ron pauls choice fore fed chairman addresses the debt swap.
http://video.cnbc.com/gallery/?video=3000077329
http://video.cnbc.com/gallery/?video=3000077329
Short term trades in the stock market •$$$$$•
- Thread starter TNTBudSticker
- Start date
ISDA Finds Greek Credit Event Has Occurred
"A credit event requires a payout to those who held credit default swaps as insurance to protect themselves in the event of a Greek default."
Decent article explaining it: http://www.ftense.com/2012/03/bomb-triggered-isda-determines-greek.html
Other Refs:
http://www.marketwatch.com/story/isda-says-greece-experienced-credit-event-2012-03-09
http://www.bloomberg.com/news/2012-...-injection-after-isda-triggers-greek-cds.html
http://www.zerohedge.com/news/isda-finds-greek-credit-event-has-occurred-reports-bloomberg
http://www.zerohedge.com/news/greece-has-defaulted-here-where-we-stand
http://www.zerohedge.com/news/isda-cds-trigger-decision-unanimous
"A credit event requires a payout to those who held credit default swaps as insurance to protect themselves in the event of a Greek default."
Decent article explaining it: http://www.ftense.com/2012/03/bomb-triggered-isda-determines-greek.html
Other Refs:
http://www.marketwatch.com/story/isda-says-greece-experienced-credit-event-2012-03-09
http://www.bloomberg.com/news/2012-...-injection-after-isda-triggers-greek-cds.html
http://www.zerohedge.com/news/isda-finds-greek-credit-event-has-occurred-reports-bloomberg
http://www.zerohedge.com/news/greece-has-defaulted-here-where-we-stand
http://www.zerohedge.com/news/isda-cds-trigger-decision-unanimous
Greek default was welcome eod , taking shorts on AAPL on first pop & 2nd double top @ $546+ hoping to find some fundie step in a take profits frustratingly did not happen till the default news came later . Even then barely a 2.5pt drop on AAPL was all it gave up & SPY hardly dented ...
WLT perfect bounce off rsi30 and "reset low pivot"
http://stockcharts.com/h-sc/ui?s=WLT&p=D&b=5&g=0&id=p12780549667
On the long side chech out the chart on WLT the pure steel coal play (not for fuel) mentioned popping off what is so commonly a bounce point and chart formation like to call "the reset low pivot" ...when stock comes full circle revisiting & bouncing off lower support. In the case of WLT this pivot was $56 & tagged $62 today ...
MCP similar reset low @ $24 hit $31 today on small bounce then one big candle
http://stockcharts.com/h-sc/ui?s=MCP&p=D&b=5&g=0&id=p27459133821
Another reset low should have mentioned that caught our eyes was lithium miner MCP which earlier this week during the swoon a good trader that thinks similarly piped up "does anyone want MCP @ $24?" He's one of those that loves to catch bottom plays & extreme sell offs like GMCR off $47 last night , also ANTH after the bell today he caught for 25% bounce . Well MCP sure was bottomed and did +23% this week screaming up today ....
JVA who knew ! But while GMCR got hammered JVA came off rest low of $7.60 and banged up 33% after reporting really decent revs . $JVA , 3.99mil float 6 times the revs than BVSN and only 1/4 the pps ...and BVSN with 2.5mil float has over twice the market cap ...figure that riddle out .<g
Java longs really got a great wake up & smell the good coffee today, PEET's coffee popping a bit too .
WLT perfect bounce off rsi30 and "reset low pivot"
http://stockcharts.com/h-sc/ui?s=WLT&p=D&b=5&g=0&id=p12780549667
On the long side chech out the chart on WLT the pure steel coal play (not for fuel) mentioned popping off what is so commonly a bounce point and chart formation like to call "the reset low pivot" ...when stock comes full circle revisiting & bouncing off lower support. In the case of WLT this pivot was $56 & tagged $62 today ...
MCP similar reset low @ $24 hit $31 today on small bounce then one big candle
http://stockcharts.com/h-sc/ui?s=MCP&p=D&b=5&g=0&id=p27459133821
Another reset low should have mentioned that caught our eyes was lithium miner MCP which earlier this week during the swoon a good trader that thinks similarly piped up "does anyone want MCP @ $24?" He's one of those that loves to catch bottom plays & extreme sell offs like GMCR off $47 last night , also ANTH after the bell today he caught for 25% bounce . Well MCP sure was bottomed and did +23% this week screaming up today ....
JVA who knew ! But while GMCR got hammered JVA came off rest low of $7.60 and banged up 33% after reporting really decent revs . $JVA , 3.99mil float 6 times the revs than BVSN and only 1/4 the pps ...and BVSN with 2.5mil float has over twice the market cap ...figure that riddle out .<g
Java longs really got a great wake up & smell the good coffee today, PEET's coffee popping a bit too .
Last edited:
Equities pulled back a bit. Not sure why the market reacted so strongly. He wasn't anymore hawkish than he's been in the last few speeches.
I have been waiting for a good buying opportunity. Thanks Uncle Ben!
$GLD was sure something friday am though easily saw the short on the daily double top @ $174 & bounce off $161's after the tank ($GOLD bouncing off $1665/75 ) should see all the bears that come out crying for the great gold correction that hasn't come yet . Was just a spectator on GLD thinking might be a short at $165+ early and then it did swoon down to the 200ma =$162's and came roaring back up to $166's in a flash ... that would have been a great trade but others were firing off like JVA MCP & WLT .
Game still on for Gold so far but still has R at $1725 with any disaster event or spike in oil then it flies again . There's all possibilities present with GLD even tagging $200 but only can play near term for me . Totally threw me today but looking at chart now should have dipped off the 200ma @ $162.50
The Homeys were shortable after topping out few weeks back like TOL & LEN around $24.50 but all you can do is buy the dips on these for all that cheap money out there is luring in new buyers . This a clear case of don't fight the Fed yet mixed reports out of LL & MAS seemed to have been ignored . Home Depot & LOWES have been on non stop rolls after HD announced hiring 70,000 for spring . They owe alot to growers thats for sure ! ;o)
Being Street Smart
http://www.decisionpoint.com/TAC/HARDING.html
By Sy Harding
Why Markets Ignored Jobs Report and Greek Debt Deal! March 9, 2012.
There was much anticipation in advance of Friday's Labor Department employment report for February. The report has a reputation for often coming in with a big surprise in one direction or the other that creates a dramatic market response. This time it did not. The consensus forecast was that 213,000 new jobs were created in February, and the unemployment rate would remain at 8.3%. The actual report was that 227,000 new jobs were created, and the unemployment rate remained at 8.3%.
It was not a big surprise, but even so, it was a positive report for sure. But market reaction was surprisingly muted.
The big news in Europe was that officials in Greece were successful in coercing holders of Greek debt into swapping their old bonds for new bonds valued at much less, amounting to a 'voluntary' loss of roughly 70% on their investments. It was a major hurdle that had to be cleared in order for Greece to obtain its second massive bailout of the last two years.
It was also positive news. But market reaction was muted.
Why weren't these reports, one showing continued strength in the U.S. economic recovery, the other pushing the concerns about a messy Greek default further into the background, greeted more robustly by markets?
Because the game has changed.
Last October the worry was that the significant summer slowdown had the U.S. economy sliding into recession again, and in Europe that another bailout of Greece was not going to happen.
At that point, improvements in U.S. economic reports unexpectedly began to show up, as did indications that eurozone officials were determined to find a way to save Greece from default after all. They became game-changing reports. The scary global market declines of the summer began to reverse, and global markets were soon in impressive rallies.
As it became ever more evident that the U.S. economic recovery was exceeding expectations, and that the Greek crisis was going to be resolved favorably, those positive outcomes were increasingly factored into stock prices.
However, recent economic reports reveal how much the game may be changing again.
As we all know, European countries began imposing harsh austerity measures on their economies last year, in an effort to begin cutting into their record debt levels. Some economists, including the U.S. Fed, warned it was too soon in the anemic global recovery to do so.
By late last year economic growth in Europe was already losing the conflict with the harsh austerity measures. The economies of the 17-nation eurozone shrank 0.3% in the fourth quarter, and the European Commission forecasts a recession of the same magnitude will continue this year.
The International Monetary Fund recently warned that "The global economy is at a precarious stage and downside risks have risen sharply." The IMF cited the economic slowdown in Europe as the likely catalyst, warning it would also "drag China's important growth lower".
So perhaps the negative news from China this week should not be surprising. With roughly 20% of its exports normally going to Europe, China's industrial output slowed in January and February to its lowest level since July, 2009.
Meanwhile Japan, the world's second largest economy, reported its trade deficit hit a new record high as its exports slowed. And Brazil, the world's 7th largest economy, reported its GDP growth rate slid to just 1.4% in the fourth quarter from a year ago, and blamed the developing recession in Europe.
In the U.S., mixed in with the still mostly positive economic reports in the headlines have been reports that Durable Goods Orders unexpectedly fell 4.0% in January after rising 3.2% in December, factory orders unexpectedly fell in January, as did Construction Spending, while the ISM Mfg Index unexpectedly declined in February.
And this week it was reported that the U.S. trade deficit widened by 4.3% in January to its largest gap between imports and exports since October, 2008.
So the game is possibly reversing from last October, when the surprise reports began showing the U.S. economy was improving impressively and might even manage to become the salvation of the entire global economy.
Now worries are increasing that the rest of the world may drag the U.S. down.
The Fed has said it stands ready to provide another round of stimulus if the economy falters again. But the market is worried that the strong jobs report on Friday may influence the Fed to wait longer than it might have if another round of stimulus becomes necessary.
That was the problem in each of the last two summers. The Fed waited until the stock market was down 20%, on the verge of dropping into a bear market, and the economy was on the verge of sliding further into recession before it stepped in with QE2 in 2010, and 'Operation Twist' last year.
Surely that won't happen again, in this, an election year.
However, that concern may explain the market reactions to Friday's big positive news events, that the employment picture in the U.S. improved faster than forecasts again in February, and that Greece cleared a major hurdle in resolving its debt crisis.
Those are probably no longer the front-burner concerns.
http://www.decisionpoint.com/TAC/HARDING.html
By Sy Harding
Why Markets Ignored Jobs Report and Greek Debt Deal! March 9, 2012.
There was much anticipation in advance of Friday's Labor Department employment report for February. The report has a reputation for often coming in with a big surprise in one direction or the other that creates a dramatic market response. This time it did not. The consensus forecast was that 213,000 new jobs were created in February, and the unemployment rate would remain at 8.3%. The actual report was that 227,000 new jobs were created, and the unemployment rate remained at 8.3%.
It was not a big surprise, but even so, it was a positive report for sure. But market reaction was surprisingly muted.
The big news in Europe was that officials in Greece were successful in coercing holders of Greek debt into swapping their old bonds for new bonds valued at much less, amounting to a 'voluntary' loss of roughly 70% on their investments. It was a major hurdle that had to be cleared in order for Greece to obtain its second massive bailout of the last two years.
It was also positive news. But market reaction was muted.
Why weren't these reports, one showing continued strength in the U.S. economic recovery, the other pushing the concerns about a messy Greek default further into the background, greeted more robustly by markets?
Because the game has changed.
Last October the worry was that the significant summer slowdown had the U.S. economy sliding into recession again, and in Europe that another bailout of Greece was not going to happen.
At that point, improvements in U.S. economic reports unexpectedly began to show up, as did indications that eurozone officials were determined to find a way to save Greece from default after all. They became game-changing reports. The scary global market declines of the summer began to reverse, and global markets were soon in impressive rallies.
As it became ever more evident that the U.S. economic recovery was exceeding expectations, and that the Greek crisis was going to be resolved favorably, those positive outcomes were increasingly factored into stock prices.
However, recent economic reports reveal how much the game may be changing again.
As we all know, European countries began imposing harsh austerity measures on their economies last year, in an effort to begin cutting into their record debt levels. Some economists, including the U.S. Fed, warned it was too soon in the anemic global recovery to do so.
By late last year economic growth in Europe was already losing the conflict with the harsh austerity measures. The economies of the 17-nation eurozone shrank 0.3% in the fourth quarter, and the European Commission forecasts a recession of the same magnitude will continue this year.
The International Monetary Fund recently warned that "The global economy is at a precarious stage and downside risks have risen sharply." The IMF cited the economic slowdown in Europe as the likely catalyst, warning it would also "drag China's important growth lower".
So perhaps the negative news from China this week should not be surprising. With roughly 20% of its exports normally going to Europe, China's industrial output slowed in January and February to its lowest level since July, 2009.
Meanwhile Japan, the world's second largest economy, reported its trade deficit hit a new record high as its exports slowed. And Brazil, the world's 7th largest economy, reported its GDP growth rate slid to just 1.4% in the fourth quarter from a year ago, and blamed the developing recession in Europe.
In the U.S., mixed in with the still mostly positive economic reports in the headlines have been reports that Durable Goods Orders unexpectedly fell 4.0% in January after rising 3.2% in December, factory orders unexpectedly fell in January, as did Construction Spending, while the ISM Mfg Index unexpectedly declined in February.
And this week it was reported that the U.S. trade deficit widened by 4.3% in January to its largest gap between imports and exports since October, 2008.
So the game is possibly reversing from last October, when the surprise reports began showing the U.S. economy was improving impressively and might even manage to become the salvation of the entire global economy.
Now worries are increasing that the rest of the world may drag the U.S. down.
The Fed has said it stands ready to provide another round of stimulus if the economy falters again. But the market is worried that the strong jobs report on Friday may influence the Fed to wait longer than it might have if another round of stimulus becomes necessary.
That was the problem in each of the last two summers. The Fed waited until the stock market was down 20%, on the verge of dropping into a bear market, and the economy was on the verge of sliding further into recession before it stepped in with QE2 in 2010, and 'Operation Twist' last year.
Surely that won't happen again, in this, an election year.
However, that concern may explain the market reactions to Friday's big positive news events, that the employment picture in the U.S. improved faster than forecasts again in February, and that Greece cleared a major hurdle in resolving its debt crisis.
Those are probably no longer the front-burner concerns.
Low interest rates and QE: the winners and losers
Winners Mortgage payers: Cheap money has fed through into less expensive home loans, with particularly hefty gains for those on floating rate mortgages. For those in this group who held onto their jobs during the worst of the recession in the winter of 2008-09, there were sizeable reductions in their monthly repayments as bank rate came down from 5% to 0.5%. Although the full benefits were not passed on to mortgage payers by lenders, the reductions helped underpin consumer spending and limited home repossessions. In recent days, however, some of the biggest lenders have announced sharp increases in their standard variable mortgage rates.
Exporters: The low level of interest rates, coupled with the increase in the money supply, has made sterling less attractive to investors. A weaker pound makes UK exports cheaper, providing a boost to manufacturing and those parts of the service sector that trade overseas. Much of the fall in sterling, however, took place before March 2009.
Asset holders: An explicit aim of rock-bottom interest rates and the QE programme was to make it less attractive for people to hold on to cash. The Bank assumed that investors would seek out higher yields in property, the stock market, and commodities. Higher asset prices would, Threadneedle Street said, make people feel wealthier and thus increase economic confidence.
Banks: Banks have been beneficiaries of the QE programme because they have been able to exchange assets – mainly government gilts – for cash, which they have used to repair balance sheets damaged during the financial crisis. The expected increase in bank lending to individuals and businesses as a result of stronger balance sheets has not, however, materialised.
Losers Savers: The flipside to the gains for mortgage payers has been three years of pain for savers. Interest rates have collapsed, making life tougher for those – especially pensioners – dependent on the interest on nest eggs built up over their lifetime. The annual incomes of many pensioners are closely linked to official interest rates and groups representing savers have become increasingly vociferous in their criticism of the Bank of England.
Pension funds: Shortfalls in pension funds have increased as a result of QE. When the price of a government gilt goes up, the interest rate (or yield) goes down, and the effect of the Bank's £325bn asset purchase programme has been to reduce the supply of government bonds, pushing up their price. Gilt yields, which are used as a rule-of-thumb guide to the future income of pension funds and of the likely inflation rate, have crashed, thus widening pension shortfalls.
Consumers: One of the unintended side-effects of low interest rates and QE has been rising global commodity prices as investors sought out higher-yielding assets. Speculation in the oil market led to a near-doubling of the price of crude between early 2009 and early 2010, with food prices also rising sharply. Exacerbated by the weak pound, the annual inflation rate rose to above 5%, which squeezed consumer spending power and put the brake on economic recovery.
Emerging markets: QE weakened currencies in developed countries such as the US and the UK, but led to higher exchange rates in some of the bigger emerging markets, such as Brazil and Mexico, leading to weaker exports, slower growth, the introduction of capital controls and the threat of currency wars.
http://www.guardian.co.uk/business/2012/mar/08/low-interest-rates-qe-winners-losers?newsfeed=true
Winners Mortgage payers: Cheap money has fed through into less expensive home loans, with particularly hefty gains for those on floating rate mortgages. For those in this group who held onto their jobs during the worst of the recession in the winter of 2008-09, there were sizeable reductions in their monthly repayments as bank rate came down from 5% to 0.5%. Although the full benefits were not passed on to mortgage payers by lenders, the reductions helped underpin consumer spending and limited home repossessions. In recent days, however, some of the biggest lenders have announced sharp increases in their standard variable mortgage rates.
Exporters: The low level of interest rates, coupled with the increase in the money supply, has made sterling less attractive to investors. A weaker pound makes UK exports cheaper, providing a boost to manufacturing and those parts of the service sector that trade overseas. Much of the fall in sterling, however, took place before March 2009.
Asset holders: An explicit aim of rock-bottom interest rates and the QE programme was to make it less attractive for people to hold on to cash. The Bank assumed that investors would seek out higher yields in property, the stock market, and commodities. Higher asset prices would, Threadneedle Street said, make people feel wealthier and thus increase economic confidence.
Banks: Banks have been beneficiaries of the QE programme because they have been able to exchange assets – mainly government gilts – for cash, which they have used to repair balance sheets damaged during the financial crisis. The expected increase in bank lending to individuals and businesses as a result of stronger balance sheets has not, however, materialised.
Losers Savers: The flipside to the gains for mortgage payers has been three years of pain for savers. Interest rates have collapsed, making life tougher for those – especially pensioners – dependent on the interest on nest eggs built up over their lifetime. The annual incomes of many pensioners are closely linked to official interest rates and groups representing savers have become increasingly vociferous in their criticism of the Bank of England.
Pension funds: Shortfalls in pension funds have increased as a result of QE. When the price of a government gilt goes up, the interest rate (or yield) goes down, and the effect of the Bank's £325bn asset purchase programme has been to reduce the supply of government bonds, pushing up their price. Gilt yields, which are used as a rule-of-thumb guide to the future income of pension funds and of the likely inflation rate, have crashed, thus widening pension shortfalls.
Consumers: One of the unintended side-effects of low interest rates and QE has been rising global commodity prices as investors sought out higher-yielding assets. Speculation in the oil market led to a near-doubling of the price of crude between early 2009 and early 2010, with food prices also rising sharply. Exacerbated by the weak pound, the annual inflation rate rose to above 5%, which squeezed consumer spending power and put the brake on economic recovery.
Emerging markets: QE weakened currencies in developed countries such as the US and the UK, but led to higher exchange rates in some of the bigger emerging markets, such as Brazil and Mexico, leading to weaker exports, slower growth, the introduction of capital controls and the threat of currency wars.
http://www.guardian.co.uk/business/2012/mar/08/low-interest-rates-qe-winners-losers?newsfeed=true
Fearful investors look to a world after QE
By Henny Sender
This week in Texas, Dallas Federal Reserve President Richard Fisher voiced perplexity at the market’s obsession with “so-called QE3”. Mr Fisher is in the hawkish camp that believes no further monetary easing is necessary. His remarks came three weeks after the Bank of Japan announced it had adopted a 1 per cent inflation “goal” and an expanded asset purchase programme. This was just days after the European Central Bank distributed almost €530bn to European banks, bringing its balance sheet to more than €3,000bn.
His remarks also come at a time when markets are beginning to anticipate the possibility that the most aggressive easing is coming to an end, even while central banks maintain their promise to keep rates on hold (accounting for a huge part of demand for securities and keeping asset prices artificially high in the process).
These cross currents account for a big part of the volatility in the markets today.
The explosion of the ECB balance sheet is right up there with that of the Federal Reserve, which has more than tripled its balance sheet since January 2009 to more than $2,500bn. It now owns $1.6tn of treasury debt and more than $800bn of mortgage-backed securities (although it hasn’t actually bought any securities in over nine months), according to data from Wells Fargo.
Meanwhile, since the global financial crisis, despite its rhetoric, the Bank of Japan has barely expanded its balance sheet – it is in fact lower today as a percentage of gross domestic product than it was in 2005, according to CLSA. Yet this past week, the dollar/yen rate barely moved while the dollar actually weakened against the euro.
It isn’t clear what is driving currencies these days. Economic fundamentals certainly don’t explain relative values and neither does monetary policy. Six months ago, most hedge funds were betting that the euro would soon slide to parity with the dollar. Yet the euro remains puzzlingly strong despite what the ECB is doing.
Some say that currency strength reflects the fact that European banks have been selling US assets, converting the dollar proceeds into euros and bringing them home. Others speculate that China has been propping up the euro to help make its own currency more competitive and make its exports more attractive.
The Chinese have gradually reduced their holdings of dollar-denominated assets, particularly Treasuries. European debt (particularly German debt) has been the main beneficiary, says Stephen Green, a Hong Kong-based economist with Standard Chartered Bank. Mr Green estimates that China will accumulate $300bn in reserves this year and only half of that will go into US dollar assets.
Weak economic conditions alternating with fears of inflation explain central bank thinking. But, as time passes, there will be other factors that may well influence them, especially the fear of losses on their holdings. Now, governments are propping up securities but what happens when you take away that prop?
Today, with the Fed sitting on trillions of dollars of both Treasury and mortgage securities, fear of potential losses when QE is finally unwound is becoming more of an issue. For example, both Fed and former Treasury officials say that the US government’s exposure to lenders Fannie Mae and Freddie Mac is a big reason for the lack of action in dealing with them.
One of the reasons regulators were concerned about Countrywide’s fate before Bank of America bought the ailing mortgage lender was because the Federal Home Loan Bank of Atlanta had lent Countrywide a huge amount of money, vastly exceeding credit to any other borrower and held Countrywide collateral in return. If Countrywide went under, that collateral would lose much of its value, according to people familiar with the matter.
Fear of losses aren’t just confined to Frankfurt, Tokyo and Washington. It prevails to an even greater extent among non-dollar investors in Asia, where currencies are generally on an upwards trajectory. If Beijing were to let its currency appreciate to the extent the west wishes, the value of its foreign currency holdings would drop substantially.
By Henny Sender
This week in Texas, Dallas Federal Reserve President Richard Fisher voiced perplexity at the market’s obsession with “so-called QE3”. Mr Fisher is in the hawkish camp that believes no further monetary easing is necessary. His remarks came three weeks after the Bank of Japan announced it had adopted a 1 per cent inflation “goal” and an expanded asset purchase programme. This was just days after the European Central Bank distributed almost €530bn to European banks, bringing its balance sheet to more than €3,000bn.
His remarks also come at a time when markets are beginning to anticipate the possibility that the most aggressive easing is coming to an end, even while central banks maintain their promise to keep rates on hold (accounting for a huge part of demand for securities and keeping asset prices artificially high in the process).
These cross currents account for a big part of the volatility in the markets today.
The explosion of the ECB balance sheet is right up there with that of the Federal Reserve, which has more than tripled its balance sheet since January 2009 to more than $2,500bn. It now owns $1.6tn of treasury debt and more than $800bn of mortgage-backed securities (although it hasn’t actually bought any securities in over nine months), according to data from Wells Fargo.
Meanwhile, since the global financial crisis, despite its rhetoric, the Bank of Japan has barely expanded its balance sheet – it is in fact lower today as a percentage of gross domestic product than it was in 2005, according to CLSA. Yet this past week, the dollar/yen rate barely moved while the dollar actually weakened against the euro.
It isn’t clear what is driving currencies these days. Economic fundamentals certainly don’t explain relative values and neither does monetary policy. Six months ago, most hedge funds were betting that the euro would soon slide to parity with the dollar. Yet the euro remains puzzlingly strong despite what the ECB is doing.
Some say that currency strength reflects the fact that European banks have been selling US assets, converting the dollar proceeds into euros and bringing them home. Others speculate that China has been propping up the euro to help make its own currency more competitive and make its exports more attractive.
The Chinese have gradually reduced their holdings of dollar-denominated assets, particularly Treasuries. European debt (particularly German debt) has been the main beneficiary, says Stephen Green, a Hong Kong-based economist with Standard Chartered Bank. Mr Green estimates that China will accumulate $300bn in reserves this year and only half of that will go into US dollar assets.
Weak economic conditions alternating with fears of inflation explain central bank thinking. But, as time passes, there will be other factors that may well influence them, especially the fear of losses on their holdings. Now, governments are propping up securities but what happens when you take away that prop?
Today, with the Fed sitting on trillions of dollars of both Treasury and mortgage securities, fear of potential losses when QE is finally unwound is becoming more of an issue. For example, both Fed and former Treasury officials say that the US government’s exposure to lenders Fannie Mae and Freddie Mac is a big reason for the lack of action in dealing with them.
One of the reasons regulators were concerned about Countrywide’s fate before Bank of America bought the ailing mortgage lender was because the Federal Home Loan Bank of Atlanta had lent Countrywide a huge amount of money, vastly exceeding credit to any other borrower and held Countrywide collateral in return. If Countrywide went under, that collateral would lose much of its value, according to people familiar with the matter.
Fear of losses aren’t just confined to Frankfurt, Tokyo and Washington. It prevails to an even greater extent among non-dollar investors in Asia, where currencies are generally on an upwards trajectory. If Beijing were to let its currency appreciate to the extent the west wishes, the value of its foreign currency holdings would drop substantially.
Bernanke's QE Pickle: Rising Oil Prices And Vicious Feedback Loops
The recent oil price rally, if sustained, will put Fed Chairman Ben Bernanke between a rock and a hard place. With zero-bound interest rates set to remain in place at least until late-2014, Bernanke and other central bankers in so-called advanced economies will be forced to use quantitative easing to monetarily stimulate their economies, as growth slows.
Excess liquidity will go overseas, as it did during QE2, sustaining emerging market growth and fueling further oil demand strength and higher crude oil prices. A vicious cycle will ensue, where higher oil prices lower potential output in the U.S. and force Bernanke to keep ultra-loose policy to foster growth, apparently perpetuating the cycle.
U.S. economic indicators have surprised to the upside, suggesting the modest economic recovery has legs. Across the Atlantic, European policymakers are slowly moving to engineer a solution to their sovereign debt crisis, despite probably slipping into a “mild recession” in 2012. Around the EM world, major players like China and Brazil are beginning to unwind monetary tightening in the face of a softer global outlook, opening the door for stimulus.
While these are bullish signs, they have helped push oil prices up rather markedly. U.S. benchmark WTI had moved well into the triple digits, trading at $109.62 a barrel by Friday’s close while Brent crude, the international benchmark, hit a euro-denominated all-time high on Thursday above €93 a barrel.
Economists from Nomura to Bank of America agree that part of the problem stems from the massive amounts of liquidity in the system. In the U.S., Ben Bernanke has engaged in two rounds of asset purchases or quantitative easing after having lowered interest rates to zero; the Fed’s balance sheet now holds nearly $3 trillion in assets. (Iran and geopolitical instability is a big part of the problem too).
At the same time, as recognized by Dennis Gartman, the monetary base is once again expanding, going from $2.5 trillion at the end of 2011 to $2.75 trillion. “This is not inconsiderable and perhaps too rapid increase for the first time in quite some while, certainly since the end of QEII last July,” noted Gartman before adding that it appears the Fed has already embarked in covert QE3.
The problem with QE and ultra-loose monetary policy in the context of growing EM demand is the creation of negative feedback loops. Specifically, as QE liquidity moves abroad, it supports global growth and feeds their rampant demand for crude oil, according to HSBC.
To illustrate the point, HSBC’s analysts note global oil consumption has increased 4% from ’05 to ’10, while OECD or “developed economy” consumption has fallen 7%. What happened here? Voracious non-OECD appetite for crude oil, where consumption jumped more than 20%; while EMs account for only 25% of global GDP, they currently represent 50% of oil consumption, the analysts explain.
Historically, rising oil prices responded to a supply shock or an increase in demand, led by growing OECD consumption. Thus, markets counted with a stabilization mechanism of sorts, as HSBC’s economists explain:
Historically, a slump in growth of developed economies weakened demand and led to lower oil prices globally. This in turn helped stabilize consumer and business expectations and aided economic recovery.
This time around, though, advanced economies are the ones experiencing the slump, but demand is coming from EMs, particularly from South East Asia. The stabilization mechanism has been broken, forcing Bernanke to see rising oil prices due to higher demand much in the same way as he would if they were a reaction to a supply shock. More from HSBC:
This link has clearly been broken now. The automatic stabilization that was seen through falling activity, lower prices, rising disposable income and finally growth is no longer happening, complicating the whole recovery process in the western world. Western economic activity is lower than in 2007 but the price of oil is higher. Real disposable incomes are getting squeezed as incomes have not kept pace with inflation caused by rising energy prices. And incomes are not rising because of high unemployment rates and the low bargaining power of employees.
Major oil companies have already shown that even in times of high oil prices, business can suffer. While exploration and production benefits from high selling prices, the downstream business suffers. Chevron posted disappointing earnings on the back of weak refining margins while Exxon Mobil saw growth come from its upstream business. ConocoPhillips has already decided to split up given the difficulties of running both businesses together. At the end of the day, oilfield services companies like Halliburton and Schlumberger could benefit, as long as exploration and drilling activity remains high.
Bernanke finds himself between a rock and a hard place. While the economy can definitely survive high oil prices, it definitely makes it harder to engineer a self-sustaining economic recovery if real disposable incomes take a hit from high gas prices. Unwinding loose monetary conditions, though, could have an equally devastating effect.
The recent oil price rally, if sustained, will put Fed Chairman Ben Bernanke between a rock and a hard place. With zero-bound interest rates set to remain in place at least until late-2014, Bernanke and other central bankers in so-called advanced economies will be forced to use quantitative easing to monetarily stimulate their economies, as growth slows.
Excess liquidity will go overseas, as it did during QE2, sustaining emerging market growth and fueling further oil demand strength and higher crude oil prices. A vicious cycle will ensue, where higher oil prices lower potential output in the U.S. and force Bernanke to keep ultra-loose policy to foster growth, apparently perpetuating the cycle.
U.S. economic indicators have surprised to the upside, suggesting the modest economic recovery has legs. Across the Atlantic, European policymakers are slowly moving to engineer a solution to their sovereign debt crisis, despite probably slipping into a “mild recession” in 2012. Around the EM world, major players like China and Brazil are beginning to unwind monetary tightening in the face of a softer global outlook, opening the door for stimulus.
While these are bullish signs, they have helped push oil prices up rather markedly. U.S. benchmark WTI had moved well into the triple digits, trading at $109.62 a barrel by Friday’s close while Brent crude, the international benchmark, hit a euro-denominated all-time high on Thursday above €93 a barrel.
Economists from Nomura to Bank of America agree that part of the problem stems from the massive amounts of liquidity in the system. In the U.S., Ben Bernanke has engaged in two rounds of asset purchases or quantitative easing after having lowered interest rates to zero; the Fed’s balance sheet now holds nearly $3 trillion in assets. (Iran and geopolitical instability is a big part of the problem too).
At the same time, as recognized by Dennis Gartman, the monetary base is once again expanding, going from $2.5 trillion at the end of 2011 to $2.75 trillion. “This is not inconsiderable and perhaps too rapid increase for the first time in quite some while, certainly since the end of QEII last July,” noted Gartman before adding that it appears the Fed has already embarked in covert QE3.
The problem with QE and ultra-loose monetary policy in the context of growing EM demand is the creation of negative feedback loops. Specifically, as QE liquidity moves abroad, it supports global growth and feeds their rampant demand for crude oil, according to HSBC.
To illustrate the point, HSBC’s analysts note global oil consumption has increased 4% from ’05 to ’10, while OECD or “developed economy” consumption has fallen 7%. What happened here? Voracious non-OECD appetite for crude oil, where consumption jumped more than 20%; while EMs account for only 25% of global GDP, they currently represent 50% of oil consumption, the analysts explain.
Historically, rising oil prices responded to a supply shock or an increase in demand, led by growing OECD consumption. Thus, markets counted with a stabilization mechanism of sorts, as HSBC’s economists explain:
Historically, a slump in growth of developed economies weakened demand and led to lower oil prices globally. This in turn helped stabilize consumer and business expectations and aided economic recovery.
This time around, though, advanced economies are the ones experiencing the slump, but demand is coming from EMs, particularly from South East Asia. The stabilization mechanism has been broken, forcing Bernanke to see rising oil prices due to higher demand much in the same way as he would if they were a reaction to a supply shock. More from HSBC:
This link has clearly been broken now. The automatic stabilization that was seen through falling activity, lower prices, rising disposable income and finally growth is no longer happening, complicating the whole recovery process in the western world. Western economic activity is lower than in 2007 but the price of oil is higher. Real disposable incomes are getting squeezed as incomes have not kept pace with inflation caused by rising energy prices. And incomes are not rising because of high unemployment rates and the low bargaining power of employees.
Major oil companies have already shown that even in times of high oil prices, business can suffer. While exploration and production benefits from high selling prices, the downstream business suffers. Chevron posted disappointing earnings on the back of weak refining margins while Exxon Mobil saw growth come from its upstream business. ConocoPhillips has already decided to split up given the difficulties of running both businesses together. At the end of the day, oilfield services companies like Halliburton and Schlumberger could benefit, as long as exploration and drilling activity remains high.
Bernanke finds himself between a rock and a hard place. While the economy can definitely survive high oil prices, it definitely makes it harder to engineer a self-sustaining economic recovery if real disposable incomes take a hit from high gas prices. Unwinding loose monetary conditions, though, could have an equally devastating effect.
Apple's Worth Now Is larger US Retail Sector
Submitted by Tyler Durden on 03/13/2012 09:41 -0400
Posted a day ago , yesterday Apple added $15Bil so now $1bil more than all retail combined in the USA ,
As Apple gaps open by another 1% at $558, it stands less than $14bn (in market cap) away from being larger than the entire US retail sector. The good news: it still has a ways to go before eclipsing the retail and the semi sectors combined.
Submitted by Tyler Durden on 03/13/2012 09:41 -0400
Posted a day ago , yesterday Apple added $15Bil so now $1bil more than all retail combined in the USA ,
As Apple gaps open by another 1% at $558, it stands less than $14bn (in market cap) away from being larger than the entire US retail sector. The good news: it still has a ways to go before eclipsing the retail and the semi sectors combined.
>AAPL PT raised from $515 to $720 at Morgan Stanley”. At historic highs. It becomes their best idea.
so when's apple getting into the TV market?
Departing Goldman banker Blast's Goldman's "rip-off" culture, Calls Goldman Sachs "Toxic & Destructive"
( stock takes a hit )
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
(knowing Wall St , the hit will be only temporary then back to "Greed is Good" as usual)
http://finance.yahoo.com/news/departing-goldman-banker-slams-rip-010052954.html
http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=3
( stock takes a hit )
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
(knowing Wall St , the hit will be only temporary then back to "Greed is Good" as usual)
http://finance.yahoo.com/news/departing-goldman-banker-slams-rip-010052954.html
http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=3
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Not a bad looking chart and looks like its turning up , one announcement of a deal with Visa would send this rocketing up past $10 for 20% gain . Has fairly high short interest
$AAPL short today @ $600 made 22pts to the down side , money turned towards other sectors with the Rails & Tran bidding up along with the flying Banks . Apple's turn to rest today ..
He ripped them pretty good. ZeroHedge as coined it "MuppetGate". It's already forgotten about though and largely unreported outside of financial news circles.
It's amazing how Goldman tries to justify their obvious conflict of interests.
Causing the stock to jiggle & fall because of course shorting that latest runnup to $125 was the rote trade on that negative exposure ...but then buying that muppet pain~drop to $120 found stock rebound back to $123.50 just the next day was back to "greed is good" biz as usual . Still the overhang found it weak & more shorts stepped in to push back down to $121 where today that was the long trade again for $1.50 bounce gain to $122.50 and closed firmly there .
After stress tests & JPM's squeeze after the Fed Rate decision Tues , BofA became the monster trade jumping 30% in a week to almost $10 .
One of the things i'll do if not long is wait for one like JPM squeeze up to a "round number" this morning near $45 ($AAPL @ $600) and just short with big size like 2-5k shrs & scalp and take 60c on the pullback/ proftaking logging a quick $1500=$3000 in 2hrs . $CMG paused 4 times this week too if you caught short selling above $400 and good for four 3pt scalps in a row but $397 dips were being bought too and today pushed back over $400 to stay looks like for now . But the trades were there for 12pts short 1rst 4 days of this week . $CRM pausing twice now for short scalps from near $155 another bull market darling .
Wished was better with options trading there's a fellow that has an options thread i look in on that did an absolutely masterful job playing this earning's season turning a $2k Ibd account into $170,000 in just 4wks time , with $MA , $PCLN , $FOSL, $LNKD, $CME, $ICE ...and more lately $SINA $WYNN & $MCP runnups that also turned into good shorts .
One of the few people ever run acrossed that posted all set-ups in advance & screen shots later of all his trades . In this bull market if one traded with empasis on the long side you just cleaned up , look $PCLN (Priceline) jump another 20pts today <gg
* AAPL great on the short side past two days , held firm to $578 pivot though for long .
some bounces in beaten down coals like BTU off congestion low @ $30
What will Apple do with its roughly $100 billion in cash? Investors to get the answer tomorrow: http://on.wsj.com/AbetHo
@jimcramer $AAPL should go the way of $DPZ, nice special dividend there Friday ! Has a real good cheese free $DPZ for lunch with my daughter today. There's usually nothing on Sunday night, we have fab games, Frozen Planet and NAZI scrapbooks on Natl Geo... Plus $AAPL guesswork!!!
@jimcramer $AAPL should go the way of $DPZ, nice special dividend there Friday ! Has a real good cheese free $DPZ for lunch with my daughter today. There's usually nothing on Sunday night, we have fab games, Frozen Planet and NAZI scrapbooks on Natl Geo... Plus $AAPL guesswork!!!
Here's $GS up over $125 again , barely missed a beat after the knock down to $120
