World economy talk

[tidus1203]

I saved the best for last and that is the GBP/JPY. The ultimate in massacres



Take note I have a chart the extends all the way back to 1988 and the GBP/JPY is in all time lows since that time frame. Now back to chart reading and analysis. Its also very very similar to EUR/JPY but this one is even steeper and even deeper. In fact the GBP/JPY is such a damaged good that the resistance is so so far away at 148. I think this damage is so permanent already that I doubt if the GBP could ever go back those all time highs at 251 at least in our lifetimes. Likewise all momentum indicators are pointing down while a short term bounce is in order as depicted by the stochastics it will remain as that just a short term bounce and should be used as an opportunity to sell the GBP against the JPY or to add more positions if you are already in.

[uls]

yan ang tinatawag na cliff diving

the NOT-SO-GREAT British Pound

[tidus1203]

What it took the GBP/JPY to go up for 2 decades has been erased and then some in a year and a half. The British Pound has taken a permanent hit that in my view is irreversible anymore. The damage is just too much to repair and the UK will now sink into mediocrity in my view. To make it worse now they have admitted to PRINTING MONEY as their next move. Things are only to get worse for the British Pound.

[uls]

yep the GBP is sooo damaged

the UK economy is in very bad shape

U.K. Economy to Shrink 3.3% in Worst Slump Since 1980, CBI Says

http://www.bloomberg.com/apps/news?p...4NU&refer=home

Feb. 16 (Bloomberg) -- The U.K. economy will shrink at almost twice the pace previously forecast this year as the credit famine plunges the nation deeper into the worst recession in almost 30 years, the Confederation of British Industry said.

Gross domestic product will contract 3.3 percent, instead of the 1.7 percent predicted in November, the biggest U.K. business lobby said today. By the end of 2009, the economy will have contracted for six consecutive quarters, it said.

“The world has changed dramatically,” Richard Lambert, the CBI’s director general, told reporters in London. “Faced with a global confidence crisis, a rapid fall in demand and credit constraints, U.K. firms have been forced to scale back investments and cut jobs.”

Prime Minister Gordon Brown has pledged billions of pounds to revive lending as a housing slump deepens and job losses mount. The CBI expects the economy to shrink 4.5 percent from the start of the recession in the third quarter of last year, only slightly less than in the early 1980s slump during Margaret Thatcher’s first term. Output will stagnate in 2010, it said.

[emanzano]

Tidus, great charts and thanks for sharing.

Although i might agree with you academically, i'm still betting on the depreciation of the Yen. Reason being that it is the only way for them to survive. A 12+% decrease in GDP is just unacceptable and Japan will not survive if this continues. Hence, you will see them deliberately debase their currency to remain competitive. They will continue to be an export-oriented country long into the future.

As big a mess the US created, at the end of this crisis, they will still be the 'big dog'. Sad but true...

[tidus1203]

I only follow the price (I don't listen to economists or for anyone for that matter), so I will only change if the price changes. If the Japanese survival is dependent on the Yen's weakness then the price should show me the Yen is weakening and has reversed.

[emanzano]

My investment recommendation. Buy the Japanese Yen if you have it continue to hold.

Not a recommendation but what I would do if i had Yen: Time to sell. I think those who are thinking of buying Yen have already missed the boat. So they'll have to wait for the next wave.

[tidus1203]

I still have Yen and I am not selling at all... I just don't see any indications of reversal from a price action standpoint to a momentum standpoint.

[uls]

With bailouts and stimulus costing trillions of dollars, the US is on a record-breaking borrowing spree

the US govt is issuing tens of billions of dollars of new debt paper almost everyday

will there be enough buyers?

China is right to have doubts about who will buy all America's debt
http://www.telegraph.co.uk/finance/b...icas-debt.html

Chinese doubts about the value of US Treasury bonds highlight a crucial question: who will buy the estimated $2.7 trillion (£1.9 trillion) to $4.2 trillion of debt expected to be issued over the next two years?

By Martin Hutchinson
Last Updated: 12:14PM GMT 13 Feb 2009

With annual foreign purchases accounting for less than a tenth of the low end of that range, and domestic investors unable to bridge the gap, the Chinese are right to worry.

Yu Yongding, former adviser to the People’s Bank of China, recently demanded guarantees for the value of China’s $682bn of Treasury securities. Then Luo Ping, director of the China Banking Regulatory Commission, said that China had misgivings about the US economy, but despite this it would continue to buy Treasuries. The two statements appear designed to raise the issue non-confrontationally before new chief US diplomat Hillary Clinton’s visit to Beijing on February 20.

China worries about the dollar’s value against other currencies, particularly the yuan. With US interest rates so low, the dollar’s value may slide. However, President Barack Obama has repeatedly said he wants a strong dollar, and indeed its trade-weighted value rose 13.9pc between April and December 2008.

The other area of concern for China is the value of its Treasuries. Given the US borrowing requirement and its lax monetary policy, Treasury bond yields could well rise sharply, causing a corresponding price decline. If China’s holdings match Treasuries’ average 48-month duration, then a 5pc rise in yields, from 1.72pc on the 5-year note to 6.72pc, would lose China 17.5pc of its holdings’ value, or $119bn.

Foreign buyers have absorbed a little over $200bn of Treasuries annually, a useful contribution to financing the $459bn 2008 deficit, but only a modest help towards the $1.35 trillion minimum average deficit forecast for 2009 and 2010.

Unless that changes substantially, there will be $1trillion annually to be raised by the Treasury from domestic sources, more than double the previous record from domestic and foreign sources together, plus whatever is needed to bail out the banks.

Even if the US savings rate were to rise from zero to its long-term average of 8pc of disposable personal income, that would create only an additional $830bn of savings -- not enough to fund the domestic share of the deficit. Interest rates would probably have to rise substantially to pull in more foreign investors.

Yu is right to worry.

the article didnt say that if there won't be enough buyers, the Federal Reserve Bank will be the buyer of last resort

the Fed will simply create money to buy the treasuries

so far the Fed isnt doing that

they are trying to avoid doing that

[tidus1203]

PHILADELPHIA (Reuters) - Trump Entertainment Resorts Inc, Donald Trump's casino group, is expected to file Tuesday for bankruptcy, The Wall Street Journal reported.
The company's board was scheduled to meet late Monday night to decide whether to authorize the filing, the newspaper reported in its online edition. Otherwise, the casino operator would be forced into bankruptcy involuntarily by creditors, the newspaper said.
Such a filing would mark the third appearance in bankruptcy court for Trump Entertainment, which most recently emerged from bankruptcy proceedings in 2005, the newspaper said.

http://www.reuters.com/article/domes...51G05X20090217


Just got out of bankrutpcy in 2005 and now back there again!

[tidus1203]

the article didnt say that if there won't be enough buyers, the Federal Reserve Bank will be the buyer of last resort

the Fed will simply create money to buy the treasuries

so far the Fed isnt doing that

they are trying to avoid doing that

But they won't have a choice but to do THAT! The UK already gave in, the US will follow sooner rather than later.

[uls]

yep

if the yield on the longer term treasuries keep on rising, the Fed will step in

[uls]

hey there's a rush into the USD today

it's safe haven play

something bad is going on

eastern european countries are on the verge of collapse

they owe a lot of money to Austrian, Italian, French, Belgian, German, and Swedish banks

get out of the Euro

[tidus1203]

And guess what currency is not as affected with the USD surge while all others are getting hammered? Yep you guess it the JAPANESE YEN. While down its only down a few Yen cents hardly enough to make me scared meanwhile my Short EUR/JPY and short AUD/JPY is paying dividends (sayang wala akong short GBP/JPY) Just another day in the office in 2009 (2009 so far has been so easy just buy the Yen).

[uls]

check out gold price

i know it's paper gold

just use it as an indicator

in the last 12 hours, there was a rush into USD, and gold price hit a 7 month high

interesting day today

[Monseratto]

Apparently there is still a long painful road ahead...

NEW YORK—US stocks slid within striking distance of the November bear-market low on Tuesday, as grim manufacturing data signaled the recession is worsening and warnings on risks facing European banks underscored the continuing toll of the financial crisis.

“As we retest these November lows, the reality that sets in is that we may have another leg to go down in the economy and the market,” said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.

Analysts said the market does not see any quick relief from the tax cuts and spending bill and has little confidence that it will work.

Frederic Dickson at DA Davidson said the economic stimulus package “hasn’t inspired investors, as many have lingering questions about the timing and its ability to achieve near-term economic stability.”

“There’s some question as to how effective the stimulus will be in jump-starting the economy,” said Michael Sheldon, chief market strategist at RDM Financial in Westport,
Connecticut.

“Based on the size and what’s included, there’s no doubt that we’ll get some stimulus out of the package. The only question is how much, when will it start, and how long will it last.”

“There’s a growing sense that no matter who’s in office, no matter how much they spend and on what, it’s going to be a long, painful process to get out of this situation and restore the economy to normalcy,” said Michael Shinnick, manager of the $100 million Wasatch-1st Source Long/Short Fund, which has returned 1 percent this year as the S&P 500 retreated almost 13 percent.

U.S. Treasury securities and gold advanced as investors sought protection against falling equity values. Newmont Mining Corp. led gold producers higher as the precious metal climbed to more than $975 an ounce, the highest price since July.

[tidus1203]

Now its do or die for those people who said we won't re-visit the November lows. If we break those November lows I am going to be even more pessimistic than I am now. Why you ask? Its all market psychology! Those who bought on the November lows are still making money but once those lows are breached they are now losing money. The mentality of being in the green as against being in the red is very very different and fear is a very strong animal than can easily crush greed thus triggering more sell orders and stop loss orders thus compounding the situation.

[tidus1203]

I find it totally ironic that the biggest contributor to this mess has said that its going to be hard to repair....

Feb. 17 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the U.S. may be doing too little to repair its financial system and promote an economic recovery.
President Barack Obama today signed into law a $787 billion economic stimulus package of tax cuts and increased spending. He has also pledged to use the bulk of the roughly $315 billion left in the bank bailout fund approved by Congress last October to revive the battered financial industry.
“The amount of money in both these pots may not be enough to solve the problem,” Greenspan said in an interview before a speech prepared for today to the Economic Club of New York.
The comments highlight the difficulties Obama faces in fighting the steepest recession in a generation. The economy contracted at an annual pace of 3.8 percent in the fourth quarter of last year, the most since 1982.
Greenspan, who now heads his own Washington-based consulting company, warned in his speech that the positive impact of the stimulus package on the economy will peter out if the U.S. fails to fix its financial system.

http://www.bloomberg.com/apps/news?p...t9g&refer=home

[uls]

Yep...

revisiting November 2008

[Monseratto]

It will just keep growing and growing and growing... hmm, sounds familiar. Next move would be to nationalize these companies...sounds familiar too.

DETROIT – Billions of dollars in government loans to prop up General Motors and Chrysler won't be enough. The companies, which have received $17.4 billion so far, filed plans with the government more than doubling that request to a staggering total of $39 billion.

In a dramatic acknowledgment that conditions in the U.S. auto industry have grown significantly worse in just two months, GM alone said it would cut 47,000 jobs globally by the end of the year — 19 percent of its work force. It also said it would close five more U.S. factories, although it did not identify them.

Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.