in ways such that I am close to being completely right or completely
wrong on both of them.
-The Federal Reserve will become active in the foreign
exchange markets. At different times of the year they will both buy and
sell dollars. Their objective will be stability. These efforts will be
referred to as “smoothing operations”.
-There will be no breakup of the Euro. Greece will not
pull out. The strong members will provide some relief for the weak. But
the problems will not go away and the possibility of some form of
two-tiered Euro will be a matter of open discussion. It is in this
context that the Fed’s FX intervention takes place.
In my opinion the decline of the Euro in 2010 has be orderly, up to the
last week. Two "big figures" on any given day is part of the adjustment
process that is necessary due to the changing fundamentals. That is not
disorderly. But we have lost five big figures in a week. That is a big
adjustment, but is still not the Central Banker's definition of a market
that would necessitate coordinated intervention. But it is getting
close. A few more days at the current pace would likely get us to the
point where some action may be required.
The problem is that the Euro/$ is the "go to" trade that reacts to every
bit of bad news that is coming out of the EU. I am not sure if the Euro
is falling because Spanish bonds are in the crapper or if Spanish bonds
are getting hit because the Euro is so weak. If the deep thinkers at
the EU central bank are in the later camp then they must be itching to
react. Everything they have built for the past 20 years is coming
unglued. They are unlikely to go down easy.
I dismiss the news/rumor/importance of the BIS being in the market. If
something is going to come it will arrive with a bang and it will not be
subject to any guesses. There will be clear statements by the ECB that
they have, “Acted decisively to stabilize markets”. They
will sell 10-30 billion dollars into the market over a few days. That is
not that big an amount in the FX markets, but it will have the effect
of re-establishing the notion of “two way risk”. It has been far too
easy to make money shorting the Euro. They need to change that
risk/reward equation.
This possible action could take a number of forms. Should it happen it
would look like one of the following:
A) The EU Central Bank draws down swap lines at the Fed and sells
dollars for its own account. This is the “Go it alone” approach. It will
not work. It will look like a weak effort that does not have the
support of the other central banks. It will fail in short order.
B) The ECB and the Swiss National Bank would intervene jointly. The
Swiss would buy Euros and sell the CHF. (They love to do that, but have
been bashed by the market in the past). While this approach would be
better than A, it would not get the job done.
C) The Bank of England joins in with the ECB and the Swiss. This would
be a hell of a party, and probably would reestablish a two-way market.
But I don’t think it will happen. There is too much election pressure
for the BOE to get involved, unless:
D) The Fed joins the festivities. That would be decisive, and with the
US cover the Brits would get in the game.
A and B will end badly, C will not happen. Only D has a chance of buying
two to three months to address some of the problems. At best this means
by the end of the summer we will be back at it.
It is equally possible that the global CBs will do nothing and the Euro
makes a beeline to 1.10. That approach will end badly as well. My
prognostications will not come true. If the Euro was to collapse, Greece
would be forced out of the Euro Zone, and it would be followed in short
order by a sharp decline in economic activity for 500mm people.
I made another prediction back in December. If A, B or the “Do Nothing”
plan are in the future, then I think this one will come home:
-Gold prices will trade as low as $900 and as high as
$1,400. $1,400 will come first.
years of history:
It amazes me how little things change
over time.
This is history going down....
euro usd 127. euro death watch
hah! goodluck fucking with multi-trillion markets! This ain't the NYSE fools.
I think we are seeing wide spread loss of faith in the EU. Their situation is dire and the horizon looks even worse with PIS. Short term, the bailout passes tomorrow and EURO goes down.
The election itself is today, but the forecast is for a hung Parliament and I imagine that the BoE would not want to do anything very dramatic until a new government is formed.
I will go with what Peter Schriff and Jim Sinclair are saying..
The bottom line is that Greece (and probably some other Euros) can no longer feed it's public sector, preemptive austerity is clearly a non-starter and countries like Germany won't carry them forever. Collapse is a question of 'when' not 'if'.
Short of abandoning the currency all together Euro member countries could kick laggards out one by one or engineer a spin-off for a bunch of them at once into a Euro minor league.
if "do nothing" strategy is what's going to happen, then the environment is going to be even more deflationary than in 2008, which means gold 800, and then 1400, and then perhaps 2000. so, i agree with the prediction, and with gold prices. just not the sequence of price changes
Look at the price action today. What ever your deflation expectations were a day ago, they are worse today. The largest economic bloc on the globe is unwinding. There are legitimate questions on the safety of both the banks and the Governments. Are they good for the money? Who is backing that up?
Yet gold is up 2% vs dollar and 3% vs Euro. So it is the panic that is drovoing the price. Not any inflationary expectations.
So in this enviroment gold is running against traditional logic. It is running against all forms of paper.I don't think we are even half way through this blow up. But in two or three months what will be left is a very deflationary outlook and gold will react to that.
So for me, Higher first, lower later. We shall see.
bk
As the Ponzi unravelling accelerates...
Germany needs a lower Euro. Straight to 1.10, do not pass go, do not collect jack shit.
@zerosum, that means that if a Mercedes E class drops from $50,000 to $45,000 you are buying?
Germany needs strong global growth far more than a slight currency advantage over the dollar or ruble.
That would be like you in the US waking up tomorrow and saying, "Oh gee! The price of most of the things I use have gone up in price by 30%".
Trust me they hate this. They loved the strong Euro and the advantages it brought. Screw exports. Travel is more fun.
It's how they fix their balance sheet; they are the only country in a position to do that in the face of this nightmare. I work closely with a small German tech company that is staffed entirely with extremely bright PhD engineers; every last one of them is rooting for a lower Euro to come out of this. And they do like their vacations very much.
Back in the early 80's you could travel to Europe and live like a Latin American dictator on paper route money.
Bring it on!
Anybody know how to buy shrimp futures?
'Panic buying' driving up shrimp pricesUpdated: Wednesday, 05 May 2010, 4:43 PM EDT
Published : Wednesday, 05 May 2010, 4:43 PM EDT
INDIANAPOLIS (WISH) - Oil continues to spew into the Gulf of Mexico as a 12-ton device is being slowly moved to the site in an effort to cap the well.
The full impact of the spill on fishing grounds is not yet known. But it's already having an impact on fish prices. Shrimp supplies are the most affected by the Louisiana spill.
Dixon Fisheries on the west side of Indianapolis processes thousands of pounds of fish each year -- the fish ends of up in your grocery stores or local restaurants. So the company keeps a close watch on the available supply and the wholesale cost of fish.
Jim Dixon, owner of Dixon Fisheries, said, "The market has jumped about 30 to 40 cents a pound from last Friday and it's kind of a wait-and-see mode now."
Dixon said, "There is a good supply of shrimp, but what happens is there's been a lot of panic buying the last two three days."-
More earnings for Bubba-Gump fleet....
Here is how it's done:
http://www.youtube.com/watch?v=iLkNPjbaPTk
Here I was, expecting this to be an article about people using CB radios to communicate once the Internet breaks on SHTF day.
The Italian Author of "Il Gattopardo" , have his main character, a Sicilian nobleman, the Prince of Salina say, in front of the Garibaldi conquest of the South of Italy " We need to change everything...because everything can remain the same".
Italians have been cynical since the Roman Empire...but that if you don't learn from the past you really don't learn nothing is something they knew since then.
The Fast Money guys on CNBC have all been bandwagoning "short Euro" trades, all of those guys are pyramiding onto their already crowded positions.
Wondering what the catalyst could be that could blow these guys out of the water.
When the rumor of Spain needing 389 billion dollars is actually true.
Yeah, but.... Then they go into hedging that with their upside-down, straddled, side-saddled, hexagonally configured calls and puts. So, none of this is a pure-play on anything. (You can safely deduce that I know diddly about the mechanics of puts/calls for hedging purposes.)
All I know is that if anything happens to pensions the game will be over, so they have to keep equities up. I say they have a big tea party and the ECB toasts the BoE and the Fed for bringing the punch. Otherwise everybody is up the creek without a paddle, and QE would have been for naught.
This is getting hairy.......
That's a lot of scheming and manipulation. One sheds a tear to see so much effort over such a long period return us all back to ZERO.
Crying? Like this Italian man?
http://www.youtube.com/watch?v=_R-FZsysQNw
oh man, i laughed, i know i should have cried though...damn.