Friday, October 29, 2010

Roubini Loses Cool; Gloves Are Off

It has been an interesting day in Twittland. Please take a look at the latest Roubini twits:



 [...]

To which the Business Insider responded with:
"On the record, Nouriel Roubini thinks I'm an idiot.

Off the record, well.... he just revealed that in an accidental Tweet that was clearly intended to be a private message regarding me".
Then there was another one earlier:
"After incorrectly calling the Q3 GDP number, and then calling us an idiot for pointing that out, Roubini has made another forecast
Q4 is when we'll see the wheels fall off."

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Roubini: U.S. Heading for Fiscal Train Wreck, QE Will Have Little Effect on Growth

BNN is reporting that Nouriel Roubini says the US is heading for a fiscal train wreck. It appears to be  a reference to a piece he wrote for the FT.

He says that president Obama inherited the worst economic crisis since the Great Depression, as well as a budget deficit that  "after much needed bail-outs and a series of reckless tax cuts – was already close to $1,000bn".

He gives credit to Obama for preventing another depression with his stimulus package, backstop of the financial system, low rates and quantitative easing

However, he says this is but one half of the picture: "we must also judge his first two years on his ability to anticipate what the economy will need tomorrow. Here the picture is much less positive. Given the likely path of fiscal policy after next Tuesday’s election – with the expiration of existing stimulus and transfer payments, and even with most of the 2001-03 tax cuts being kept – the US economy will soon experience serious fiscal drag just when it needs a further boost. Problematically, the administration’s failures leave it relying on the Fed, which is bent on further QE, likely to be announced next Wednesday. But studies show this will have little effect on US growth in 2011, so fiscal policy should be doing some of the lifting to prevent a double dip recession".

[...] "The risk, however, is that something on the fiscal side will snap, and the bond vigilantes will wake up. The trigger could be a debt rollover crisis in a major US state government, [...]. Only then will our politicians suddenly remember that, on top of our federal debt, the US suffers from unfunded social security and Medicare liabilities, state and local government debt, and public pension bills that add up to many multiples of US GDP".

[...] "The result will soon be the worst of all worlds: neither short-term stimulus nor medium-term fiscal sustainability. Fiscally the only light at the end of the tunnel may be that which causes the upcoming crisis. With two years of gridlock in prospect, it will fall to the next president in 2013 – whoever he or she may be – to start fixing America’s fiscal mess. Whether that is Mr Obama or not, that he may leave this challenge may become the worst of his legacy".

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Brazil's New Giant Sweet Light Oil Field: PBR

With Brazil set to announce its largest sweet light oil well ever, here are straddles for PBR for November an December, computed with StraddlesCalc Tool:


Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Thursday, October 28, 2010

Brazil To Announce Its Largest Ever Light Oil Discovery To Date: 12B Barrels

Brazil will announce on Friday its largest oil discovery ever. The new Libra field is expected to be even larger than Tupi, in the Campos basin, and will likely have around 12 billion barrels. This is a very conservative estimate, which assumes that only 13% of the oil can be recovered, with total of 60B barrels.

The announcement will be made by the National Oil Agency. The first target was hit earlier this week, at a depth of 6,900m. Although he well is being drilled by PBR, Petrobras, PBR (click for alerts and TA), it is owned by the country.

12B barrels = about $1T at current prices.
60B barrels = $4.8T



The timing of the announcementt is of course highly suspect, as Brazil heads for runoff Presidential elections this Sunday.

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General Electric Straddles

For November and December. Big company, stuck around the $16 level for a long time.


Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss. Computed with StraddlesCalc Tool

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Poor HAL Being Blamed for BP Spill: Next The Dog; Straddles for HAL

HAL has taken a beating today as it is now being blamed for the BP spill. Who is next down the chain? CEMEX? Has anyone seen the dog?

Below are straddles for HAL.


Please do your own due diligence, this is not advice!

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McDonalds to Indemnify Manager Because He Gained 30Kg On the Job

A McDonald's in Brazil was ordered to pay compensation to a former employee who said he had gained weight about 30Kg (64 pounds) during the 12 years he worked in the company.

He probably used himself as evidence.

The decision, approved on appeal, provides for payment of R$30,000 for punitive damages.
According to information from the press office of the Regional Labor Court, the official said weighed between 70 and 75 kg when he started working in the cafeteria, and 105 kg when he left work.

According to Judge John Ghisleni, the former employee was required to taste high-calorie foods like burgers, fries, sodas and ice cream..It is not known if he was required to swallow though.

The former employee also claims that the meals provided by the Company were also high-calorie foods and that it was not possible to exchange them for money for a snack or meal voucher.

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First Nations of Saskatchewan Preparing Big for POT; Will Seek Court Injunction Against BHP

A group of Saskatchewan First Nations is prepapring  a bid for Potash Corp. of Saskatchewan, in conjunction with merchant banks, pension funds and Chinese investors.

The multibillion-dollar bid will compete with the unwanted U.S. hostile takeover attempt by BHP Billiton.

Ottawa Citizen: "A flurry of meetings has taken place in the past week between provincial ministers, First Nations leaders, potential investors and Potash Corp. officials, according to Indigenous Potash Group spokesman Rick Gamble".

"We cannot be left out. We are moving on this," said Gamble, chief of the Beardy's and Okemasis First Nation. "This is exciting stuff. We're ready to go."

The First Nations are also demanding the Canadian government halt the takeover by BHP.

If Investment Canada approves the BHP takeover, First Nations officials have drafted an immediate application for a court injunction.

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The Fed In An Impossible Situation: Now Acting By Others' Expectations

We mentioned that the Fed had put itself in an impossible situation, as numbers were leaked about $1T, $2T, or $4T in QE2. If the fed delivers such numbers, it's a disaster for the US Dollar, and possible inflation down the road. If the Fed does not deliver, the markets will carter.

Well, today Bloomberg reports that the Federal Reserve sent out a survey to bond dealers and investors for their estimates of what the asset purchases will be over the next six months. Is the Fed going to use the figure to aim rigth at the middle of the estimates? Is this how the Fed is run now?
The survey asks about expectations for the initial size of any new program of debt purchases as well the time over which it would be completed.

By the way, it is another indication that the purchases will be made over a period of time.
Bloomberg: 'What the market wants to hear is that the Fed is going to buy $1 trillion”' of Treasuries, said Joseph Lavorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. 'Concerns that it might be less is causing investors to worry about how deep and broad this program is going to be.' "

Somebody will be hard at work next week to prevent the markets from collapsing. What a disaster.

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Wednesday, October 27, 2010

Europe Financial Problems Escalate, Again, To Hit Euro Hard

As we suspected and wrote here, European woes are now hitting the news en masse, as the Euro was getting too high.

Greek 10-year yields surged 67 points to 10.26% (!), the biggest jump since the turmoil in June.


The Telegraph reports that a new budget deal in Portugal "has collapsed after marathon talks between the minority government of socialist premier Jose Socrates and conservative leaders ended in acrimony". Finance minister Fernando Texeira dos Santos said failure to agree on budget cuts will "plunge the country into a very deep financial crisis".

John Fitzgerald from Ireland’s Economic and Social Research Institute says "there is a risk that austerity tips the economy into a downward spiral, comparing it to an overdose of 'chemotherapy' that does more harm than good". Meanwhile Finance minister Brian Lenihan says the country has no choice:

"The cost of borrowing is high and rising, and if we do not act soon to live within our means, people may stop lending to us. We will not fool the markets for an instant if we seek to defer any longer what evidently needs to be done now. The Irish people will have to accept cuts in public expenditures and higher taxes,".

We are just missing Italy now.

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Options for BCE Earnings

BCE will declare earnings next week. American readers may not know, but there is now a lot more competion in the wireless space in Canada (finally!).

Ths is what happened to Rogers when it declared earnings yerterday:



These are straddles for BCE, on the TSX:


Only a 3.2% move required.


Not advice!

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Bill Gross Warns: QE2 May Not Work; Fed's Ponzi Scheme

Something we said here. The Fed has nowhere to go, whether they do or do not do QE2, QE3, QE4.

Says Bill Gross:


"We at PIMCO join with Ben Bernanke in this diagnosis, but we will tell you, as perhaps he cannot, that the outcome is by no means certain. We are, as even some Fed Governors now publically admit, in a “liquidity trap,” where interest rates or trillions in QEII asset purchases may not stimulate borrowing or lending because consumer demand is just not there. Escaping from a liquidity trap may be impossible, much like light trapped in a black hole. Just ask Japan. Ben Bernanke, however, will try – it is, to be honest, all he can do. He can’t raise or lower taxes, he can’t direct a fiscal thrust of infrastructure spending, he can’t change our educational system, he can’t force the Chinese to revalue their currency – it is all he can do, and as he proceeds, the dual questions of “will it work” and “will it create a bond market bubble” will be answered. We at PIMCO are not sure".


[...]
"Still, while next Wednesday’s announcement will carry our qualified endorsement, I must admit it may be similar to a Turkey looking forward to a Thanksgiving Day celebration. Bondholders, while immediate beneficiaries, will likely eventually be delivered on a platter to more fortunate celebrants, be they financial asset classes more adaptable to inflation such as stocks or commodities, or perhaps the average American on Main Street who might benefit from a hoped-for rise in job growth or simply a boost in nominal wages, however deceptive the illusion. Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme. Public debt, actually, has always had a Ponzi-like characteristic".

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Currency Wars: South Africa Warns and To Take Measures Against Rand Appreciation

South Africa warned against currency devaluation and trade protectionism as a response to the strong rand.


South Africa will " follow the established course of mitigating the negative impacts of the local currency's gains by boosting foreign currency reserves and easing restrictions on capital outflows".

South Africa warned it could not fully offset the ravages of massive global capital movement, and needed greater productivity and competitiveness to cope with the rise of the rand.

Finance Minister Pravin Gordhan: “Inappropriate short-term responses to global currency adjustments, such as competitive devaluations or increased trade protectionism, will entail longer-term costs to economic growth.
“A co-ordinated international agreement on currency alignment would help to minimise the negative effects of this rebalancing, especially for developing countries.”

Last week he warned that devaluations by separate nations could spark a trade war.

Reserve Bank Governor Gill Marcus had called extraordinary measures to mitigate rand strength.

Reuters Africa: "On Wednesday however, Marcus sat next to the minister as he briefed media on the MTBPS and agreed that trying to depreciate the currency could prove dangerous and fleeting benefit. She said it was vital for Treasury and the bank to work together on measures that “mutually reinforce each other”.

“For us is really is about what is appropriate and what is the likely outcome that you would achieve.

“Japanese debt GDP ratio has now risen to 226 percent. If you look at one or two days where they intervened with trillions of yen and the currency might have weakened for a day or two and then just strenghtened again, “.
“The first question we need to face is not about depreciating the currency but whether there are ways in which we could stop it appreciating further.”

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Manulife Advises Clients to Head For Cash; Fed's QE Boost Will Fail

Manulife, the big Canadian  insurer (and investment) company, has advised fund managers to head  into cash because stocks may plunge in the event U.S. Federal Reserve stimulus policies fall short of expectations.

Don Rich, vice president of tactical asset allocation for MFC Global Investment Management says:

“Fundamentals are bad and deteriorating and the market’s got ahead of itself,” “There’s really no place to hide. Just take as much money off the table as you can and sort of sit on the sidelines for a while.”

“The euphoria wears off. That’s the hangover I’m afraid we’re setting ourselves up for,”

"After the Fed launches the second round of quantitative easing, investors will realize it is a solution for the wrong problem". (Bloomberg)

QE2 is a liquidity enhancer and worked the first time because we had a liquidity crisis,”

“The U.S. consumer’s balance sheet is a problem.

The structural problems on the European periphery are huge. There are several problems throughout the world, but right now, a liquidity crisis isn’t one of those problems.”

“There’s been little to no improvement in the labor front,” “That is ground zero of all the problems. In fact the numbers seem to be softening and not strengthening.”

“The European problems haven’t gone away, and they won’t go away,” “At some point Greece and some of the other periphery countries will have to restructure. So they’re going to be plagued by these structural problems for years, and it’s going to challenge the European unity.”

"... investors will know it’s time to get back into the market when they see Asian markets begin to rebound after the coming downturn". "More-volatile markets such as those of China, Taiwan and Singapore “tend to be first in and first out” of pullbacks, he said.

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More Greek Tragedies To Bring Euro Down: Greece's Deficit Was Actually 15% of GDP

Remember the Greek deficit that went from 3% of GP to 12%? Well, it turns out it was 15%!

FXE straddles anyone?

Eurostat has reported that "once and for all" its 2009 deficit was above 15 percent of GDP.

Reuters reports: "Greece's 2011 draft budget earlier this month estimated the 2009 deficit at 13.8 percent of gross domestic product, but the EU's statistics office Eurostat is expected to revise the deficit upwards in data to be published in mid-November.

"The cost of insuring Greek debt against default rose on Wednesday as risk aversion to the sovereign continued to grow after a series of negative comments, while bonds sharply underperformed German debt. Five-year credit default swaps (CDS) on Greek government debt rose to 720 basis points, up 39 bps according to data monitor Markit"

Prime Minsiter Papaconstantinou said that economy would contract by between 2.5 and 3% next year.

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Currency Wars: Greek and Portuguese Yields Soar, To Bring Euro Down

Portuguese and Greece's 10-year bond yields soared today:


More of the same is expected until the Euro drops...

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Tuesday, October 26, 2010

The New Norm: 50-Year Bond for Goldman Sachs

Will GS exists in 2060?

A first 60-year note, for Goldman Sachs.

No doubt, the first of many to come. Note the maturity: Nov 2060 (yes, two thounsand and sixty).

All these banks are loading up on money, boosting their balance sheets, taking advantage of investors desperate search for yield.

ISSUER: Goldman Sachs Group, Inc.
EXPECTED RATINGS: A1 / A / A+ (Negative / Negative / Negative)
REGISTRATION: SEC Registered
SECURITY DESCRIPTION: Senior Unsecured Notes
TOTAL SIZE: $1.3bn (52mm $25 par notes)
PAR AMOUNT: $25 Par
MATURITY: 50yr (November 1, 2060)
PRICE GUIDANCE: 6.125%
PAYMENT DATES: Quarterly on or about the 1st of February, May, August and November, beginning February 1st, 2011

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KRY, Crystallex, Quiet For Too Long


KRY's stock has been very quite for a long time, too long. We wonder when the next phantom news about it will start, and the stock will move violently.

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Government Conceals $40B In AIG Losses

Have you heard laely how the government has "made money on all those TARP investments"? Well, Reuters reports that the U.S. Treasury concealed $40B in likely taxpayer losses on the AIG bailout. The figures comes from a report by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program.

"In our view, this is a significant failure in their transparency,"

The issue stesm from the fact that Early this month, the Treasury changed its usual valuation methods and issued a report saying that U.S. taxpayers would ultimately lose "just $5 billion" on the AIG investment.
"The Treasury will include more information about the AIG investment when it issues its own audited financial statement in November, which may likely report taxpayer losses of more than $5 billion, according to the paper".

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El-Erian: Fed's QE Will Not Lower Unemployment And Will Cause Commodities to Rise

Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co, says the Federal Reserve Treasury purchases will probably not lower unemployment, while it will cause global inflation. He added that QE (Quantitative easing), will not be enough to deliver high economic growth.

Goldman Sachs estimates the next round of QE (QE2) at $2T. Then there may be QE3, QE4, etc, really devaluing the USD dollar for good.

In addition, he commented on the huge, record amount of U.S. debt, saying it is another problem for the economy.

“One thing that the Fed cannot do is stand still, it is terrified of deflation,” “QE on its own means we’ll have the same issues in six to nine months time with the rest of the world being inflated.”

“If I were to design the right policy response and implement it, it would be a package that would include structural reforms making us more competitive and the economy more flexible, more safety nets,”

On commodities, he says that new QE measures and  Treasury purchases will drive commodity prices even higher "as much of the money added to the U.S. economy spreads to other nations".

Of course, the Fed is now in an impossible situation that it itself caused. It pretty much announced QE. If it does not deliver, the markets will crash. And QE will likely not work.

Actual interest rates too high

By buying more bonds and treasury assets the objective is to lower real rates. Although nominal rates are very low, because there is zero inflation, or even deflation, the actual interest rates are too high. The Fed wants to increase inflation and therefore, reduce the cost of borrowing in real terms.

"The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower".

Negative Yield

The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction yesterday as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.
 
Got commodities?

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AAPL, Apple's New Balloon Computer

This was too funny:

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Monday, October 25, 2010

Thousands of N.Y. Foreclosures Riddled With Flaws; Is Wells Fargo Next?

The morgage mess and foreclosures continues to gather steam. Thousands of foreclosures across the city are being questioned because of shoddy paperwork. The documents used to justify the seizure of homes is "riddled with flaws", according to the Daily News.


"Banks have suspended some 4,450 foreclosures in all five boroughs because of paperwork problems like missing and inaccurate documents, dubious signatures and banks trying to foreclose on mortgages they don't even own".

While all the attention has been on Bank of America and its purchase of Countrywide, not much is heard, yet, about Wells Fargo and its $15B purchase of Wachovia. Can Wachovia have been very different from Countrywide?

Below are straddles for Well Fargo:



"Last week, New York's top judge, Jonathan Lippman, began requiring all bank lawyers to sign a form vouching for the accuracy of their foreclosure paperwork. That could have been a problem for one Long Island foreclosure that was being brought by GMAC Mortgage last year.

GMAC suspended foreclosures in the 23 states where court approval is required. The moratorium, which ended last week, came after GMAC "robo-signer" Jeffrey Stephan admitted in a Maine case "he'd signed 10,000 foreclosure documents a month without reviewing them".

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List of Countries the U.S. Wants Punished

Courtesy of the Business Insider:


Hat tip to Seamus!

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Profitting From Euro Moves, France Chaos, and U.S. Elections

Besides the delicate state of the PIIGS countries, the current situation in France will certainly affect the country's GDP, and in turn it may have an effect on the Euro. As the USD continues to sink, the Euro is too high versus the USD. As soon as the US elections are over, the Euro is due for the reveral.

Below are straddles for FXE for both November and December, which allow an investor to profit whether it goes up or down, as long as it moves the necessary amount.


Computed with StraddlesCalc Tool

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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The World of Wild Currencies: Aussie Dollar Straddles Rock

The Aussie dollar, in the form of the FXA ETF, continues to rock. Please take a look at the current status of our curerency straddles:


Still lots of time left on these.

Computed with StraddlesCalc Tool

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G20 (Actually G19) Meeting: Green Light To Sell the US Dollar: Stocks Up

Please note that we have a new Tracking Live page that tracks the DX index and all the currencies that make up the index. We are also working on something better, stay tuned.



After the latest G20 fiasco (actually G19 since Brazil did not bother to show up), Reuters reports that the dollar is dropping broadly on Monday, hitting a new low versus the yen.

As a result of another rop in the US Dollar, US-priced stocks markes are lifting.

The "Group of 20 agreement to shun competitive currency devaluations was taken as a green light to resume dollar selling by investors. [...] At the meeting in South Korea, G20 finance chiefs struck a surprise deal to give emerging nations a bigger voice in the International Monetary Fund, recognising the quickening shift in economic power away from Western industrial nations. They also agreed to exchange rates being market-determined".

"Analysts said the outcome pointed to a status quo in currency markets, with the dollar staying under pressure due to market expectations for the Federal Reserve to unveil a second round of quantitative easing as early as November".

The dollar index, which measures its value against a basket of currencies, dropped 0.9 percent to 76.799 .DXY with support seen around its 10-month low of 76.14 in the near term. Dudani expected the dollar index to see some choppiness ahead of the Fed meeting on November 2-3.

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Currencies Wars: Brazil Now Seeks Applying Income Tax for Foreign Investment

If the new increased tax on Financial Operations (IOF) does not reach the desired goal of containing the currency appreciation versus the dropping US Dollar, the government is considering sending to Congress a Provisional Measure to end the foreign investors exemption from Income Tax (IR) in government securities.


The decision is urgent because it must be approved by Congress by year's end if it is to come into force in 2011. Under Brazilian law, a change in income tax which results in increase of the tax can only enter into force the following year of its adoption by the legislature.

Government sources revealed that the end of the exemption is one of the measures studied by the government to solve the exchange issues due created by the devaluation of the US Dollar. Its impact is not immediate, but would be medium term. So it has a different from the kind of actions being taken recently, more focused on the short term and which take the financial market by surprise.

Dilemma.

If on one hand the government reckons that this war will not end in the short term and may worsen in 2011, on the other there is concern about the stability of rules for investors, especially for those which come to the country for longer term and are not simply speculators and seeking short term gains.

Another delicate point is the uncertainty regarding the behavior of Congress, which can reject the proposal. It's not a simple matter. This hypothesis has quirks because it involves Congress.

In 2006, when the government decided to exempt foreign capital, after many years of market demands, the justification was the need to stimulate an increase in term length of the domestic debt. Foreign investors traditionally have higher risk appetite and are willing to buy securities with longer maturities. Before this,  investors paid a tax rate of 15%.

With news from O Eztado de Sao Paulo.

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Saturday, October 23, 2010

Pele: The $1B Man - As Great As Ever

It's Pele's 70th birthday. The man still inspires for his skills, sportsmanship, and exemplary behavior, a role model for all athletes today. He has not kicked a ball professionally since 1977, but his credibility, respect, and admiration remain huge.


It is estimated that his name, or brand, is worth $1B.

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Germany Says U.S. Printing Money is Currency Devaluation

The G20, actually G19 - since Brazil's finance minster did not attend, ended as expected, with a farsical declaration, but only disagreements among the nations.

China will never allow its currency to appreciate, like Japan was forced to do in 80s, and then suffer Japan's fate.

German Economy Minister Rainer Bruederle said it clearly:

The U.S. Federal Reserve’s push toward easier monetary policy is the wrong way to stimulate growth and may amount to a manipulation of the dollar,

Bernanke' strategy to jump start the U.S. economy and is expected to include greater asset purchases drew criticism.

“It’s the wrong way to try to prevent or solve problems by adding more liquidity,” the same Bruederle said, adding that emerging-market officials were among the critics.

Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate,”
Timothy F. Geithner was asked whether he expected Germany’s criticisms to gain steam  “I do not.” (!)

“We are going to continue to try to strengthen the recovery under way so we can dig out of this as quickly as we can,” and does this involve strengthening the very weak US dollar?

Central Bank President Jean-Claude Trichet said that the G-20 made “no particular conclusion”

“The remark was made that the accommodating policy vis-a- vis the U.S. might mean problems for the emerging economies, at least in terms of inflation,” “The point was made that it was much more complicated than that”

The ultra low rates in the U.S. and Japan allow investors to put their money to work in places like Brazil, causing those currencies to appreciate, and asset bubbles. "Such concerns have prompted economies from South Korea to Brazil to take steps to slow the inflow of speculative cash", says Bloomberg.

“I’m not a friend of this but I can understand” why Brazil introduced capital controls, Bruederle said.

According to the Financial Times, Brazil did not attend the meeting because it has lost confidence in the G20.

Emerging-market equity mutual funds have attracted more than U.S. $60B this year and bond funds lured $41B, both on pace for record annual inflows.

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PBR: New Giant Oil Field's Production to Rise to 100k bpd Next Week, To Invest $240B

José Sergio Gabrielli, the president of Petrobras (PBR on the NYSE) confirmed today that production of the Tupi field will increase from 14,000 barrels of oil per day to 100,000 barrels per day on October 28 .

He also confimed the company's investment plan of $ 224 billion company by 2014, adding that most of that will be covered by cash resources, capitalization already made, and revenue generation.


Gabrielli also said that the leverage ratio will rise to 30% in coming years. He said there was now a debt of $ 38 billion that can be rolled and there is need of getting about $38 billion more over the next five years. "It's not something that is considered impossible or very difficult," he said. "Our leverage is that the debt on equity is 16%, 18%, then the new (debt) goes to 30%," he said during a news conference at the end of their participation in the seminar "Pre-salt and Rio Grande do Sul - Opportunities for Industry, Workers and Society ", in Porto Alegre.

The president of Petrobras believes that the decline in the price of PBR in recent days is due to a general movement of global capital market, especially in the fields of energy companies and oil. "As Petrobras has a very high volume of transactions, it's a very liquid, it tends to have more intense movements that many other companies," he said.

In addition, he cited the change in the collection of IOF on fixed income and variable in early October as another factor for stabilizing actions, due to portfolio adjustments made by international investors.

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Friday, October 22, 2010

G20 Pledges Not To Devalue Currencies, i.e, Not To Print Any More Money!

"Oct. 23 (Bloomberg) -- Group of 20 finance chiefs will pledge today to avoid competitive devaluations and endorse market-based exchange rates in a fresh effort to defuse mounting trade tensions before they hurt the world economy"
Then it must mean that the U.S. won't print any more money!

And no QE2 too!!

"The G-20’s finance ministers and central bankers will make the commitments in a statement to be released after talks end today in Gyeongju, South Korea, a G-20 official said on condition of anonymity."

Who believes any such statements?

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Skype and Internet on Your TV

(this is not an ad for Skype or TV manufacturers).

It is possible to get Skype and Internet directly on a TV set:


We are big fans of Skype as we ran the daily trading chat and comments live through a public Skype chat session (developed by yours truly).

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The Dreadful VXX and UNG ETFs, And Very High Correlation

You may be thinking, what do UNG and VXX have to do with each other...

Some people buy VXX thinking that it will offer them protection in case of a market drop. However, please compare VXX and the actual volatility index VIX:


We also know how dreadful UNG is. Now, let's take a look at UNG vs VXX:


Look similar? You bet.

In fact, both ETFs have a very high correlation. Since June it is 0.85!  From our online correlation tool:


Which one is worse? It's hard to tell.

Why anyone would like to hold these for the long term is astonishing.

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The US Dollar Index: Tracking Live Through ETFs

I set up a new Tracking Live page for the US dollar index, USDX. It shows all currencies that make it up, and computes the weighted index. It also shows historical charts, and compares to the UUP and UDN ETFs.

UUP and UDN do not behave as you expect. They actually track futures and not the index itself. However, holding both of them shows a loss, which indicates that they are not good instruments in the long term.

You may track it live here.


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Brazilian Election Results in U.S. and Canada Show Very Different Outcome

These were the official results of the Brazilian election in the U.S. and in Canada. Valid votes:

Canada:

  • Jose Serra: 46.42%
  • Dilma Rousseff: 27.08%
  • Marina Silva: 24.95%
US:
  • Jose Serra 48.6%
  • Marina S. 25.11%
  • Dilma R. 23.8%
 
Quite different from the country itself.

Official data from  Brazil's TSE.

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Thursday, October 21, 2010

American Express Earnings Disappoint: The Rich Are Still Cautions

American Express declared eanings today after the markets closed:

Third-quarter profit rose 71%, beating analysts’ expectations (as always these days), as cardmember spending climbed 14% and loss provisions fell.


However... Chairman and Chief Executive Kenneth Chenault said:

“Lending volumes, however, remain below pre-recessionary levels as cardmembers continued to manage their finances carefully and pay down outstanding debt,”
AXP is dropping in after-markets trading.

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Gold Acts Leveraged Versus The US Dollar: Watch Out Below When Trend Reverses

With regards to our previous post on the U.S. Dollar index (USDX), now we add gold to the picture (in the form of GLD ETF, all the others are ETFs), and we see that gold has dropped 1.93% as of 2:15PM:


The 1.93% drop cannot be explained solely or even mostly by the drop in currencies.

The conclusion here is that gold seems to acts as a leveraged entity versus the USD. Watch out below if the US dollar dropping trend reverses and the USD rises.

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Beware When People Refer to The US Dollar Index

The US dollar index USDX, or $DXY, is made of:

  • 57.6% Euros
  • 13.6% Japanese Yen
  • 11.9% British Pounds
  • 9.1% Canadian Dollars
  • 4.2% Swedish Krones
  • 3.6% Swiss Francs


When people refer to the US dollar having dropped x% today, it really means little as it may have gone up versus one currency and down versus another. For example, gold went down quite a bit today, but the USD only rose 0.3% versus the Euro:


 Note the very different moves above.

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UNG Loses on Average 8.37% Per Month

This is the chart of UNG for the last 3 years:


On average, since it's peak at $62.97 in June 20008, to today's price of $5.45, the losses are 8.37% per month

0.9163 ^ 28 = 0.087  (28 months)

5.45/62.97=0.087

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Brazilian Unemployment Lowest in 8 Years at 6.2%: Jobs Are Created, Not Because People Stopped Looking for Work

The Brazilian Institute of Statistics announced that the unemployment rate in September was 6.2% in the major metro areas, the lowest in 8 years.

The figure came below expectations. The surge in employment is attributed to the "favorable economic scenario".

Contrary to the U.S., the institute aid that the lower unemployment levels was a result of more jobs offered, not because of people stopped looking for jobs. The number of employed in metro areas grew to 22.28M people, 0.7% higher than in August and 3.5% higher than the same period in 2009.

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Wednesday, October 20, 2010

Crazy Activity in Bank of America Long Term Options

Investors are snapping up long term options of BAC. We are talking January 2013! We are talking $2.50 puts!

You can also buy $10 2012 puts for about $1.40. Is BAC to go under? We should look at long term straddles.

(please click to enlarge)

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Currency Wars Straddles Update, The More Currency Wars the Better

What can we say... Straddles from yesterday on the Aussie and the Loonie are doing very well already. I don't recall these moves in one single day. FXA is today +2% (yesterday it was -2%). This makes it almost too easy.

The trick is always when to get out. Lots of time on these. FXY waiting for BoJ move, and CYB will slowly get there, currently both at breakeven.

Once again, currencies is the place to be...


+23% and +8% in one day, not bad.

Oil (our favorite UCO) is also quite profitable today. Wednesdays are great (inventories released), combned with  the drop of the USD made for a good winner.

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BAC Crash: Profitting From Bank of America Rising or Dropping Further

Bank of America is in deep trouble for its Countrywide mortgages. The stock has dropped 15% in 5 days.

Below are straddles for November, for both BAC and XLF. Note that XLF has historically disappointed with regards to straddles.


Computed with StraddlesCalc.

Options are very dangerous and may cause 100% loss. Please do your own due diligence.

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Technical Analysis: 17 Money Making Candlesticks Formations

For those interested in technical analysis: 17 Money Making CandleStick formations in one pdf file (click to download)

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Why Gold Dropped So Hard

Latest video explains why gold dropped so hard this week.

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Roubini: Growth to Slow to 1%, House Prices Still To Go Down, Severe Risk of Trade Wars

the New York University professor who predicted the global financial crisis, said slowing economic growth in advanced economies will eventually curtail the recovery in emerging markets.

Nouriel Roubini said yesterday in Kiev that U.S. economic growth may slow to 1% by the end of 2010  as fiscal stimulus becomes a fiscal drag and that a sluggish recovery in the U.S., western Europe and Japan will eventually slow growth in emerging markets.

“My base scenario is that we will have a slow, U-shaped recovery in the advanced economies, but still there is a probability of a double-dip recession, or near depression, as in Japan in the 1990s,”  “The recovery in advanced economies is still very tentative.”

1% = recession

“If growth is only 1 percent, it is going to feel like recession, though technically it will not be a recession,” “You don’t create private jobs, the budget deficit widens, house prices go down instead of stabilizing.”

Roubini forecasted a V-shaped recovery for many parts of Asia and Latin America, including China, India and Brazil, but predicts growth in emerging markets to be weaker in the second half of 2010 and into 2011.

Roubini warned that the fundamental problems of Greece, Ireland, Italy, Portugal and Spain haven’t been resolved after Europe’s sovereign debt crisis. He says that the euro may strengthen against the dollar as the Federal Reserve eases monetary policy, potentially extending the recession in these countries..

“I am worried about the five countries on the periphery of the eurozone,” While there is a risk these countries may leave the eurozone, “I think the break up is less likely than restructuring of public debt,”

Trade Wars

He also warned that there is a danger of trade wars breaking out as countries weaken their currencies to stimulate exports.

“We are in a world where everybody wants to grow” “The risk of trade war is severe in relations between the U.S. and China.”

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U.K.: 1 in 10 Public Sector Jobs To Be Cut

The Mail Online reports 1 in 10 public sector jobs are to go. The government coalition is expects=ing 500,000 public sector jobs to be lost as a result of the drastic spending cuts.

"Danny Alexander let slip the forecast when he was spotted driving into the Treasury with an open copy of the Comprehensive Spending Review on his lap.

The Chief Secretary to the Treasury - who has been nicknamed Beaker after the Muppets character - was reading the document, which was caught on camera by waiting photographers.
It laid out details about the likely effect of spending cuts on the public sector as well as the coalition's plans to pour billions into tackling climate change."
[...]

"In the second quarter of 2010, both private sector and total employment experienced their largest increases on record.  However, the OBR's Budget forecast was for a reduction in public sector workforce numbers of 490,000 by 2014-2015

It will be for each public sector employer to determine the workforce implications of spending settlements in their areas
The fact that both were photographed on the same day has sparked speculation that the papers were deliberately 'leaked' to soften the blow ahead of the official announcements.

The document stresses that tackling the deficit now is 'unavoidable' and will ultimately benefit the public and private sectors.

It warns it will 'inevitably impact' on workers because the paybill in Whitehall accounts for such a huge proportion of departmental spending.

Action on pay - a freeze for the lowest paid is already in place - will help reduce job losses, the papers say.

But they make clear that the Government has adopted the Office for Budget Responsibility's forecast that 490,000 jobs in the public sector will go by 2014/15.

Each public sector employer will have to 'determine the workforce implications of spending settlements', the document says.

It adds: 'Government will do everything they can to mitigate the impact of redundancies'."

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Tuesday, October 19, 2010

Gold is Dead

It dropped so much today that it flatlined, according to Kitco:


It appears that their feed died. Gold bugs must have had heart attacks today.

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Profitting From the Currency Wars: Yen, Yuan, Aussie, Canadian Dollars

The latest game in town is currencies, as they are extremely volatile. Except, they are of course not a game, people lose and gain lots of money with them.

Below are straddles for our favorite currency ETFs for November computed with the fabulous StraddlesCalc Tool


Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.


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Violent Moves in Gold and Oil: Profitting From Gold and Oil Going Up or Down

Gold and oil have taken a tumble today. below are straddles and strnagles that allow an investor to profit whether they go up or down, as long as they move the necessary amount, indicated below. We use our favorite miner Yamana (AUY) and the UCO ETF for oil.



Computed with StraddlesCalc Tool

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Unemployment As Measure by Gallup Is Much Higher Than BLS, Suggests Much Higher Numbers Coming on November 5th


Also, underemployment reached 18.8% in September from 18.6% in August, up from 18.4% in July.
This suggests that the next report by the BLS on Nov 5, just after the mid term eelctions,  will be much higher than the previous one.

"The government's final unemployment report before the midterm elections is based on job market conditions around mid-September. Gallup's modeling of the unemployment rate is consistent with Tuesday's ADP report of a decline of 39,000 private-sector jobs, and indicates that the government's national unemployment rate in September will be in the 9.6% to 9.8% range. This is based on Gallup's mid-September measurements and the continuing decline Gallup is seeing in the U.S. workforce during 2010.


However, Gallup's monitoring of job market conditions suggests that there was a sharp increase in the unemployment rate during the last couple of weeks of September. It could be that the anticipated slowdown of the overall economy has potential employers even more cautious about hiring. Some of the increase could also be seasonal or temporary".
"Regardless, the sharp increase in the unemployment rate during late September does not bode well for the economy during the fourth quarter, or for holiday sales. In this regard, it is essential that the Federal Reserve and other policymakers not be misled by Friday's jobs numbers. The jobs picture could be deteriorating more rapidly than the government's job release suggests".

Hat tip to Mish.

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Fed's Fisher: We Cannot Accept Being the Least Worst; QE Not Proven

Dallas Fed's Fisher today gave a brilliant speech. Some exceprts:

Speaking of what the Fed has done:

In my darkest moments, I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places.
Turning to final demand, the weak pace of recovery in U.S. export markets and political and budget realities mean that little near-term growth impetus can be expected from net exports and government purchases.
On further accomodation:
The problem is that, presently, the efficacy of further accommodation using nonconventional policies is not all that clear.


A great many baby boomers or older cohorts who played by the rules, saved their money and migrated over time, as prudent investment counselors advise, to short- to intermediate-dated, fixed-income instruments are earning extremely low nominal and real returns on their savings. Further reductions in rates earned on savings will hardly endear the Fed to this portion of the population. Moreover, driving down bond yields might force increased pension contributions from corporations and state and local governments, decreasing the deployment of monies toward job maintenance in the public sector. Debasing those savings with even a little more inflation than what is above minimal levels acceptable to the FOMC is also unlikely to endear the Fed to these citizens.
“Central bankers elsewhere are strongly indicating that they are preparing to open credit spigots to reflate their economies at a time when fiscal policy is stalled or contracting.”


My reaction to reading that article was that it raises the specter of competitive quantitative easing. Such a race would be something of a one-off from competitive devaluation of currencies, a beggar-thy-neighbor phenomenon that always ends in tears.
Conclusion:
Before concluding, I want to return to the TIC data I mentioned earlier. Yesterday, I asked a trader of sovereign debt how he interpreted the recent numbers. His answer: “We are still the best-looking horse in the glue factory.” It was a witty reply. But it was disturbing. This is America. Whether we are Ranger or Yankee fans, Texans or New Yorkers, we have been blessed to live in the most prosperous nation on earth. We cannot now accept simply being the “least worst” among major economies. We must be better than the rest.

This cannot be accomplished by the FOMC alone. Whatever we do with monetary policy will be of limited utility, if not counterproductive, unless it is complemented by sensible fiscal policy that restores confidence and puts the American people back to work. We are not glue-factory horses. We are thoroughbreds. It’s time to put us back on track.

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IBM Drops Hard on Bad Earnings: Oddities

IBM is dropping today after earnings. Its chart, however, reveals an oddity, a straight line up since September.


 

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Bond Short Term Yields Go Down, Long Go Up

US treasury short term yields continue to drop, but long term yields have gone up a little, probably not what the Fed wanted. The data is from the US Treasury Dept.

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Why Currencies Appreciate: Global Interest Rates - In a Chart

Chian raised its benchmark interest rates to 5.56%. But why is the Brazilian real appreciatig so much? lease see below the interest rates of several countries:

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Currency Wars: Geithner Says Devaluing Dollar is Not a Viable Strategy (!)

Geithner, October 18 2010, in California:

“It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity and competitiveness,”
“It is not a viable, feasible strategy and we will not engage in it.”
The mind boggles. Dropping rates to zero and engaging in QE is what then?

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Currency Wars Escalate Worldwide: Brazil Fires New Shot, Tells Others To Stop Devalueing

As Brazil raised its benchmark interest rate to 10.75%, the highest of the G20, contain inflation (something Bernanke dreams of), its currency has appreciated tremendously in recent months. Speculators and big money funds are borrowing from Japan or from the fed at virtually zero rates, and then earning interest in Brazil.

Well, Brazil fired a new shot by raising inflow taxes, its IOF went to 6%, and added it may be forced to take additional measures. Brazil also closed a loophole and boosted the levy on money brought into the country to make margin deposits for transactions in the futures market to 6 percent from 0.38 percent.

Finance Minister Guido Mantega called for an end to the worldwide currency wars, the move by the US to devalue its currency, with China pegging the Yuan to it.: “This currency war needs to be deactivated,” “We have to reach some kind of currency agreement.”

Worldwide Escalation
South Korea also announced further measures to counter capital inflows that it blames on low interest rates overseas.

Bloomberg reports that Indonesia’s "central bank said it plans to offer term deposits with longer maturities of three months, six months and nine months as it seeks to reduce volatility in the rupiah".

"Mantega cited the Plaza Accord of 1985, when governments agreed to intervene to devalue the U.S. dollar against the yen and the German deutsche mark, as the kind of agreement that might be required. International policy makers failed to narrow their differences on intervention in currency markets during the International Monetary Fund’s annual meeting this month".

The higher inflow tax applies to fixed-income investments, local equity funds, hedge funds and pension funds..

Reactions

Reactions are varied to the new measures

Arminio Fraga, former central bank president says "The taxation on foreign purchases in Brazil may provide a temporary relief but won’t do the job,”.

Barclays Capital, however,  says "the latest tax increase may succeed where the first one failed. The higher levy will only affect new flows of money into the country, not deposits already in Brazil".  “We believe this time will be different,” “With this new IOF tax hike, the government is signaling that it will do whatever it takes to prevent the Brazilian real from appreciating.”

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Monday, October 18, 2010

Why Deflation is So Bad: Japan and the Future For the U.S.

The problems with mortgages in the U.S. are in all the news lately: foreclosures, people who owe more on the mortgages than what their houses are worth, and so on.

The problem is closely intertwined with deflation, an what may happen in the U.S. Take a look at this Japanese case, from the New York Times:

"Masato Y. enjoyed a level of affluence two decades ago that was the envy of the world. [...] bought a $500,000 condominium, vacationed in Hawaii and drove a late-model Mercedes. But his living standards slowly crumbled along with Japan’s overall economy. First, he was forced to reduce trips abroad and then eliminate them. Then he traded the Mercedes for a cheaper domestic model. Last year, he sold his condo — for a third of what he paid for it, and for less than what he still owed on the mortgage he took out 17 years ago."

Sounds familiar?

"... as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future. Even as the Federal Reserve chairman, Ben S. Bernanke, prepares a fresh round of unconventional measures to stimulate the economy, there are growing fears that the United States and many European economies could face a prolonged period of slow growth or even, in the worst case, deflation, something not seen on a sustained basis outside Japan since the Great Depression".

[...] as political pressure builds to reduce federal spending and budget deficits, other economists are now warning of “Japanification” — of falling into the same deflationary trap of collapsed demand that occurs when consumers refuse to consume, corporations hold back on investments and banks sit on cash. It becomes a vicious, self-reinforcing cycle: as prices fall further and jobs disappear, consumers tighten their purse strings even more and companies cut back on spending and delay expansion plans".

“The U.S., the U.K., Spain, Ireland, they all are going through what Japan went through a decade or so ago,” said Richard Koo, chief economist at Nomura Securities who recently wrote a book about Japan’s lessons for the world. “Millions of individuals and companies see their balance sheets going underwater, so they are using their cash to pay down debt instead of borrowing and spending.”

Japan has a grave probem with demographics: an aging population. This is something that is also happening with the U.S., but at the same extent. The U.S. still has a lot more immigration anda higher birth rate to alleviate the issue. However, tough economic consdiitons thend to adverselty affect both: people have fewer children, and the the more extremist and less educated parts of socitey start proposing measures against immigration.
"As living standards in this still wealthy nation slowly erode, a new frugality is apparent among a generation of young Japanese, who have known nothing but economic stagnation and deflation. They refuse to buy big-ticket items like cars or televisions, and fewer choose to study abroad in America".

That is deflation - and no more debt. No more buying silly things like cars, plasma TVs, and cable TV.

"The classic explanation of the evils of deflation is that it makes individuals and businesses less willing to use money, because the rational way to act when prices are falling is to hold onto cash, which gains in value. But in Japan, nearly a generation of deflation has had a much deeper effect, subconsciously coloring how the Japanese view the world. It has bred a deep pessimism about the future and a fear of taking risks that make people instinctively reluctant to spend or invest, driving down demand — and prices — even further.

“A new common sense appears, in which consumers see it as irrational or even foolish to buy or borrow,” said Kazuhisa Takemura, a professor at Waseda University in Tokyo who has studied the psychology of deflation.

Deflation destroys the risk-taking that capitalist economies need in order to grow,” said Shumpei Takemori, an economist at Keio University in Tokyo. “Creative destruction is replaced with what is just destructive destruction.”

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Friday, October 15, 2010

May Day, May Day, One Currency Going Down

See the one on the right:


Except that some countries seem to think that their currencies going down is a good thing.

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Chilean Rescue: The Bravest Man on Earth


Manolo Gonzalez, the first rescuer to ride the capsule nearly 700m down, and the last to leave. He was left all alone at the bottom of the mine waiting for his ride up.

It takes a lot of courage. This one man I would like to meet.

This clip shows the capsule arriving at the bottom, and Monolo leaving.




And when he arrives at the top:

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Bernanke's QE2 Needs More Than $1T To Succeed

After Bernanke's commnets were published today, the Globe and Mail hd this to say:

"Unfortunately, we're still no closer to knowing exactly what the so-called QE2 program might involve, in particular what amount of Treasury securities the Fed could end up buying," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.


"... Our feeling is still that, given the strong resistance to further QE from some hawkish Fed officials, the program that eventually emerges, most probably at the next FOMC meeting in early November, will be too timid to have any real impact. At this stage, $500-billion or even $1-trillion is just not going to do it. Yes, it might lower long rates a little and juice stock markets a bit more. With mortage rates and corporate bond yields already close to record lows, however, we doubt that would have any meaningful impact on the wider economy. "

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Bernanke Removes Any Doubts That QE2, QE3, QE4, QEN, Will Happen

Speaking in Boston tday, Bernanke lays down the cards. It is not only QE2, it's QE3, QE4, .., QEn, etc, as per post here a few weeks ago. The question is whether it will be $100B or $200B each month or more. Why gold drops on these news is bizarre (mst eb the verall negative tone of his remarks)

 
Fed's Bernanke Summary:
  • Inflation is too low, may stay that way for some time. At current rates of inflation, short-term real interest rates are too high. (this is so funny)
  • The risk of deflation is higher than is desirable.
  • Notes that evidence suggests that asset buying is effective in aiding the economy. Warns that balance sheet expansion is a risk to inflation expectations.
  • Fed needs to weigh the costs and benefits in deciding how aggressive to be with pace or size of any asset purchases.
  • High level of unemployment is cyclical, not structural. (excuses us Mr. Bernanke, it the population not aging?). Unemployment will likely persist for some time. Prolonged high unemployment poses risks to a sustainable recovery.
  • The economic recovery has slowed, growth will be fairly modest in the near term.
  • QE2 would have undesirable impact on inflation expectations. (Excuse us?)

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Braskem, Brazilian Leader in Chemicals Returns +342%

We posted about Braskem a year ago, on October 7 2009. The company is the best performing Brazilian stock that trades in the NYSE (as an ADR).

The company makes plastics out of sugar cane and had announced at the time a major deal with J&J. "Made with 100% renewable raw materials, Braskem's Green Ethylene is produced from the dehydration of ethanol from sugar canes (the same that is currently used as fuel in hybrid cars) and then polymerized into green polyethylene. "Green Resin" is considered a watershed in the polymer market. It has the same appearance and properties of traditional plastics in the final product, the difference is that it can capture CO2 from the atmosphere, i.e. one ton of green resin captures 2.5 tons of CO2".




We track all Latin American ADRs live here.

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Thursday, October 14, 2010

Roubini: How to Avoid the Double Dip; U.S. Increasingly Vulnerable to Fall Back Into Recession

Foreign Policy has the latest article by Noriel Roubini.

Dr. Roubini says that the U.S. economy looks increasingly vulnerable to falling back into recession and that flirting with stall speed, an anemic rate of growth that can lead to collapses in:

  • spending,
  • consumer confidence,
  • credit, and
  • other crucial engines of growth.
 In other words, a double dip or the Great Recession, Round II:

"Whatever the term, we're talking about a negative feedback loop that would be devilishly hard to break".


 

 "If Barack Obama wants a realistic shot at a second term, he'll need to act quickly and decisively to prevent this scenario".

 

The cause? He says that near double-digit unemployment is the root of the problem.
 
"Without job creation there's a lack of consumer spending, which represents 40 percent of domestic GDP. To date, the U.S. government has responded creatively and massively to the near collapse of the financial system, using a litany of measures, from the bank bailout to stimulus spending to low interest rates. Together, these policies prevented a reprise of the Great Depression. But they also created fiscal and political dilemmas that limit the usefulness of traditional monetary and fiscal tools that policymakers can turn to in a pinch".

 

Roubini says that Obama should reduce payroll taxes for both employers and employees as the reduction for employers will lower labor costs and allow the hiring of more workers. For employees, the added take-home pay will get people spending again.

He says this can be funded by allowing Bush's tax cuts for people making more than $250,000 to expire while keeping in place those for middle- and low-income earners, whihc are the vast majority of Americans.

"After two years, when U.S. growth is hopefully more robust and the pace of private-sector hiring has picked up steam, Obama can afford to phase out the payroll tax cuts. But the income-tax increases for the rich? They'll need to stick around".

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Perfect Portfolios, Tracking Their Buy and Sell Signals

INO has released a new video, in which they describe an interesting idea. They has created three portolios and they will post all their trades in real-time, buys and sells.

Portfolios include 1. emerging markets (Brazil, India, China, Russia, plus Australia), 2. "perfect 401k", 3. World. "Perfect" for anyone looking to retire in the next 10, 15, or even 20 years

(BTW, you can access the portfolios through a risk-free trial here (with a 2 months bonus through this link).

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China: By Devaluing The Dollar U.S. Internationalizes Its Debts, Transferring Its Debts to Others

More from China' on the US dollar devaluation, from the People's Daily:

"The move nominally aims to further drive down the interest rate in America to prevent the occurrence of a double dip. But it will affect the value of the dollar too, prompting the dollar's devaluation".

"U.S. government's strategy to double its exports within five years needs the considerable depression of the dollar. For America, boosting exports is a must in the post crisis era, because it cannot pin its hope for economic growth on the prosperity of its real estate market and consumption based on borrowing money".

"The last but the most important point is that in the long run the considerable depreciation of the dollar will help America to transfer its debts to others. If we say the international financial crisis nationalized the private debts, then in the post-crisis era, the United States sees an urgent need to internationalize its debts".

A great amount of bad debts of American financial institutions have been converted to government debt through government aid measures. [...] How America retains economic growth while reducing the deficit is a big problem for the country. Historic experiences show debt-to-GDP ratio is not directly linked with economic growth and inflation (even devaluation) in most countries. But the United States is an exception because the dollar serves as the world currency. [...]  Even if the United States denies its motives to transfer their debts, it will unavoidably happen in reality.

Given a sluggish economy and huge amount of debts, driving the value of the dollar down is in line with America’s interests, both in short term and in long term. The international community ought to stay vigilant about the strong motive for active devaluation under the guise of a market-based move".

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China: Without Weak Currency the U.S. Has No Hope Of Meeting Its Goals

Li Xiangyang, head of the Asia department at the Chinese Academy of Social Sciences, is quoted on the front-page of the People's Daily, as describing the United States as the currency war's "first maker of tomb figures,", meansinh someone who creates a bad precedent.

He added that continued intervention in currency markets by developed economies would deal a blow to global economic recovery. "The dollar's depreciation may appear to be market-driven. In reality, it is a depreciation colored by very strong, deliberate actions,"

Although not news, he also added that the Fed's announcement that it could launch another round of quantitative easing by buying bonds and other financial assets had been the key factor pulling down the dollar.

The motives?

They are "plain enough":

"Without a weaker dollar, the United States would have no hope of meeting President Barack Obama's goal to double exports in five years"

"Dollar depreciation will also serve longer-term interests by generating inflation and easing the debt burden that the financial crisis dumped on the U.S. government".

"If the global financial crisis was about nationalizing private debt, then in the post-crisis period the urgent need of the United States is to internationalize its national debt,".

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Foreclosures Still Soar in the U.S. to 102k+

Banks in the U.S. foreclosed 102,134 houses in September, wit data according to real estate company RealtyTrac

Foreclosures have been in all the news lately  as "lenders work through questionable paperwork". However, bu notr foreclosing, lenders also get to avoid declaring bad loans and continue to have inflated balance sheets.

The campany says foreclosures could spike after if lenders "are able to quickly resolve the paperwork questions". "However, if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows - causing more uncertainty about home prices,"


In Q3 2010 there were 930,437 foreclosure filings, a 4% increase over Q2. One in every 139 homes received a foreclosure filing in Q3.


On Wednesday, all 50 states launched a joint investigation of the mortgage industry after widespread reports of mortgage industry officials signing foreclosure documents without knowing their contents.

Nevada had the highest foreclosure rate for the 45th straight month, then followed by Arizona, Florida, California and Idaho.

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Wednesday, October 13, 2010

Chile's Success: 33 Up, 0 Down



An amazing feat! Incredible. All 33 are safe.

Luis Urzua, the 33rd miner,  at the surface.

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Chile's Super Mario Rescue

This is simply spectacular:

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Wild Currencies Update: Where the Volatility and Opportunity Are

Here it is as of 10AM. The spike on the Canadian dollar makes the position profitable (or almost). This was the only losing position. FXY was sold last week. Overall ROI is now +75%.

Currencies is clearly where the volatility is - and the opportunity.


Computed with StraddlesCalc Tool

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Tuesday, October 12, 2010

Chilean Miners To be Rescued in 2 to 4 hours: Canadian Flag Waves At the Site

The Chilean miners will begin to bwe rescued around 6 to 8PM local time (5PM to 7PM ET). The erscue will be brodcasted live on all major TV stations around the world.

In the meantime, the Canadian flag continues to wave at the mine rescue site, quite visible from all angles


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After FOMC Minutes: Will the Bank of Japan Act Again Tonight?

The US dollar tanked hard after the release of the FOMC minutes today. The Yen is soaring, creating an impossible to tolerate scenario for the Bank of Japan.

Here are October straddles, not for the faint of heart. Requires about 1% move.


Computed with the StraddlesCalc tool.

Options are dangerous and may cause 100% loss. This is not advice. Do your own due diligence pelase.

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The Yen at 7AM

Here is the yen overnight, still hovering around new highs. Current value: 81.97:


Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

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Monday, October 11, 2010

Currency Wars: Japan to Take Bold Action Against Rise of Yen

Currencies continue to act chaotically. The yen today rose its highest level since 1995.

Yoshihiko Noda, the Japanese Finance Minister, said today that the government is ready to take “bold” action agaisnt the rise of the yen. This may include currency intervention.

“We will watch currencies with great interest and will take bold action, which includes intervention, if needed,”

Mr. Noda also said that the Group of 20 will discuss how to respond to pressure among governments to compete to devalue currencies when they meet later this month after G-7 members failed to reach a conclusion on the topic.

Banri Kaieda, Economy Minister, said in Tokyo that an abrupt strengthening of the yen can hurt Japan'srecovery and "there is no change in the government’s stance to take decisive measures when necessary".

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Sunday, October 10, 2010

Canadian Flag Seen on Rescue of Chilean Miners

Chilean newspaper La Tercera shows live video from the mine site. While newspapers show many Chilean flags being waved, interestingly, the live video shows a Canadian flag is clearly visible:



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