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Dumb And Dumber

Tyler Durden's picture





 

From Nic Lenoir of ICAP

As the competition as to who will print the most money & debt to manufacture artificial growth rage, the US and the UK seem to be our two finalists. China was disqualified as the lack of transparency makes it difficult to quantify how much public spending is done in order to pump GDP numbers, though we do not doubt they try thir very best.

All jokes aside, that's why the USD and the GBP have been generally the butt of the FX markets. Whether these currencies continue to weaken against the rest of the space, especially in the case of the USD, relies on what gives first: money creation or capital markets. As long as the markets don't force governments to stop, or a catalyst triggers a return to risk aversion, the ramp up will continue in equities as liquidity keeps pouring into the markets courtesy of the governments until the bubble levels become unreachable. Personally I would prefer the bubble to burst before it's too damaging but it's probably wishful thinking.

For those however who don't really want to call the end of the bubble and get too direcional, you can try investing in relative value between the two biggest printers of cash: the US and the UK. On the daily chart we see bearish divergence in RSI, but the RSI has actually retraced considerably from the highs, and at this point it could be a breather before a run up in GBPUSD. The 50 day moving average which has been a fitting envelop of recent moves has caught up with prices and we are currently consolidating before a break-out either way. There is a very clear H&S pattern with the neckline coming in at 1.6150 which we failed to break yesterday. Zooming, we see that we have a morning star pattern on the daily candlesticks right on the neckline of the H&S. Taking a step back and looking at weekly chart, we see that we are getting close to a strong resistance in RSI though. Elements are conflicting which shows that the market is having a hard time picking the worst horse to bet on. Given the stron H&S signal we would think short term GBPUSD should rally to maybe retets the intermediate resistance at 1.6740/1.6750, but bigger picture we conserve for now a bearish preference.

Good luck trading,

Nic

 


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Tue, 09/22/2009 - 17:35 | Link to Comment pigpen
pigpen's picture

Any ideas who will speak the the US dollar funeral?

Will there be a wake? What should we send to taxpayers in lieu of flowers?

When does this become political and all eyes even eyes of idiots glance over at the FED and US Treasury?

So many question.

TD or Robot, will you guys give an eulogy for my beloved national currency?

Or maybe this is a job for Ben Dover? Maybe we can have wallstreetpro2 do some sort of audio visual performance art piece.

Any suggestions will be welcomed.

Tue, 09/22/2009 - 17:37 | Link to Comment Stevm30
Stevm30's picture

Part of that eulogy should be "Let the death of the dollar be a symbol to future generations: When your politicians say 'I am not a crook'; they are lying."

Tue, 09/22/2009 - 17:50 | Link to Comment Anonymous
Tue, 09/22/2009 - 21:21 | Link to Comment Steak
Steak's picture

Which country would consider it a delicious irony to send a couple cruise missiles to the dollar's funeral...

Wed, 09/23/2009 - 01:35 | Link to Comment Anonymous
Wed, 09/23/2009 - 12:21 | Link to Comment Anonymous
Tue, 09/22/2009 - 17:45 | Link to Comment Hephasteus
Hephasteus's picture

The ponzi is dead. Long live the new ponzi.

Tue, 09/22/2009 - 17:48 | Link to Comment pigpen
pigpen's picture

We imperialistic, leveraged to crony finance, well-armed anglo saxons are not long for this world.

Tue, 09/22/2009 - 17:49 | Link to Comment par068
par068's picture

That's it,

Green Shoots = New Ponzi

Tue, 09/22/2009 - 17:50 | Link to Comment Miles Kendig
Miles Kendig's picture

In a race to the bottom who has the most juice?

Tue, 09/22/2009 - 17:51 | Link to Comment chumbawamba
chumbawamba's picture

It's too quiet.  Something is imminent.  I can taste it.

I am Chumbawamba.

Wed, 09/23/2009 - 01:36 | Link to Comment Anonymous
Tue, 09/22/2009 - 17:51 | Link to Comment TwoJacks
TwoJacks's picture

Bernie Madoff has got to be crying in his rack right now, and blubbering, "...and they put me in jail for what I did?"

Tue, 09/22/2009 - 17:59 | Link to Comment Bam_Man
Bam_Man's picture

And I'm sure Bernie is also saying to himself:

"Sonofabitch! If I'd only been able to hang in there for a couple of more months, this new equity bubble would have kept the whole thing going..."

Tue, 09/22/2009 - 18:16 | Link to Comment deadhead
deadhead's picture

Sonofabitch! If I'd only been able to hang in there for a couple of more months, this new equity bubble would have kept the whole thing going..."

This!!!!!  It must be driving Madoff nuts right now because it is oh so true.

Great comment, one of the best I have seen this week so far.

Tue, 09/22/2009 - 18:22 | Link to Comment Anonymous
Tue, 09/22/2009 - 20:48 | Link to Comment mickey the piker
mickey the piker's picture

"Bernie couldn't any careless he never traded anyway. That was the whole idea"

If you believe that Bernie didn't trade, then I have a prime first lien mortgage to sell you...


Wed, 09/23/2009 - 00:13 | Link to Comment Anonymous
Tue, 09/22/2009 - 17:52 | Link to Comment Anonymous
Tue, 09/22/2009 - 18:01 | Link to Comment Dixie Normous
Dixie Normous's picture

Nice analysis, especially interesting going into Fed Speak.

Holy shit though if your bearish analysis is wrong and this breaks out of the 160-170 channel to the upside.

Tue, 09/22/2009 - 18:06 | Link to Comment Anonymous
Tue, 09/22/2009 - 18:12 | Link to Comment Tyler Durden
Tyler Durden's picture

Zero Hedge presents all information that could be considered relevant by our readers. While we may or may not agree with Nic's thesis, one could easily make the argument that we have gotten to a point where fundamental analysis is the equivalent of horse manure or coffee bean readings in the current market.

Tue, 09/22/2009 - 18:21 | Link to Comment Raymond Shaw
Raymond Shaw's picture

Technical analysis does have its place.  I have been touting Sterling shorts for quite a while.  Fundamental data not so hot right now with the outright manipulation of statistics (redundant, I know).  Anyway, 'nuff said.

Tue, 09/22/2009 - 19:42 | Link to Comment Missing_Link
Missing_Link's picture

Agreed.  Not all technical analysis is bogus.  Some of it is, but not all of it.

Tue, 09/22/2009 - 21:18 | Link to Comment TumblingDice
TumblingDice's picture

I think patterns are the most legit part of TA, but not all patterns have to be technical.

Wed, 09/23/2009 - 01:45 | Link to Comment texpat
texpat's picture

Here's an improving fundie. Check the latest week against the trailing average...

http://railfax.transmatch.com/

Wed, 09/23/2009 - 01:41 | Link to Comment Anonymous
Tue, 09/22/2009 - 21:15 | Link to Comment Tripps
Tripps's picture

tyler just NAILED it! What a QUOTE to be remembered!

 

"we have gotten to a point where fundamental analysis is the equivalent of horse manure or coffee bean readings in the current market"

 

the market is so WAY off the fundamentals that everything is backwards. So everyone HAS been following T/A for months now and lo and behold we 20% UP above the nearest respected moving average and all of a sudden T/A doesn't matter, there will be no big pullback, etc. All these PMS, analysts, talking heads, kudlow show wanna-be hosts who show up and PUMP PUMP PUMP their book even though they never even SAW the recession! these people should be BAnned FROM TV....AND YET THERE THEY ARE ON NIGHTLY

Wed, 09/23/2009 - 01:42 | Link to Comment Anonymous
Wed, 09/23/2009 - 07:12 | Link to Comment Anonymous
Tue, 09/22/2009 - 19:18 | Link to Comment Thurgy
Thurgy's picture

@Anonymous #76798 : Is that you Kneale?

Tue, 09/22/2009 - 22:03 | Link to Comment long-shorty
long-shorty's picture

Anonymous,

Would you prefer ZH limit itself to articles about Vanguard and DFA? i can't figure out why i keep making so much money on breakouts when technical analysis doesn't work and stock prices demonstrate a random normal or log-normal pattern of return. oh wait... THEY DON'T!

Nothing wrong with technical analysis, though one thing wrong with this article is that the right shoulder in a H&S should not be taller than the left shoulder. The big picture pattern I see here is a cup and handle, which is likely to resolve itself by moving to the upside.

The vast majority of research, either technical or fundamental, that is of predictive value, is not going to be on ZH, CNBC, or elsewhere, because it's proprietary. If you have something and you believe it works, you don't talk about it or you say just enough to get client $, you don't go and publish in a journal.

 

Wed, 09/23/2009 - 06:55 | Link to Comment Anonymous
Wed, 09/23/2009 - 01:39 | Link to Comment Anonymous
Tue, 09/22/2009 - 18:24 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

Ummm...what happened to the thesis of "the dollar is immediately going to reverse and become the king of all toilet papers"?

"you can try investing in relative value between the two biggest printers of cash: the US and the UK"

No thank you. I'd rather invest in the ultimate hard currency of Gold rather than any toilet-paper currency.

Tue, 09/22/2009 - 19:15 | Link to Comment Hephasteus
Hephasteus's picture

Oh come on don't get all fussy about the love between continents and islands. You  might like it. This is what they listen to when they do the carry trades at night. It's hot libor love. Do me in the accounts payable or recievable or wherever. LOL

http://www.youtube.com/watch?v=-zHVW7Zy_vg&feature=related

Tue, 09/22/2009 - 20:37 | Link to Comment Anonymous
Wed, 09/23/2009 - 04:08 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

I am only long Gold right now. Zero longs in everything else, but not short either.

Tue, 09/22/2009 - 18:55 | Link to Comment Anonymous
Tue, 09/22/2009 - 19:28 | Link to Comment Thurgy
Thurgy's picture

I deduce they will run of out ink which will temporarily force a correction in the copper market because the pig farmers have no additional buying power.

Tue, 09/22/2009 - 19:40 | Link to Comment SWRichmond
SWRichmond's picture

http://www.guardian.co.uk/world/2008/jul/23/zimbabwe

Soldiers await pay as Zimbabwe runs out of paper to print money
Tue, 09/22/2009 - 19:50 | Link to Comment Thurgy
Thurgy's picture

The next problem Zimbabwe will have is converting to scientific notation on their bills.

Tue, 09/22/2009 - 22:15 | Link to Comment aldousd
aldousd's picture

They actually cranked it back 10 digits all at once, and did a reverse split. of 10^10 to 1. Fancy that, and they were back where they started 6 months later.( I don't know the exact time frame, don't quote me on the 6 months.)

Tue, 09/22/2009 - 20:48 | Link to Comment Hephasteus
Hephasteus's picture

LOL they have to pay software licenses to print the bank notes. OMG what a world.

Tue, 09/22/2009 - 21:16 | Link to Comment TumblingDice
TumblingDice's picture

That is when you know: Zimbabwe can't print more money because they can't pay the German printing press to come out with a design for a higher denomination with the money they have printed previously.

Tue, 09/22/2009 - 21:27 | Link to Comment MinnesotaNice
MinnesotaNice's picture

"Zimbabweans were limited to withdrawing just $100bn a day from their bank accounts, enough to buy less than half a loaf of bread, although the government had just increased the allowance to $1.5tn a day for members of the military."  Wow is all I can say! 

Tue, 09/22/2009 - 21:37 | Link to Comment TumblingDice
TumblingDice's picture

You can also say that the smart Zimbabwean government officials have read their history books: it goes guns and butter not butter and guns. You've got to work your way up the curve.

Tue, 09/22/2009 - 21:41 | Link to Comment MinnesotaNice
MinnesotaNice's picture

Its just amazing Tumbling Dice to think how devalued their currency is... yet there remains a Zimbabwean government...

Tue, 09/22/2009 - 22:21 | Link to Comment TumblingDice
TumblingDice's picture

Someone has to hold on to the AKs...plus I think that the people might even realize that the true source of oppression is the IMF and the Fed and not the government. In their case the government is simply incompetent, and not completely evil. They just printed money without creating debt and thats a big no-no for the "market".

Then again it most likely has to do with the fact that the effective range that the 9mm pistol the farmer has is about 5 times less than the AKs the uniformed dudes are holding, and theres more of them and they get paid about 15 times more than the farmer so theyre more nourished since they're the ones that buy up the farmer's food.

Wed, 09/23/2009 - 04:10 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

Bingo.

Wed, 09/23/2009 - 08:59 | Link to Comment Anonymous
Tue, 09/22/2009 - 19:51 | Link to Comment Anonymous
Tue, 09/22/2009 - 21:00 | Link to Comment Gilgamesh
Gilgamesh's picture

GOOD NIGHT IRENE!  (caps intentional)

 

Take a look at the USD right now.

 

Edit:  Look away; was a stop spike in the USD/JPY under 91 and spilled over to all others vs. USD to take it sub 76 (and sub 75.89).  Stair-stepped retracement has completed, and actually overshot previous levels.  Heck of a move, though.  Anything 15-min or less bars will show it.

Wed, 09/23/2009 - 01:47 | Link to Comment texpat
texpat's picture

You just aggravated my 'nervous rectum'.

Tue, 09/22/2009 - 19:42 | Link to Comment Thurgy
Thurgy's picture

Bernanke hates me

Tue, 09/22/2009 - 20:29 | Link to Comment Anonymous
Tue, 09/22/2009 - 21:11 | Link to Comment Anonymous
Wed, 09/23/2009 - 08:25 | Link to Comment Anonymous
Tue, 09/22/2009 - 21:13 | Link to Comment Yossarian
Yossarian's picture

I understand Gold, I understand oil, I even understand BRL/AUD/CAD but can someone please explain to me EUR? What is so anti-dollar about EUR? I see that their balance sheet grew by a smaller amount than The Fed Balance Sheet but it did so by buying (often via triangulation with European private banks) the lowest quality crap out there. Say what you want about UST's and FNM/FRE MBS but Spanish commercial loans and Irish NAMA crap are much more dubious credits.

Wed, 09/23/2009 - 08:41 | Link to Comment Gunther
Gunther's picture

Yossarian,

let me try an answer.
A good part of the Euro is Germany's Mark and the German Bundesbank. In Germany are still some people remembering the inflation of 1923. That makes the Bundesbank and to a somewhat lesser degree the ECB an inflation hawk.  In one of the baltic countries (sorry, without looking them up I mix them all the time) they get deflationary treatment right now with lower wages, cutting public spending and keeping nominal debt levels. Compared to Western standards they were poor before,  I do not want to imagine how they are doing now.
Ireland is cutting public salaries too.

On the other side is the ECB's buying of crap.

Wed, 09/23/2009 - 11:19 | Link to Comment Yossarian
Yossarian's picture

That is reasonable but I think this perception may be too strongly held and does not mesh well with the reality, which is that The ECB balance sheet also exploded.  Also note, while the Federal government is spending like drunker sailor, the states are being forced to cut so perhaps net/net the difference between the US and Euroland isn't so great. 

Tue, 09/22/2009 - 21:20 | Link to Comment Anonymous
Tue, 09/22/2009 - 22:05 | Link to Comment Yossarian
Yossarian's picture

That is a concise, intelligent assessment but how is that outlook much different than many EU nations?  Again, I am not asking why $ is weakening, I am asking why it is weakening versus the Euro and I still don't quite understand the Euro fetish.  

Wed, 09/23/2009 - 06:04 | Link to Comment jm
jm's picture

IMHO, consensus believes the Euro is shepherded by wonks who are willing to permit more deflation than any other central bank.  Note poor Ireland.  This makes Euro-denominated sovereign debt very attractive relative to the dollar. 

This trumps the improving US C/A.  Fundamentally, everybody is screwed, so fundamentals don't make as much difference.

Tue, 09/22/2009 - 21:51 | Link to Comment Ragnarok
Ragnarok's picture

Ok, let's say the excrement finally hits the fan and the markets around the world tank and risk aversion takes over.  USD briefly rallies as safe haven and on demand as people liquidate their positions.  Where do you move those dollars before they are again beaten down? Gold? Commodity Currencies? Swiss Franc? Back into equities? Ammo? Tuna? 

 

Just trying to think it out.

Tue, 09/22/2009 - 23:08 | Link to Comment TumblingDice
TumblingDice's picture

The next distruption in confidence might take down the dollar with it, since the institutions connected with the dollar's foundation (the gov and fed) are so intwinded in equities and credit markets, which are the places where such a distruption would most likely to occur.

I would go with land, seeds, water distiller, guns, ammo, alcohol and cigarettes and pm's as the investments to make for the next time the SHFT. Definitely not the Franc. I don't remember where I read it but it made sense to me: the franc is sort of like a call option on the financial industry. Switzerland is the epicenter of it all and their currency has value as a hedge for financial disturbances only at a time when these are not systemic.

Even if you are not banking on an TEOTWAWKI scenario those investments still make sense as the uncertainty surrounding this house of cards will increase at every bold new step, and just like now, the prices for these things should keep going up.

Tue, 09/22/2009 - 22:12 | Link to Comment CD
CD's picture

Steven Pearlstein at the Washington Post has started reading ZH (at a minimum):

A New Bubble Of the Fed's Creation

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/22/AR2009092203737.html?hpid=news-col-blog

Also, TD -- iStockAnalyst still has the old blogspot address for ZH:

http://www.istockanalyst.com/article/viewarticle/articleid/3493214

 

Tue, 09/22/2009 - 23:04 | Link to Comment Anonymous
Wed, 09/23/2009 - 10:25 | Link to Comment Anonymous
Tue, 09/22/2009 - 23:42 | Link to Comment Anonymous
Wed, 09/23/2009 - 01:06 | Link to Comment AmenRa
AmenRa's picture

USD broke through 76 in after hours trading. This is going to be similar to going over the edge of a cliff. Then you find out that the green shoots in the cliff face are dead twigs and that there is nothing to stop the fall.

 

Wed, 09/23/2009 - 01:45 | Link to Comment Anonymous
Wed, 09/23/2009 - 02:28 | Link to Comment Econocataclysm
Econocataclysm's picture

I'm just now getting into forex trading, but let me tell you I wouldn't bet shit on this pair.

That having been said, my big winner right now is the AUS/USD carry trade!!!

You've got two majors, one at .25% and the other at 3.0% (I've closed all my positions in anticipation of what the Fed says tomorrow, but I'm just seriously risk-averse. Don't bet the farm that Bernanke will recall the helicopters any time soon because he's trying to reflate real estate in nominal terms with a weak dollar and he hasn't really gotten anywhere with that yet - simple demand destruction coupled with deflation in domestic currency stocks is trumping inflation at the moment.) The U.S. has shitty fundamentals, including massively negative GDP growth, unsupportable wars, etc. Austrailia has actually GROWN it's GDP through the crisis, albeit modestly. They run a small national debt ON PURPOSE and have only tens of billions of trade deficit. Plus, you get PAID OUT on the difference in interest rates when you do a rollover AND the fact that both currencies are majors means most houses will let you use lots and lots of LEVERAGE. Shorting the greenback into the aussie as a carry trade is SEXY AS SHIT right now. About the only thing I would use the GBP for would be as the butt of a AUS/GBP carry, but I'm really looking to help Bernanke destroy America AND the BoE is holding .5%, so the dollar carry trade is a absolutely a bit sexier.

More helicopters, Ben!!! Get it down to .1% like Japan and Obama gets MY vote lolz!!! You're making me a FORTUNE!!!

I'll post some stuff over at my blog once I have some more trading results on that, and let's see what helicopter boy does tomorrow. Plus, part of my strategy is sinking the profits into gold as fast as I can to hedge against the helicopters lolz!!!

Wed, 09/23/2009 - 07:38 | Link to Comment Anonymous
Wed, 09/23/2009 - 03:37 | Link to Comment Anonymous
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