Archive - Feb 14, 2011

Earlier today the Euro dropped to a three week low in the mid 1.34s, following a Reuters report that troubled German lender WestLB may have hit a snag in its restructuring plan. Per Reuters: "Aid for WestLB hangs in the balance, a source told Reuters
on Monday, as the bank struggles to come up with a rescue deal
as it enters the final stretch to present a restructuring plan
to the European Commission. "The WestLB news doesn't provide a great deal of optimism to
the euro at the start of the week."." Not at all, although the 100 pip move lower is par for the course for the one currency that has now absorbed all the vol of the Fed-manipulated and irrelevant stock market. The only question on most investors' minds is whether WestLB will follow Danish bank Amagerbanken A/S as the second one to follow with a senior bondholder restructuring per the new European guidelines. While Amagerbanken was small and isolated, it is time to see just how willing Europe truly is to put its insolvency where its mouth is.

Love means never having to say you're convicted...

The administration’s FY 2012 budget and one Fed appearance of note…There is a micro $1-2 billion TIPS POMO to celebrate Valentine's day.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 14/02/11

USDCAD has been in the strong short zone for a while, Fridays action saw a strong drop in the pair and has led to an equally dramatic change in retail positioning, retail traders are now 79.53% long USDCAD the highest level of retail positioning we have seen in a many month. GBPUSD has moved back into the Strong Long zone.

Ben Shalom Bernanke, we the entrepreneurs of the United States of America request that you divide one upcoming day's worth of asset purchases between Wall Street and us, to wit, may the tiny sum of $3 billion, minuscule juxtaposed with the hundreds and hundreds of billions of dollars you are feeding your Primary Dealers and their clients in your Quantitative Easing program, may the modest sum of $3 billion be used for a pilot program to purchase securities issued by American entrepreneurs in connection with the startup of 3,000 validly formatted new business enterprises, such $3 billion to be used to purchase $1 million of the Perpetual Subordinated Capital Securities of each. Your pilot program, Ben Shalom, will show results almost immediately, thereupon you should expand the program, first to $5 billion, a little more than half of one major day's worth of asset purchases, for the startup of 5,000 validly formatted new business enterprises, then to $7 billion, almost all of just one major day's worth of asset purchases, for the startup of 7,000 validly formatted new business enterprises. A validly formatted new business enterprise is one with a valid business purpose and whose management is mentored by the SBA's resource partner the Service Corps Of Retired Executives. The SBA will manage the Perpetual Subordinated Capital Securities positions purchased by the Federal Reserve System. Transactions will be executed on a first come, first served basis, venture capitalists aka vulture capitalists neither welcomed nor required.

With the economy strong, EM underperforming, US yields rising, and no signal of QE2 being extended, USD could be poised to rally here. The recent breakout in USDJPY could signal a shift of carry funding back to the JPY, as the summer 2010 double-dip fear-induced USDJPY plunge is unwound.