Jobs Week Wednesday: Four Key Releases and a 'Funeral' [View article]
Now wait a minute! Anyone who has followed my posts knows that I, like any semi informed market follower, simply takes for granted the gross understatement of govm't figures.
Take them more as an index, which drives markets based on its change relative to prior and expected results.
Because I write for both long term investors and short term traders, I do at times fail to clarify that which for one audience may not be clear. Mea Culpa.
The short term trader crowd understands the "BS" in the BLS #s but also understands that in the near term (plenty of $ to be made there) markets move based on whether these figures are relatively better or worse than expected. Short term movements have NOTHING to do w/ reality (er, at times ditto longer term rallies like the once since March)
Sorry to have confused you. I don't understand a lot, and sure don't claim prophecy, but at least have the decency not to suggest I'm totally naive & lacking understanding
I get plenty of that from my wife & teens, thank you.
Anyway, hope you get something out of the posts & always appreciate constructive criticism (that's why I'm still married!) Cheers, Cliff
Why Economists Didn't Anticipate the Financial Crisis [View article]
Winner of my scariest but must read article of the day for yesterday. Great post. You just got a new follower
As I wrote recently in one of my posts, THE question hanging over markets for the coming year is whether markets can avoid collapsing under the debt load. see Graham Summers' recent article: • U.S. Housing: The Big Picture - a close runner up and chilling example of how the coming mortgage resets over the next two years will be a series of torpedoes in the hull of the already badly listing economy.
Western Government Sovereign Debt in Trouble [View article]
Great post - winner of my scariest but must read post of the day that I'll be sending the link to those near & dear.
As I noted recently in one of my posts, THE question for the coming year is essentially: can we bear the DEBT. It's all about debt.
Can the global/national/state/... bear the current load? If this great Keynesian experiment of the past 2 years failed- then what bullets have policymakers got left?
Australia, the developed world's poster child for recovery, recently reported GDP that showed the growth was based on stimulus. And when that is withdrawn? This, folks, was the BEST developed world economy. What about the US, EZ, and UK?
Oh, there ARE options. Having lived in Israel during the 1980sm through over 100% a year inflation, I can remember:
'New' Israeli sheckles replacing the old ones. Don't ask what the rate was. Spending paychecks immediately before they lost about 8% on the month Banning of Forex holdings
No wonder the New Sheckle is holding up. They learned the hard way.
USD Weekly Outlook: Beware 11 Events that Could Move the Dollar and Global Markets [View article]
Who said I believed it? But that's what the markets are going on, and it reflects some kind of relative improvement compared to the past reports. No secret that the jobs reports vastly underestimate. Acknowledged. But now, in theory, they are undersestimating a shrinking #.
If you're trying todetermine how markets will react in order to make money (vs. divining reality) we then we can use the reports for that, because that is what the markets are going on. Forgive my cynicism. Just trying to help the readers stay out of the poorhouse. Maybe.
The usual good post, You are one of the kings of income investing, can't figure out why more aren't following you here - they should! From one of your biggest fans, please keep the posts coming. Happy NY, Cliff
Absolutely. Energy, or more to the point, lack cheap & clean energy, is one of the lurking threats to civilization as we know it. Work & pray for a technological breakthrough, because fossil fuels are not the long term solution, and waste storage remains a question for nukes (though the French have been good so far).
On Dec 30 10:44 AM Ferdinand E. Banks wrote:
> Let me add something to the above. Fully recognizable economic recovery > might soon be sight because a couple of the best economic brains > in the world are on the Obama team, by whom I mean the good Larry > Summers and the photogenic Ben Bernanke. They didn't have people > like that in or near the White House during the 'great' depression. > > > The problem is on the oil front. When the next sustained oil price > increase begins, it will begin from the 70s or 80s - where that is > dollars/barrel. This is very bad news folks, and I hope that your > political masters comprehend this dilemma.
Canadian Dollar Resists U.S. Dollar’s Advance [View article]
Good article, Doc. A few points to add:
Other reasons for the CAD's relative strength include:
1. as one of the "commodity dollars" it tends to move with the AUD and NZD, even though it doesn't offer nearly the interest rate advantages. This "birds of a feather" syndrome has benefitted the CAD greatly - moving up with these other risk currencies when optimism/risk appetite rose, even though its rates are the same as the US (NB: in FX the terms "risk currency" and "safe haven currency" have absolutely nothing to do with actual financial stability, but simply refers to whether or not they rise with optimism or pessimism)
2. As I've discussed repeatedly in my posts last spring, Canadian banks did not participate in the subprime madness, hence no need for massive bailouts to their banking sector. Their housing market is also far healthier. Together, these alone provide significant fundamental advantages over the USD
3. As a commodity based economy with a sound financial system, the CAD is a natural USD hedge and hence has tended to move opposite the USD - with exceptions such as the past days.
4. The BoC is an obstacle for the CAD only insofar as any central bank of an export based economy can't let its currency get too high to fast, otherwise it makes the exports more expensive and hinders growth.
5. The only real problem with the CAD's prospects is it's low yield compared to the other "com-dollars" with which it gets bought or sold. All things being equal (rare), the CAD s/b the first com dollar to get sold off, because traders can get better yields elsewhere. What counters that tendency is that Canada has a lot of oil (similar to the Saudis if you include the tar sands, expensive as extraction is) so any positive growth news tends to support oil, and the CAD moves first and foremost with oil.
FYI: Note how oil has risen despite the rising USD - THAT is the prime reason for the CAD's relative strength vs the USD.
in the words of John Maynard Keynes: markets can stay irrational longer than you can stay solvent. and that is why we go with trends and use stop losses and other risk managment tools so that we don't suffer too much for being wrong. Feel free to have an opinion about the market, but not to follow it if it starts exceeding your planned maximum loss on a given trade/investment -WHICH WE ALL HAVE, FOR EVERY TRADE/INVESTMENT, PLANNED BEFORE WE ENTER, RIGHT????
On Dec 28 11:49 PM Fr0gger wrote:
> Your articles are interesting, no doubt, it's only a shame that your > numerous subscribers cannot pretend their oh so painful losses from > following your doom and gloom predictions in the last 6 months were > just a dream... Most of your recommendations went down the drain > 5% to 35% in losses while the markets soared. It's a consolation > to future followers that you decided to stop giving stock recommendations > in 2010.
Good article, as usual. Of course, the analogy, good as was, leaves out a few points to consider.
1.where else can those seeking to park cash turn, especially if the Eurozone is also having debt trouble, and if that trouble spreads
2. What if those countries/customers depend on the US as an export market? Politicians worldwide tend to think short term (or at least not much beyond their anticipated reign). Will, they like the US banks that depended on subprime borrowers, continue to make riskier loans by buying US bonds in order to keep their own employment and exports going, at least in the short term.
3. What if those countries/customers risk losing the value of their considerable foreign reserves if they don't keep lending?
I've pondered these questions in prior posts and at fxmarketanalysis.wordp.../ and I've no clear answer. They may not love US debt, but can they afford to ignore it?
Washington is not only the capital of the US, but of "Too Big To Fail"
Some way to start a millenium, eh? Keep up the good work
Bankers, Economists Say Gold Is a Bubble: Here's Why You Should Ignore Them [View article]
1. Facts?What you say may be true, but the article was long on passion and opinion and short on quantitative evidence. Consider a follow up article in which you summarize and reference your quantifiable evidence.
2. Deflation? Gold is primarily an inflation hedge.FYI while gold may be a great long term play, timing could be tricky. Indeed, given the lurking sovereign debt crisis on an international and national and even local level (forgetting the parlous state of most individuals) another credit seize up and market crash could bring back DEFLATION, and indeed this is the primary concern of the Bank of Japan already.
3. Because it is priced in USD, gold tends to (though not always) move opposite the USD. As I've stated repeatedly in recent posts, the ongoing sovereign debt threat in the Euro-zone is likely to provide significant support for the dollar over at least the coming months, if not longer.
4. there is a small but real chance that if gold provides too much competition for fiat money, governments can simply ban its possession. That has happened before. Then what?
5. Finally, remember that gold too is largely a fiat currency, just one with a longer track record. Can't use it for much, really. In a real collapse, its land, food, water, and energy and other hard assets that have actual value.
In sum, while I agree gold has a place in a portfolio, and that the USD and other fiat currencies are troubled, I see no real replacement for them at this time. Curious to hear your thoughts. see fxmarketanalysis.wordp.../
Gold, Dollar, Euro: 2010 'Menage a Trois'? [View article]
Damn! Love that title. Gotta remember that one. Good article and best title of the day. Agree that gold has legs long term, but timing that will be tough. A few pts really need clarification:
As I've noted for months now, the USD would, and did rise when one of the following occurred:
a. major fear event: got that from Dubai World's announcement, and EZ downgrades kept fanning the fear, which in turn plays into the USD's safe haven role as risk seeking carry trades unwind b. fundamental improvements in jobs and spending that in turn move up expectations for Fed QE exit and interest rate increases. Expectations on this front were so low not much was need to beat them. c. An event that undermined the EUR.The EUR/USD pair comprises about a third of all FX. In other words, for every 3 euro bought a dollar is sold. They almost always force each other to move in opposite directions. Debt downgrades of Greece and Spain, with more threatened, as the somnambulant ratings agencies awoke after the Dubai wake up call, undermined the EUR, and thus helped the USD. These problems aren't going away any time soon, so expect them to continue to prop up the USD. Yes the US is far from a paragon of fiscal virtue. But in Forex all is relative, and here it's not as much a beauty contest as a competition for "least ugly."
Soveriegn debt threat remains for the EUR for the foreseeable future, providing support for the USD and a reminder to traders that too many USD shorts could be dangerous under these conditions.
the author writes:
"The United States is still $12 trillion in debt with a double-digit unemployment rate, more spending, higher taxes, while the monetary policy will likely remain loose in 2010.
The Obama administration has warned that if the debt ceiling is not raised, the government risks default as early as New Year’s Day. Democrats have estimated that to get through the 2010 elections, Treasury needs to have the debt ceiling raised by as much as $1.8 trillion above today’s $12.1 trillion cap.
No, it is illogical to conclude that the buck's rise from near rubble is due to material improvement in the fiscal or monetary conditions in the U.S. Rather, it is the decline in the euro and some other key currencies that has accelerated due to substantial weakness as compared to the dollar."
1. VERY tough to separate moves of the EUR and USD. Why? As noted above the EUR/USD pair comprises about a third of all FX. In other words, for every 3 euro bought a dollar is sold. They almost always force each other to move in opposite directions. Re the debt issue, yeah, USD is still weighed by debt, but the historical connection between account deficits and the USD is not far from clear. Yes, logically if you or I kept taking on debt people would eventually stop lending to us. Unless of course, we owed them a lot (see China) so its not that simple. To big to fail may reign on Wall Street, but its capital is in Washington.
2. Trading is all about expectations, not reality. Over the past month the USD has exceeded expectations relative to other FX regarding stimulus exit and interest rates as both jobs and spending have improved more than expected. As long as that trend holds (no doubt it won't be straight up)....
The author writes:
" Capital is fleeing out of the euro due to possible sovereign risk in the E.U. states, which sent the euro plunging, and dollar (quite ironically) reclaiming its status as "the currency of choice” on the risk aversion side."
No irony, as noted above, this is SOP for the euro and dollar. What's good for one is bad for the other
The author writes that central banks are buying gold, including Russia. Just last week, news broke that Russia is actually selling about $1 bln in gold. Why? To service its debt (at what it believes are still good selling prices, we presume). We still don't really know how much sovereign debt threat is out there, but if gold stays high, it may be tempting for central banks to use it to pay off debt.
Moreover China doesn't need to buy gold, it produces it.
Gold’s Euro Affair
The author writes: "For this reason, gold's price movement this month has been largely dictated by the euro instead of the dollar due to the capital shift triggered mostly by the E.U sovereign risk. This has prompted an almost record high short-term correlation between the EUR/USD currency pair and gold prices. At the same time, the inverse correlation seen between dollar and alternative asset classes remains broken as both stocks and dollar have advanced in previous trading sessions."
1. Historically, the USD and US stocks did move together, because the underlying news and risk sentiment affected both the same way. That's what happened over the past month. There was news that was good for both, as jobs and spending data improved. Good for growth and thus stocks, good for QE exit and rate increase expectations and thus the USD (Bernanke won't tighten up until these improve). 2. over the past 2 years "good" news for stocks was of the "less bad than expected" variety regarding earnings, jobs, and spending. None of that upped expectations for QE exit or rate increases.
In sum: As paper currencies worldwide devalue in the wake of stimulus induced money supply (assuming we actually get a recovery, if not, deflation remains a threat) gold s/b a good LT play. Timing will be tricky. Divining the turn is very complex on a fundamentals basis. We'll need to just follow trends and use our tech indicators
Global Markets Overview: Beware Illiquid, Pre-Holiday Trading [View article]
Thanks for the kind comments, glad the articles are helping, if you've questions, you can always leave them at the website comments section & I'll try to answer.
Not sure I understand what you're getting at in Part 2.
Jobs Week Wednesday: Four Key Releases and a 'Funeral' [View article]
Take them more as an index, which drives markets based on its change relative to prior and expected results.
Because I write for both long term investors and short term traders, I do at times fail to clarify that which for one audience may not be clear. Mea Culpa.
The short term trader crowd understands the "BS" in the BLS #s but also understands that in the near term (plenty of $ to be made there) markets move based on whether these figures are relatively better or worse than expected. Short term movements have NOTHING to do w/ reality (er, at times ditto longer term rallies like the once since March)
Sorry to have confused you. I don't understand a lot, and sure don't claim prophecy, but at least have the decency not to suggest I'm totally naive & lacking understanding
I get plenty of that from my wife & teens, thank you.
Anyway, hope you get something out of the posts & always appreciate constructive criticism (that's why I'm still married!) Cheers, Cliff
Why Economists Didn't Anticipate the Financial Crisis [View article]
As I wrote recently in one of my posts, THE question hanging over markets for the coming year is whether markets can avoid collapsing under the debt load. see Graham Summers' recent article: • U.S. Housing: The Big Picture - a close runner up and chilling example of how the coming mortgage resets over the next two years will be a series of torpedoes in the hull of the already badly listing economy.
Western Government Sovereign Debt in Trouble [View article]
As I noted recently in one of my posts, THE question for the coming year is essentially: can we bear the DEBT. It's all about debt.
Can the global/national/state/... bear the current load?
If this great Keynesian experiment of the past 2 years failed- then what bullets have policymakers got left?
Australia, the developed world's poster child for recovery, recently reported GDP that showed the growth was based on stimulus. And when that is withdrawn? This, folks, was the BEST developed world economy. What about the US, EZ, and UK?
Oh, there ARE options. Having lived in Israel during the 1980sm through over 100% a year inflation, I can remember:
'New' Israeli sheckles replacing the old ones. Don't ask what the rate was.
Spending paychecks immediately before they lost about 8% on the month
Banning of Forex holdings
No wonder the New Sheckle is holding up. They learned the hard way.
USD Weekly Outlook: Beware 11 Events that Could Move the Dollar and Global Markets [View article]
If you're trying todetermine how markets will react in order to make money (vs. divining reality) we then we can use the reports for that, because that is what the markets are going on. Forgive my cynicism. Just trying to help the readers stay out of the poorhouse. Maybe.
U.S. Housing: The Big Picture [View article]
Economic Lessons from 2009 [View article]
Economic Lessons from 2009 [View article]
On Dec 30 10:44 AM Ferdinand E. Banks wrote:
> Let me add something to the above. Fully recognizable economic recovery
> might soon be sight because a couple of the best economic brains
> in the world are on the Obama team, by whom I mean the good Larry
> Summers and the photogenic Ben Bernanke. They didn't have people
> like that in or near the White House during the 'great' depression.
>
>
> The problem is on the oil front. When the next sustained oil price
> increase begins, it will begin from the 70s or 80s - where that is
> dollars/barrel. This is very bad news folks, and I hope that your
> political masters comprehend this dilemma.
Canadian Dollar Resists U.S. Dollar’s Advance [View article]
Other reasons for the CAD's relative strength include:
1. as one of the "commodity dollars" it tends to move with the AUD and NZD, even though it doesn't offer nearly the interest rate advantages. This "birds of a feather" syndrome has benefitted the CAD greatly - moving up with these other risk currencies when optimism/risk appetite rose, even though its rates are the same as the US (NB: in FX the terms "risk currency" and "safe haven currency" have absolutely nothing to do with actual financial stability, but simply refers to whether or not they rise with optimism or pessimism)
2. As I've discussed repeatedly in my posts last spring, Canadian banks did not participate in the subprime madness, hence no need for massive bailouts to their banking sector. Their housing market is also far healthier. Together, these alone provide significant fundamental advantages over the USD
3. As a commodity based economy with a sound financial system, the CAD is a natural USD hedge and hence has tended to move opposite the USD - with exceptions such as the past days.
4. The BoC is an obstacle for the CAD only insofar as any central bank of an export based economy can't let its currency get too high to fast, otherwise it makes the exports more expensive and hinders growth.
5. The only real problem with the CAD's prospects is it's low yield compared to the other "com-dollars" with which it gets bought or sold. All things being equal (rare), the CAD s/b the first com dollar to get sold off, because traders can get better yields elsewhere.
What counters that tendency is that Canada has a lot of oil (similar to the Saudis if you include the tar sands, expensive as extraction is) so any positive growth news tends to support oil, and the CAD moves first and foremost with oil.
FYI: Note how oil has risen despite the rising USD - THAT is the prime reason for the CAD's relative strength vs the USD.
Cheers, Cliff
Latest Case-Shiller Housing Report and Its Ramifications: Seeds of a 2010 Crisis? [View article]
Have no fixed opinion on this or anything else if data shows otherwise.
Stubborness is a VERY expensive fault in investing & trading.
Thanks & Keep 'em coming. Cliff
Watch Bonds, Not Stocks, In 2010 [View article]
On Dec 28 11:49 PM Fr0gger wrote:
> Your articles are interesting, no doubt, it's only a shame that your
> numerous subscribers cannot pretend their oh so painful losses from
> following your doom and gloom predictions in the last 6 months were
> just a dream... Most of your recommendations went down the drain
> 5% to 35% in losses while the markets soared. It's a consolation
> to future followers that you decided to stop giving stock recommendations
> in 2010.
Watch Bonds, Not Stocks, In 2010 [View article]
1.where else can those seeking to park cash turn, especially if the Eurozone is also having debt trouble, and if that trouble spreads
2. What if those countries/customers depend on the US as an export market? Politicians worldwide tend to think short term (or at least not much beyond their anticipated reign). Will, they like the US banks that depended on subprime borrowers, continue to make riskier loans by buying US bonds in order to keep their own employment and exports going, at least in the short term.
3. What if those countries/customers risk losing the value of their considerable foreign reserves if they don't keep lending?
I've pondered these questions in prior posts and at
fxmarketanalysis.wordp.../ and I've no clear answer. They may not love US debt, but can they afford to ignore it?
Washington is not only the capital of the US, but of "Too Big To Fail"
Some way to start a millenium, eh? Keep up the good work
U.S. Dollar / Canadian Dollar: A Textbook Trade Approaching Key Support [View article]
Bankers, Economists Say Gold Is a Bubble: Here's Why You Should Ignore Them [View article]
2. Deflation? Gold is primarily an inflation hedge.FYI while gold may be a great long term play, timing could be tricky. Indeed, given the lurking sovereign debt crisis on an international and national and even local level (forgetting the parlous state of most individuals) another credit seize up and market crash could bring back DEFLATION, and indeed this is the primary concern of the Bank of Japan already.
3. Because it is priced in USD, gold tends to (though not always) move opposite the USD. As I've stated repeatedly in recent posts, the ongoing sovereign debt threat in the Euro-zone is likely to provide significant support for the dollar over at least the coming months, if not longer.
4. there is a small but real chance that if gold provides too much competition for fiat money, governments can simply ban its possession. That has happened before. Then what?
5. Finally, remember that gold too is largely a fiat currency, just one with a longer track record. Can't use it for much, really. In a real collapse, its land, food, water, and energy and other hard assets that have actual value.
In sum, while I agree gold has a place in a portfolio, and that the USD and other fiat currencies are troubled, I see no real replacement for them at this time. Curious to hear your thoughts. see fxmarketanalysis.wordp.../
Gold, Dollar, Euro: 2010 'Menage a Trois'? [View article]
Damn! Love that title. Gotta remember that one. Good article and best title of the day. Agree that gold has legs long term, but timing that will be tough. A few pts really need clarification:
As I've noted for months now, the USD would, and did rise when one of the following occurred:
a. major fear event: got that from Dubai World's announcement, and EZ downgrades kept fanning the fear, which in turn plays into the USD's safe haven role as risk seeking carry trades unwind
b. fundamental improvements in jobs and spending that in turn move up expectations for Fed QE exit and interest rate increases. Expectations on this front were so low not much was need to beat them.
c. An event that undermined the EUR.The EUR/USD pair comprises about a third of all FX. In other words, for every 3 euro bought a dollar is sold. They almost always force each other to move in opposite directions. Debt downgrades of Greece and Spain, with more threatened, as the somnambulant ratings agencies awoke after the Dubai wake up call, undermined the EUR, and thus helped the USD. These problems aren't going away any time soon, so expect them to continue to prop up the USD. Yes the US is far from a paragon of fiscal virtue. But in Forex all is relative, and here it's not as much a beauty contest as a competition for "least ugly."
Soveriegn debt threat remains for the EUR for the foreseeable future, providing support for the USD and a reminder to traders that too many USD shorts could be dangerous under these conditions.
the author writes:
"The United States is still $12 trillion in debt with a double-digit unemployment rate, more spending, higher taxes, while the monetary policy will likely remain loose in 2010.
The Obama administration has warned that if the debt ceiling is not raised, the government risks default as early as New Year’s Day. Democrats have estimated that to get through the 2010 elections, Treasury needs to have the debt ceiling raised by as much as $1.8 trillion above today’s $12.1 trillion cap.
No, it is illogical to conclude that the buck's rise from near rubble is due to material improvement in the fiscal or monetary conditions in the U.S. Rather, it is the decline in the euro and some other key currencies that has accelerated due to substantial weakness as compared to the dollar."
1. VERY tough to separate moves of the EUR and USD. Why? As noted above the EUR/USD pair comprises about a third of all FX. In other words, for every 3 euro bought a dollar is sold. They almost always force each other to move in opposite directions. Re the debt issue, yeah, USD is still weighed by debt, but the historical connection between account deficits and the USD is not far from clear. Yes, logically if you or I kept taking on debt people would eventually stop lending to us. Unless of course, we owed them a lot (see China) so its not that simple. To big to fail may reign on Wall Street, but its capital is in Washington.
2. Trading is all about expectations, not reality. Over the past month the USD has exceeded expectations relative to other FX regarding stimulus exit and interest rates as both jobs and spending have improved more than expected. As long as that trend holds (no doubt it won't be straight up)....
The author writes:
" Capital is fleeing out of the euro due to possible sovereign risk in the E.U. states, which sent the euro plunging, and dollar (quite ironically) reclaiming its status as "the currency of choice” on the risk aversion side."
No irony, as noted above, this is SOP for the euro and dollar. What's good for one is bad for the other
The author writes that central banks are buying gold, including Russia. Just last week, news broke that Russia is actually selling about $1 bln in gold. Why? To service its debt (at what it believes are still good selling prices, we presume). We still don't really know how much sovereign debt threat is out there, but if gold stays high, it may be tempting for central banks to use it to pay off debt.
Moreover China doesn't need to buy gold, it produces it.
Gold’s Euro Affair
The author writes: "For this reason, gold's price movement this month has been largely dictated by the euro instead of the dollar due to the capital shift triggered mostly by the E.U sovereign risk. This has prompted an almost record high short-term correlation between the EUR/USD currency pair and gold prices. At the same time, the inverse correlation seen between dollar and alternative asset classes remains broken as both stocks and dollar have advanced in previous trading sessions."
1. Historically, the USD and US stocks did move together, because the underlying news and risk sentiment affected both the same way. That's what happened over the past month. There was news that was good for both, as jobs and spending data improved. Good for growth and thus stocks, good for QE exit and rate increase expectations and thus the USD (Bernanke won't tighten up until these improve).
2. over the past 2 years "good" news for stocks was of the "less bad than expected" variety regarding earnings, jobs, and spending. None of that upped expectations for QE exit or rate increases.
In sum: As paper currencies worldwide devalue in the wake of stimulus induced money supply (assuming we actually get a recovery, if not, deflation remains a threat) gold s/b a good LT play. Timing will be tricky. Divining the turn is very complex on a fundamentals basis. We'll need to just follow trends and use our tech indicators
Global Markets Overview: Beware Illiquid, Pre-Holiday Trading [View article]
Not sure I understand what you're getting at in Part 2.
Merry Xmas (or vacation), Cliff