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Things are getting interesting again
After gapping up a few hundred pips on news of the gajillion euro bailout, the euro is back near its lows against the dollar with pervasive selling into strength. Europe is China's biggest export partner, and with talks of rampant asset bubbles and consequent monetary tightening coming out of there, things look increasingly bad for China. The Shanghai Index is indeed down over 20% off its highs, putting it in technical bear market territory, by some definitions. This weakness is spreading to commodities, for which China has been showing record demand in recent quarters, with crude and copper both down 12% off their highs. And this, of course, has spread to the Aussie Dollar, with the AUD/USD down close to 400 pips off its high and approaching a definitive 200DMA breakdown, which has been what I've been calling for as a terrific short trigger for various risk assets, including equities.
During the flash crash last Thursday, JPY and gold got the safe haven bids as investors fleed risk assets. Gold is a rational safe haven, considering the central bank policies of today, and indeed gold just made a new closing high today in terms of USD, after making new highs in EUR, CHF, GBP, and various other currencies recently. The yen, on the other hand, is less obvious of a choice as far as safe havens, considering Japan's ballooned debt-to-GDP, which finally will put pressure on JGBs as the next wave of the financial crisis hits. The JPY's strength as equities declined on Thursday reveals the carry trade nature of this market, as the JPY is the lowest-yielding of currencies and most apt to be carried for risk assets. Indeed, the selloff in EUR/JPY on Thursday preceded (and in my opinion, catalyzed) the risk asset crash. With the EUR back to near lows and commodities selling off, the EUR/JPY is close to breaking back down to crash levels, and in the process, close to catalyzing another wave down in equities in my opinion.
The charts will tell but things are once again getting interesting, and the huge volatility in the euro, especially with the massive selling into the bailout gap-up, could be a harbinger of worse to come, especially considering the record bid-to-cover in the recent 3yr Tsy auction. Risk aversion is here and even if we get a short-term bounce on some sort of political event/reactionary policy, it will be short-lasted and by the end of the summer/beginning of the fall, it should be clear that the next wave of the financial crisis has arrived.
And sovereign debt crises are much more political and have worse economic and social consequences (trade wars, revolts, riots, civil wars, and even world wars) than financial/private debt crises.
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wait till they swap like mad. euro to the moon. deflate that debt bitches! rock and roll.
Australia's foreign debt is a taboo topic: http://www.brisbanetimes.com.au/business/why-our-foreign-debt-is-a-taboo...China's new type of land mine.
Normally if you step on a land mine you are fine. The problem is when you lift your foot and release the pressure. It is then that the sucker blows you to pieces. In terms of China's US treasury holdings a new type of land mine is defined. Not only can they not lift up their foot - they actually got to add a few billion regularly otherwise the sucker will blow them sky high in any case. This process guarantees a spectacular explosion when (not if) it happens.
There's a missing piece of the puzzle here. Europe is China's largest trading partner and there is no way they would want to see total collapse. Although the cannot openly switch heir huge Treasury holdings and buy Euro denominated debt, maybe they are closing the circle with the European CBs. To wit, Fed lends USD to Euro CBs, CBs then use proceeds to swap Treasury risk with the BoC, who buy risk on European debt from the Euro CBs, all unseen by the markets and they can appear to be continuing to increase holdings of Treasuries. Since everyone is convinced the Eurozone is about to descend into the Dark Ages, with wars, cannibalism I would not be surprised if China were to take a different view.
Shipments to such (Greek) firms without insurance would constitute a form of hara-kiri or Japanese ritual suicide.
http://www.austrianindependent.com/news/Business/2010-05-11/2565/Credit_...
Euro 1.2700 as i type this. Swap Agreemen+Japanese housewifes and professionals alike are short the Euro=Potential shakeout, yes i said potential.
Apologies in advance to the affected/offended, got to get the word out on this.
Deepwater Horizon Control Solution, version Deux
www.squareandc.net
Updated, gentler on the eyes, with a lot more information. Please post at as many places as you can, e-mail to your buddies etc. Times a wasting.
To all the snarlers from last time, thanks for taking a look at least.
Not farming for Ip addresses or anything of the sort. Just trying to reach an informed audience, from where it might leap into a meme-esque public consciousness and to the right eyes/ears.
I'm serious and so is the problem. If the oceans go, no gold, no s&p, no forex, no SHIT.
For the thousands who did visit from this site, thanks for stopping by, do so again and if called this time, spread the word. Incredibly hard to reach people on site or at BP etc., especially sitting here in India.
Keep the faith but know that this poor black swan (literal) is beyond sad.
Thanks. You can e-mail me from the site for friendly words of advice and encouragement.
Dude it is a logo...thats it...you are totally farming for IPs
Why would you imagine that? Plus, I don't even know what the heck to do with an IP.... What do you do with IP's papaswamp?
Anyways, all good.
Note to other ZH'ers passing by, not an IP farming op.
It is a save the gulf op and using any all means I know to get the word out.
ABC news could not get through to BP for heavens sake!
Thanks all of you for your attention.
The egregore is picking up steam.
Hey genius- why don't you just tell us what your brilliant idea is. If it's really as scintillating as I certain it is, I promise I'll put in a good word with all my pals at BP.
Surely your stunning intellect deserves a chance to shine!
"Things Are Getting Interesting"
Reminds me of the Chinese curse...
May you live in interesting times!
If it makes the history books its not a good
time to be alive
I disagree. All the information I had about the last dep. was the stories my mother told me. Bums, hobos, perverts, but thats just the political side. We have much cooler and more colorful tents in which to live now and the goobermint will provide WiFi to the tent cities. With the ECB you don't even have to stand in soup lines anymore. But if you did, we now have those way cool foldable seats with beer holders. Man, life is good. Please continue to vote Dem/Repub so we can party on.
Gold does not go up based on inflation or deflation it is a hedge against government stupidity. When people loose confidence in government it is the alternative money. It will continue to go up until the confidence is regained. In other words not in the foreseeable future.
Inflation and deflation are usually caused by government greed and stupidity.
I've got some groceries,
Some peanut butter,
To last a couple of days
In that case I'd say a type of ballistic lead delivery system might be your next order of business. You'll need to relieve somebody of their goodies to survive. Just sayin'....
Euro so pretty, but francly I'm not feeling very randy toward yuan the basis of the pounding you are taking.