living off the land, as in Deliverance, and of course the alien predator seem perfectly suited to a nature raw environment. As the Predator looks like a tribal or indigenous being who doesn't seem out of place as he (she?) hunts humans, which in the case of the Predator franchise, are military personal; who look out of place in environment (natural) where they have to fight to survive. As it turns out, the modern weaponry (humans) seem ineffective, so it's down to a one on one, hand to hand, physical death match. Great stuff.

So we have what many feel is a reboot from the (Director: John McTiernan) Predator 1985 classic, although Rodriguez (who is an incredibly smart director/producer) and directed by Nimród Antal, who I don't know that much about. Appear to have created a twist on the Predator theme, in the sense that it is that the Predators that have picked a bunch of 'killers' (human) and dropped then on a 'safari' planet.
Looking forward to seeing this one.

Thursday, June 17, 2010

Bet against the European Central Bank (ECB)

Which would be short the EUR.

Spain gets a reprieve in the bond markets (Thursday 17th June 2010) as bond traders drive the 10yr Spanish debt yield up to 4.86% from 4.05% on (May 2010)

ECB is buying up commercial paper/bonds/EUR in turn having EU banks drop their toxic assets onto the ECB balance sheet. All to drop yields, attempt to create liquidity and maintain assets prices.

You would think the Europeans would learn from their history books that no war can be fought on all fronts. You'll exhaust your supplies and weary your troops. The ECB will crack at some point and the EU will go into turmoil.

The EUR has a huge sell signal coming up.

Wednesday, June 16, 2010

Tuesday, June 15, 2010

Market is overpricing risk (update 3) -Longs on the Dow ( US stocks), thin volume on the EUR

Yes there appears to be long positions flowing into the Dow, also the S&P500. A good sign amidst poor economic and consumer data/news? Are we looking at liquidity rallies, which can be disputable, unless you believe that the Fed is funding Wall Street to buy shares (which is true to the extend that fixed income trades are history and yields on stocks are higher) but is there a Fed sponsored PPT (Plunge Protection Team)? Which buys stocks via inflows of Fed capital to offset a downward market. I don't believe it. The 2009 stock rallies came essentially from government sourced stimulus, consumer confidence goes up up as they have tax credits/grants to buy cars/houses and shop. The market sees good numbers and buys into stocks/currencies etc. Thus creating a bubble in stocks (which we were in the middle of a correction May 2010). What we are seeing now is a hangover from the 2009 stimulus lead stock rallies. An illusionary 'feel' of sustained rallies, but while stimulus is being wound back and austerity measures in EU will start to take hold and squeeze the citizens of the Europe, hence the latest economic data refer to Market is overpricing risk (update 2) - sucker rally is indicative of this.

What I do believe has taken place is there has been some central bank intervention refer to Amazing Central bank intervention and Amazing Central bank intervention (update 1), I think this is to try and restore confidence rather than propel a super rally again like 2009. But it's a fools paradise, the market can be tricked on the short term refer to Pricing in the big one (sell) 2010 , but then realizes and sells the fuck out of everything.

Dow chart is self explanatory, large volumes and a higher OBV and MFI show money moving into US stocks:




The EUR (v's USD) which has been rallying int tandem with stock markets, appears to not have the volume of long positions (1 hr chart) that they Dow and other indices have. There is the 1.20 line drawn and I would say that if we look at European Central Bank (ECB) intervention, it will be there; if there are buying operations taking place (including EU debt buying), the 1.20 appears to be the defense line. How long can this carry on? Hard to say, the short sellers of the EUR have bought back positions and now are trading into a buy/sell spread at 1.21 and 1.23. So it's range trading with thin volumes. Classic formulation to a breakout on the downside.

Market is overpricing risk (update 2) - sucker rally

Mostly long positions especially on the EUR and Dow and S&P 500. Strange because what came out of the the EU and US (overnight trading 15 June 2010) was not happy rally news. Still longs get cut hard on a downtrend so we have a overpriced market risk

refer (as at 16th Jun 2010)

Germany ZEW indicator for economic sentiment drops 17.1%

US consumer confidence (ABC) falls

US builder confidence drops

UK consumer confidence falls

The rallies, using the EUR and Dow has examples, may be from a technical rally supporting short covering and buying longs. Probably fatal in someways.

An analysis of both indexes (EUR and Dow) posted soon.





Monday, June 14, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 17)

An 'unnamed' Chinese bank-regulator has hit the wires, let the truth be known...

*Says global economic recovery likely to be "slow and tortuous"
*Warns of risk from sovereign debt crisis, rising gov't deficits, U.S. fx rates
*Warns of increased risks from Chinese bank loans
*Urges attention on risks in real estate lending, says "credit risks may rise"
*Chinese banks face "quite large risk" from unwise lending to local govt units
*Warns some banks concealed fresh loans; says "latent risks cannot be tolerated"

Thursday, June 10, 2010

Polina Barbasova (model)


hermoso!

(pic from here)

If you ever get a chance check out her shoot for S Magazine...

Amazing Central bank intervention (update 1)

Asia hit out first with a massive bout of intervention on Thursday 11th 2010 with US and European central banks/goverments backing it up, we now have a market correction that has gone in reverse (markets at this point were not oversold).

The Central Bank intervention and goverment rhetoric started on the May 20th 2010 refer to:

A Foreign Exchange (FX) trading war about to erupt between Central Banks and Hedge Funds

Amazing Central bank intervention (FX markets)


China:

The rumors of 50% export surge was then downgraded to the 48.5% this was still a primer for market risk appetite and equity rallies maintained on the trade surplus (after a trade deficit in April 2010 at $7.2 BillionUS)

China sovereign find talks up the EUR , even though China's sovereign fund took a 10% loss on it's China helps in EU zone. PBoC (Peoples Bank of China) agrees to extend a currency swap with the Chinese Yuan and Icelandic Crowns. This also buoyed markets and added to equity and currency rallies (EUR and other 'risk currencies')

Conclusion: China is playing a double edge sword. A property bubble and an ecomomy that is possibly showing overcapacity (reports China now is using it's iron ore reserves). It can ramp up or talk up economic growth and try to appease the markets, but at the expense of a growing US trade gap (China cheap imports crushing US exports). Meaning? A trade war is back on the table, mixed with a property speculation bubble. Very FUBAR situation unfolding.

Korea:

Bank of Korea is a big player (intervention) in the FX markets, but now their goverment wants to limit forward contracts of buy/sell on the Korea WON and also restrictions on FX derivatives. A socialistic style of control re: currency fluctuations.

Conclusion: Korea is worried about it's depleting and value losing FX reserves. It's going to run out of ammo come fresh economic crisis.

Japan:

Bank of Japan have been intervening directly into the FX markets in conjunction with other regional central banks, BoJ have bought AUD, sold YEN, bought EUR, sold YEN, bought CAD and sold USD etc etc. Obsessive and Compulsive intervention in the foreign exchange markets

Conclusion: Japan is worried about it's depleting and value losing FX reserves. It is being used by other CB's to intervene in clandestine FX propping operations.

Then there is Europe and the US...

Pretty much there has been a line drawn under the EUR and the DOW (using stock index as an example), the EUR at 1.19/1.20 and the Dow at the psychological 10,000.

Europe and the US haven't got much left in the way of goverment based fiscal intervention (ref: EU deficits/debt crisis), what they do have is their central banks such as the Federal Reserve and the European Central bank and the Bank of England is the power to print money, swap currency's on low interest rates (particularly the US Fed flowing US dollars into Europe via currency swaps), buying government bonds (such as the ECB/FED are doing) or sovereign debt. The other thing they have is verbal rhetoric in conjunction with government talk, which has a stabilizing effect (very short term) on the markets. A good example is Germany and France, with that French midget Nicolas Sarkozy and that German woman Angela Merkel obsessively trying to impose restrictions on short selling (which will be across the board). So far they have written a letter outlining this, whether it comes into play will be disputable, but they have both inked out a communistic style support of 'weak' assets ( as short selling cleans out the financial system of weak, corrupt assets ref: Enron, BP etc etc)

So currently there is a lot of asset support in EU and US markets, whether much liquidity is behind this is disputable. But regardless verbal support/rhetoric from central banks is doing the trick on the short end.

Conclusion: Europe and US are screwed. Desperate measures and rushed policies of asset support (everything) means one thing. The end is near.

Wednesday, June 9, 2010

MEC.RESEARCH store - More Money Than God: Hedge Funds and the Making of a New Elite

Market is overpricing risk (update 1) - China comes out swiniging

... with words and a leaked (possibly fudged) export numbers

*Market gets the 'China up 50% exports' on the 9 June 2010 (leaked rumour), rallies the Shanghai (then drops again on the 10th June 2010) and other risk 'on' assets. Question is who is China selling too (exported goods); the US? Europe? or Japan (GDP is hardly moving)? Unless the ships leave China taking a loop in East China Sea then dock back at Shanghai and unload the containers onto the docks. We will have to check the Chinese terms of trade to see if a 50/50 of exports/imports has occurred (do you sense the sarcasm?). But then again the Dry Baltic Index (shipping index) is down over 20% since May 2010.

*China says the Euro can withstand the 'crisis'. Thus this verbally pumps the EUR up.

With Government officials and central bankers (globally) using verbal rhetoric to keep the market stabilized (amidst a global sell off). Do we see this has a desperate measure?

Then there is the Bank of Korea going all out to intervene on the WON... but that is for another update.

Asia is looking nervous.

Tumultonomics - (update 2) 'The End is Near' when...




JP Morgan Chase (investment bank) downgrades Camapri (old school Italian 'Aperitif' maker) to 'underweight (crappy stock)'

We are talking about Campari here! No one is drinking cocktails anymore?

Monday, June 7, 2010

The Australian Reserve Bank are becoming desperate

AUD 0.80 support. Propped up by various RBA officials and reserve bank currency buying ( and also Japanese housewife's).

Once 0.80 is broken nothing will stop the market for a major sell.

The currency hit list - The Australian Dollar

Australia faces two main problems economically that encompasses an magnitude of macro and micro economics issues.

The two main problems are China and a global sovereign debt crisis.

The current Australian government made a bet on fiscal stimulus, the bet was that the government would overinflated housing thus created an 'wealth effect' environment. This was achieved via tax deductions on stamp duty and first home owners grants that at one point totals $30,000.00+. The theory is simple, keep people spending via the wealth effect and housing equity; maintain consumption and stabilize unemployment, it was successful on a short term but requires to China continue high octane growth (on the short term,). The government could then tax the country's high earning industries (mining), with a suggested tax amount at 40%, this would then alleviate any required taxes from the consumers, property would level out, consumption would be maintained and the government would then attempt to edge back into surplus.

A fatal bet, one that is doomed to fail.

The Reserve Bank of Australia caught a whiff of inflation from housing and started a rate tightening cycle, that has ended leaving a yield on the AUD at 4.50%.

As discussed in Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 16) iron ore shipments to china are slowing (April 2010), prices are high and China are now using it' huge surplus of iron ore as a fall-back to paying higher spot prices. The government 40% tax on miners may misfire, as the miners profits are about to be squeezed in the next 6mths.

The other major issue facing Australia, apart from a China slow down, credit market funding costs and interbank funding costs are blowing out. Note the LIBOR from Retuters: "Extending recent gains, the three-month euro London interbank offered rate reached 0.65 percent EUR3MFSR the highest since early January daily fixings from the British Bankers' Association showed." This is indicative of the interbank markets are now showing stress and asking for more % yield on the money markets, particularly in Europe. From Dow Jones in relation to CDS spreads widening on corporate grade debt "LONDON (Dow Jones)--European corporate and sovereign credit default swap indexes failed to consolidate early gains Tuesday, as persistent concerns on sovereign debt and the global recovery hit financial markets again and pushed the cost of default insurance back up. At 1025 GMT, the iTraxx Europe index, which measures the cost of insuring the debt of 125 investment grade European corporate borrowers, was four basis points wider from Monday's close, at 139/140 basis points, according to Markit."

The above points relating to LIBOR rates and CDS spreads is that the costs for holding debt and lending on risk are increasing, this is passed onto the consumer via real interest rates on credit and eventually if we get a return to 2008 levels where the credit markets freeze up again, credit is then unavailable to business/corporate high risk/consumers etc.

So the central banks may have no alternative but to allow the markets to devalue currencies, I suspect this will happen to EURO. But high yield currencies like the (Brazil) REAL, (Canada) CAD and the AUD should come under intense selling pressure once the full extent on a China property/economy slow down and a Europe bank crisis reveals it's self to the market.

But in the meantime CB's will try and manage a sell off of currencies rather than a panic sell. This is done by talking up monetary measures to support currencies, then they will indicate that they see their currencies go lower. The ECB have been doing this for weeks now. It is pitiful and I suspect once a bank/s writedown's start to filter through to the market some larger sells should take place.

At this point the market will be setting up large positions to sell the AUD after buying into 0.82 and 0.81 ranges.

Sunday, June 6, 2010

Thursday, June 3, 2010

It's a bad joke - NFP due figures US markets 4/06/2010

"Figures from the Labor Department show there were about 417,000 more census workers on government payrolls during the employment survey week, which includes the 12th of the month, than in the same period in April.

The unwinding of census employment may keep distorting the payroll figures for months as the government dismisses workers when the count is completed. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010."

bloomberg


Wednesday, June 2, 2010

Market is overpricing risk.

Two economies that have huge deficits from the massive amount of fiscal stimulus, the UK and the US. Both now have had a 'bounce' in housing (from tax credits or stimulus driven). A relief rally (US/Asia markets) ensured on the 2nd Jun 2010 namely on housing (US/UK). The other subtle reason for market rallies is the central banks, working behind the scenes, to bail out the European banking sector (ECB now receiving $387.1billion USD from EU banks prior to the 2010/2011 write downs) and to rev up currency swaps, from the Brazilian central bank to the Japanese central bank or have been talking about a continued and extensive currency swaps. This could be the beginning of a massive wave of central bank intervention.

Will this flow into stocks? Hard to say, I am beginning to think the power of fiscal intervention/stimulus is having a more predominant role in rallying equities of late, than CB money printing. It all seems disproportionate and strange. But the market is dying to de-leverage, it was stopped on the 26th May 2010 (refer to Dow 10,000 breach). At his point the market is overpricing risk trades.

(note: thinning volumes)

Tuesday, June 1, 2010

Japanese/Asian investors buy AUD - 2/06/2010

The AUD is on a downward spiral of risk aversion selling. Perfect markets for bull traps and smaller investors buying into gaps.

Good example is todays trading (02/05/2010) of AUD against the USD

Lows of 0.82. then it jumps to high 0.83 on Japanese political uncertainty (Yen selling) and then the AIG flop (UK prudential pulls out GBP is bought drags up GBP crosses)

So in jumps some traders, most probably Japanese retail/housewife investors, and they bought on the AUD dip. They will get slaughtered on a gap sell or a bull trap (thin volumes)




Volatile markets = deadly