Wednesday May 26, 2010 - 14:02:11 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
Jim, are you talking your BRIC book?Key News
‚ÄĘ Fed Chairman Bernanke warned that the Fed "does not want to be providing USD swaps as a permanent service for financial markets." (Reuters)
Note: Counterparty risk is rising and liquidity is falling among banks in Europe, as expected. Below is the spread between three month libor and overnight indexed swaps (3-mo). [Chart not available in text format.]
To give some perspective on this spread, the chart below includes the credit-crunch blowout period: [Chart not available in text format.]
‚ÄĘ South Africa‚Äôs inflation rate fell to 4.8 percent in April, the lowest in almost four years. (Bloomberg)Quotable
‚ÄúA liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.‚ÄĚ ‚ÄĒG. Gordon Liddy FX Trading ‚Äď Jim, are you talking your BRIC book?
Talk about talking your book! I read this in the Financial Times this morning:
‚ÄúJim O‚ÄôNeil of Goldman Sachs says policy crisis in the eurozone is unlikely to be a source of global financial market contagion. ‚ÄėNearly 70 per cent of the eurozone economy is made up of three countries‚ÄĒFrance, Germany and Italy‚ÄĒand unless sovereign debt crisis derails their economies, it is tough to see how the eurozone could weaken sufficiently.‚Äô‚ÄĚ
Question: Jim; did you recently get hit by a BRIC upside your head? Or maybe the question should be: How do you define contagion? Jeez Louise!
Where does one even begin with that type inanity, from a person who is far from inane? Yo Jim! Germany, that little country holding it all together over there; well, they send about 50% of their exports to the eurozone each year. If demand craters precisely because austerity works, staving off sovereign default, Germany will have to find some other customers very fast. Danger Will Robinson, danger! Back to short-term Treasuries and gold!
And here is why I think this is a man talking his book. As Germany heads off in search of greater demand for its exports, it bumps up against the BRIC among BRICS‚ÄĒChina; a country who we know is still desperately seeking places for exports now that it‚Äôs leveraged its manufacturing capacity to the hilt. China would be hit hard if eurozone demand falls drastically thanks to austerity.
The Japanese, kind of a big exporter in the world, also rely heavily on eurozone consumption of their goods. And by the way, US companies tend to sell a lot to the eurozone too.
So it begs the question: If the glue that is holding together the eurozone‚ÄĒGermany--can‚Äôt find a suitable home for its goods to replace the demand it is losing on its continent, how long will they continue to prop up the euro welfare system when their incentives are nil, at best, and likely slipping into negative territory given the growing political backlash among German taxpayers? Thus, should Germany shrug, you can bet there will be major contagion in the world.
Martin Wolf of the Financial Times has done an excellent job over the last several months pointing out there must be balance in the world, i.e. if deficit countries cut deficits, demand for exports fades for now-surplus countries. Demand must come from somewhere, and if no one is willing to change their export model (read China and Germany), in a big way, there will be major tensions in the global economy despite the attempts by governments to soothe over this reality by wasting trillions of dollars of our money. [Note: That was my summary of Mr. Wolfe; he of course states it much more eloquently than I ever could.]
So, Mr. O‚ÄôNeil, I beg to differ. But then again, maybe I‚Äôm just talking my book.
Black Swan Capital
www.blackswantrading.com Have you heard about PositionTrader FX?
We‚Äôve been getting the same question a lot over the last few days: is it too late to profit from the euro crash; and what about the Aussie ... or yen?
And our answer is:
We‚Äôve done well in 2010. And we expect to do even better as the halfway point approaches.
For good measure, I‚Äôve included our entire year-to-date track record and profit curve here, as of Thursday, May 20.
Here‚Äôs the bottom line‚Ä¶
We think the Euro is going to par with the dollar ‚Äď 1:1 ‚Äď or maybe even lower.
If you‚Äôve been waiting on the sidelines, now is time to jump in.
If you‚Äôre not sure how to implement a currency trading strategy, we‚Äôve got you covered. And we offer a 30-day 100% money-back guarantee if this isn‚Äôt for you. After that we prorate your refund on a weekly basis if it‚Äôs not working for you.
This is speculative trading and is not for everybody. If you‚Äôre cut out for this, jump over now and give it a try.
All the best,
Director of Sales and Marketing
Black Swan Capital
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."