Tuesday, November 30, 2010

"Interpol posts wanted notice for WikiLeaks founder"

"(Reuters) - Interpol issued a "red notice" on Tuesday to assist in the arrest of Julian Assange, founder of the whistle-blowing website WikiLeaks, who is wanted in Sweden on suspicion of sexual crimes.

Assange, a former computer hacker now at the center of a global controversy after WikiLeaks released a trove of classified U.S. diplomatic cables at the weekend, denies the Swedish allegations.

The website of Interpol, the international police agency, said anyone with information on the Australian-born Assange, 39, should contact their national or local police.

Red notices allow arrest warrants issued by national police authorities to be circulated to other countries to facilitate arrests and help possible extradition.

Assange's current whereabouts are not known and he is believed to move from country to country.

A Swedish court on November 18 ordered the detention of Assange. The prosecutor's office had started an investigation into allegations of rape, sexual molestation and unlawful coercion against Assange in September.

Assange's lawyer, Bjorn Hurtig, told journalists after the hearings he expected a European arrest warrant would be issued for Assange, who had sometimes visited Sweden in the past, and that he would probably appeal.

Assange has called the allegations baseless and criticized what he has called a legal circus in Sweden, where he had been seeking to build a base in order to benefit from its strict journalist protection laws.

WikiLeaks has angered the United States by releasing more than 250,000 State Department cables exposing the inner workings of U.S. diplomacy, including brutally candid assessments of world leaders.

WikiLeaks had in October released nearly 400,000 classified U.S. files on the Iraq war, which Assange said showed 15,000 more Iraqi civilian deaths had occurred than thought."

The above warrant is re: Sweden sex crime allegation.

The governments of the world are worst than the mafia (remember the Godfather - Al Pachino quote? Go watch the movie)


Risk aversion coming back (update 8) - EU bond contagion, China

We got a two way (risk averse) knock down on equities, as discussed in The Dow successfully creates another 'bulltrap', and Risk aversion coming back (update 7) - Ireland bailout/PIIGS tumoil just begining (update 3) - Poland 1st victim re: CDS spreads as bond spreads widen the market is now pricing in a bond contagion from Europe, essentially what that means is that the bond spreads of high risk debt widens against 'everything' which in turns erodes the value of the bond/s worth, on top of that is the insurance to cover a default on a bond, the CDS spreads, which are widening also; this can be attributed two the EU/IMF bailout of Ireland that in turns has put stress on the other 'peripheral' (PIIGS) countries such as Portugal, Spain and Italy. So now we are going into the big leagues of 'bailouts' as countries like Spain and Italy are larger economics to Ireland. The general fear is does the EU have a enough cash and can they afford to insure (via German, ECB backstops) against other EU countries asking for a bailout. The market doesn't think they can, therefore it is now wise to factor in a possible default by one of those countries (Portugal, Spain, Italy) and then a restructure of debt payments (bond holder losses) that do not involve a bailout by the EU/IMF. This country may be Portugal.

All and all this will effect risk and risk aversion will be in full swing, any bond losses from a default could be the precursor for a major correction on 2010. The interesting aspect to that was discussed in Contrarian play on the upcoming Permanent Open Market Operations (POMO) by the FED ala 600billion buy up of US Treasuries and an early post titled An interest rate wipeout coming , is that the Federal Reserve 600billion stock market prop has been a flop, with POMO operations occurring everyday. There is no indication that stocks will rally with so much risk around. I called a contrarian play on the start of the Fed's T-Bill buyup and POMO operations, that they would NOT cause a rally in market. I was right. But in saying that, we have an overstretched market on thin liquidity, which is lethal for buying into a bull-trap, both dumb money and smart 'dumb' money have been buying into closing of stock rallies (HFT 'grinds'), only to be sold at the start of the next day trading; this patten may go on for awhile, as the market edges down towards supports, that may then set a 'flash crash'. This is something that needs to be watched.

China has been speeding up in a hyper inflation way, with China now panicking to maintain price stability, I think this is the start of the China inflation driven crash, which should finally correct their property market, but the correction will be brutal. As discussed in China's 'Goldilocks Omen'. A major Chinese economic correction is now on the cards.

When an stock index, the Shanghai composite ,can crash in one day and strip 3% value in minutes. We have a problem



The other risks to the market are geopolitical South/North Korea, and social/political unrest in Europe stemming from Ireland, France, Spain, Italy.

We are now entering a time of major economic, social and political problems

Sunday, November 28, 2010

Ireland secures EU/IMF bailout: Irish citizens/taxpayers will backstop Irish bondholders. Won't stop 'contagion' (update 1)

It begins:

DUBLIN (Dow Jones)--Thousands of people marched through Dublin Saturday, demanding the Irish government default on the country's debts, call an immediate election, and reverse plans for tough budget cuts and financial support from the International Monetary Fund.

Police said about 45,000 took part in the demonstration organized by the Irish Congress of Trade Unions, an umbrella group for unions representing some 800,000 workers across the island of Ireland that wants the government to do more to generate growth and jobs.

Blowing whistles, and to the sound of a marching band and drummers, the protesters chanted "Burn the bondholders" and "They say cut back, we say fight back," as they made their way to a gathering at the city's General Post Office, the site of an uprising in 1916 that served as a catalyst to events that led to Irish independence.

"We should be having an immediate election. I think they [the government] should default on the bonds," said Valerie Whelan, a 58-year-old writer holding a placard saying "I don't want my daughter to emigrate."

"We are suffering so the bondholders don't suffer--it's capitalism gone mad," she said.

Faced with a debt crisis following the collapse of the country's banking system, Ireland's government has announced severe budget cuts and is negotiating a multibillion euro support package with the International Monetary Fund, European Union and European Central Bank, which is expected Sunday.

On Thursday, it announced details of a four-year plan including EUR10 billion in expenditure cuts and EUR5 billion in tax measures to slash the country's budget deficit to below the EU limit of 3% of gross domestic product by 2014 from an expected 32% this year. The government is due to outline EUR6 billion of the cuts in a budget Dec. 7.

The measures include lowering the minimum wage, cutting public-sector jobs, salaries and pensions, reducing social-welfare spending, increasing the sales tax to 23% by 2014 from 21%, and widening the income-tax base.

David Begg, the general secretary of the ICTU, told demonstrators that the country couldn't afford to pay billions of euros to bail out Europe's banking system.

"We can't pay that money and we won't pay that money," he said.

Impact, Ireland's largest public-sector union, has said the government's four-year plan is driven by an obsession to bail out "zombie banks" rather than the need to stimulate economic activity.

But despite some of the harshest budget consolidation measures in Europe, the ICTU appears to have little appetite for industrial action of the kind seen in countries like Spain, Portugal, and Greece that have also been subjected to tough austerity measures.

"I don't think the right focus at the moment will be on industrial action, it is on political action looking at the forthcoming general election," Sally Anne Kinahan, ICTU assistant general secretary, said ahead of the march. Irish Prime Minister Brian Cowen has said a general election will be called in the New Year.

Nevertheless, some left-leaning groups and many of the marchers demanded the Irish unions go further.

"They need to escalate and do strike action rather than just marching people around the town," said Brid Smith, a local government official in a working class suburb west of Dublin for People Before Profit, a small left-wing grassroots political grouping.

She said bondholders should bare a greater share of the losses, and the government should reverse its austerity measures and introduce heavier taxes on the wealthy people who profited most during the boom years that earned Ireland the name as the Celtic Tiger.

Martin Bonney, a 60-year-old taxi driver, said the usually mild-mannered Irish have almost run out of patience with the government.

"It's not fair. Wait until the budget comes out--it's going to blow," he said. "If I was a few years younger I would be off to Australia for a couple of years."

Evan O'Gorman, a 15-year-old secondary school student holding two placards that said "Free Eire" and "Everyone hates Cowen," said he wouldn't leave the country but he could understand why some would.

"The budget and the four-year plan is a disgrace," he said.

Des Devine, a 40-year-old who traveled from Galway on the west coast of Ireland to take part in the march, suggested the government emigrate and go into exile.

Bringing up the rear of the march, Eddie Glackin, a 64-year-old retired union worker, held aloft cut-out pictures of Cowen and two main opposition leaders with "Puppet of EU and IMF" stamped across them.

"We should default--the idea that the workers of this country should pay for the gambling of the billionaires is disgusting," he said.

Tim O'Donovan, a 34-year-old student, held a placard with an uncompromising message to those running the country--"You useless bastards."

Surveying the crowd of protesters, he said he was surprised at the turnout, particularly given the snowfall overnight. ""This is very unlike Irish people--they like being told what to do."

Ireland secures EU/IMF bailout: Irish citizens/taxpayers will backstop Irish bondholders. Won't stop 'contagion'

This is the low down re: Irish bailout deal:

Annex : Distribution of the Loan to Ireland
Total Programme Volume (Billions of euro)
Contribution by Ireland 17.5
External support 67.5
Total 85.0

External Support Breakdown
IMF (One-Third)* 22.5
Europe (Two-Thirds) 45.0
Total 67.5

European Breakdown
EFSM 22.5
EFSF (Plus Bilaterals) 22.5
Total 45.0

EFSF (Plus Bilaterals) Breakdown
EFSF (Effective) euro area 17.7
United Kingdom 3.8
Sweden 0.6
Denmark 0.4
Total 22.5

The 'geniuses' at the European Union/International Monetary fund and Irish weak arse politicians have allowed the senior debt bond holder (European Central Bank being one: sitting on a ton of 'junk' PIIGS bonds) a deal, in other words they don't have to write down bond values or take a 'haircut'. But in actual fact they eventually will, and the morons running the ECB (European Central Bank)/IMF and EU have not only fueled a European Zone major industrial strike action, but have also dumped the Irish people into sellout deal in which their pension, taxpayer funds will backstop the bond holders (short term solution) as they quietly offload Irish debt onto the market and the ECB will buy it and print Euro's like no tomorrow, which in turn will set Germany alight (via inflation fears). The cycle of political turmoil and economic destabilization will increase 10 fold in Europe, perpetuated by the most incompetent, stupid and irresponsible men ever to manage, regulate or whatever they fuck they do; which in turn will grow onto a huge wave of uncertainly in the Euro Zone.

They have lit the fire by not being creative and intelligent in their 'bailout plans' but also not showing social awareness (don't treat the citizens of these countries like fools!) Seriously, when will these fucking, butnut clueless 'academics' learn that if you don't unify a consensus, or a populous, the majority of the people; you will fucking lose. That's it, simple. Their rushed and poorly thought out 'plans' stupidly 'throwing' together a Irish bailout deal before the markets open to try and stave off a yield blow out on Spanish and Portuguese debt and a sell on the EURO. They used Ireland as a short term solution ( in their feeble minds) but will actually end up costing more and also (apart from sending Ireland into a protest/riot/civil unrest zone) the bond holders will have to write-down bond values.; when yields on the rest of the PIIGS: Spain, Portugal, Greece and Italy go upward after the Irish Parliament is either dissolved, or voted out into oblivion. So again, uncertainly will be the trigger for CDS (credit default swaps) spikes and yield spikes and EUR selling.

The whole thing is a disaster as the European zone bond 'contagion' will go into overdrive.

Thursday, November 25, 2010

Risk aversion coming back (update 7) - Ireland bailout/PIIGS tumoil just begining (update 3) - Poland 1st victim re: CDS spreads as bond spreads widen

refer:

"The Republic of Poland's 3s/5s dual-tranche Samurai has been pulled on the back of EU periphery widening sparked by the Irish debt problems. The EU sovereign debt concerns have taken its toll on Poland having pushed out the deal's spread to the wide-end of price guidance. As of yesterday, the last day of marketing, joint-leads Daiwa Capital Markets, Mitsubishi UFJ Morgan Stanley and Mizuho refined the price guidance to OS+90bp for the 3-year tranche and OS+105bp for the 5-year tranche, the wide-end of the OS+70bp-90bp and OS+85bp-105bp respective price ranges. A total size of around JPY45bn has been expected.

The Irish contagion has spread to the Samurai market. "Poland has effectively satisfied its total borrowing requirements for 2010 already and therefore agreed that the optimal course of action was to approach the market again once stable investor sentiment has returned," noted the leads in a statement."

Major war/conflict cycle commencing? (update 7) Nth/Sth Korea


"N.Korean Shelling 'Aimed for Maximum Damage to Lives, Property'

North Korean coastal artillery batteries fired a considerable number of 122-mm Multiple Launch Rocket System shells that can kill or wound people or animals at Yeonpyeong Island on Tuesday. The shells have an extra-high penetration capability and are filled with special gunpowder that causes massive conflagrations.

A military source on Thursday said analysis of about 20 unexploded shells collected from the island showed that many of them are not ordinary 76.2-mm coastal artillery shells but 122-mm MLRS shells.

These so-called fuel-air shells have deadly killing power, generating high heat and high voltage. Military authorities believe that the North has deployed them warfare-ready since 1985."

from The Chosun iIbo

Risk aversion coming back (update 6) - Ireland bailout/PIIGS tumoil just begining (update 2) - Interbank CDS fear gauge blows out

This is so similar (regarding fear 'contagion') to what happened in 2008 when US banks started writing down, a contagion of write-downs of other banks (overseas or otherwise) started to write-down assets/derivatives connected with the US suprime housing meltdown, when Lehman Brothers went bankrupt; the whole banking system was crunched: CDS spreads, TED spreads and LIBOR/interbank spreads all blew out.

Ireland is looking like a 'Lehman' style epicenter, of course the Irish government has not only handled the situation appallingly, they have also treated the Irish people like imbeciles. This is going to backfire, as the Irish are now ready to protest and kick out the government that caused this mess by recklessly allowing over speculating through banking/mortgages. Thus creating a housing bubble that went bust.

The fear is to what extend will the ECB/IMF/EU able to provide adequate liquidity to Ireland (through the bailout), if the whole Euro Zone starts to buckle under the fear that the EU may break up, or a country is kicked out and restructured with out ECB/EU assistance. The costs to insure and purchase/hold EU debt will skyrocket and if senior bond holders are asked to write-down or take a 'haircut' on bond values. You'll see liquidity completely dry up for Ireland, which will effect the whole European sovereign markets i.e EU banks

This can now be seen via fears of a sovereign/bank contagion from Ireland is spreading, effecting the whole EU banking system. RE: CDS's on Senior Financials

"LONDON (Dow Jones)--The iTraxx Senior Financials index traded wider Wednesday as concerns around sovereigns spread into the financials' sector.

The index widened "quite aggressively" early Wednesday to spike at 163.5 basis points, according to a trader, before coming back in slightly to trade at 156/158 basis points by 1540 GMT.

The widening reflects a flow-on effect from sovereign concerns into the financials sector, an analyst said.

The financial sector is strongly correlated to sovereigns because of the "implicit support" expected from government, he noted. The widening reflected concerns around the financial situation of Portugal and Spain, following Ireland's admission it needed financial support, he said.

Ireland's government Wednesday outlined EUR15 billion in spending cuts and tax increases over four years that are intended to reduce the budget deficit to 9.1% of gross domestic product in 2011.

Irish Prime Minister Brian Cowen said Ireland has discussed a financial aid package of EUR85 billion with the European Union and International Monetary Fund. A final figure is still under discussion."


Wednesday, November 24, 2010

Ireland will send the Euro into a death spiral

Sure the ECB will support the EUR and there will be dip buying as short position cover, but civil unrest Irish style is on the cards and the European Union being one for all and all for one, we should see civil unrest, protest, riots extend across Europe. A major sell pressure will form on the EUR if a country leaves or is kicked out.

from NYT


"DUBLIN — Acting to secure a $114 billion international bailout, the Irish government announced plans on Wednesday for steep tax increases and sharp cutbacks in its social welfare state.

The austerity measures, which would slash public spending by $20 billion over four years, would help pay for a severe banking crisis that has depleted the country’s finances and led to a dramatic weakening in the government that is likely to see Prime Minister Brian Cowen ousted from office early next year. A crucial, separate 2011 budget is to come to a vote on Dec. 7.

A throng of protesters shouted outside the Finance Ministry as Mr. Cowen and Finance Minister Brian Lenihan unveiled details of how the government planned to slash the deficit to 3 percent of domestic gross product in 2014, from 32 percent. Details of the plan were released as the government prepared to effectively nationalize two troubled banks that have bled the state of money, and as Standard & Poor’s lowered Ireland’s credit rating, citing concerns about how much the government was borrowing and about the vast amounts needed to shore up the country’s banking system.

In a speech Wednesday afternoon aimed at bolstering national morale, Mr. Cowen urged Ireland to “pull together as a people to confront this challenge, and do so in a united way.” He said the four-year plan would raise money mainly by taxing those who earned more, while going easier on those who had less. But he also warned that the “size of the crisis means no one can be sheltered.”

Mr. Cowen refused to answer questions about when he might step aside, an outcome that has gained momentum as opposition politicians press for his removal and the electorate blames his government for wrecking Ireland’s economy.

The prospect of political chaos in Ireland, and fears that a splintered government might roll back deficit-cutting measures amid public ire, had worried European officials and financial markets. The events in Ireland have led investors to turn their attention to the troubled economies of Spain and, in particular, Portugal. On Wednesday, Portuguese workers staged a huge strike to protest government austerity measures designed to get the nation’s finances under control.

In Ireland, trade unions were also warning of “civil unrest” and planned protests in Dublin on Saturday"

And belgium isn't even in the PIIGS

European economic woes are getting worst:

Re: Belgium is now looking problematic from Reuters 24/11/2010

"The cost of insuring Spanish, Portuguese and Belgian bonds against default rose to record highs on Wednesday as Ireland's debt crisis spilled over into other euro zone debt markets. "Fears of contagion permeate the market, despite the (Irish) bailout earlier this week," said Markit analyst Gavan Nolan, referring to Dublin's request for European Union/IMF aid. Overnight, ratings agency Standard and Poor's cut Ireland's credit rating to A from AA- and placed the sovereign on creditwatch negative. Five-year credit default swaps (CDS) on Portuguese government debt rose to 510 basis points, up 21 bps on the day, according to Markit. This means it costs 510,000 euros to protect 10 million euros of exposure to Portuguese bonds. Irish CDS was also higher on the day, 16 bps up at 595 bps"

10-yr UST yield is up again

As discussed in 10-yr UST 2.9110% crushes attempt at Dow and S&P500 rallies

After the thanksgiving (US) when every second person says there is going to be a stock market rally...yeah a contrarian play again.

The 10yr is going upward again, could it breach 3.00%?

The Dow successfully creates another 'bulltrap'

As discussed in Relief rallies on soon-to-be Ireland bailout or a bull trap? Watch HFT bid/offers for 'grind' patten and the day/s after also discussed in this post No relief rallies re: Ireland bailout (22/11/2010). The Dow, amongst other indices, have been successful in creating 'bull trap' trading environments in the last month of so with the unusual 'grinding' of ranges once the index tops out. The grind occurs after a rally, usually from marked up distribution on lowish volume, in this case at 10.10am ( when the rally started. In which the range then grinded (on low volume) until the close of trading, obviously attributed to High Frequency Trading (HFT). It then appears (towards the end of the close) that a flood of 'dumb money' poured in which was the large volume spikes prior to the close, either that or POMO (Permanent open market operations via the Fed) - which is essentially dumb 'hot' money.

Lethal.

The Dow's topped out range is between 11000 and 11400, refer to *pivot points and the trading ranges, with the *50ma being the 'grind' HFT support. With the way this market is trading and the risk 'on' and risk 'off' influenced interaction which occurs in a very short time scale, I don't think there will be huge 100+point rallies breaking through the 11400 resistance. Instead a sell on the open of next day of trading.

Refer Dow charts:

Note *50ma, and the price stabilizing along the *50ma support, also note pivot point ranges. Also note OBV and ACD trending downward.



Dow with a marked up distribution rally (lowish volume) at the start pf trading, a stabilized 'grind' patten on low volume, then a spike in volume at the close of trading.

Tuesday, November 23, 2010

Major war/conflict cycle commencing? (update 6) Nth/Sth Korea

Although it is not uncommon for skirmishes take place between Sth/Nth Korea, normally resolved with diplomacy or intervention (verbal) by the US/China/Japan. But this time a daylight attack on a Sth Korean claimed Island could up the ante into broader tensions and/or conflict.

from CNN

(CNN) -- A disputed maritime border. Long-standing tensions. And Tuesday, a sharp escalation of hostilities. North and South Korea fired at each other for about an hour on an island that sits off a disputed border. The deadly skirmish raised fears of war between the two rival nations, once again spiking tension in the entire region.

How did the latest hostilities begin?

South Korea said North Korea fired artillery Tuesday toward the border between the two nations. Two South Korean marines were killed and 18 soldiers and civilians were wounded.

South Korea had been conducting maritime military drills, which the North called "war maneuvers."

The North accused the South of "reckless military provocation" for firing dozens of shells inside North Korean territory around the South Korean island of Yeonpyeong.

Plumes of smoke billowed from the island of 1,300 people but it was not immediately clear how much damage was incurred. Many residents were fleeing to the South Korean port of Incheon.

Why did this happen?

Tension has been running particularly high in the Korean peninsula after the March 26 sinking of the South Korean warship Cheonan. Tuesday's incident, however, is one of the most serious that has occurred in recent years.



The hostilities come as North Korea is undergoing transition -- the ailing and reclusive leader Kim Jong Il is believed to be in the process of transferring power to his son Kim Jong Un. Some analysts believe upcoming internal changes have prompted North Korea to flex its military muscle in recent days.

Tuesday's violence was also preceded by the revelation of a North Korean uranium enrichment program.

Has this happened before?

Yes, Yeonpyeong Island has come under attack before. Last January, South Korea reported that the North had fired shells that fell in waters north of the Northern Limit Line, the de facto inter-Korean maritime border.

North Korea wants that border redrawn farther south.

Over the past six decades, small-scale skirmishes have flared repeatedly along both land and sea borders as each state aims to reunify the peninsula according to its own terms and system of government. Deadly naval clashes occurred along the demarcation line in 1999, 2002 and 2009.

What is the history of conflict?

After Japan's defeat in World War II, Korea became a divided nation, the capitalist South supported by the United States and its Western allies and the communist North an ally of the Soviet Union.

Cold War tensions erupted into war 1950, devastating the peninsula and taking the lives of as many as 2 million people. The fighting ended with a truce, not a treaty, and settled little.

Technically the two Koreas are still at war.

Besides the border skirmishes, other incidents also have proven provocative. In 1968, North Korea dispatched commandos in an unsuccessful attempt to assassinate South Korea's president. In 1983, a bombing linked to Pyongyang killed 17 high-level South Korean officials on a visit to Myanmar. In 1987, the North was accused of bombing a South Korean airliner.

What happened with the Cheonan?

South Korea said a North Korean torpedo last March sent the warship Cheonan to the bottom of the Yellow Sea off the Seoul-controlled island of Baengnyeong. The sinking, also in the border area, killed 46 South Korean sailors.

South Korea was outraged by the incident. North Korea vehemently denied any responsibility, even after an international investigating team blamed North Korea. The United Nations Security Council statement condemned the attack but stopped short of placing blame on the North.

Will the two nations go to war?

South Korea put its military on high alert following Tuesday's exchange of fire. But whether that will translate into further military action is impossible to predict.

Events in the past few months suggested a slight thawing of icy relations.

North and South Korea had begun discussions on the possible resumption of reunions of family members separated by the Korean war and North Korea has requested military talks. In early September, the South offered food aid to the impoverished North for the first time in three years.

Given the closed nature of North Korean politics, it's hard to tell what changes the new leadership of Kim Jong Un will entail or whether re-engagement is on the table. Another wild card is the influence of China; some South Koreans fear a Chinese takeover in the event of a North Korean collapse.

Some analysts viewed Tuesday's exchange as North Korea flexing its military muscle in the light of its leadership transition. Others said it was related to the nuclear issue.

How will nuclear talks be affected?

Washington accuses Pyongyang of running a secret uranium-based nuclear program. The United States, along with the two Koreas, Russia, Japan and China, have been involved in what is called the Six Party Talks.

But those talks have been slow and arduous and in limbo since 2008. And after the revelation of the North Korean uranium enrichment facility a few days ago, the resumption of talks seemed in jeopardy.

Stephen Bosworth, the U.S. special envoy on North Korean denuclearization, said Tuesday's hostilities will prove a further obstacle.

Choi Jin-wook, senior researcher at the Korea Institute of National Unification, said the North is "frustrated with Washington's response to their uranium program and they think that Washington has almost given up on negotiations with North Korea."

"I think they realize they can't expect anything from Washington or Seoul for several months, so I think they made the provocation," Choi said."

Monday, November 22, 2010

The AUD is becoming extremely overbought. (update 9) - Shanghai collapses down over 2%



...and the AUD just sits there. Now that IS an ominous malfunction.

Refer: China inflation/hall marks of hyperinflation from Bloomberg

"China’s plans to rein in prices include selling state food reserves, stabilizing the cost of natural gas and cracking down on speculation in and hoarding of agricultural products, the State Council said. The aim is to damp food inflation that reached 10 percent in October, more than twice the 4.4 percent headline rate."

took out the Shanghai on China tapping food reserves, may lead to commodity/steel/iron ore reserves.

Are HFT's supports at 1.36 EUR? Refer April 15th 2010. Support broken. Now @1.35 - a possible panic sell on Ireland problems/Spain/Portugal(update 4)

It's back on:




Good to watch UST's to see how much the yield flattens, problems? Yeah of course, the amount of new bonds being issued on global markets is out of fucking control.

Yields should hold steady or incline upward on long dated bonds. Interest rates are going up baby...and leveraged/indebted nations are going take further hits.

No relief rallies re: Ireland bailout (22/11/2010)

I was correct: please refer to Relief rallies on soon-to-be Ireland bailout or a bull trap? Watch HFT bid/offers for 'grind' patten, also Risk aversion coming back (update 3) - Ireland bailout looming (update 3)

Apart from a technical analysis as far as saying that most indices (particularly the Dow) prior to the IMF/EU bailout package for Ireland showed an over confidant and over optimistic buy up, that 'grinded' a tight bid/offer range to an almost horizontal line. We know this is HFT trading, we also know how vulnerable HFT trades are (due to rapid buying and selling) when the market losses confidence and begins to sell. Any bot trading, like humans, panic and sell; which can be influenced by negative news on political/market uncertainty. We saw this on May 6th 2010 (flash crash) which was primary based on the short selling of the Euro and the possible default of Greece; a sell can be dramatic as long positions are then scaled into short positions; on mass.

At the moment the markets are running on thin liquidity with sell off's that are usually followed by a consolidation before the close of trading. That is an ominous patten.

From the close of the 18th/11/2010 a bull-trap was formed, this might be the trading trend as gaps are filled with sells orders on an open. So I don't think we are going to see massive breakouts on 100points rallies towards the end of 2010. Too mush risk about, that and the market is finally waking up to the fallacy of 'bailouts' and ineffective Federal Reserve money printing, there will be corrections that may send the Dow, S&P500 much lower.

The market will need to factor in political ramifications of the Irish bailout, which it missed and comparing the bailout to what occurred with Greece was a bad comparison in the sense the Greek economy is smaller and quite irrelevant (as it was the short selling on the EUR and bond yields that caused a alarm to go off at the ECB/EU). The main problem economies in the PIIGs are the trillion dollar economies like Spain; the political/social and economic shocks would reverberate much harsher in global markets than Greece. Ireland is a wake up call because the populous are the ones who will lose out on a bailout package i.e protests, riots. This could extend further into Europe that may shut down Europe (industrial strikes) and cause political turmoil.

That is the fear.

Sunday, November 21, 2010

China adds more bonds to the oversupplied bond markets.

As discussed in Asian CDS markets are now oversupplied, China is now adding to the mass of bonds hitting the markets. Asia bond and CDS markets are hitting bubble status and when it bursts...

HONG KONG, Nov 22 (IFR) - China’s Ministry of Finance has announced a CNY8bn (US$882m) renminbi sovereign bond in Hong Kong, which will mark its return to the territory after over a year. In September 2009, the MoF tapped a CNY6bn bond. Launch of the new deal is expected shortly. The deal size remains at CNY8bn despite some rumours suggesting a scale-down to Rmb6bn. Bonds of 3-, 5- and 10-year and longer tenors are likely to be on offer. Bank of China (Hong Kong) and Bank of Communications, which handled MoF’s previous deal, are leading to the new issue with ICBC Asia. The CNY5bn part, consisting of CNY2bn 3-year, CNY2bn 5-year and CNY1bn 10-year, targeting institutional investors will be using a tendering method on the Central Money markets Unit (CMU) of Hong Kong Monetary Authority. And, the rest CNY3bn for a tenor of 2 years will be offered to the retail investors. “This will facilitate the development of Hong Kong's RMB bond market by enlarging the scale of RMB bond market in Hong Kong, helping set the pricing benchmark for other RMB bonds, and increasing the participation of institutional investors,” according to a spokesman at the HKMA

and

China Development Bank will offer on November 25 at least CNY30bn (USD4.5bn) of 5-year financial paper, which comprises of a CNY10bn fixed-rate tranche with a CNY7.2bn greenshoe, and a CNY10bn floating-rate tranche referenced to the 1-year deposit rate with a CNY6bn greenshoe, and a CNY10bn floating-rate tranche referenced to the 3-month Shibor rate with a CNY6bn greenshoe. The purpose of the three-tranche feature is to set benchmark and establish relevancy among different structures for the domestic bond market. Selling concessions are 10bp for all three tranches, and additional 5bp on basic underwriting amounts for the fixed-rate and the 1-year deposit rate linked tranches, but no basic underwriting requirements for the Shibor rate referenced one. Settlements will all be on December 7. Outstanding 5-year fixed-rate policy bank paper was quoted at 3.86% in the secondary market, while CDB’s last 5-year floater tap was a CNY15bn deal on October 28 at 8bp over the 3-month Shibor rate. Prior to the new deals, CDB has raised CNY730.8bn so far this year, surpassing CNY570bn from 23 issues in 2009.

Risk aversion coming back (update 5) - Ireland bailout/PIIGS tumoil just begining (update 1) - Portugal

It begins
from Reuters

"(Reuters) - Portugal's budget deficit and public debt are higher than those reported by the government, which is trying to regain investor confidence amid a debt crisis, the leader the main opposition party said on Saturday.

Pedro Passos Coelho told a meeting of his Social Democratic Party items like state-run companies' debts were not included in the overall public debt, which the government puts at 82 percent of gross domestic product this year.

He said that the "true" total public debt stood as high as 112 percent of GDP, while the budget deficit should be at 9.5 percent of GDP, far above the minority Socialist government's target of 7.3 percent for the end of the year.

"The state has for many years been removing from the budget a series of activities, which has made a large part of our numbers fictitious," he said in televised remarks.

Government officials were not immediately available for comment. They have previously denied similar allegations by smaller opposition parties, saying that the statistical and budget data were regularly monitored by Brussels."

Risk aversion coming back (update 4) - Ireland bailout/PIIGS tumoil just begining

When we talk about turmoil, we are not taking about market turmoil per se, as in the markets. Which adjust to bailouts/yields/CDS spreads all done in a less humanistic basis; an impersonal drive to protect assets. What we are taking as far as turmoil from a humanism perspective is that political and social upheaval occurs more intensely when goverments, 'custodian' type bodies like the IMF start meddling in natural ebb and flows of boom bust cycles, done in the idea of maintain stability. The arrogance is that they believe that financial stability, in their definition, should be constantly supported and controlled . We know this impossible re: collapse of communism, and the US recession and problems relating to the 'bailout' mentality of Barack Obama, who is now essentially a lame duck president. The point is, attempting to protect or insulate the status quo only allows the bad management, or bad businesses to survive; when what should have occur is a natural restructure: social/business/economy etc. But they trying a desperate attempt to justify a theory that simply does not work. In other words allow the markets correct naturally and adapt, we will ALL be better of in the long run. So the ridicules European Central Bank, the pointless International Monetary Fund and the ad hoc irrational decision making of the European Union solution to 'market' problems; is to create a 'cartel' of asset support, or economic support of countries that will should be allowed to fail and then rebuild them stronger. Rather their 'bailout' mentality has never worked in European history, strong and innovative nations evolve from change (social/economic).

That is life. It's never smooth or easy, it is a hard reality of dealing with change and uncertainty. We need support from time to time, but done with the idea of self sufficiency. A lesson that has been ignored and attempted to be remove from the public psyche; the idea replaced with a custodian rule of order, an attempt to maintain structure based on a rigid status quo.

The bailouts of the indebted badly managed PIIGS: Portugal, Ireland, Italy , Greece and Spain, so far has been Greece and now Ireland. The European central bank has been keeping the rest of the 'zombie' countries alive with constant bond purchases. The whole thing joke and a bad one, Greece will NEVER be able to pay it's loans back to the EU/IMF, the country is so economically wreaked it's basically a writeoff that should have been WRITTEN OFF, not bailed out. Ireland is the same, in fact it's worst a soon to be flow of 70billion (EURO) worth of European taxpayer money and IMF loans are going to be pumped into the Irish banking system, that, in their insane economic theory will then go into the wider ecomomy. Of course, the Irish banks will suck the bailout money dry, the pitiful Irish goverment will then attempt a push at austerity onto the populous; cutting basically everything but allowing international companies/banks to exploit Irish weak corporate taxes

It won't work, with the rest of the PIIGs hopping to tap bailout monies for their incompetence, is like giving a 'mentally unstable' drug addict more drugs

The EU/IMF are not only delaying the invertible they are fueling a more brutal restructuring of the European Zone; it will be the social and political upheaval that will cause the major pain for everyone in Europe.

Thursday, November 18, 2010

Risk aversion coming back (update 3) - Ireland bailout looming (update 3)

A bet the whole thing will be a confusing flob? Hey? Alright it's my cash...

from WSJ

"Anxiety about Ireland has rubbed off on other financially shaky euro-zone countries. On Wednesday, Portugal shelled out a lofty interest rate to attract investors in a routine auction of government debt. On Thursday, a Spanish auction fared better, but the country still had to offer a yield that was about half a percentage point higher than when it last issued debt two months ago.

Jean-Claude Trichet, president of the European Central Bank, also sounded an alarm Thursday, saying he had "grave concerns" about how much was being done to toughen the EU's fiscal-discipline rules, which were widely ignored for most of the past decade.

Trying to quell public furor over how much the Irish government has already spent in vain on bank-rescue efforts, Mr. Lenihan said an international bailout "would not necessarily" create additional burdens on the taxpayer beyond fees for the borrowing.

Still, borrowing tens of billions of euros a year could add billions in extra interest payments for the Irish government.

Any loans also could come with conditions attached by the IMF, , which has dispatched a team of about a dozen economists to Ireland, and expects to start working on Friday."

China is about to crash (update 4): Inflation crash HK on the rader (IMF)

Basically the IMF, via Hong Kong, is underscoring the big worry of China's property market/s

from WSJ

"HONG KONG (Dow Jones)--The International Monetary Fund warned Thursday it sees increasing risks of a property bubble in Hong Kong amid continued liquidity inflows and rock-bottom interest rates coupled with tight housing supply, urging the city's government to take further measures to rein in the booming real estate market if the asset-price inflation continues.

The IMF said in its annual review of the Hong Kong economy that while the city has returned to robust growth, it sees rising inflationary pressures fueled in large part by soaring property prices and a stronger Chinese yuan.

"These pricing pressures will become increasingly visible in the coming months with inflation expected to reach around 5% by end-2011," the IMF said in its review under the Article IV consultations.

The organization said it expects Hong Kong's gross domestic product to expand 6.75% this year, with the growth moderating to 5% to 5.5% in 2011.

The IMF said that Hong Kong's fixed exchange rate system with the U.S. dollar creates challenges going forward in preventing inflation and property price bubbles. The exchange rate means Hong Kong essentially imports the currently very low interest rates set by the U.S. Federal Reserve.

"Hong Kong has monetary policy determined by the U.S. in an economy growing much faster than the U.S.," said Nigel Chalk, a senior advisor of the IMF.

Chalk said a main area of concern to the IMF is the rapid increase in property prices in Hong Kong. For now, however, the IMF feels prices don't reflect "misalignment or disequilibrium." Tight land supply, low interest rates, rising incomes and rising rents all justify the increase in housing prices, he said.

The concern is that should property prices continue to accelerate at roughly 20% a year, as they have the past two years, it could create a disruptive scenario when the economy slows.

"Our concern isn't now, it's a prospective concern," said Chalk. The use of so-called Hibor mortgages, in which the interest rate floats according to the benchmark Hong Kong interbank offered rates, puts added risk on homeowners in a downturn. A slowing economy in Hong Kong and China, combined with a healthy economy in the U.S., would mean falling home prices with rising interest rates.

"You could end up where the property market starts to deflate, prices going down, but payments on household mortgages are going up. It becomes harder to pay your mortgage on an asset that has less value," Chalk said.

The IMF said measures taken by the Hong Kong government to safeguard financial stability amid the property price inflation is essential and should continue. It said the government should consider adopting more measures, such as further increasing transaction levies on property sales, should prices continue to soar"


I wrote a blog post (on my old blog, please click here) about the pre 2007 inflation spike that lead to the 2008 market collapse. Mentioning the Chinese inflation problem

Aspects (from above link) of the China inflation story (pre/post 2007) came from the Bank of International settlements article appearing in the Telegraph June 2007

"The BIS said China may have repeated the disastrous errors made by Japan in the 1980s when Tokyo let rip with excess liquidity.

The Chinese economy seems to be demonstrating very similar, disquieting symptoms," it said, citing ballooning credit, an asset boom, and "massive investments" in heavy industry.

Some 40pc of China's state-owned enterprises are loss-making, exposing the banking system to likely stress in a downturn.

It said China's growth was "unstable, unbalance, uncoordinated and unsustainable", borrowing a line from Chinese premier Wen Jiabao"

Relief rallies on soon-to-be Ireland bailout or a bull trap? Watch HFT bid/offers for 'grind' patten.

Particularly the Dow, as a massive bull trap has formed. Low volume towards the close of trading, marked up distribution on buys and the unmistakable 'grinding' patten (top end) of High Frequency Trades throughout out the trading period. No attempts at further breakouts with a rally that mirrored the sell a day earlier (17/11/2010) with the HFT's grinding along the bottom end.

The rally or 'relief rally' started on the IMF/EU and Ireland bailout plans that are now filtering through to the broader market. It was a rally on the premise of a bailout of Ireland's banking system minus a bailout of government. Of course Ireland is trying to play a bluff and get the banking sector bailed out, therefor avoid a total government bailout (like Greece). This won't happen and Ireland fiscally will be bailed out. A smoke and mirrors trick to instill confidence into the market which shrank the yields of Irish bonds and narrowed the credit default swap (CDS) spreads.

But, I think a rally on Ireland's overall bailout may not happen, only because yields on Irish bonds may still increase as the likely hood that the rest of the PIIGS will be giving bailouts such as Greece and now Ireland. Germany may decided to rethink the EU's haphazard country bailout fund; as the costs to Germany may be extreme - with Portugal eyed next and Spain then Italy. Debt markets will be choked and oversupplied with all the new debt waiting in the pipelines. The problem? Will the European Central Bank (ECB) still gobble up European debt? For this they have to narrow yields (to keep interest rates down) thus pumping liquidity into Europe, again Germany (who has nightmare inflation memories) may put a swift end to the PIIGS/EU bailouts; and do what should be done; restructure indebted nations. Portugal maybe the upcoming experiment. Which may mean shrinking the European Union i.e kicking out nations, letting them back in only when they have got their shit together.

Whatever ones opinion is of HFT trading, it's here to stay. However it is how one adapts to the illusion of stock price stabilization (as far as 'grinding' bid/offer spreads) via HFT trading. As long as governments and central banks 'band aid' fractured economics and insolvent banking system and countries, we will see these wild swings from sell to buy and buy to sell and with expectations that HFT will smooth out bid/offer ranges thus ensuring a possible meltup or meltdown.

Which would be a bet or gamble as the market grinds a trading range for the day.

The bull trap that has formed on this market is quite an interesting one in the sense that the relief rally drove (using the Dow as an example) a major overbid (5 shares bought for every 1 sold): on the opening 18th Nov 2010, the Dow's low @11010 which then went to the high @ 11151, a 141 point change, as the market rallied on the opening session. At 2.00GMT it consolidated @11125 then hit the daily high @11199 a further 74points. Some further consolidation as the bid/offer spreads tightened and the Dow grinds out for the rest of the trading day closing @ 1181

Note: the 14day Kairi Relative Index and the Relative Strength Index indicators both show price divergence from the closing price 19th Nov 2010, which indicates the Dow is overbought. More particularly is the KRI (black-line overlay with the Dow) showing a price swing down (high%) = sell signal.



Chart below (Dow) shows the grinding from the bottom (17/11/2010) and top (relief rally 18/11/2010)

Wednesday, November 17, 2010

Risk aversion coming back (update 2) - Ireland bailout looming (update 2)

As the market awaits Ireland's bailout do we see a massive relief rally, or a sell off?

Again, a contrarian play and it's all about yields that should go ballistic in the next 24hrs.

Risk update 18/11/2010

  • Euro zone members begin the bail out Ireland's banking sector (i.e Ireland) with the IMF, markets are worried about delays with Dublin still undecided whether to request the aid. Irish bonds @ 30% is a reflection of that nervousness.
  • Spain and Portugal: are also making investors nervous after data showed Spain’s economy stagnated in the third quarter and after yields spiked at a treasury bill auction in Lisbon. So if the EU/IMF and Ireland hobble a bailout package together, Spain and Portugal will line up next.
  • Beijing: That is making global investors jittery as it could cool demand in the world’s fastest growing major economy at a time of failing recovery in Europe and the United States.
  • The Fed’s USD600bn quantitative easing programme re: Republican lawmakers wrote a letter of protest to Ben Bernanke. The letter said the bond-buying campaign will debase the dollar, spawn inflation and generate asset price bubbles.
  • US Treasury prices falling as rising political pressure, both at home and abroad, re: Fed to back off from the plan has caused Treasury yields to rise and lifted the dollar to multi-week highs.
  • Financials were sold after the Federal Reserve said it will evaluate the ability of 19 large financial institutions to withstand losses in "adverse" economic scenarios. Which would mean that a liquidity/credit crunch could be on the way if Eueope goes into a bailout confusion direction add the Foreclosure mess in the US

Tuesday, November 16, 2010

Hang Seng listed Aust lithium miner (Galaxy) - Mini Flash Crash

One of the smaller darlings of the Australian mining (rare earths/lithium) 'small cap' stocks. Ambitious in it's business model and 'selling' a lot of it's status as a lithium miner to Asia, specifically to China. Galaxy (GXY) soon to be listed on the HK (Hang Seng) stock exchange, but when China's Shanghai composite had a meltdown on the 16th November 2010, closing very close to a -4% wipe-out, it sent reverberated sell signals thought out the Hang Seng exchange (which appears to be very dominated by HFT orientated trades).

Hence causing a mini 'flash crash' on Galaxy's stock price on the Australian stock exchange (ASX)



Compared with the Hang Seng Index (in which Galaxy is listed on)

Asian CDS markets are now oversupplied


Note graph with out Japan and Australian debt insurance, can you imagine if they were added?

CDS spreads should still widen even on Ireland's soon-to-be bailout add confusion and uncertainly: ...then there is China apparently trying to slow its inflation crash.

You'll have net sellers galore.

Risk aversion coming back (update 2) - Ireland bailout looming (update 1)

Of course Ireland's stubbornness, like Greece, of not admitting the country is financial fucked doesn't help them come to terms how fucked they really are, it shows poor leadership and arrogance. I hope the markets punish the fiscal irresponsibility of Ireland (and the rest of the PIIGS) even with the potential bailout being implicated. As the poor citizens of indebted countries deal with arrogant and pitiful leadership.

On a political front seeing the unsettled and rattled government of France (non PIIG) make suggestrions about how to solve Ireland debt woes is beyond comical. The fact of the matter is that France is a p-hair away from insolvency.

"PARIS (Dow Jones)--French finance minister Christine Lagarde said Tuesday a plan to respond to problems in Ireland's finance could include bilateral agreements.
Lagarde was speaking to reporters after European finance ministers agreed the European Commission, the European Central Bank and the IMF should travel to Dublin to prepare activation of the European Financial Stability Facility, the emergency loan program created earlier this year by the European Union to help euro-zone countries that need help refinancing their debts.
The Wall Street Journal reported earlier Tuesday that European finance ministers are working on an international aid package for Ireland and want the U.K. to make bilateral loans to Dublin as part of a larger aid package.
"If bilateral instruments are suggested, why not [...]? It is one of the options that can be envisaged," Lagarde said when asked whether the U.K. might provide an additional element in the plan.
Lagarde said the Irish government is determined to act quickly in talks with the European Commission, the ECB and the IMF.
This work involves looking verification of risks, the situation of banks and then making recommendations, she said.
Asked if it will be a question of days for that work to be completed, Lagarde answered "I think so."
Lagarde said the situation in Ireland is not the same as the situation was in Greece as Ireland's sovereign debt situation is under control and it has implemented a courageous budgetary adjustment.
She also said the Ireland situation is different from Greece's because banks were involved and required restructuring.
Still, she said observers shouldn't jump to the conclusion that it would be a bank rescue package."

Monday, November 15, 2010

Are HFT's supports at 1.36 EUR? Refer April 15th 2010. Support broken. Now @1.35 - a possible panic sell on Ireland bailout (update 2)

Rather than rallies, ala when Greece was bailed out in May/June 2010 by the EU/IMF, it will be just a panic sell with short positions filling in the blanks.

Why no rally on bailout? Because Portugal and Spain will be next, then Italy.

10-yr UST 2.9110% crushes Dow and S&P500 rallies.


10yr UST



S&P500

Dow

Yes, the fog has descended. With yields rising the Fed's idea to propel stocks upward is failing miserably, even though we are at two days of the $600billion buy up of US Treasuries by the Federal Reserve. The plan is going haywire

from Reuters
:

A rise in 10-year Treasury yields to a three-month high pushed the dollar, with the Wall Street Journal reporting that a group of Republican-leaning economists was launching a campaign calling for the Federal Reserve to drop its plan to buy $600 billion of Treasuries.

So we have some internal disputes occurring namely the Republicans who correctly are concerned with long term ramification of printing excess liquidity into the system, debasing the US Dollar and leading the US economy further into inflation.

From Market Watch

NEW YORK (MarketWatch) -- U.S. stocks struggled to hold their gains late Monday as Treasury prices fell sharply, denting cheer that came with a jump in retail sales and after Caterpillar Inc. announced a sizable acquisition.

"Treasury's are getting splattered and 10-year yields are at three-month highs; if rates are going up, it's not a good thing for equities. This is the Fed's worst nightmare," said Peter Boockvar, equity strategist at Miller Tabak.

The grinner's in all this are the foreign debt holders, whose currencies have been over bidded on a weak USD, a somewhat sigh of relief. But major stock sell off's (globally) which could speed up towards the end of 2010 may lead to a further monetization from the Fed, still this should be offset with confusion, turmoil and internal disputes at the direction of the US ecomomy. Europe and China will also add to the tensions (economically), that may further lead to economic/trade conflict/s.

The fog of war falling over the markets may only get worst as the global economy reaches closer to it's tipping point.

Market volatility will be extreme towards the end of 2010 and into 2011

Sunday, November 14, 2010

The markets are entering a 'Fog of War' - Yields going upwards after the Feds QE2

As discussed in Contrarian play on the upcoming Permanent Open Market Operations (POMO) by the FED ala 600billion buy up of US Treasuries and Risk aversion coming back (update 2) - Ireland bailout looming I was correct on the contrarian view on the beginning of the Quantitative Easing 2 and the warning signs from April/May/June 2010 when yields on short term to long term bonds went upward and stocks were sold, despite the Feds constant monetization of US debt. Although incorrect in my counter view on QE2 was that gold would rally.

The general belief of the QE2 effect (on stocks and UST yields) from blogs, to various commentary was that QE2, in it's beginnings which occurred on 12th November 2010 would propel stocks into a hyper buy-up on the back of POMO operations and send yields downward. As we are now all aware what did occur after the 1st day of the Feds QE2, yields moved up, stocks were sold off. This is the fundamental dilemma that sometimes what we think should happen actually doesn't happen, much like Nicholas Taleb's Black Swan theory for the markets. Essentially what we are looking at is the markets reacting to inflation expectations with the very real chance of cyclical inflation returning and retuning hard, with nice doses of risk aversion from both Europe and China. The simple explanation of US yields (apart from the major jump on the 30yr UST) moving slightly upward, whilst the Fed attempted to crush yields on short term US debt, is why would you want to hold it US debt (short/mid term) as yield payments decrease: say China?

The other factor too, this reminds me of the fantastic documentary The Fog Of War, is that you can run statically models, charts and try and calculate a percentage of what is needed to get the desired effect. The problem of course is the unpredictable and psychology of emotion and changing environments that if you cannot adapt to, you are lost. This happened in the Vietnam War, when the US government utilized advisors, the Fog of War discusses this re Robert McNamara (the former US Secretary of Defense). McNamara and others thought they could calculate an outcome for the Vietnam conflict; of course they failed and hence the term the Fog of War. So it's the adaption that is missed on unpredictability

What we may be entering now within the markets is a sort of Fog of War and unclear patten emerging that is occurring from geopolitical/and or political tensions. If Brazil's Guido Mantegasaid that we are now in a 'currency war', then conflict (defined by the term 'war') in the markets could extend into other aspects, such as trade protectionism and so on. Mix this with a descending 'fog' and expectations or statistical modeling to try and figure out the cause and effects will be rendered useless.

Thursday, November 11, 2010

Dubai misses a interest payment on 330million dollar loan (FT link)

China's 'CNY' says F*** you


China getting ready for a total Euro Zone slowdown and the Fed's QE2 to be a flop?

Decides to weaken the Yuan on a US dollar bid 'smokescreen'. Nice work

Contrarian play on the upcoming Permanent Open Market Operations (POMO) by the FED ala 600billion buy up of US Treasuries

Like this, most investors dump large chunks of US Treasuries (instead buying gold), US Fed buys up UST's via POMO, but yields stay high and increase (long dated US bonds), USD is bid, interest rates increase and market stays risk averse at best stocks struggle to rally.

dates of the POMO (NYFED)

Risk aversion coming back (update 2) - Ireland bailout looming

Getting closer to a complete IMF/EU bailout (Ireland), just as Greece was bailed out as discussed in Are HFT's supports @1.36 EUR? Refer April 15th 2010 (update 1); we may see a major sell off 'bailout news' the reason would be that the with Greece and possibly Ireland tapping the IMF/EU bailout fund, not only are the PIIGS on ECB bond buying life-support, but are economically dropping like flies. As a backlash against bailout of indebted countries will exasperate, more so from Germany. An eventual restructure of debt will occur, so essentially bankruptcy will be the final play. The market knows this and will sell on that premise.

Then there is the Federal Reserve 600billion print job, will that be a support to markets? Maybe not, after the 30yr (yield @ 4.32%) auction flop. Traders should quickly remember what started to knock the Dow and S&P500 rallies down in March/April/May 2010; was the high yield on the 30yr i.e pass on to 30yr mortgage rates.

Watch the EUR.

Oil on a 25mth cyclical bull run. Update 10 - Oil 'cruch' at $90?

If we are to believe that China's inflation is running as hot as it is, then there is a possibility that oil could 'crunch' economic growth, thus causing an inflation based oil 'panic'.

I saw a documentary about China's growth, it wasn't so much about the economic aspects (figures, charts and ramblings) that often, or in most cases, misses the intricacies of sociological issues relating to growth, development, trends etc. The one aspect of Chinese growth story is the love affair wit the car, the documentary was fascinating, for the first time in history the Chinese can enjoy driving a car, a freedom that was restricted to them when communistic dictatorship and oppression was at it's peak. Still, the car is that important symbol of that emulation of freedom that we take for granted in the West. Of course the problem is, the Chinese are net importers of oil, so is consumption and trends in buying cars, motorbikes or anything related to a combustion engine puts pressure on the oil price and price inflation.

Oil has been on it's 25mth cyclical bull run, with now the possibility of spikes in the oil price as it nears $90 a barrel. The combination at play is the weakening US Dollar and oil demand, inflation and supply not as prevalent as it once was re: peak oil theory.

Current oil price@87, November high@88 as at 1st-12th 2010

Wednesday, November 10, 2010

The PBoC are....(update 6)



f****** with you.

Inflation figures released and they show that China is burning hot like a nuclear reactor about to go critical. Problem is, the currency was fixed higher (steady@6.618 on day of CPI release), not lower against the USD. Meaning = China tightening (on blowout inflation) isn't so 'critical' otherwise the Yuan would be much lower against the USD (indicating a Strong CNY).

Conclusion: China is probably slowing, good to watch Steel prices and Merger & Acquisitions activity into 2011, but the best view is China's property market and its bubble/price movements.

China's inflation numbers: October 2010

Get ready for the Chinese inflation 'crunch'. If oil goes to $90+ (via USD weakness), China will have a sell signal from hell.

  • Oct Consumer Prices +4.4% on Year Earlier (F'cast 4.0%) -Media
  • Oct Producer Prices +5.0% on Year Earlier (F'cast 4.6%) -Media
  • Oct Industrial Output +13.1% on Year Earlier (F'cast 13.5%) -Media
  • Oct Jan-Oct Urban Fixed Asset Investment +24.4% on Year Earlier -Media
  • October Consumer Prices +0.7% on Month Earlier
  • October Producer Prices +0.7% on Month Earlier
  • October Retail Sales +18.6% from Year Earlier (F'cast +18.7 Pct)
  • Jan-Oct Urban Fixed Asset Investment +24.4% on Yr Earlier (F'cast +24.3%)
  • Oct Retail Sales +18.6% on Year Earlier -Media

Lithium as a conflict/war trade

What do you buy (stocks) when conflict and geopolitical tensions arise? Apart from commodities, US dollar, government debt and defensive stocks such as energy/food etc; the other big play is Lithium, if China can cut a supply of rare earths (Lithium not a rare earth but in that basket of demand) to Japan and in less than 12hrs Japan releases the Chinese boat captain, please refer to the post Major war/conflict cycle commencing? (update 5) Japan/China and Inches away from an Asian trade war (update 4) - first shots fired China/Japan embargo (rare earths)

It would be a no brainer that china will want to also monopolize the Lithium market as well as owning majority rare earths.

"China hints at curbing exports of Lithium and other rare earth compounds


(AXcess News) Hong Kong - The Chinese government indicated over the weekend at the National People's Congress (NPC) in Beijing that it would curb the export of lithium and other rare earth compounds, opting instead to build a strategic reserve.

Hu'ercha, a deputy to the NPC from north China's Inner Mongolia Autonomous Region, said on the sidelines of the legislative body's annual session on Friday that China should set up a national reserve of rare earth resources and work out development strategies for rare earth-related new and high-tech industries "as soon as possible."

"The government should attach greater importance to the purchase and storage of the strategic resources," Hu'ercha stated.

Influencing the Chinese lawmakers comments is the fact that Hu'ercha is also mayor of Inner Mongolia's Baotou city, home to 75 percent of China's rare earth reserve. The Chinese politician urged the country to work out policies to support the development of rare earth-related industries and set up a development fund to strengthen basic research on rare earth.

Though China supplies about 90 percent of the world's rare earth, it has little say on international pricing due to inadequate industrial innovation and slow development of high-end products.

With China's booming growth in domestic auto sales, now ranked as the world's largest, Premier Wen may be listening to Hu'ercha and other Chinese party political backers as demand for lithium batteries and other products grow.

While lithium is not considered a rare earth and readily available, concentrations plentiful enough to mine economically are a different matter. Already companies like Korea's POSCO, the world's fourth-largest steel maker, are moving to build new sources of supply themselves while brine recovery technology lies at the forefront. POSCO recently made a rare bid to invest up to US $5 million in a junior exploration and development company's Mexico brine project if the level of lithium and other metals proved worthwhile. Chile, a hotbed of lithium exploration, is also the world's largest exporter. Pan American Lithium (TSX.V: PL), which entered into the letter of intent with POSCO, is also involved in a 100% company-owned lithium brine property in Chile. The recent earthquake in Chile delayed initial reports on Pan American's lithium property, though the Company continues to see record trading levels despite the delay."