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Marc Chandler

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  • Germany Is Also To Blame In The Euro Crisis [View article]
    The evidence suggests a slightly different relationship between European sub prime sovereign and US sub prime household crisis. When the US subprime blew up, European banks appeared to shift from them to the periphery in Europe. French banks seemed more aggressive than German banks in this shift.
    Nov 21 08:11 PM | Likes Like |Link to Comment
  • Germany Is Also To Blame In The Euro Crisis [View article]
    Agree completely. My own work shows that Germany banks essentially financed 50% of German exports to Greece over the past decade. Fully agree too that it is easy to talk about how debtors need to adjust, but few appreciate the extent that the German model will have to change. It is shifting exports to Asia and emerging market countries, but the crisis in Europe is very much a German crisis.

    In my my analysis (fellow SA contributor and blog at, I argue that there is a battle for the soul of Germany. Should it act like other countries in self-interest or must is still eschew political power commensurate with its economic prowess ? I think the realpolitick wins out and the solution for Europe is a German-led fiscal union.
    Nov 21 04:45 PM | 1 Like Like |Link to Comment
  • Forex Forensics: Yen Strength [View article]
    Ryanclarke says yen carry trading ins unwinding still--I say that data does not support that...carry trade implies short yen positions being covered. I say IMM has been long yen for some time and portfolio managers have been big buyers of Japanese assets this year. This includes of course Japanese equities, contrary to ryanclarke's claim.

    Are we to believe than that hedge funds have stayed short the yen through even though the yen has been one of the best performing currencies, even against many emerging market currencies? I don't buy it and ryanclarke provides not evidence, only his assertion.

    He says that "every one knows without an export market Japan is at a total loss". I say Japan expanded the best within the G7 in Q3 and with a trade deficit. MOF figures show Japanese made the shift in the late 1990s whereby they produce locally and sell locally more than exports. It is like Japanese cars in the US. Most driven in the US are made in the US.

    He draws superficially on geopolitics but fails to draw real connections to wit: Japan is going to implode because "Japan doesn't have a military to force the Chinese to buy their stuff." Really ? Are we to believe only countries' military might is key for trade. Switzerland for example and Sweden export a great part of their GDP than Japan and they don't have much in the way of military.

    Finally he gives us sage advice at the end--the yen will collapse but until then it is going up...
    Nov 20 09:22 AM | Likes Like |Link to Comment
  • Forex Forensics: Yen Strength [View article]
    Dorky, yen carry trade implies using the yen as a funding currency, shorting it and using the proceeds to by a higher yielding security, like Treasuries or bunds, for example. This is the reason often cited for the yen weakness in the past. Yen carry trades generally appear to have been unwound. However, as I point out here, the yen is being bought by Japanese investors. This repatriation may be considered the unwinding of yen carry trade by Japanese investors. Foreign investors, as the numbers above show have been large buyers of Japanese assets. This is not the unwinding of carry trades. But of course the yen remain an enigma and alternative theories or explanations are welcome.
    Nov 19 10:15 AM | Likes Like |Link to Comment
  • 5 Uncommon Observations About Europe [View article]
    I don';t think the fact that Fed has three mandates (yes three) and ECB has one is material. Fed understands that three are related and the ECB, as it just did a few weeks ago, cut interest rates despite inflation above target. I argue the fundamental difference between the two is in the structure. The Fed dilutes the power of regional presidents, while at the ECB they are the majority.

    I continune to bleieve the most likely outcome will be in the direction of greater integration--means less sovereignty--rather than less integration and more sovereignty.
    Nov 16 11:25 AM | Likes Like |Link to Comment
  • 5 Uncommon Observations About Europe [View article]
    I suspect if the euro zone moved toward political union as Merkel argued at her party congress today, there would be less need to buy sovereign bonds because the fiscal transfers could/would replace ECB purchases. Eurobonds is a result of greater integration, not the cause, I think.
    Nov 14 03:17 PM | Likes Like |Link to Comment
  • Rome Burns, Greece Dawdles, China Fizzles [View article]
    Saraiva tells us it was time for Berlusconi to step down and that is all that matters. I disagree. I argue Berlusconi, the longest serving Italian PM was not only the cause of poilitical dysfunction but he was also a reflection of it. The fact that Italian bonds were crushed after Berlusconi indicated he would step down is telling. The opposition in Italy has had many chances to push Berlusconi out and did not. The one thing that markets find more unsettling than Berlusconi is the opposition. It is intellectually bankrupt.

    Davemart thinks 7% is the point of no return for Italy. I try to show that it is not clear yet. The 7%+ is in the secondary market, not the primary market. A few auctions producing bond yields above 7% will not be Italy's deathknell because its stock of debt is so large and the ave maturity is high at 7 years. If this is the end game as he say, I suspect it will it is a long long end game.
    Nov 9 01:31 PM | Likes Like |Link to Comment
  • Italy Grabs The Limelight From Greece [View article]
    Flash9...a few days ago there was talk of Greece rejecting the reforms agreed with Europe at the end of Oct. Latest moves suggest a national unity government that will deliver a 180-seat super majority for those reforms. I stand my my analysis, Greece is taking a step away from the abyss. Of course, its debt and lack of competitiveness has not been addressed in sustainable way, but the immediate political problem is moving toward a solution. That is all I am saying...and of course that Italy's political problems are commanding more attention. I agree with most of what you wrote. The situation in the world is fragile, leaving precious little room for a policy error and I agree the much needed bold innovative political leadership is sorely lacking.
    Nov 7 02:46 PM | Likes Like |Link to Comment
  • Dollar Continues To Gain Momentum [View article]
    My point was simply that smart money as you defined it sovereign wealth funds and funds with large assets under management have mixed track records to the extent that we know them. For example, few sovereign wealth funds do we know the track records. And as far as betting on the smart money what does that really mean ? Give your money to them to manage. Retail cannot match the kind of deal say that Buffet got from Goldman so trying to duplicate what you say is smart money is even more complicated. You say smart and more successful then me. Perhaps, but I don't believe markets reward smartness and success is a different matter. I am not sure how to measure that, especially on a risk adjusted basis. No doubt Warren Buffet is a great investor as was Peter Lynch, but my point that you glossed over is still valid, most of those who fit your definition of smart money, under perform the stock market on average most of the time. This helps explain the attractiveness of index funds, which is a move away from active management and what you call smart money.
    Nov 3 09:47 PM | Likes Like |Link to Comment
  • ECB Surprises And Greece Says 'Never Mind' [View article]
    Wow Moon, "unnecessary easing" Really ? The regional economy is hitting the skids hard, bank de-leveraging, new orders drying up, outputs faltering, financial stresses....Don't you agree that 3% inflation is so yesterday--ECB policy needs to look through the windshield not rear view mirror. I am not sure what you are referencing when you say Draghi helped run Italy into the ground with too much laxness. BoI has not sent monetary policy for over a decade and Italy's problems besides the lack of growth is old debt. It is currently the only country, I believe, in the euro zone running a primary budget surplus. I had thought that the April and July hikes were unnecessary, but that political and institutional considerations would stay his hand.
    Nov 3 04:02 PM | 2 Likes Like |Link to Comment
  • FOMC: No Surprises In Statement, Yet A Dove Cries [View article]
    I was surprised by Evans dissent because 1) there has not been a dovish dissent in several years and 2) while he has called for more Fed easing, I hadn't thought it would produce a dissent, which seems to be a high bar of disagreement, especially for a Fed that has take two big easing decisions in recent months. No doubt Evans is a dove. I had been thinking about hawk dissents. I was wrong and I will be again.
    Nov 3 03:09 PM | Likes Like |Link to Comment
  • Dollar Continues To Gain Momentum [View article]
    Ah like Pimco selling dumping Treasuries, missing a rally and then having to buy them back ? And the bulk of the asset managers who cannot out perform the market (and of course the bigger they become the more of the market they are) ? Smart money ?...if you say so.
    Nov 3 03:06 PM | Likes Like |Link to Comment
  • FOMC: No Surprises In Statement, Yet A Dove Cries [View article]
    Ryanclarke--correct me if I am wrong, but the Federal Reserve Chairman did not talk about "little people", that is your jargon for the Fed trying to make sense of its mandate for full employment. He did not hint at QE, but explicitly indicated there were more steps the Fed could take. This is to say the Fed did not rule out any options should the situation require it. I say the bar to QE3 is high--US economy headed for a recession or the threat of deflation re-emerges. I haven't a clue what you are claiming about the super committee. Do you want to try again ? And I am not sure who the wolves are. Bond vigilantes? People who agree with you ?
    Nov 2 05:21 PM | 1 Like Like |Link to Comment
  • The CDS Market And Greek Developments [View article]
    Innocents Abroad: You make a good point. I did not have the names of the banks that were on the ISDA Determination Committee, as I had not seen them published.
    Nov 2 05:16 PM | Likes Like |Link to Comment
  • Dollar Continues To Gain Momentum [View article]
    It is tough to call it a range when we haven't see either level for months--$1.30-$1.50. I am not sure who the Smart Money is these days, but if you do, all the more power to you. I think European problems will get worse before getting better. I think its problems are existential in nature and urgent. The US problems are simply important.
    Nov 2 05:14 PM | Likes Like |Link to Comment