Archive - Nov 2010 - Blog entry

Both of Bernanke’s claims (that QE will help housing and spur business investment) are a crock. So what’s the REAL reason he’s frantic to kep interst rates low?

Derivatives.

According to the Office of the Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activities for the Second Quarter 2010 (most recent), the notional value of derivatives held by U.S. commercial banks is around $223.4 TRILLION.

Five banks account for 95% of this. Can you guess which five?

Banks, insurers and ratings agencies conspired to move junk assets that were guaranteed to implode - and implode they have. They were (Wall)Street hustling, 3 Card Monte style, but what most are dismissing is that the ponzi/hustle collapse has yet to truly happen!

Some say all this insanity is just greed and corruption run amuck. Others claim the political, financial and judicial process has been co-opted in some type of modern day Coup D’état. Might it be both and could it have taken place much earlier in the decade under the cover of some other triggering event?

Ooops

High interest rates aren't a crisis as Ben Bernanke assumes, instead they're a positive symptom of past mistakes which ensure that no more capital will be destroyed supporting what has already failed.

You can see that gold is mainly a negatively correlated trade against the dollar - it's there to protect your cash! You stocks are not cash, your TBills are not cash, your other commodities are not cash so don't make the mistake of over-protecting yourself because gold will crash with the markets - that's something a lot of people did not realize in our last crash as people panicked into the dollar and sent commodities right off a cliff along with equities.

One way this could play out.

What you have is a contest where you are trying to find the proverbial dog with the least flees on it, and at these levels, I am not sure the euro is the winner in this currency contest.

A fundamental restructuring America’s conduct of its foreign policy through the implementation of a quadrennial review is in the works. The US is executing a two pronged military/diplomatic strategy of stepped up bombing, while enticing the Taliban to the negotiating table. Before the US helps Pakistan, it must help itself first, through the raising of domestic taxes. Pushing for a common negotiating forum with Europe to bring Iran to the table on the nuclear issue. The START treaty with Russia on nuclear weapons control may pass in the Senate during the lame duck session. The US supports China’s peaceful rise, but the picture is “complex.”

"The love of money as a possession--a distinguished from the love of money as a means to the enjoyments of life--will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shutter to the specialists in mental disease."--John Maynard Keynes

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

The markets appear to be risk-off this evening as the JPY strengthened materially against the USD despite overall strength in the greenback. Within a few minutes the USD/JPY managed to fall 50 pips from 81.25 to 80.75, the Yen is now flirting with all time lows against the USD. This is extremely dangerous for the perfectly correlated markets, we are now waiting for Bernanke's Plunge Protection Team to step in to fight the fire. A collapse in the AUD/JPY translates into a drop in the ES sell-off. How will the Fed's turn the market to print green by end of day tomorrow?

Heck of a job, guys ...

Economist Jack Mintz from the University of Calgary got crowds buzzing at the western regional conference of the Canadian Pension and Benefits Institute, when he predicted that the defined benefit pension plan could make a comeback.