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The JPYEUR Pair, Pardon, The Market, Is Flying As EUR Shorts Unwind, Carry Trades Reestablished
If anyone tells you there is such a thing as a stock market, laugh in their face. It is just the JPYEUR pair, whose every single tick pushes the various computer signals to buy buy buy (and pray to whatever binary gods are in vogue that there isn't a volume spike, else it becomes sell sell sell). Don't buy it? Credit is unchanged - IG and HY are basically flat, while FINLs are wider on the day.
Following last night's Shirakawa commentary that the BOJ is now powerless to fight deflation, the carry trade is back on full bore, with the Yen getting crushed. The Record numbers of euro shorts is not helping, which, as expected is causing a scramble for the exit.
Lastly, some channel musings on where long-term support and resistance levels will ultimately play out.
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Correct, there is no stock market -- just electrons that shoot across fiber optic cables from one computer code assemblage to the other. Assets are no longer productivity measures or denominations of "value-added"; they have been reduced to variables in the great algorithm. All hail the infinite squid wisdom!
I only discovered today that there really is a "vampire squid."
From National Geographic:
http://www.huffingtonpost.com/2010/02/16/vampire-squid-threatened_n_4568...
And goldman sachs has made it to the front page of google search results for it. good job tyler & co!
KING DOLLAR: I'LL BE BACK.
Yes, see u @71.18
the USD will not give up the 50 day and 200 day quite so quickly, so your prediction of 71.18 must be a long term prediction. it was under the 50 and 200 day for 10 months. it is likely we will stay above the 50 and 200 day for a few months. we will probably see the 50 day re-tested this week, and the action there will tell us what we need to know. it held the 50 day 6 times from Mar '09 to Dec '09. so far it has held the 50 day once in the last two months.
do i like the USD? no, but in the land of the blind...
Germans telling Greece to drop dead: strong Euro.
Exactly, the Germans don't see the solution for the problems of their profligate neighbors as printing more money.... not great for Greece, but positive for the Euro.
That's the "efficient market" forced into being by the arbitrage algos. I don't think the original theory considered the volatility as a side effect, or as the effect that eventually, by vibration stress, will fracture the structure of the very same market.
the next move up in the dollar, to begin shortly, is going to give people a nose bleed.
Yeah, when Greece stiffs German, French and Swiss banks for around $300 bn. The flight out of the Euro will truly be a sight to behold.
But hey, the Euro is saved for maybe another 30 days.
LOL - I junked you because I now have a nasty picture in my head of naked Euro(peans) running out a tight door as a "sight to behold". Thanks
lets hope so but i have given up with all this talk of the market going down as it clearly should
Like I said, Charts and Analysis mean shit. If there is a way to pump this market, it will be done regardless of how it's done. It's time to draw up new chats that are taylored to a corrupt market. Good luck.
Like I said, Charts and Analysis mean shit. If there is a way to pump this market, it will be done regardless of how it's done. It's time to draw up new chats that are taylored to a corrupt market. Good luck.
Hi everybody!
Sorry for an off the subject quiestion but does anyone know where I could download a new movie about the floor trading, called - Floored (2009)
(http://www.imdb.com/title/tt1326220/)
Any infomation is welcome!
Thanks
Carry trade all the way to the floor. See if anyone notices.
The vampire squids busy today
This deserves a repost because it's exactly what we're feeling now: PAUL CRAIG ROBERTS: AMERICA—A COUNTRY OF SERFS RULED BY OLIGARCHS
The media has headlined good economic news: fourth quarter GDP growth of 5.7 percent ("the recession is over"), Jan. retail sales up, productivity up in 4th quarter, the dollar is gaining strength. Is any of it true? What does it mean? Or is it all a lie
The 5.7 percent growth figure is a guesstimate made in advance of the release of the U.S. trade deficit statistic. It assumed that the U.S. trade deficit would show an improvement. When the trade deficit was released a few days later, it showed a deterioration, knocking the 5.7 percent growth figure down to 4.6 percent. Much of the remaining GDP growth consists of inventory accumulation.
More than a fourth of the reported gain in Jan. retail sales is due to higher gasoline and food prices. Questionable seasonal adjustments account for the rest.
Productivity was up, because labor costs fell 4.4 percent in the fourth quarter, the fourth successive decline. Initial claims for jobless benefits rose. Productivity increases that do not translate into wage gains Cannot Drive the consumer economy.
Housing is still under pressure, and commercial real estate is about to become a big problem.
The dollar’s gains are not due to inherent strengths. The dollar is gaining because government deficits in Greece and other EU countries are causing the dollar carry trade to unwind. America’s low interest rates made it profitable for investors and speculators to borrow dollars and use them to buy overseas bonds paying higher interest, such as Greek, Spanish and Portuguese bonds denominated in euros. The deficit troubles in these countries have caused investors and speculators to sell the bonds and convert the euros back into dollars in order to pay off their dollar loans. This unwinding temporarily raises the demand for dollars and boosts the dollar’s exchange value.
The problems of the American economy are too great to be reached by traditional policies. Large numbers of middle class American jobs have been moved offshore: manufacturing, industrial and professional service jobs. When the jobs are moved offshore, consumer incomes and U.S. GDP go with them. So many jobs have been moved abroad that there has been no growth in U.S. real incomes in the 21st century, except for the incomes of the super rich who collect multi-million dollar bonuses for moving U.S. jobs offshore.
Without growth in consumer incomes, the economy can go nowhere. Washington policymakers substituted debt growth for income growth. Instead of growing richer, consumers grew more indebted. Federal Reserve chairman Alan Greenspan accomplished this with his low interest rate policy, which drove up housing prices, producing home equity that consumers could tap and spend by refinancing their homes.
Unable to maintain their accustomed living standards with income alone, Americans spent their equity in their homes and ran up credit card debts, maxing out credit cards in anticipation that rising asset prices would cover the debts. When the bubble burst, the debts strangled consumer demand, and the economy died.
As I write about the economic hardships created for Americans by Wall Street and corporate greed and by indifferent and bribed political representatives, I get many letters from former middle class families who are being driven into penury. Here is one recently arrived:
"Thank you for your continued truthful commentary on the 'New Economy.' My husband and I could be its poster children. Nine years ago when we married, we were both working good paying, secure jobs in the semiconductor manufacturing sector. Our combined income topped $100,000 a year. We were living the dream. Then the nightmare began. I lost my job in the great tech bubble of 2003, and decided to leave the labor force to care for our infant son. Fine, we tightened the belt. Then we started getting squeezed. Expenses rose, we downsized, yet my husband's job stagnated. After several years of no pay raises, he finally lost his job a year and a half ago. But he didn't just lose a job, he lost a career. The semiconductor industry is virtually gone here in Arizona. Three months later, my husband, with a technical degree and 20-plus years of solid work experience, received one job offer for an entry level corrections officer. He had to take it, at an almost 40 percent reduction in pay. Bankruptcy followed when our savings were depleted. We lost our house, a car, and any assets we had left. His salary last year, less than $40,000, to support a family of four. A year and a half later, we are still struggling to get by. I can't find a job that would cover the cost of daycare. We are stuck. Every jump in gas and food prices hits us hard. Without help from my family, we wouldn't have made it. So, I could tell you just how that 'New Economy' has worked for us, but I'd really rather not use that kind of language."
Policymakers who are banking on stimulus programs are thinking in terms of an economy that no longer exists. Post-war U.S. recessions and recoveries followed Federal Reserve policy. When the economy heated up and inflation became a problem, the Federal Reserve would raise interest rates and reduce the growth of money and credit. Sales would fall. Inventories would build up. Companies would lay off workers.
Inflation cooled, and unemployment became the problem. Then the Federal Reserve would reverse course. Interest rates would fall, and money and credit would expand. As the jobs were still there, the work force would be called back, and the process would continue.
It is a different situation today. Layoffs result from the jobs being moved offshore and from corporations replacing their domestic work forces with foreigners brought in on H-1B, L-1 and other work visas. The U.S. labor force is being separated from the incomes associated with the goods and services that it consumes. With the rise of offshoring, layoffs are not only due to restrictive monetary policy and inventory buildup. They are also the result of the substitution of cheaper foreign labor for U.S. labor by American corporations. Americans cannot be called back to work to jobs that have been moved abroad. In the New Economy, layoffs can continue despite low interest rates and government stimulus programs.
To the extent that monetary and fiscal policy can stimulate U.S. consumer demand, much of the demand flows to the goods and services that are produced offshore for U.S. markets. China, for example, benefits from the stimulation of U.S. consumer demand. The rise in China’s GDP is financed by a rise in the U.S. public debt burden.
Another barrier to the success of stimulus programs is the high debt levels of Americans. The banks are being criticized for a failure to lend, but much of the problem is that there are no consumers to whom to lend. Most Americans already have more debt than they can handle.
Hapless Americans, unrepresented and betrayed, are in store for a greater crisis to come. President Bush’s war deficits were financed by America’s trade deficit. China, Japan, and OPEC, with whom the U.S. runs trade deficits, used their trade surpluses to purchase U.S. Treasury debt, thus financing the U.S. government budget deficit.
The problem now is that the U.S. budget deficits have suddenly grown immensely from wars, bankster bailouts, jobs stimulus programs, and lower tax revenues as a result of the serious recession. Budget deficits are now three times the size of the trade deficit. Thus, the surpluses of China, Japan, and OPEC are insufficient to take the newly issued U.S. government debt off the market.
If the Treasury’s bonds can’t be sold to investors, pension funds, banks, and foreign governments, the Federal Reserve will have to purchase them by creating new money. When the rest of the world realizes the inflationary implications, the US dollar will lose its reserve currency role. When that happens Americans will experience a large economic shock as their living standards take another big hit.
Come on dude, none of this matters!! We will simply all buy stocks, the market can not POSSIBLY go down. We'll get rich by owning stocks!!
That is the new economy V3.0
If you are looking at the correlation between the S&P 500 and a particular FX pair, I think you should take a look at AUD/JPY rather than EUR/JPY. The one-year correlation of the daily % changes is higher (0.66 vs. 0.53).
ZeroHedge is hands down my favorite blog, so don't take this as a complaint. I think you should try to be more consistent in the way you quote currency pairs. I much prefer the style of the post earlier quoting the pair as EURUSD, rather than this post which uses JPYEUR.
Like Tyler has said, a lot, the stock market is ruled by trading computers, some high frequency scalping machines, others high frequency correlation machines. We all see the currency/commodity/stock correlations, over the short term.
Longer term, try to use gross market aberrations to one's advantage. But don't forget that these same markets are manipulated by central banks effecting economic policy. You can't short anything with the government propping up asset prices, even bonds. I'm thinking relatively undiscovered small cap stocks and less liquid commodities are the place to be, where the trading is too thin for the big boys.
Anyone with some ideas?
i dont get why half of u choose dollar side and the others anti-dollar, better to trade both dont u think so?
Well, the "Euro" crisis was short-lived, shorter even than Dubai. Hard to believe a week ago people were talking of break-up of Europe, the Europeans have understood that the memory span in financial markets is measured in seconds nowadays, and besides, these euro politicians have mastered the art of letting time "resolve" its scandals.
And of course a strong euro is a face-saving issue, they probably welcomed the help of octopuses of various stripes to "teach the shorts" a lesson. The King squid of course needs to redeem itself in the light of the revelations of the various Spartan and Roman swaps, the European bond market is nothing like the orgy of US Treasuries issuance, but still considerable if the King squid were to be barred from Europe altogether.
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