Sunday, May 30, 2010

RIP Dennis Hopper



He made taking drugs look cool.

An American icon in both film and popular culture.

Thursday, May 27, 2010

Pricing in the big one (sell) 2010

Markets like confidence, but that also makes them vulnerable to being tricked. As we saw with the massive rallies from 2008/2009 rallied 80 to 100 percent from lows (we all made money in 2009). The trick was to instill confidence into the makes via monetary and fiscal policy. The US Fed pushed money into the system by lowing interest and buying distressed debt and government debt, the attempt was to bring down the yields on the 10yr at 3.34, 20yr at 4.08, 30yr at 4.24 treasury notes that the market uses to price mortgage/credit rates. The Obama administration (and other goverments) threw money at the consumers via tax credits (cars, houses), stimulus etc. That caused the markets to think that a recovery has taken place, which somewhat occurred. In the sense a consumption type recovery occurred, but it seemed muted ( please refer to low US CPI Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 16)). Markets are now trying to digest a current correction that again has had a line drawn underneath falling assets, namely currencies and stocks as discussed in Amazing central bank intervention (FX markets), currency confidence appears to be one of the psychological tactics used by central banks. The theory may be that they can underpin falling currencies and talk up new stimulus issues (refer to the ECB and the 1trillion dollar EU bank bailout) and keep the markets stable (across the board, like a communist/socialist economic model). It has worked but with added volatility.

The currencies that seemed to have had heavy intervention have been the Korean WON, New Zealand Dollar, the EURO, Japanese Yen (selling down rather than up to stave of risk aversion buys) and the Australian Dollar. We had a attempt for the market/s to de-leverage which was halted after the slide in the EUR was imminently underpinned at 1.20/1.21

It should be priced in that a massive deflationary sell off of equities may be on the cards in 2010/2011.

Price in also China's insane property market imploding (refer to their stock market underpreforming in 2009). It will be like a A-Bomb going off on the markets.





Tuesday, May 25, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 16)

The markets are now pricing in the severity of widening CDS spreads and LIBOR spreads, which in turn is the start of a possible credit crunch emitting from Europe, commonly known as a 'contagion'.

Most stock indexes are now falling into bear markets, which is also an indication that a double dip recession for the global ecomomy is almost a certainty in 2010. This can bee seen with Spot Iron ore prices out of China for April showing an increase in costs, but it is the decline in imports that is the concern. Which points to China slowing in 2010; and output operational costs fro miners are increasing.

A good reference for dry shipping activity is the Baltic dry index, on a two year chart we can see how the global recession in 2008 sent the rate tumbling only to be dragged along struggling to make it over the 4000 point rate (May 2010). Which would indicate that the economic recovery has not been a powered up by an export/ trade recovery, but rather countries self funded stimulus and/or goverment fiscal and central bank monetary intervention.


BDI index (2yrs)

The EU and European central bank will attempt to navigate a severe banking crisis in Europe with more bailouts/intervention/asset support on a 1 Trillion dollar pledge. The problem of course is confidence and it's being eroded dramatically in European financial markets for three reasons. 1. The trillion dollar bailout is to secure the European banks and their exposure to PIIGS junk bonds and decayed credit markets. 2 is to try and underpin the Euro. 3. Austerity measures by goverments and high taxes will decrease consumption and slow growth. The current psychological theory (of central banks) I suspect is that they will keep a line under the EUR (and other currencies), to somehow create an illusion that the ecomomy is stabilizing. It's Smoke and Mirrors by essentially throwing money at the system, the big fear is a currency collapse (in a sense the EUR has already collapsed) which will spill over into equities and deteriorate investor confidence in a complete manner. This intervention will stave this selling on the EUR to a degree, but it wont last. As the markets are dying to de-leverage (with added volatility), we have seen this already with stocks and currency's all being sold that are now close or in bear markets.

The US is able to alleviate it's invertible judgment day on it's debt by printing money with 0% interest rates. The problem of course is that not only we will see inflation spikes on food and oil, the consumer will also be effected by real interest rates on credit, which have already been adjusted for inflation via the interest payment 10yr and 30yr notes. This erodes purchasing power and this could have effected the recently low CPI, although I am speculating here, but I suspect that interest payments of homes/cars and credit cards have not decreased but increased; thus effecting credit purchasing power.

It is the last hurrah of intervention by goverment and their incumbent central banks. This can been seen daily in the FX markets. Japan central bank (BoJ) has indicated that it will intervene on the the rising Yen, South Korea central bank (BoE) has said they will prop up it's falling WON (which they have already started to do), the EUR and high risk currencies such as the AUD and NZD are also showing signs of central bank/s intervention. This is a game of attrition (against preying speculators) to support currencies that are destine to be devalued, as mention it is done to maintain an illusion of confidence.

But we can see markets struggle to maintain liquidity support, the rug at some point will be pulled. And the 'sell' will be brutal.

Monday, May 24, 2010

Some visual inspiration (mine - update1)


Photo: A.Glass



photo: A.Glass


Sunday, May 23, 2010

Can that idoit Geithner...

...shut up, he is distracting the market. We want to get back to pricing in ECB unrealized losses, EU banking crisis and a South/North Korea (possible) inter-boarder conflict...oh yeah and a China meltdown.

Thursday, May 20, 2010

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

So stupid central banks like the ECB with that dreadful German goverment will try and wage a war against the so called 'speculators', first shots fired was the banning of the naked short selling/CDS. Next will be the FX market/s on central bank intervention. Will it work? Who will win? Well that is obvious. No it won't work and the market always wins. The ECB will need to print to finance it's 'buying' operation. So either way the market will hedge on something, either currency or commodities. So watch oil now and other vulnerable currencies.

The central banks and goverments are acting extremely irrational, thus expect market volatility

Amazing Central bank intervention (FX markets)



We have a huge de-leveraging of risk trades in the last 48hrs. Then as Asian markets opened on 21st May 2010 two trades were bought in earnest. The AUD from lows of .80 to bounce within 30mins to highs of .82, the EUR is the incredible one here from 1.23 to 1.25.

Ok, you have oversold markets, but we also have massive risk aversion. This is Central Bank/s intervention at it's finest, note that the coming G7 meeting may try to stop speculation in the currency markets (so intervention will continue), one way of doing this is to try and squeeze short sellers (central banks will buy currencies). A socialistic/communistic way of supporting (unnaturally) the FX markets, as we are all aware of eventually fails spectacularly, or causes more uncertainty; thus encourages more selling.

Market capitulation now on point. The Dow and S&P 500 are ready for bigger falls.

As discuses in The Dow touched capitulation point at 10,000, the psychological level on the Dow is the 10,000 when the bull run that occurred last year it was able to smash through the 10,000 on the 5th November 2010 (shown in vertical line - blue) and rallied into tight range, the dow then collapsed out of that tight range on the 20 January 2010 (shown in vertical line - red) and struggled to rally back into those ranges again. The current correction on the dow started on the 3rd May 2010.

Please refer to chart:


So we are back to the capitulation (downtrend) or psychological point of 10000, from here we should see some large losses until a bottom is formed, at this point one could guess that the dow could fall to lows of 9000.

The big question is do we rebound on goverment stimulus money printing, or are goverments essentially exacerbating the destabilization the markets with intervention, meaning that they will try and curb speculation, short selling etc. The point is a debt crisis in one country is a contagion crisis, especially when LIBOR spreads rise thus effecting interbank spreads. The big unknowns of course are Asia, especially China. Does China continually want to have a devalued currency on top of a astoundingly huge bubble in property? Now Taiwan is showing bubble signs in their property markets. A regional war such as Nth/Sth Korea could also economically destabilize the whole Asian region. If this is the case, there is pretty much nothing goverment/s can do in reinvigorating the markets, there will be an eventual bottom; but if we see 'worst case' scenarios such as a debt contagion, war and a China slowdown. We could see some historic sell offs in the equity markets.

Tuesday, May 18, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 15)

Germany is panicking, re: banning naked short selling. Means funding issues with German banks, that are very leveraged, barely scrapped by after the 2008 credit crunch:

from Telegraph

"Traders are predicting chaos on the world's second-largest government bond market after the German authorities on Tuesday announced a ban on all naked short-selling in European public debt, as well as shares in the country's 10 largest financial institutions."



Monday, May 17, 2010

Some visual inspiration (mine)


Australian model Bambi Northwood-Blyth


Easy Rider



La Valote Bovet (Absithe)

Thursday, May 13, 2010

Strong violatility on global indices in 2010

The trick is to try and work out how dramatic those swings are from sell to buy. The market is currently looking more towards having peaked out, or topped out from their highs. Personally it is more about a divergence in safe haven buys as oppose to risk, then selling in between that cross over to risk aversion, then buying back into risk 'on' environment. All done within a period of high volatility. This may take place within in 2-3 days on a week, or week to week, or month to month.

The play would be gold as far as a warrant on the gold price, or option plays; as a higher leverage buy.

Overall the market may trail lower into 2010, but not with out the wild swings.

Or it just sinks hard.

* MEC.research doesn't give investment advice, trade at your own risk

MEC.RESEARCH mini reviews (update 7)



Mine are black.

Magis 'First Chair' designed by Stefano Giovannoni. Comfortable with a nice angle, these aren't mass produced so you know you are getting a product with some thought put into it. Made from polypropylene with added glass fibers. Actually quite/heavy a solid chair. Doesn't feel cheap. For my indoor dining table.



Barceló Añejo Rum

Terrible. Rough as in bitter tasting and that trade mark (for crap spirits) heavy alcohol smell upon opening. Probably close to the horrendous Bacardi Rum. This doesn't taste aged (Anejo), just a nasty cheap tasting rum.

Wednesday, May 12, 2010

Gold has had been rallying since March low 2010

On March the 3rd 2010 I wrote in Gold is still solid - a buy on IMF intervention (Europe), that there was a market rumour that the IMF would help bailout out indebted countries by providing loans to Spain, Greece. As we know now the close to 1 Trillion bailout from the EU/ECB and IMF to keep the Europe markets liquid occurred on the 10th May 2010 and the market reaction thereafter, please refer to The EU/ECB bailout package will send Europe into a inflationary style depression. (update 1).

Gold hit a low on the 25th March 2010 at 1086.20 falling from the 2nd March 2010 high of 1137.40. The rally took off from the 26th March at 1088.85 to 1237.00 (12th May 2010). The current gold price at 1237.63 is an all time high. So the analysis that I made on the 3rd March was correct (refer to link) gold retraced back from it's 1137.40 as it became oversold on a daily chart, entry points for gold buys were indicated in the period leading up to the 26th March rally.

Several factors are at play with the gold price, 1. one we still have a lot of risk aversion in the markets on short term plays. 2. Excess liquidity and low to 0% interest rates on US dollars and now the ECB will print money (buying bonds from European banks and loans EU banks at a discounted rate). So on a long term play, both major central banks, the US federal Reserve and the European Central Bank are now stuck in a money printing dilemma as bond yields on indebted EU countries continue to rise, the Euro currency (EUR) value will decrease rapidly. This could be seen when the EU revealed to the market the 1 trillion dollar bailout of European banks, the day after the announcement (11 May 2010) the EUR immediately was sold again closing at 1.26 after the ' bailout announcement' high of 1.30 (10 May 2010), please refer to chart:



Both aspects mentioned are supported of the gold price, regarding risk aversion and devaluation of the EUR. The other major supportive aspect of gold, is a diversification away from the EUR from sovereign funds, particularly out of Asia, namely China.

If the Asian goverments decide to dump the EUR, we may see an increase in gold holdings to offset the diminishing value of the EUR. The USD is currently on a risk averse buy and supported by the Federal Reserve ability to print a global currency. The USD dollar could come under major strain if the US faces a debt problem as Europe has, this is an inevitability and may be on the cards in the next few years, or sooner if the US cannot reign in spending.

Gold chart:

*Note the Take Profit line at 1,167.93 Supports for gold appear to be plentiful @ 1227 down to 1200. Entry buys at those points. Currently gold looks a little overstretched on a daily



* MEC.research doesn't give investment advice, trade at your own risk

Tuesday, May 11, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 14)

A 'worlds collide' scenario: Europe spends and China tightens (possibly sooner than later), both will effect the global ecomomy substantially

Nude Paper Magazine




Similar to S Magazine bringing back the artistic and style of nude photography (fashion/art/cuture) magazines.

Check the link here: Nude Paper

Monday, May 10, 2010

The EU/ECB bailout package will send Europe into a inflationary style depression. (update 1)

'Shock and awe' didn't work in the Gulf War and it certainly won't work within the markets.

The shine of EU/IMF bailout proposal is fading rapidly from Reuters

"(Reuters) - Excitement over the euro zone's mammoth $1 trillion rescue package gave way on Tuesday to doubts whether its weakest economies can meet their end of the bargain and deliver drastic debt cuts, driving the euro and stocks lower. The emergency plan -- the biggest since G20 leaders threw money at the global economy following the collapse of Lehman Brothers in 2008 -- impressed markets with its sheer size and sparked a spectacular rally in world stocks and the euro. Yet financial markets turned cautious when they reopened for business in Asia on Tuesday, with investors concerned that the plan was not a long-term solution to problems plaguing the 11-year old single currency area.

In a sobering note, the International Monetary Fund said that even though Greece's public debt was sustainable over the medium term, the nation whose debt woes spurred the unprecedented euro zone action, faced plenty of risks. Moody's credit ratings agency also warned it might downgrade Portugal's debt rating and further cut Greece's to junk status, noting the contagion effect of Greece's crisis on other euro zone members. "Contagion has spread from Greece -- historically a weaker credit in the context of the euro zone -- to sovereigns with stronger credit metrics like Portugal, Ireland and Spain," Moody's said."

The EU/ECB bailout package will send Europe into a inflationary style depression.

Think about there is a company that is heavily indebted it had more liabilities to it's income. A prudent measure for this business is the company goes bankrupt, restructures it's debt and tries to survive, albeit scaled down. It takes the pain treats it's staff well and negotiates in a respectful manner wage cuts and agreements, to hopefully reemerge again and expand and become profitable. What it doesn't do or shouldn't do is take out more loans to survive, this will cause the company to continually cut back staff and create a environment of uncertainty, which in turn the company eventually goes into default in a spectacular fashion and implodes.

The same is happening with the nearly 1 Trillion $US bailout of Europe, what essentially is going to happen is indebted countries that are unable to finance their debt obligations, will be given new loans, thus making them more indebted (great plan huh?). Even if the interest rate is low (on borrowed funds from the the EU/IMF/ECB), the countries (PIIGS) still have to pay back the money loaned to them by other EU countries and the IMF/ECB. So like Greece there will be brutal austerity programs unleashed onto the people, a continued indebted presence in the EU, in which goverment cuts and spending will be so harsh that the average person will feel no benefit from this so called 'bailout'.

In the meantime as indebted countries struggle to pay back loans, the bond yields should remain high whilst the foolish ECB tries to print money, there will be an interest rate 'playoff' between the ECB and bond vigilantes (as yields will still remain high on EU debt). But the ultimately the whole EU region will be effected as output slows and inflation climbs. Should eventually lead into an inflationary type depression.

Sunday, May 9, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 13)

Now the China syndrome.

With whats happening with ECB money printing and EU bailouts, China now appears to be disinterested in tightening monetary policy

A shrinking trade deficit and a loose monetary policy that has spawned the housing bubble in China. China with overcapacity (exports slowing) and now slowing input credits into their terms of trade points to one thing: a rapid slowdown.

Frightening

From Bloomberg:

"China’s trade surplus shrank 87 percent from a year earlier as imports grew at a faster pace than exports, the state-run Xinhua News Agency reported.

The surplus was $1.68 billion, Xinhua said today on its website. Exports rose 30.5 percent from a year earlier to $119.9 billion, while imports climbed 49.7 percent to $118.24 billion.

The 79 percent decline in the trade surplus this year, reported by Xinhua, may ease pressure for gains in the yuan and strengthen Premier Wen Jiabao’s argument that the currency isn’t undervalued. The sovereign-debt crisis in Europe that today prompted a loan package of almost $1 trillion to help nations under attack from speculators may also encourage Chinese officials to delay ending the yuan’s peg to the dollar.

“The trade surplus will continue to narrow this year as booming domestic demand supports imports and the European debt crisis clouds the outlook for global demand,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia who formerly worked at the International Monetary Fund and the European Central Bank. “Improvements in the trade balance may help to reduce pressure for the yuan to appreciate.”

In Europe, China’s biggest export market, the 16 euro nations will offer financial assistance for debt-laden countries and the European Central Bank said it will buy government and private bonds. The crisis that is centered on Greece roiled global markets last week and highlighted Chinese officials’ concern that the world could face a second economic slump. "

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 12)

The 'geniuses' at the European Central Bank and goverment politicians within the EU are going to print money to try and 'short squeeze speculators who are short selling the Euro (betting it down).

Essentially their futile and money wasting attempt is to create a buying trend on the EUR (Euro) and squeeze out the traders/investors/hedge funds that are shorting the EUR. Will it work? Short term it will stabilize the currency, as the majority on the buyers will be ECB and Goverment related departments, but in the mid/long term it will be failure. As the confidence will not return to buy a low yield currency connected to a huge sovereign debt issue (Europe), in the sense that the major problem is the high risk of investors to hold sovereign debt from European. It is expensive to insure ( increasing credit default swap yields) and unprofitable (no one will want to buy/trade), so investors see more value in short selling the EUR currency, not buying and holding the EUR.

The best thing the ECB could do is increase interest rates on the European cash rate, this will add value to the EUR and the market will buy and dump the US dollar.

And take the pain (the banks) as funding costs rise.

Eventually an oversold asset is usually bought back, as long as the value returns. Postpone and/or destroy that value, the pain will be longer and harder. This is what the ECB and the flunkies (European politicians) are doing.

More central bank intervention and more goverment intervention not only erodes confidence in the financial stability of the EU but also it won't work this time (as opposed to the massive monetary intervention in 2008/2009, dropping yields/funding costs). The debt problem in Europe is precisely the byproduct of that irresponsible attempt at flooding the ecomomies with liquidity and burdening the unfortunate citizens (at this point Greece), who have to endure governments short term and reckless disregard for financial stability and prosperity. What has happened in Greece (as far as a backlash against goverment) will resonate throughout the European ecomomy.

Update: ECB/EU/IMF have decided on a massive money printing exercise at (reported)600 Billion Euro.

It is almost comical, what needs to be watched if the yield spread on CDS falls to lows. Early days, but the whole deal sounds rushed, I would say it was aimed at squeezing short sellers. The market should maintain skepticism and I suspect selling pressure will remain on the EUR and interbank/CDS spreads should widen. The reasons for skepticism. How will this massive amount of money be distributed? And how will it help the broader ecomomy and it's people? Disastrous for the markets and the EU as to fund this bailout brutal austerity measures will be delivered to the PIIGS (Portugal, Ireland, Italy, Greece and Spain).

Thursday, May 6, 2010

MEC.RESEARCH mini reviews (update 6)



Pyrat Rum
Terrible. This is basically a standard rum with added orange oil (I was repeating after drinking this, same feeling when you eat something and the cooking oil has gone rancid) and some chocolate flavour. Strong alcohol smell with orange and choc taste. This is not premium rum. Gimmicky and tragic, you are essentially paying for the packaging.

The Dow touched capiulation point at 10,000

The Dow will eventually fall through the 10,000 'psycho' support and will capitulate thereafter. The warning 'shots' was the massive sell (a near 1000 point drop - 6/5/2010) via a Wall Street error, which was a miscalculated trade with a sale of Procter & Gamble stock.

But even with that error aside the CDS, funding/EU contagion will continue to cause selling on global indices.

Wednesday, May 5, 2010

The EUR has collpased

Historic in someways. Although not the end of the EUR (yet). The Greece/CDS contagion will ensure further selling. If the ECB print money, then there will be more selling. It's a dying currency.

Tuesday, May 4, 2010

666 Watches (from Spain)



Not bad at all.

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 11)

" May 5 (Bloomberg) -- The cost of protecting corporate bonds from default surged in Australia and Asia after U.S. and European stocks and the euro plunged on concern Greece’s debt crisis may spread.

The Markit iTraxx Australia index of credit-default swaps jumped 14 basis points to 99 basis points as of 8:32 a.m. in Sydney, on course for its biggest one-day increase since June 23, according to prices from Nomura Holdings Inc. and CMA DataVision in New York. That would be the highest closing level since Feb. 19, the prices show.

“After a very brief pause, sovereign risk contagion fears gripped both the debt and equity markets in Europe last night and it was pretty much one way traffic -- lower for equities and wider for credit,” National Australia Bank Ltd. analysts led by Michael Bush wrote in a note to clients today."

This has a substantial effect on stock prices.

from Bloomberg

There will be no more goverment stimulus on a double dip recession in 2010

Currently we have a two prong crisis forming on global markets.

1. the sovereign debt issue lead by Europe (CDS swaps blow out, thus being more expensive to insure sovereign debt, this will be felt also on AAA rated goverment debt)

2. China slow down penciled in for 2010.

If the global ecomomy goes into a nasty double dip recession in mid 2010 the goverment will not issue any more fiscal stimulus, instead central banks worldwide will devalue their currencies and print money.

So the third crisis, which the beginnings can be seen in the oil and gold markets, is inflationary conditions globally.

Monday, May 3, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 -Marc Faber 9-12 mth China crash (update 10)

Marc Faber makes some very good points, particularly the warning signs of a China crash ( precursor concerns on the Shanghai stock market please refer to: Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 6))

Also his point on the Australian goverment resource tax on miners, that essentially will drive down the miners share price but may support and give lift to commodities prices; by pricing up commodities through higher operating expenses.

Of course he his spot on regarding the Greece debacle (bailout), which the market is also aware that eventually Greece will default.

Sunday, May 2, 2010

Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - Greece should have been kicked out(update 9)

Except they were bailed out by the EU/IMF/Germany. Essentially Greece haa already has defaulted as their bonds (10yr) are now junk sitting in no mans land with yields that peaked at 7.5%

No one wanted them.

Now the Greek goverment has to raise money, as part of the austerity plan set out by the EU/IMF, this means a brutal tax regime, funding cuts and general financial/social mayhem. Just to save the necks of a stupid corrupt goverment.

All and all it won't make much difference (the bailout), as the Greek situation sits as the top of a massive problem for the EU, whilst spreads (on debt) widened for both Spain and Portugal. Even as the Greek bailout took place.

The one to watch is of course Spain, a trillion dollar ecomomy with a debt to GDP at 11.20% (probably higher) and unemployment running at 20.05%

Spain will be like an A-bomb on the markets if bond auctions collapse and the country goes into a default spiral.