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EUR Non-Commercial Spec Positions Surge To Multi-Year High As USD And JPY Prepare To Take Out Lows

Tyler Durden's picture


Commodity speculators may or may not be the vile criminals the president and his new working group are making them out to be, but they sure have made their view clear on where they think the USD and the EUR (the JPY not so much) are going. Below is the latest update from the CFTC Commitment of traders report on the three key currencies. While there has been some modest short covering in both the USD and JPY, both continue to trade like the carry funding currencies they are. And with bullish spec positions in the EUR at a multi year highs, the only question is whether the yen or the dollar will be the carry currency of choice in the next beatdown. Of course, how the EUR is expected to retain its lofty perch with all of the PIIGS soon to go under is beyond us, but hopefully it makes sense to Trichet, who is stuck between an inflationary rock and a insolvent peripheral hard place.


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Sat, 04/30/2011 - 15:25 | 1224329 slaughterer
slaughterer's picture

What about that news release on Friday afternoon about the EU creditors not responding well to the haircut plan?  And the dire tone of other announcements about EU bank chaos this weekend?  Are you telling me the Euro is being bid up on this news, or that the news itself was fake or a red herring?

Sat, 04/30/2011 - 16:05 | 1224379 ivana
ivana's picture

wait a while. creditors are fighting for first rows for greek assets expropriation. it probably takes some time until vultures agree who is stronger
In meantime, WS masters have more time for shearing sheeps in the greatest trading pair EURUSD

Sat, 04/30/2011 - 16:14 | 1224398 topcallingtroll
topcallingtroll's picture

How can eur/usd be a great pair trade if you think the euro will depreciate? You are being inconsistent unless i missed something.

Sat, 04/30/2011 - 16:13 | 1224399 ivana
ivana's picture

sorry for my english. Was thinking that EURUSD as pair with greatest volume in currency trade

Sat, 04/30/2011 - 19:05 | 1224573 Orly
Orly's picture

Besides, sometimes the greatest trade pairs are shorts.  A great trade doesn't necessarily mean higher.


Sat, 04/30/2011 - 15:24 | 1224331 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Well, when the markets were rational and could still be considered 'markets', this would be bearish for the EUR.

But, we are now in a new normal. Market's are no longer price discovery mechanisms, they are tools for the fascist controllers.

Sat, 04/30/2011 - 15:30 | 1224338 topcallingtroll
topcallingtroll's picture

The pending restructuring and massive haircuts and subsequent forced cuts in social services is deflationary and supportive of the euro.

Sat, 04/30/2011 - 15:57 | 1224374 Gold 36000
Gold 36000's picture

How is your ZSL doing, troll?  What was it you said? LOL Be right and sit tight.  Be wrong and take the schlong?

Sat, 04/30/2011 - 16:08 | 1224386 topcallingtroll
topcallingtroll's picture


The schlong is out of the pants and heading toward me, but i aint been fooked yet.

Still holding on with a 13.69 basis.

I had a couple of bad trades in december and january, but i got my mojo back. This schlong will never come near me.

Sat, 04/30/2011 - 16:51 | 1224424 hardcleareye
hardcleareye's picture

uggghhhh  that's a mental image I didn't need........

Sun, 05/01/2011 - 02:34 | 1225051 jeff montanye
jeff montanye's picture

speaking of zsl, have you noticed the huge, huge volume jumps in the last week or so?

Sun, 05/01/2011 - 16:30 | 1225910 ZeroPower
ZeroPower's picture

Right across the board, AGQ, SLV, and SIVR

Sat, 04/30/2011 - 15:58 | 1224376 ivana
ivana's picture

I do not thnk so. PIIGS economies are dead and govs will receive new loans (after restructuring) which will than be distributed for consumption.

Of course, that will just be another bs case of "stimulating economy trough public spending"

Sat, 04/30/2011 - 16:12 | 1224394 topcallingtroll
topcallingtroll's picture

I hope you are right.

We need more ugly girls in this currency beauty contest so that the dollar still looks good by comparison.

Sat, 04/30/2011 - 18:06 | 1224523 sabra1
sabra1's picture

would janet napolitano do?

Sat, 04/30/2011 - 18:27 | 1224544 Gold 36000
Gold 36000's picture

she is too ugly and no one would accept her in exchange for goods lol.

Sun, 05/01/2011 - 02:36 | 1225052 jeff montanye
jeff montanye's picture

that's mean.  she is an excellent conversationalist.

Sat, 04/30/2011 - 19:33 | 1224601 Orly
Orly's picture

If I may interject an idea...

All of these machinations in QE have been done to prop up the Great British Pound Sterling, which essentially failed when the crisis unfolded.  Watch that pair and it is the key to all of the other ones, including the EURUSD and the AUDUSD.

When they decide to let the GBPUSD settle, the other pairs will settle as well, at a much lower level than they are sitting right now.  That having been said, it is certainly unclear how long they will keep propping up the Cable.

Right now, all three pairs are bouncing against long-term Fibonacci retracement levels and they are having trouble breaking through, with the exception of the AUDUSD.  If the AUDUSD breaks through the 1.10 Fibonacci level, it is possible that it could breach 1.1522, which is a 150% long-term Fibo-level.  It is hard to imagine that this would be possible but Japan has just opened the flood-gates to new money and the Ozzie carry can get a major boost from that.

It is also possible that the AUDUSD specs can also carry the EURUSD and the GBPUSD higher with it as a simple "risk-on" trade.  Or, the AUDUSD could rocket while the Euro and the Cable churn at these levels (which is what I think is most likely...).  Once the Cable goes, though, that is the signal to short the Euro and the Ozzie dollar against the greenback.

Meanwhile, the USDCAD and the USDCHF have made long-term bullsih Gartley patterns on the daily and weekly charts.  It seems that They are trying very hard to eliminate all technical trading but I don't see how it is possible for very long.

I appreciate your input.  We need more opinionated 4X traders around here!

Thanks to the troll, as well.  Anybody seen Ro?  It's getting lonely around here!


Sat, 04/30/2011 - 20:07 | 1224639 ISEEIT
ISEEIT's picture

I'm looking at EUR/CHF. Short. I'll be watching the Asian market tomorrow at open. If the pair moves down in the first hour I expect about a sixty pip move down on the session. Lots of room. The other one to watch for me is AUD/USD. I am a bit leary of cable cause I see the next resistance only about 30 pips away, I'll let others mess with that.

Sat, 04/30/2011 - 20:15 | 1224650 Orly
Orly's picture

I've had my (ample..) ass handed to me lately by the AUDUSD pair.  Watch 1.10.  That's the level.  A significant break above that and it moves five more cents easily.

The Double-line indicator on the EURCHF weekly says it's on the rise, while the daily shows a possible move lower to its lower Bollinger Band @~ 1.273.  I am leery of that one, as it appears to be forming a long-term consolidation pattern at these levels.  Nothing very clear at all.

Best of luck, though!  I hope it works out for you!

Sat, 04/30/2011 - 21:14 | 1224731 ISEEIT
ISEEIT's picture

Sounds like a technicians take. Not saying you would be wrong but we don't live in normal times and I suspect therefore that sentiment/fundamentals run the show, with tech as a referee. I get the hypocrisy when I mention resistance for cable, its just two dead guys fighting it out though and that is an uncomfortable match to me. I'm an amateur and don't claim to be an authority in the least....But how did you get your ass handed to you with AUD? Staying out? I stayed out and wish like hell I had not. What a freakin' run.

Technicals aside, I see EUR having a bad week and my take is that it will get hurt worst in the CHF pair.

Sat, 04/30/2011 - 22:34 | 1224825 Orly
Orly's picture

First, the quadruple top was blasted through at ~1.02, even though it was apparent that the US was going to stop QE.  I was short there.  Somehow, the Ozzie kept on rolling, even though the "risk-on" trade was clearly going to take a bath.  It didn't seem to faze the market in the least that the US was going to stop spending billions daily to prop up the markets.

Didn't make any sense whatsoever because the Chinese are going to have to tighten monetary policy, meaning there will be a slowdown in their economy.  No commodities for you, Mr. Wang.  A slowdown in the commodities trade directly affects the Australian economy, for the worse.  Fundamentally speaking, as you say, those two things alone should have been the death-knell for this run.

Then, it blew right through a Fibonacci level at 1.06 and didn't even budge backward.  I was short there, too.  Sentiment, in that case, should have been on the side of some sort of correction, no matter how small.  That didn't happen, either.

Now, I suppose that traders have their eyes on the nice round number of 1.10, which is really absurd, if you think about it.  Then, as Tyler pointed out, the Japanese basically doubled their money supply in a week- just last week, in their own version of QE.  The pair stalled at 1.06, as it should have, but then resumed the trade upward on this news of free Japanese money moving into the carry trade.

But with the new money and new life to the carry, you can expect that the pair will reach the next Fibonacci level in short order, as it is a blow-off top mode.  Looking at the chart, one can see that the movement is nearly vertical, much as the Naz was in the  Once it hits 1.1522, the next Fibonacci level, which is a 123% retracement from the lows of March of 2002 to the previous high set in July of 2008, then some major, major resistance should be reached.

The 1.522 level, or thereabouts, should mark the long-term high of the AUDUSD pair for quite a while, if not all-time.  These next few weeks are going to be interesting and I will be curious to see whether the pair rockets to that level or simply grinds higher in the face of a deteriorating global economy.  It will definitely be there by mid- to late September.

This week, look to see if 1.10 is breached with any authority.  If so, the next stop will be the all-time highs.  Then, short the hell out of it because it really belongs at about eighty cents.  Commodity bubbles don't last and the Japanese simply cannot pump as much money into it as the Fed has.  The 1.15-level will also signal a top in gold, silver and every other precious and base metal trading.

Or not.


Sun, 05/01/2011 - 11:45 | 1225488 piceridu
piceridu's picture

Hi Orly,

Just as Chinese entities secretly accumulated gold tonnage without affecting market prices and flipped it back to the PBoC, don't you think that could happen in Austrailia too? China will divest of USD and secretly accumulate every resource Austrailia has to offer and bank it (warehouses). Could this be an explanation as to why AUDUSD seems unaffected? China will still be a buyer no matter what happens as they divest over 2T worth of USD.

Sun, 05/01/2011 - 12:05 | 1225530 Orly
Orly's picture

Sure.  That sounds possible if unlikely.  There is still such a thing as nationalism and I imagine it is burning brightly in Australia.

I remember when the Japanese bought 30 Rock.  The entire world was going to go down in flames.  Anyone without round eyes was looked upon with great disdain and many jokes were made about Japanese tourists with fourteen cameras around their necks.

If it were to happen, the Australian government would have to look the other way was Billiton and Tinto have new owners in Beijing.  I would think that it would be difficult to pull off without a serious backlash from the Australian public.

But if you mean that the Chinese wouldn't buy the companies but just the resources they produce, that would be very interesting, indeed.  It has long been my contention that all of this banking nonsense was really about economic warfare of the West against the Chinese.  What better way than having them divest of US dollars, thus basically liquidating their US loan portfolio, while buying commodities at the top?

Once they've divested....ooops!  Imagine that!  Markets do go down after all.  In fact, they go down quite a bit.  Sorry, Hu.  Seems like your country has made some seriously unwise trading decisions.  Better luck next time.

You do make an interesting point, though, with food for thought.

Thanks for that.

Sun, 05/01/2011 - 05:39 | 1225146 ivana
ivana's picture

Some fibo relationships point to 1.14 on AUDUSD

Sun, 05/01/2011 - 11:32 | 1225466 Orly
Orly's picture

Yes, they do.  Actually, I misspoke in the post above.  (Looking at the wrong chart...).  The 123% retrace is for the 1.10 level.  The 150% retracement level is about 1.15.

Of course, Fibonacci levels are subjective in the most steady of times but when the trade is all over the place, the best we can do is try to find a range.  1.14 easily fits into that range.

I have drawn my lines from ~ July 2008 to ~ December of 2009, taking out the extremes and drawing from the basing pattern in those areas.


Sun, 05/01/2011 - 14:35 | 1225750 falak pema
falak pema's picture

do you make any money out of this monkey play?

Sun, 05/01/2011 - 12:53 | 1225605 disabledvet
disabledvet's picture

"Ireland failed" too.

Sun, 05/01/2011 - 19:21 | 1226211 longorshort
longorshort's picture

Orly what is your email?  Do you do just day trades in FX or swing trade?

Sun, 05/01/2011 - 19:51 | 1226363 Orly
Orly's picture

Sorry.  My privet is private...

But, my style is to find extremes and play the retraces.  Usually on longer time frames, such as the Daily, Weekly or eight-hour.  I don't know if that means "swing trading" or not.  Sometimes, I like to scalp for kicks, though not often.

It has been a very rough go of late, as the markets seems to miraculously pull something out of their pockets in the form of some announcement or other.  The latest is that the Japanese have doubled their monetary base in a week!  I just can't compete with such stuff.  Basically, I am a technical trader and use fundamentals as a booster.

I tell my picks here and you should take them for what their worth: not a lot.  I do have technical reasons for saying these things and I will tell you those, as well.  I have no reason to keep secrets, as I firmly believe that there is more than enough for everybody.  I usually like to drop picks on Bruce Krasting's page, so look for me there.

I have been ridiculed before and I'll be ridiculed again, so I am not afraid to be wrong.  You'll just have to read my ideas and see if that comports to your ideas and trading style.  I am not ashamed, though lately I have been wrong...or waiting.

Having said that, there are two trades that are just dying to be made and have been for over two weeks (hence the waiting...).  There is a bullish Gartley formation on the USDCAD daily and a bullish Gartley formation on the USDCHF weekly.  They have been trying their best to buck it down but the formations are so long-term and so strong, I don't think they can.

The USDCAD target is 1.01 from 0.945.  That's quite a move.


P.S.  The upside target for USDCHF is 1.0336.  Another big move.

Sun, 05/01/2011 - 00:35 | 1224971 morkov
morkov's picture

"markets" are NOT "economies"...the "mechanisms" are not adequate

Sun, 05/01/2011 - 12:53 | 1225598 disabledvet
disabledvet's picture

"Goldfinger.  He's the man THE MAN WITH THE MIDAS TOUCH!"

Sat, 04/30/2011 - 15:34 | 1224343 slaughterer
slaughterer's picture

But it looked like the haircuts would be impossible to make on Friday. 

Sat, 04/30/2011 - 15:37 | 1224349 uhb
uhb's picture

The simple reason is that the EUR is 15-20 years behind the $ in the deadly debt spiral.

The $ will bust way before the EUR... but both fiat currencies will not prevail.

Sat, 04/30/2011 - 18:06 | 1224519 topcallingtroll
topcallingtroll's picture

As tyler mentioned the banking problem in eurotown is ten times worse than in the usa.

Why would the dollar collapse first?

Sun, 05/01/2011 - 16:31 | 1225917 ZeroPower
ZeroPower's picture

How long the currency has existed for is irrelevant. Debt acquired in Liras is equal (comparably) to debt acquired before in DMs and in Pesetas, etc - all of which have pressure on the current euro situation.

Sat, 04/30/2011 - 15:39 | 1224353 razorthin
razorthin's picture

The REAL criminals will soon attempt to handcuff the "speculators" - you know, tie our feet and hands behind our backs while drowning us in clownbux.  Of course THEY will be free to swim to safety.

Sun, 05/01/2011 - 13:00 | 1225610 disabledvet
disabledvet's picture

i think the old school term is "hold their feet to the fire."  And by "old school" i'm talking Shakespeare here since "they literally held your feet to a fire" when you "the trader" didn't come up with the money you owed.  it appears the "modern day equivalent is currency trading."

Sat, 04/30/2011 - 15:44 | 1224359 Caviar Emptor
Caviar Emptor's picture

Clearly, we need another press conference from Ben. Confidence! 

Sat, 04/30/2011 - 16:01 | 1224380 topcallingtroll
topcallingtroll's picture

I am praying to bob.that there will be no more press conferences from timmah or ben until i am ready to close out ZSL and go long again.

Bob, can you hear me?

Sun, 05/01/2011 - 13:01 | 1225614 disabledvet
disabledvet's picture

did someone say "another press conference?"

Sat, 04/30/2011 - 15:51 | 1224368 JR
JR's picture

“Commodity speculators may or may not be the vile criminals”…but how about the criminals who are not speculators but control the markets?

A Stalinesque financial price cordon around world commodities that people need to survive - and most heinously around the most basic vital essentials such as food - by Goldman Sachs may soon become known, as was The Ukrainian Famine premeditated by Stalin, as another Holodomor, meaning “death by hunger.”

It’s called the Goldman Sachs Commodity Index (GSCI). It is a derivative that tracks “24 raw materials, from precious metals and energy to coffee, cocoa, cattle, corn, hogs, soy, and wheat. They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation.”

In a new “Foreign Policy” article, “How Goldman Sachs Created the Food Crisis,” Frederick Kaufman writes: “Demand and supply certainly matter. But there's another reason why food across the world has become so expensive: Wall Street greed…

“For the roughly 2-billion people across the world who spend more than 50 percent of their income on food, the effects have been staggering: 250 million people joined the ranks of the hungry in 2008, bringing the total of the world's ‘food insecure’ to a peak of 1 billion -- a number never seen before," says Kaufman.

It has been a long, steep slide from the words of Adam Smith to the words of Leon Trotsky: “Where the sole employer is the State, opposition means death by slow starvation. The old principle: who does not work shall not eat, has been replaced with a new one: who does not obey shall not eat.”.

From the fruits of a free enterprise supply and demand economy that created mankind’s greatest miracle on earth, we arrive at today’s message from the representative of the would-be world rulers – Goldman Sachs and the Federal Reserve.

From the article (a must read):

”The structure of the GSCI paid no heed to the centuries-old buy-sell/sell-buy patterns. This newfangled derivative product was 'long only,' which meant the product was constructed to buy commodities, and only buy. At the bottom of this 'long-only' strategy lay an intent to transform an investment in commodities (previously the purview of specialists) into something that looked a great deal like an investment in a stock -- the kind of asset class wherein anyone could park their money and let it accrue for decades (along the lines of General Electric or Apple). Once the commodity market had been made to look more like the stock market, bankers could expect new influxes of ready cash. But the long-only strategy possessed a flaw, at least for those of us who eat. The GSCI did not include a mechanism to sell or 'short' a commodity.

"This imbalance undermined the innate structure of the commodities markets, requiring bankers to buy and keep buying -- no matter what the price. Every time the due date of a long-only commodity index futures contract neared, bankers were required to 'roll' their multi-billion dollar backlog of buy orders over into the next futures contract, two or three months down the line. And since the deflationary impact of shorting a position simply wasn't part of the GSCI, professional grain traders could make a killing by anticipating the market fluctuations these 'rolls' would inevitably cause...

“Bankers recognized a good system when they saw it, and dozens of speculative non-physical hedgers followed Goldman's lead and joined the commodities index game, including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns, and Lehman Brothers, to name but a few purveyors of commodity index funds. The scene had been set for food inflation that would eventually catch unawares some of the largest milling, processing, and retailing corporations in the United States, and send shockwaves throughout the world.

“The money tells the story. Since the bursting of the tech bubble in 2000, there has been a 50-fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities -- including food -- seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. 'You had people who had no clue what commodities were all about suddenly buying commodities," an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since.'”

Sun, 05/01/2011 - 13:10 | 1225631 disabledvet
disabledvet's picture

GREAT article.  "they parked their cash in Chicago" but "the farmer ain't gettin' a frikkin' dime."  Disturbance in the force is real estate because "ain't no way that things recovering"  even after TRILLIONS "blown out of DC's keister." BIG!  Start "jammin Catepillers" (per South Park right here no less?  CLEVER?  Or "too smart for their own good"?) until "it's a bulldozer in every driveway" if need be.  And "then arrived the Silver Surfer."

Sat, 04/30/2011 - 16:00 | 1224370 Gold 36000
Gold 36000's picture

Just remember a carry trade currency carries a massive synthetic short embedded in it.  When they unwind, they unwind hard.

Sun, 05/01/2011 - 13:09 | 1225635 disabledvet
disabledvet's picture

Blow the Comex SKY PHUCKING HIGH!?!!!!  "When Dinosaurs roamed the phucking earth??!!!!"

Sat, 04/30/2011 - 16:03 | 1224378 uhb
uhb's picture



Sat, 04/30/2011 - 16:14 | 1224397 unclebigs
unclebigs's picture

It's all 1 Big Sheeple Trade:

1.  Long precious metals

2.  Long foreign currencies vs. usd

3.  Long stocks

4.  Long commodities


Just wait for the inevitable wash-out as the Sheeple get fleeced once again.




Sat, 04/30/2011 - 16:15 | 1224400 topcallingtroll
topcallingtroll's picture

Have you paid your trolling registration fee?

Seriously trolls are tolerated here, even welcome at times for an alternative view, but 100 bucks per month for adspace doesnt even cover the bills and tyler needs more server space. Damn thing is freezing up too much again.

Sat, 04/30/2011 - 17:47 | 1224495 Highrev
Highrev's picture

I'm on the other side of that trade too.

(Well, almost - I'm getting there.)


Sat, 04/30/2011 - 17:54 | 1224510 topcallingtroll
topcallingtroll's picture

So am I.

But I have donated to zero hedge and paid my trolling fee.

Sat, 04/30/2011 - 21:54 | 1224780 bothsidesnow
bothsidesnow's picture

Why pay a trolling fee when ZH is running ads for Trump. Wondering why since Trump's history of bankruptcy.

I guess they are taking the other side of the Trump trade that if Trump were elected all faith in the US would be lost and the dollar crash would certainly occur.

Not paying any feed to ZH until the Trump adds are removed.


Sun, 05/01/2011 - 01:51 | 1225023 StychoKiller
StychoKiller's picture

Install the software that you find here:

Most ads won't even get loaded by your browser.

Sun, 05/01/2011 - 03:50 | 1225087 TheGreatPonzi
TheGreatPonzi's picture

Another angry, ugly, loser and disgruntled deflationist. 

I would be angry too in their situation: being so wrong and so retarded since January 2009 is surely exhausting.

Sun, 05/01/2011 - 13:13 | 1225637 disabledvet
disabledvet's picture

the "sheeple" will get KILLED in this scenario.

Sun, 05/01/2011 - 20:08 | 1226481 longorshort
longorshort's picture

Simple but its the truth. His comment isnt junk.

Sat, 04/30/2011 - 16:17 | 1224402 Caviar Emptor
Caviar Emptor's picture

High Fives all around to long time ZHers on our little predictions: dollar, gold, and the global macro trend I call Biflation. Suddenly everybody seems to be hip! 

Sat, 04/30/2011 - 21:48 | 1224776 Hulk
Hulk's picture

Thanks in large part to you caviar. Keep up the good work!

Sat, 04/30/2011 - 16:28 | 1224409 slewie the pi-rat
slewie the pi-rat's picture

the euro will maintain its lofty staus by M&A activity, starting Monday, 5.2.11.

we have plenty of Z lore how this is "just like 2008" or "just like the spanish american war" or "weimarTM" but i want to cutnPaste this from the initial transcript of the joint CFTC-SEC Joint Advisory Comm first public meeting looking at the may 6, 2010 flash crash.  here is their website:  Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues  

their first meeting, may 24, 2010, has a complete transcript which even gets into why the emini S&P june 2010 contract had no broken trades, "liquidity providers" in securities and futures markets, and our old friends, ETFs, which stole the show for goin ape-shit.

so, as we approach the 1-year anniversary of ?wtf?, here's the intro to the report, where they give the background and set the stage for the hi freak show: 

2 Throughout the day on Thursday, May 6th, many

3 financial news outlets were reporting on political and

4 economic events that were creating uncertainty in the

5 financial markets. As reports highlighted the perceived

6 increased risk of default of certain European countries,

7 there was downward pressure on the euro in global currency

8 markets. We particularly note the European Central Bank held

9 a press conference and did not address the possibility of

10 purchasing Greek government bonds.

11 This raised concern over defaults, as reflected in

12 an increase in the price of premiums on credit default swaps

13 to protect against such events.

14 Throughout the day we also observed a broad decline

15 in the U.S. equity market as all major broad based equity

16 indices and equity index futures contracts spent much of the

17 morning and early afternoon in negative territory. This

18 decline in equity markets coincided with a rise in expected

19 volatility as captured by the rise in the CBOE S&P 500

20 volatility index, usually referred to as the VIX.

21 Prior to May 6th, the VIX in 2010 had averaged

22 about 20, indicating a relatively low level of expected

23 market volatility as compared to the levels that prevailed in

24 2008 and 2009. On May 6th, however, the VIX began the day at

25 about 26 and reached levels of about 40 during the day.


1 Beyond the effect that economic news was having on

2 credit and equity markets, there was also evidence of a

3 flight to quality as investors sought to extract funds from

4 perceived risky investments and to place them into what are

5 viewed as safer investments, such as U.S. Treasuries and

6 gold. This is evidenced by the fall in the ten-year Treasury

7 yield from a level of 3.58 percent on May 5th to an intraday

8 low of 3.26 on May 6th, before settling at 3.41 for the day.

9 Gold prices, which normally rise in times of market

10 uncertainty, rose on the COMEX where the nearby gold futures

11 contract went from approximately $1180 per ounce at the

12 opening to $1210 per ounce at the 1:30 p.m. Eastern time

13 close.

14 In addition to the flight to quality, global

15 currency markets were indicating concern over the European

16 Union. Shortly after 1:00 p.m., the euro began a sharp

17 decline against both the U.S. dollar and the Japanese yen.
Sun, 05/01/2011 - 13:14 | 1225639 disabledvet
disabledvet's picture

havn't heard the Spanish American war reference myself till now.  Interesting though.  Gold 36,000?  He's just above of course.

Sat, 04/30/2011 - 16:43 | 1224419 treemagnet
treemagnet's picture

Euro is a joke.  When it breaks it'll either be the straw that breaks the camels back or be just another headline or anecdotal peripheral causation - but its gonna break.  Soon.

Sun, 05/01/2011 - 13:19 | 1225648 disabledvet
disabledvet's picture

France.  "Viva la Revolucion."

Sat, 04/30/2011 - 17:12 | 1224450 Jasper M
Jasper M's picture

I agree w/ Treemagnet.

Also, since when are a preponderance of non-commercial specs a Good sign for the long case?

Sat, 04/30/2011 - 17:56 | 1224512 topcallingtroll
topcallingtroll's picture


There are several markets that might apply to.

Can you guys think of any?

Sat, 04/30/2011 - 17:22 | 1224458 eurusdog
eurusdog's picture

Article from 2008. Notice the last paragraph. The rising EURO will break the periphery.,1518,538385,00.html

Sat, 04/30/2011 - 17:47 | 1224498 slewie the pi-rat
slewie the pi-rat's picture

there are some interesting ideas, here.  t.y., mr dog.

the last para?  that most of germany's business is protected from the dollar?  yet, bmw is laying off 8000+?

also, the dollar is weak b/c we are having a recession, here, compared to europe.  interesting, b/c i think we are taking a little cold dip, here.

Sat, 04/30/2011 - 17:49 | 1224501 SilverDoctors
SilverDoctors's picture

Bob Chapman is predicting the IMF will decide to resctructure Greek debt at their Athens meeting next week which will result in a EU banking crisis. Maybe this is why The Bernank decided to pass on verbal support for the dollar this week?  Good luck getting safe haven flows to go into the dollar though at this point!

Sat, 04/30/2011 - 18:29 | 1224545 JR
JR's picture

Bob Chapman: he’s on it.  Says Bob:

“[W]e can only conclude the Treasury market is a bubble fostered by the Fed. When that bubble eventually bursts there will be no one there to pick up the pieces. The bankers and Wall Street have again gone too far. This bubble is far more dangerous than the real estate and mortgage bubbles, because it affects all financial markets and incomes. There is no entity capable of bailing out the system and that is why there is such a demand for gold and silver – the only real money… The downgrade from AAA for US government debt is 100% surety over the next couple of years. It looks like it has been decided that European debt is to collapse first.

“The ECB, eurozone IMF meeting in Athens in this coming week will decide that. We expect default but what the numbers will be no one knows. A default of 40 to 70 percent is in the cards. If the bankers insist on collateral such as almost all Greek government assets there will be no partial default; it will mean full default. The PM and his party does not have anywhere near the votes to get such legislation passed. The bankers and other sovereign lenders are stuck this time. It is ironic that six months ago Germany was offered 50% default by the Greeks and rejected it. The Germans did not understand the full scope of the PIIGS problems and they could not envision Belgium in the wings ready to join the failures. They could not see, as we predicted, a $4 trillion unpayable bill to bail out these victims of one interest rate fits all, a colossal blunder from the very beginning. In anticipation of this the bankers and others have mistakenly driven the euro to $1.48 and it may move higher because when the world sees Europe’s terrible situation the euro will fall and that will keep a USDX dollar at 72.90 from plunging to 71.18 at least temporarily.

“We do not believe Americans and most of Europe understand the impact of the European banking crisis. The meeting in Athens next week to restructure Greek debt probably will trigger a EU-wide banking crisis, which we have been warning about for the past two years. We do not see Greeks, Irish or Portuguese living in poverty for the next 50 years just to make sure the bankers get their money back, which the bankers created out of thin air. Greek debt to GDP is 150% and no country has ever survived such debt. There has to be default. In the wings Ireland, Portugal and Spain are watching intently to see which way they should fall. On the other side of the debate Germans and Finns do not want to spend one more euro on this problem. Let them default and leave the euro. They should have never been in the euro in the first place. The EU is fighting with Ireland as well over corporate taxation. If Ireland losses that advantage they’ll go back to growing potatoes. Greek Parliament will not accept more austerity, Ireland may walk away from bailing out the banks and Portugal may just give up and default. Next week will be an exciting one that may change Europe forever.”

Thanks for the article! And oh, yes. Bob says ”price inflation is already with us and the real rate is close to 10%. Our prediction of 14% by the end of 2011 now appears to be very conservative.”

Sat, 04/30/2011 - 19:51 | 1224625 Yen Cross
Yen Cross's picture

Off Topic: J.R. How does the R.B.A. have a 45b budget shortfall when unemployment is @ 5%.(great by western standards) The currency is 10% stronger than the USD comodity priced currency. The real estate market is in the tank.  This is so French style corruption. And RBA wants to raise rates again. Hawkish? Hit the minutes on the RBA website. I'll send the link later. Catching up!

Sat, 04/30/2011 - 19:59 | 1224633 Orly
Orly's picture

If the Australian real estate market is in the tank, then how can I get a two-bedroom apartment in the wonderful megalopolis known as Belconnen for less than $439,000?

Just curious...

Sat, 04/30/2011 - 20:05 | 1224636 Yen Cross
Yen Cross's picture

I have property in P.D. Orly. Your comment is vague. Are you in a low purchase consortium, or a retained equity sort of mind? Thanks for your comment.

Sat, 04/30/2011 - 20:31 | 1224667 slewie the pi-rat
slewie the pi-rat's picture

hey, Y/C:  i just cashed out my pokerstarZ account.  weird.  are the bush girls gonna get the franchise or something? 

Sat, 04/30/2011 - 20:46 | 1224686 Yen Cross
Yen Cross's picture

Slewie. My dear Slewie. I'm Sooo out of touch! Online what? Bush Girls?


Shave-Em and ship my (WAY)

Sat, 04/30/2011 - 20:36 | 1224671 Orly
Orly's picture

I am neither.

All I am saying is that when a two-bedroom flat- anywhere: London, Moscow, Los Angeles, Houston, Mumbai- wherever, is selling for nearly a half a million dollars, I think it is time to sit back and re-assess the situation.  It is true that those places command an exorbitant premium.

But with prices like that in a place most people have never even heard of...Belconnen?

Well, that's just absurd.


Having said that, though, if you think the real estate market is in the tank now, wait until prices get a lot more reasonable.

Hey, it happened here.  Jus' sayin'.

Sat, 04/30/2011 - 20:42 | 1224680 Yen Cross
Yen Cross's picture

Don't mind The above post Orly. Children will be children. I'll read and respond! Thanks.

Sat, 04/30/2011 - 20:45 | 1224685 Orly
Orly's picture

Bravado and bravura are okay, YC.  I don't mind being scolded by the likes of rich folks.  Makes me feel important anyway.

I have to have something to liven up my hum-drum life, you know.  That way, I can learn how to act when I hit the lottery.


Sat, 04/30/2011 - 20:45 | 1224689 Yen Cross
Yen Cross's picture

I notice your technical calls. You are far too humble!

Sat, 04/30/2011 - 20:51 | 1224694 topcallingtroll
topcallingtroll's picture

I agree.

Thanks orly.

Sat, 04/30/2011 - 21:09 | 1224720 Orly
Orly's picture

You're very welcome.

At least I'll know what to trade when I hit the lottery!  Ha!

Best of luck, you guys.

Sun, 05/01/2011 - 21:12 | 1226728 longorshort
longorshort's picture

I would stay the hell out of Austrailian Realestate and rent if it were me.  My best guess is they will hit a wall soon, lower interest rates and print more money, follow by some messed up moves in currencies and the Aussie markets.  Really messy when its not a reserve currency like the EUR or USD.

Sat, 04/30/2011 - 23:19 | 1224890 JR
JR's picture

What especially interests me is how Australia’s rate decisions to keep inflation within her target bank of two to three percent, as it affects its housing, will translate for Bernanke’s housing and rate problem.

Sat, 04/30/2011 - 18:14 | 1224531 DavidC
DavidC's picture

In one sense it's hilarious - when the EUR was at 1.18 (seemingly) everyone was calling for parity and where are we now, even WITH all the Eurozone problems?!


Sat, 04/30/2011 - 19:45 | 1224619 scratch_and_sniff
scratch_and_sniff's picture

Its always the same, you never see them coming until the dogs in the street are buying; people only started saying BTFD a couple of months back(the dip was in 2009 folks !), when the real meat of the moves have already been scoffed.

wrt the Euro, buying into the Euro was a political bet of sorts, and when you think about it, it was only natural that the politicians would have found a fix...who thought they were going to roll over and die?(are they too stupid for that i suppose? that’s not for me to say, and the people who claim they know without doubt, are without doubt, penniless).

I think the only time when you can take news and general Euro sentiment seriously is when everyone has shit literally running down their legs, all other times its optimism of one kind or another, that’s just the way it is.

Stick a line through the price and relax, because trying to work out the dynamics of the Eurozone is just a non starter. The amount of articles and papers i have read on the Euro could fill my bathroom...not one of them were a buy, NOT ONE MY FRIEND, NOT ONE!! All kinds of technical and academic masturbation, mind-bending, verbose horse shit, and wrong.

Sat, 04/30/2011 - 18:52 | 1224562 Yen Cross
Yen Cross's picture

RollingOverLaughingMyF...ingA..Off. Look at how long the COT charts are USD yen! The exporters and real money bang the dollar down every time it hits the high 82's. What a joke! The japs are hosed, and they know it. The minute ChairSatan raises short term rates (if the market doesn't do it for him first) The YEN will be paste!!!!!! WASABE PASTE!

Sat, 04/30/2011 - 20:09 | 1224641 MarcusAurelius
MarcusAurelius's picture

That's nice to hear. The EURO likely rallied off it's death bed stance and few months back and ran quite a few stops to its present high. Your right. It has no reason at all to be at this level considering it was at this level in MUCH better times back in 2005. It makes no sense on any macro fundamental level. However when have the currency markets ever made sense. Let me go one step further in saying when has ANY market ever made sense? They don't, which is why they move the way they do. If you could predict them well.....I won't even say it. I suspect though with record longs coming along both are ready for reversal now. It's a sentiment know. The sliding USD and its tight peg to the DOW and S&P are what is bouying the EUR/USD not to mention GOLD and OIL. We'll see how they all do when the USD reverses trend, if and when that happens.

Sat, 04/30/2011 - 20:18 | 1224649 Yen Cross
Yen Cross's picture

Be quiet, and run smalls. Good Man! That tool on CNBS was just finding a range for the LONG covering! Then the short limit orders kicking in!!! ROCK ON!

Sat, 04/30/2011 - 20:39 | 1224679 mcarthur
mcarthur's picture

Just another sign of "shirtsleeves to shirtsleeves in three generations".   The nasty awakening is still to occur.  

I guess as a Canadian with all financial assets now pulled out of the US, this is another way of shorting your dollar.  I'll come back in at $1.12. 

Sat, 04/30/2011 - 20:59 | 1224700 topcallingtroll
topcallingtroll's picture

You have big balls my friend, because a lot of people think a trend reversal is near.

I love to listen to orly, david, scratch, yen, etc on currency issues. Be looking for more of your thoughtful posts in the future.

Sat, 04/30/2011 - 21:15 | 1224735 mcarthur
mcarthur's picture

The fix is essentially in.  The BOC is putting up a bit of a fuss but this is to control the deceleration. There is no reversal coming.  Essentially when Canada got in deep balance sheet shit in the mid-90's the fix was in with the G8 to allow/ignore the $C collapse.  Most Canadians were oblivious to the issue.  Running shoes in Buffalo cost more. Thats about it.  We are now essentially returning the currency depreciation favour (sorry, favor, you won the revolution). And there is about 8 months to go.


To be honest you guys scare the shit out of us up here with respect to how far you have strayed from actual wealth creation via value adding to pure speculation. 

Sat, 04/30/2011 - 21:28 | 1224757 slewie the pi-rat
slewie the pi-rat's picture

jeeeeez!  you think you're scared???  you shld help us out, eh?   do some online shopping.  buy a sharks jersey and get free shipping when you prove you bought 10 cases of labatt's or molson's.  you hozer.

Sat, 04/30/2011 - 21:43 | 1224768 topcallingtroll
topcallingtroll's picture

Me scared too. But wacha gonna do?
We are all speculators now. Even people sitting in cash and guaranteed accounts.

Sat, 04/30/2011 - 22:43 | 1224840 mcarthur
mcarthur's picture

The number of decent stocks to invest in in Canada is slim compared to the NYSE but the currency hit is more than I can handle.  I rode the bond market then stock market rise in 08-10 but the currency hit these days wipes out all potential gains in a sound currency at least.  So I suspect the game is over when the majority of foreign investors come to the conclusion I have with respect to losses due to currency exchange.  The only out at that stage will be the traditional rise in interest rates to pay for your silliness down there.  I'm out, have fun. 

Sun, 05/01/2011 - 21:25 | 1226763 longorshort
longorshort's picture

Wow its amazing how every Canadian thinks Canada is OK.  Even traders.  The shitstorm is gonna be really awful when it hits you guys, not because you deserve, but because everyone is so blinded by the boom and greed.  Maybee you need to go look up what percent of your GDP is minerals and you might be shocked that contruction dwarfs it.  20 to 40x leverage is perfectly safe until something goes wrong, longorshort. LOL

Sat, 04/30/2011 - 22:22 | 1224813 Bolweevil
Bolweevil's picture

Pardon me whilst I wax sentimental, but does this thread not feel reminiscent of those regularly occurring at ye olde  I fear I still don't know what you're  talking about (I can see your lips moving).  Carry on.

Sat, 04/30/2011 - 22:40 | 1224836 Orly
Orly's picture

I remember those days.  So informative, my head would ache by the end of a thread.

It'll be back.  It seems we are more shell-shocked than anything.  Nothing makes sense but it seems that a great cosmic alignment is coming into focus.  There will be time to pay the piper and we're all going to take a giant hit and pass it along.

It's happening.  It's happening.  It's all going to start making sense once again.  No worries.

Sun, 05/01/2011 - 02:25 | 1225045 StychoKiller
StychoKiller's picture

Until ALL proprietary software used in market trades is outlawed and replaced with OPEN Source, the various markets CANNOT be trusted!

Sun, 05/01/2011 - 20:45 | 1226152 Ferg .
Ferg .'s picture

People , it's astonishing that no one has pointed out the remarkable occurence that will soon transpire . Not another spike in net long EUR specs , or the G10 carry trade at further record  highs ( Yes  , carry has now surpassed  the lofty 2007 peaks ) or the DXY collapsing through the 2008 low , no , I'm referring to the fact of the imminent arrival of EUR/USD 1.5000 and thus the vindication of the related GS forecast . That's right , in a matter of days a Goldman Sachs FX prediction will actually be realized . Now that is something truly awe inspiring .

My opinion on the surging EUR and tattered USD ? Things will likely change soon enough . I think that the DXY has either completed or is in the process of completing wave 3 of wave 5 of the down trend that started in January . I expect some dollar strength in a 4th wave followed by one final push before we see a large correction in favour of the USD . The completion of this God awful QE2 program in June would be a logical point of inflection . There's just too much  bearish sentiment at the moment  . Reminds me of June 2010 when the EUR was collapsing and analysts and commentators were talking about the fragmentation of the EMU or EUR/USD at 1.1000 or even parity .

Sun, 05/01/2011 - 20:49 | 1226659 Orly
Orly's picture


It's nice to see you're back, Ferg.  Seems we're coming out of the woodwork now.


Sun, 05/01/2011 - 21:42 | 1226813 longorshort
longorshort's picture

Whats a skype handle or email I can get you at? Wanted to ask you some stuff about AUS that an Aussie would know and some of the currency stuff you do.  This is too damn slow on message board.

Sun, 05/01/2011 - 22:11 | 1226948 Orly
Orly's picture

As I said, my privet is private.  I am not Australian.  I live in Texas.

What would you like to know?  Maybe I can be of some assistance.

What's the rush anyway?  We should enjoy our time.


Mon, 05/02/2011 - 11:54 | 1229910 Ferg .
Ferg .'s picture

Great to see you posting again as well Orly :)

Hope the FX markets have been kinder to you than they've been to me . Tending to my wounds and staying in the shadows at the moment . Late May and June will be big turning points in my view . I remember we were talking months ago about how insane the Aussie bull trade had gotten and what a profitable trade it would be once it fell apart . That was around 1.0200 and now were up at 1.1000 ! EUR/USD and AUD/USD will be the pairs to trade once the USD snaps back .

Have been looking back over some links you posted on the GBP/USD btw ... that pair gives me the creeps . There's something very odd about its price movements .

Sun, 05/01/2011 - 21:31 | 1226786 longorshort
longorshort's picture

Watch Spain or Italy give the Euro an enema.  Maybee some crazy moves in the swiss frank as people flee. But then do we see a swiss bank blow up, where is all their money invested?  Who knows, but this is one big badass tootsie pop.  Question is how many licks?

Sun, 05/01/2011 - 21:56 | 1226864 longorshort
longorshort's picture

What % does PMI insurance cover in Austrailia.  IE you must have 5% down or PMI is required and at what %loss to what %loss are banks covered.  Who are the PMI insurers in Austrialia?   Are they publicly traded?  What are their funds invested in.  Jackass PMI companies lost a billion dollars or more being cross invested into housing with their insurance funds.  If your an old fart in Austrailia with good credit.  What % of your home value is available for a home equity line credit?  What tax advantes dose the Aussie government give homeowners on interest and profit gains on homes?  Allot of Aussie boomers have pored into homes as investments and I am trying to get much deeper perspective beyond the outlandish price vs wages on the surface we see.  I suspect you have some interesting tax codes driving some like the US.  Whats the largest fixed rate mortgage allowed there and for how many years?  IE do you have JUMBOS?  If someone could answer these or some of them I would appreciate it.

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