Mr. G

FX Clearinghouses: Exacerbating Systemic Risk

Management of a FX broker on a 3 trillion dollar a day market present some interesting concepts. They only make money on the spread of bid and ask, and do not make money on other fees.

To manage institutional trades which tend to be large, I would imagine they have to hedge these positions to balance the betting to a net zero.

I can not see how a clearing house concept would relate unless the trading involves options. I see a distinct difference between the spot and options market. Anyone helping me with these concepts would be appreciated. GI

Supply, Demand and the U.S. Dollar

An odd fact is that the debt per citizen in relation govt debt in the USA is less than any other country. Our GDP is still the largest on the planet. I think a quantative analysis on the subject is in order before any realistic evaluations can be made.

The fragility of our economy lies in credit and unemployment, and if this resolves, supply and demand will escalate. 2000 thru 2008 was one of the most destructive periods in our history financially, and undoing the sins of this period will not be easy nor is there any quick fix.

If the current FED policy supports economic recovery, this supports a strong dollar even if the dollar depreciates. (odd thinking?). The rise of the S&P while the dollar goes down is known as the risk trade. The current stock market rise is a better economic indicator concerning the strength of our economy than dollar depreciation. Its based on earnings. GI

Ethanol vs. Natural Gas or Coal: Comparison Not Even Close

One of the best researched articles I have read on SA. I agree that ethanol is not a silver bullet, and I like the photosynthesis comparison.

I think the energy equation for the future is in the beginnings of transition to alternative fuels, and fossil fuels shall remain as the underlying foundation to the transition as new ideas emerge.

My personal favorite is hydrogen fuels and simple chemistry. There is more hydrogen in the universe than any other element and its usage solves almost any problem with pollution and emmissions.GI

Ethanol vs. Natural Gas or Coal: Comparison Not Even Close

One of the best researched articles I have read on SA. I agree that ethanol is not a silver bullet, and I like the photosynthesis comparison.

I think the energy equation for the future is in the beginnings of transition to alternative fuels, and fossil fuels shall remain as the underlying foundation to the transition as new ideas emerge.

My personal favorite is hydrogen fuels and simple chemistry. There is more hydrogen in the universe than any other element and its usage solves almost any problem with pollution and emmissions.GI

U.S. Share of World GDP Remains Remarkably Constant

Interesting graph. Given the data,the most important trend on the graph is the rise in asias market share of global GDP. If the trend stays intact, asia may soon surpass the US and the eurozone. GI

A Look at George Soros's Recent Trades

One of the underlying considerations stressed by Cramer is management. Smart people tend to make smart decisions. The inverse is true as well.
Soros made huge money on the sterling as a currency trader. Wish I could trade with him to learn.
When Buffet and Soros trade, they are looking for places to park huge sums with longer upside value. This is trading on a much different level, and emphasizes "it takes money to make money". GI

Is the Dollar Toast?

To the OLD Trader: NO , I am not kidding. Read the rest of my post. Dont jump conclusions. The evidence of what the FED is trying to accomplish takes time. Raising the lending rate just to correct the dollar would be detrimental to our economic expansion.

One of the primary reasons for dollar depreciation is the world holds about 7 trillion or more in reserves,and as they sell dollars to diverify their reserve base, it puts downwrd pressure on dollar value. This is causing large moves in the euro(150 pips per day average.) The cause and affect of dollar movement is not solely related to the FED rate. GI

Is the Dollar Toast?

Maintaining a 0.25% FED rate supports the economic policy of a strong dollar because it encourages bank lending to assist and foster economic growth.

Another benefit is US exports. It makes our products competitive on the global markets. The pegged yuan makes Chinas products equally competitive.

On a final note, currency traders set the prices of currency value, not the US govt. If the current pattern of FED policy works, the dollar will appreciate as our economy grows, but the hurdles of employment rate and credit markets have to resolve first. GI

Should the Federal Reserve Be Doing More?

The recent wave of unexpected corporate earnings supports the idea that FED policy has worked to some degree. The FED has very little control over the evacuation of corporations moving out of the country seeking lower labor costs.

Tax policy is another form of Govt regulation that could assist the unemployment rate, but I have not seen a govt response that would encourage our mfg base to remain in country. This not only lowers the unemployment rate, but increase the supporting industries(transportation etc.). The various govt tools have to combine to futher stimulate our economy otherwise, the jobless recovery may become the norm.

Is the Bernanke Doctrine a Disaster?

I enjoy reading the opinions of our financial problems. I think the root of the problem began when both parties, encouraging more home ownership, the "american dream", deleveraged the entire lending industry. As an attorney, I crossexamined a mortgage broker in 2006 and listened in disbelief as he testified to loans based on "stated income"(loans without verification) and no money down loans, loans based on 125% of the home value etc. I walked out of court thinking he must have been lying.
When I refinanced my own home, I was swamped with offers from lenders offering option arms(choosing payments with no principal reduction or negative amortization while tacking principal to the end of the loan). WOW! I chose a 30 year fixed interest rate loan.

The other problem unknown to the public in general is how the lending industry subdivided secured trust deeds and mortgages into investment parts based on future interest expectations and sold these parts on a global basis. AIG WAS INVOLVED IN ISSUING CREDIT DEFAULT SWAPS WHICH operate like insurance against foreclosure.

The entire system imploded as real estate began losing value. Investors of almost every class participated to some degree and on a global basis. The exponential quality of these new and exotic products practically bankrupt our entire lending industry which gives one an idea how massive this really was. You probably had no idea who was holding your mortgage or how many different investors were involved in it. The original lender simply stayed on board as the collection agent.

I hope this gives some insight into the global financial crises. This is why I say the FED became hostage to capitalism gone wild. This is why I rail at supply side economics which prefers no regulation of the industry. Deregulation of risk clearly has the potential to bring down our entire financial system. GI

Is the Local Top in Precious Metals Stocks Already Behind Us?

There was a time in history when the DOW was at 800 and gold rose to $800 the ounce. If this correlation is any predictor, gold could rise above $2000 the ounce. GI

Is the Bernanke Doctrine a Disaster?

Removing the independant power to regulate bank lending rates, and involving political regulation in the structure of the FED would lead to a disaster. Independant thinking in economics is necessary to achieve regulation of our complex economy, not political agenda. GI

Is the Bernanke Doctrine a Disaster?

Given the current massive financial crisis we now experience, FED policy to combat the crisis appears tripartite. First, maintaining a 0.25% borrowing rate for banks to lend is intended to stimulate business expansion. This may not work well if banks, jolted by their financial losses,do not participate in maintaining low interest rates to their borrowers. This is why mr. Geitner keeps commenting on bank lending policies. The alternative of lifting rates to support the dollar would not expand the economy at this time and would tend to lift lending interest rates.

Second, economic stimulus, which requires printing more money is attempting to support the unemployment rate by encouraging consumption and consumer spending.

Third, selling tips and treasuries during dollar deflation assists not only financing govt operations, but attempts to support economic stimulus.

The policy is designed, as I see it, as a good faith bet on stimulating capitalism to pull the US out of our financial crises. If the housing crises finally resolves, the unemployment rate goes down, our GDP expands, and the current account deficit does not expand out of total control, FED policy may work. I keep challenging the readership to design a superior FED policy, but I have not seen any constructive comments that discusses a comprehensive policy. I would not Mr. Bernankes job, but so far, I have to back the play. GI

Geithner's 'Deeply' Held Belief in the Dollar

The above comments reinforces my belief that americans expect instant gratification to our current financial crises. Most of the statements fail to appreciate the magnitude of what has ocurred.

I think Geitners statments are well meaning, but the "devil is in the details". I wish someone could espouse an economic policy superior to current FED action to overcome and address all the problems we currently face. GI

U.S. Dollar: Time for Deeds, Not Words

As a bond trader,I would assume the author tends to understand how markets move and for what reasons better than the average trader. The commentary on market fundamentals appears to be grounded in experience, but I see little commentary on the current FED action whether it is properly structured to bail us out of the current fiscal crises.

In fact, I see little constructive analysis other than piecemeal criticism of the isolated parts of the current FED pattern as if in isolation, each reaction to our monetary instability is a future predictor of doom. Even political pundits comment if current FED policy violates their preconceived ideas.

My point is, can anyone put together a comprehesive economic policy that not only overcomes the financial crises, but manages to preserve our capitalistic system and take into account all the problems superior to current FED policy? GI