This page has been archived and commenting is disabled.
NO FX?
I have been waiting for some clarification from either the Fed or the
ECB on a new intervention policy. Nothing. I called a few banks in NY
and they told me that there was no intervention of any sort in the US
market today.
Looking at the macro situation it is easy to paint a picture for a lower
Euro against a basket of currencies. The EU is not a growth story.
Strong currencies generally are supported by above par growth. The
region clearly has problems. You don’t bring in the IMF unless you
really, really need to.
I am left guessing on the near term future of the Euro. Given the
absence of “official guidance” the market will have to figure out what
is the "right" price.
There is more bad news coming for the EU. Not every day will be up 10%
in stocks. Greek bonds soared today to 7%. A month ago we called that
level a crisis. Today it is a big relief rally. My assumption is that at
sometime in the near future the market will have to lean on the Euro a
bit and determine exactly what the intentions of the ECB/Fed are.
I would not expect to see a one-day decline of 1% in the Euro go
unchecked by the Central Banks. If we trade to a level they do not like
they will step in and the next minute the Euro will be a big figure
higher.
If the European monetary officials wanted to see the Euro above 1.30,
then today would have been the day they would have showed their hand.
Numerous officials made clear their desire to “burn” the evil
speculators. But nothing happened on the FX battle front. As of the
close in NY the Euro is a tad under 1.28. There is nothing strong about
that price. Only dumb speculators have been hurt with a short Euro so
far.
The most optimal outcome for the EU would be for the Euro to gradually
weaken over a period of many months. The competitive advantage they
would gain would help offset the deflationary forces that reduced public
sector spending will bring.
This policy objective could be referred to as the: Managed Dirty
Downward Float (“MDDF”). Watch out if this is the policy that
unfolds. It will not work. The Central Banks are not big enough not to
absorb this.
In my opinion the Euro is better priced at 1.1 than 1.30. If we get
there without a blowup in the other markets I will be amazed. The cat
and mouse game between the market and the Central Banks will likely have
the first act this week. If we see evidence that the objective is “slow
the decline” versus “It goes no lower” it will be
the 'tell' that this is MDDF.
There will be another few rounds of betting before the last 'all in'
wagers are made. But as of now, the cards are being dealt.
»
- advertisements -
Here's what the Germans think about all this. http://www.spiegel.de/international/europe/0,1518,694226,00.html They are not happy.
Something is lacking, I'm not attracting
My boobs are not as big as I want them to be
I want 36D
I'm not receiving enough affection
Gonna get me a silicon injection
Fulfill my dreams, bust outta my seams
My social life is pathetic, I can't find a man
What I need is cosmetic surgery
Be the best I can be
Proteins, and milkshakes, mass vitamin consumption
Who needs to diet when liposuction
is painless and quick, local anesthetic
I know what I want
Now my body is a model of flawless perfection
I most certainly will cause an erection
Wherever I go, but I still don't know
The reason why I can't find a mate
Guys I meet ejaculate
Then leave through the door,
I can't take anymore
New boobs! Jugs!
Kno-kno-kno-kno-knockers! Wa-wa-wa-wazoos! Ya-ya-balloons!
My Darling, I love you
And you know my love is true
But, sweetheart, something's come between us
And those new boobs just aren't you
Ya-ya Wazoo-ooo-ooo-oo-ooooo-oo-oos!
Why the Euro is at 127 and not at a much lower level is amazing ..... but the dollar is no great shakes either. Trends do tend to hold a bit, and here the trend is up on the $$ and down on the Euro for now.
Fed's acting under the radar is SOP for them. Until 2 years ago it was a smaller issue. BTW matters really unraveled with the dollar in 72, when we ditched gold. From there to now is misery, with a few decades of unhappiness.
Would not the short side of eur be getting crowded? Intervention or not, time for a reversal up.
Markets aren't like humans who "look to their leaders." They look for leadership which of course takes character and perhaps more importantly a willingness to do something even though you know it will be "wrong." While "market participants" opine "what are the officials up to" the market is already responding based upon LEADERSHIP. In short the screw ups are almost always the same because invariably there really is no solution. But is there someone at least trying to do even the "wrong solution"? Well, now you have your answer. DOW up 400. Welcome to your "fearless leader." He's called DJIA. Don't ask me, I didn't make the rules but the way I see it "what's wrong with balancing the budget if this is the alternative."
Well the Euro has given up all y'days gains and there's been no intervention.
Maybe Timmy and Ben really meant it when they were talking up the strong dollar last fall?
You haven't cleared customs yet, have you?
"If the European monetary officials wanted to see the Euro above 1.30, then today would have been the day they would have showed their hand."
why would they want the euro there? that's 15 cents above fair value. Nobody wants an overvalued currency in these times
The only poker player at this table who will end up with anything at the end of the evening is the one who manages to empty his hand of paper and fill his briefcase with gold.
"Good night, gentlemen. It's been a delightful evening."
EURO BAIL DOA:
http://williambanzai7.blogspot.com/2010/05/eurobail-doa.html
I love NOFX. They're my favorite band. I've seen them at least ten times now.
I know that it's irrelevant to the article, but perhaps you were talking about them indirectly...
http://www.youtube.com/watch?v=5KsvStAf5L0
I got an invitation to go to anarchy camp
there will be twistin', fistin', biting, fighting all in an evening
the soundtrack will go multi platinum,
barbecue a boca while the effigies burn
you may not wanna stay to see how we take care of a turncoat
Christiania's kinda far away so come along with me
we can dance and trip and be anarchists
we gotta get the manual and put it in the oven 'til it cooks
then we're gonna take the ashes to the wassail
and use them to spike the punch
rules of anarchy camp: reckless abandonment,
random acts of dumbness will be rewarded
if you see somebody taking charge,
you'll be expected to beat them
cause everyone who's no one, will be participating
no one who is someone, will ever get to know
the joys of anarchism, destruction of the system, yeah!
so come along with us,
salad days and nights on the anarchaic bus
we're gonna pick up indigents and crusties and a half a dozen nuts
and we're never coming home
underwater basket-weaving (we got some arts and crafts)
meth-amphetamine symposiums (they last a couple days)
African killer spelling bees (you better get it right)
bowling in ice hockey rinks (of course checking is allowed)
anarchy camp's never inert (you think we don't know that it's)
not much fun 'til someone gets hurt (our only motto)
so we're greasing up the rusty vert ramp
time to make some reservations for next years anarchy camp
My favorite song ever.
NOFX - The Decline (1999)
(Place a wager on your greed, a wager on your pride... why try to beat them when a million others tried? Sounds like Wall Street to me!)
http://www.youtube.com/watch?v=DCz8PNvABO0
(the first part of it)
http://www.youtube.com/watch?v=sM6KF_Pz0mc&NR=1
(the second half of the song)
Where are all these stupid people from
and how did they get to be so dumb
Bred on purple mountain range
Feed amber waves of grains
To lesser human beings, zero feelings
Blame it on human nature, man's destiny
Blame it on the greediocracy
The fear of God, the fear of change, fear of truth
Add the Bill of Rights
Subtract the wrongs, there's no answers
Memorize and sing
Star spangled songs, when the questions
Aren't ever asked
Is anybody learning from the past
We're living in united stagnation
Father what have I done.
I took that 22.
A gift for me from you to bed with me each night.
Kept it clean polished it well.
Cherished every cartridge every shell
Down by the creek under brush under dirt
There's a carcass of my second kill
Down at the park under stone under pine
There's a carcass of my brother William
Brother where have you gone to I swear
I never thought I could I see so many times
They told me to shoot straight, don't pull
The trigger squeeze, that will insure
A kill, a kill is what you want
To kill is why we breed
The Christians love their guns the church and NRA
Pray for their salvation
Prey on lower faiths
The story book's been read
And every line believed
The curriculum's been set
Logic is a threat
Reason searched + seized
Jerry spent some
Time in Michigan
A 20 year vacation
After all he had a dime
A dime is worth a
Lot more in Detroit
A dime in California
Just a 20 dollar fine
Jerry only stayed
A couple months
It's hard to enjoy
Yourself while
Bleeding out the ass
Asphyxiation is
Simple and fast
It beats 17 fun years
Of being someone's bitch
Don't think
Drink your wine
Watch the fire burn
His problems not mine
Just be that model citizen
I wish I had a schilling for every senseless killing
I'd buy a government. America's for sale and
You can get a good deal on it and make a healthy
Profit, or maybe tear it apart you start with
Assumption, that a million people are smarter than 1
Serotonin's gone she gave up drifted away
Sara fled though process gone
She left her answering machine on
The greeting left spoken sincere
Messages no one will ever hear
10,000 messages a day a million more transmissions lay
Dead victims of the laissez faire 10,000 voices
100 guns, 100 decibels turns to one, one bullet
One empty head now with serotonin gone
The man that used to speak
Performs a cute routine.
Feel a little patronized.
Don't feel bad. They found
A way inside your head
And you feel a bit misled.
It's not that they don't
Care. The television's
Put a thought inside your
Head like a Barry Manilow
Jingle I'd like to teach the
World to sing in perfect
Harmony a symphonic blank
Stare. It doesn't make you care.
Not designed to make you care.
They're betting you wont care.
They'll place a wager on your greed.
A wager on your pride
Why try to beat them when a million others tried
We are the whore.
Intellectually spayed
We are the queer
Dysfunctionally raised
One more pill to kill the pain,
One more pill to kill the pain
One more pill to kill the pain,
Living through conformity
One more prayer should keep me safe.
One more prayer to keep us safe
One more prayer to keep us safe
There's gonna be a better place
Lost the battle lost the war lost the things
Worth living for lost the will to win the fight
One more pill to kill the pain
The going gets tough the tough get debt
Don't pay attention pay the rent our next of kins
Pay for your sins a little faith should keep us safe
Save us
The human existence is failing
Resistance essential. The future
Written off. The odds are astronomically
Against us only
Moron and genius would fight a
Losing battle against the super
Ego when giving in is so damn comforting
And so we go on with our lives we
Know the truth but prefer lies
Lies are simple. Simple is bliss. Why
Go against tradition when we can
Admit defeat. Live in decline. Be there
Victim of our own design
With status quo built on suspect.
Why would anyone stick out their
Neck fellow member of club
We've got ours. I'd
Like to introduce
You to our host
He's got his and I've
Got mine. Meet
THE DECLINE
Ahhh... they left out the lyrics at the end of the song...
We are the queer, we are the whore:
ammunition in this class war
we are worker, we love our queen
we sacrifice, we're soylent green.
:)
You're Franco-Unamerican!
I do read a little bit of Noam Chomsky, as the song would indicate.
http://www.youtube.com/watch?v=-UWCmbn_PNo
How did the cat get so fat?
Seemingly lost in all of the Euro-talk is the fact that China has once again entered a technical bear market. The SSE (down 2% on the day as I write) is now down 24% from its 12 month high, qualifying it as a bear market.
Recall that China led the first wave down in the worldwide bear market by peaking in mid 2007 at 5100 and eventually falling to 1850 or so.
With China rolling over (don't Asian markets also have a "predictive" function?), Europe in tatters, and US UE at nearly 10%, it is getting harder and harder to talk about any sort of worldwide recovery. It is also getting harder and harder to justify current equity levels in the US.
If China is in fact rolling, I would be concerned for the Aussie and Loonie, as well as each country's respective housing markets. They survived the first blow; they are unlikely to survive the second. Add Singapore to that list.
there is a world wide real estate bubble..when will it burst? China, Aus, Canada being the worst right now, think they are immune....a big take down in commodities will take down Aus and Canada...I don't know what China does because its monetary policy is so unlike West...
MM,
The Canucks KNOW their screwed( just haven't felt it yet)............it's just now starting there.
In a hyperinflation, people with hard assets don't get screwed.
It makes me feel all warm and fuzzy that the Governor of the Bank of Canada, Mr. Carney, spent 14 years under the tutelage of the wizards at GS, learning the tricks of the trade.
I'm with you on Singapore; that is one small economy at the end of a whip... I guess the upside would be affordable condos for lowly-paid expats like myself?
An 18% decline in the Euro would good for exporters and tourism, but it would kick already over-taxed EU consumers in the nuts. Prices for Chinese products and imported oil would jump immediately. Unions would demand wage increases -- how would that square with the austerity measures demanded by the IMF?
thanks for insight could you pls elaborate on this paragraph
dyslexia and double negatives don't mix well - thanks
Twas an attempt at humor. Like TALF or TARP or my favorite QE.
Bruce, what about the USD/JPY? Looks like that's still very much above last weeks levels...and I think you're right that's what made the Titanic sink last week...so maybe it's the fed and $ that's really the point of all this>
Tks Doc. I have looked at it again a few times and am convinced it was the Yen that started things off. Dennis Gartman called the Yen move a "12 Sigma event". That is something with a hell of a lot of zeros behind it.
When computers see something this irregular they are programed to drop both bid and offer sizes to reduce risk. Becasue Yen is a funding currency for the carry trade the computers are programed to move ta short bias when 4/yen weakens. That is "logical" but at 12 Sigma it just fries things. One hyper Vol move led to a similar Vol move in another.
On the Yen, I would leave it alone. As far as that goes I would recomend that no one postion FX in this market. Old rule: If you want to take an FX position overnight you must first hold your breath for two minutes..........
The SNB decision to abandon the 1.4325 EUR/CHF line is what set FX in motion last thursday. The SNB was very actively supporting the EUR in the previous days. When the SNB pulled out the EUR immediately began dropping hard. As the EUR broke thru technical support the trend accelerated and impacted correlated markets. Basically, what the SNB did in the days before was build a damn that once full they decided to abandon rather abruptly. The wonders of government intervention.
Yes the Fed does sub rosa stuff. But if they are buying in the public market there will be an announcement
Bruce do you think it is possible that the FED is using swaps to monetize European debt. I mean after all it seems lending money to our banks at near 0% did wonders for them, why not also European banks as well.../sarcasm.
Well, if the swaps are guaranteed by ECB, and if the ECB loans the swapped USD to (insolvent) EU banks, then guess how the Fed gets paid back?
Bruce, the kind of "interventions" the Fed engages in, I'm not sure you can find out without having some sort of 24/7 hidden listening device attached to Bernanke.
.