Tick Talk

BRIC Nations: Buddy, Can You Spare a New Reserve Currency?

Neena, Excellent insights. Thank you. A new reserve currency was suggested at the G-20 and was shot down. Therefore, the next question is unity. Will BRIC organize to act? Yes. They just did. The historical citations by Mad Hedge Fund are irrelevant for one reason: The U.S. has never deliberately betrayed the trust of foreign buyers of U.S. treasuries to this magnitude.

Because the U.S. willfully debased its currency by increasing the supply of the medium in which its debts are denominated, it literally robbed treasury bond holders. This tactic is a political and financial tactic and the offense that broke the BRICs back - hence the summit. As inflation proceeds, all permanent relations between debtors and creditors becomes catostrophic chaos and almost meaningless. A debauched currency is the surest sign of a crippled society and a new, even deadlier government regime.

The U.S. has lost the trust of BRIC nations and U.S. citizens. Both groups will be wise to remember this treachery and fortify themselves against future harm.

Will Emerging Currencies Undermine the Dollar?

Dave, thanks for chiming in. Let me bring you up to speed. The U.S. has no incentive to default because it can simply have the Federal Reserve print more money to satisfy payment. In effect, the U.S. is indirectly debasing its currency by increasing the medium denominated in its debts. In fact, the tactic just mentioned is the one that prompted the summit. The outcome is the same in either case: As inflation proceeds, all permanent relations between debtors and creditors become so chaotic as to become almost meaningless (example: Post WW1 German retribution payments and the now non-existant mark and more recently, the Argentinian currency crisis).

Regarding wars, right-minded or ill-conceived, and regardless of nations victorious or defeated, they are an integral part of the global economic landscape. It was mentioned because a financially unified EurAsia is the greatest threat to North Atlantic economies ever invented. It is only through a "divide and conquer" strategy that the influence of the North Atlantic nations has succeeded. So it follows history to mention that when finance is frustrated, war ensues.


On Jun 16 07:20 AM Dave Wrixon wrote:

> And like most Americans, you seem to have the debt issue arse about
> face. It is you that are likely to be the defaulting debtors. I think
> the Chinese would stoically write the debt off, but don't expect
> too many favors from them going forward.
>
> As for declaring War, you cannot even sort out Afganistan or Iran.

Will Emerging Currencies Undermine the Dollar?

Drew, -Agreed. That is why the possibility of a 10 year liquidation plan was offered in the article. The psychological impact of an accord by these countries would have immediate implications for the dollar. The actual process of unloading the assets would have long term effects.


On Jun 16 01:55 PM Drew Arnold wrote:

> Keep in mind, though, that dropping the US dollar would amount in
> a massive and immediate loss of wealth for those who hold US treasuries.
> Given China's stake in treasuries, they are extremely unlikely to
> sign on to any currency agreement that flushes out their own reserves.

In Memory of Greg Newton

But his legacy and insights live on...

The Scariest Chart Ever

Three months ago economists working at the Federal Reserve Banks went public with that chart. It was referred to as "unprecedented lending for unprecedented times." Aside from this article being very old news, I believe that it is worth revisiting - and continuing to revisit until the EXIT STRATEGY is revealed and executed. Here is the first link to a discussion at my blog about this topic. Browse forward chronologically to see the other two: www.ticktalklive.com/2.../

Nation's Debt: It's Not Being Rescued, It's Being Moved Around

DUH!!! Of course it's being moved around. It has been years since the US had a positive balance. Thank you for stating the obvious. Next time add a little value to the article - like solutions.

The Next President Will Be Trapped by History

There are a handful of authentic traders (like yours truly) who are shaking their heads and thinking: politicians are amatuers. Any real decision maker with the sense G-d gave a goose knows that the height of emotion abides at the precipice of irrationality, and to rush forward with an ad-hoc plan is to hasten losses exponentially and irredeemably. These politicians are nothing more than rank salesmen pitching an overpriced tickets for debtors prison.

The Market's Reaction to Unemployment Data

Hey. You're the only guy around here that explained the assumptions and didn't make a rash prediction. I'm wondering if any of your readers realize that this is primo evidence of a level-headed money manager. It's good stuff. Thanks!

As an aside, if the numbers were benign, what is the inside scoop on the market overreaction?

Fannie, Freddie, Uncle Sam and You

User 201843: About bankruptcy: corporations shamelessly file 11's or 7's and reorganize or dissolve the entity respectively. The patriotic American, on the other hand, actually FEELS SHAME and personally shoulders the burden of their consumption decisions (thus modifying their behaviors over time). But here's the killer, this isn't a consumption issue, it's an equity issue. No shareholder in the world NEEDS his/her equity (like consumers need food, clothing, etc.). The comparison of one to the other is apples vs. oranges. But like Whisper On The Wind mentioned, and what I think Jim Rogers is trying to say, is that each entity needs to take their lumps ALONE and not burden others with their poor decision-making (equity risk and consumption alike).

Wisper On The Wind: Your wisdom is timeless, thank you! What is the best way (most peaceful and powerful) way to reduce the size of government by 80%? Is it democratic? Is it vigilante? Please help.

Fannie, Freddie Headed for Conservatorship

It's a great time to be a politician. Imagine all the "New Deals" that could be promised to string Americans along so they don't revolt when the tax machine cranks up. Here is my research mingled with opinion: www.ticktalklive.com/2.../

Consumer Discretionary Sector is Going Down

WeeklyTA: Yeah, the 200-day SMA is the old stand-by and a good reference point. The fib time series for this issue in the intermediate/long term prognosticates a holding period through June of 2010. Thanks for the question. I'll address that in future articles.

Prudential Looks Like a Buy and Promising Covered Call

Good stuff bro. I'm partial to this sector for covered calls and diagonals as well. The price on AIG gives the best bang for the buck IMO.

U.S. Job Losses Continue Piling Up

iThinkBig has it right. Furthermore, the 06 - 07 employment lows are higher than the previous lows. Higher highs and higher lows are often referred to as an uptrend. In the case of these metrics, more joblessness equates to more misery.

Consumer Discretionary Sector is Going Down

jdmiller: I like the report. In fact, I was sold that same bill of goods from my Alma Mater. All in all, I'll bet that most of us like to think that there is order in economics. However, I have yet to see national money matters follow any such continuum. Our leaders are different, the populace is different, our global influence/susceptibili... is different. While there is the adage that those who do not learn from history are apt to repeat it; there is no guarantee that those who understand history won't make bigger mistakes. Oh, if business schools are so smart, why don't they publish a handbook for avoiding the ups and down? In summary, backtesting is 20/20, but successful fronttesting (just made that word up) belongs to those who comprehend past, present and future.

Consumer Discretionary Sector is Going Down

sbernard: Great points. I'm nodding in agreement and saying, "yep, he gets it."