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From The Mercenary Trader: …Tom Stevenson of the UK Telegraph puts together a solid macro case for a bottoming US dollar. The piece, “After a decade of decline, it’s time for the dollar to have its day,” is worth perusing. Here’s our version of the cliff’s notes: The dollar fell against a broad basket of currencies for a decade due to: - expensive military adventures abroad A new study from the conservative Heritage Foundation estimates that granting a path to citizenship for illegal immigrants will cost US taxpayers at least $6.3 trillion. DoubleLine Capital CEO Jeff Gundlach told Bloomberg Television’s Erik Schatzker and Stephanie Ruhle on “Market Makers” today that “investors should be holding cash” in this environment.
Gundlach said that risk assets have “diminishing returns” on each round of QE and “it’s almost like a half-life of a radioactive particle.” Investors shouldn’t turn to risky assets as a “Pavlovian response.” Gundlach also said that, “I don’t see a lot of value in [...] Bundesbank confirms Weidmann opposed bond buys “Germany’s Bundesbank confirmed that its president, Jens Weidmann, voted against the bond-buying proposal unveiled Thursday by European Central Bank President Mario Draghi. A spokesman said Weidmann opposed the measures, which he viewed as “too close” to central-bank financing of government deficits “with a printing press.” Draghi, in a news conference, said there was one dissenting vote on the program, but didn’t identify who cast it. [...] The United States held onto its AA+ rating from Standard & Poor’s Friday but the agency said it also kept a negative outlook on the country, citing the political deadlock over fixing the fiscal deficit. Ten months after delivering a historic rate cut to Washington, removing its top-level AAA rating, S&P warned that the reasons for the downgrade remained in place and that if anything they were deteriorating. The ideological deadlock between Republicans and Democrats continued to [...] The Bank of England has cut its growth forecast for this year to 0.8% from 1.2%, saying the eurozone “storm” is still the main threat to UK recovery. The eurozone was “tearing itself apart” and the UK would not be “unscathed”, said its governor Sir Mervyn King. He also confirmed that the Bank has been making contingency plans for the break-up of the euro. The rate of inflation will remain above the [...] From FT:
European finance ministers were warned on Friday that the underlying causes of the continent’s debt and banking crisis had yet to be resolved, as Spain, struggling to rein in its fiscal deficit, published its most austere budget since democracy returned after the Franco era. Two confidential analyses prepared by European Union officials and distributed to ministers meeting in Copenhagen said €1tn in cheap loans to banks provided since December by the European Central Bank [...] Late last year we wrote that India’s economic decline was one of the most under reported stories of the year and showed that investors were fleeing India. In a new note, Jefferies analysts Nilesh Jasani and Piyush Nahar write that India’s economic slowdown has been driven by a collapse in the investment cycle that is “far from being played out.” Jasani and Nahar write that India suffers from having a risk-averse investor class, and [...] In a stunning turn of events, a Japanese Ministry of Finance official admits to Richard Koo’s worst nightmare “Japan is fiscally worse than Greece“. Bloomberg is reporting that, at a conference in Tokyo, Yasushi Kinoshita says Japan’s 2011 fiscal deficit was up to 10% of GDP and its debt-to-GDP has soared to over 230%. What is more concerning is the Kyle-Bass- / Hugh-Hendry-recognized concentration risk that Kinoshita admits to also [...] From Newsmax: Economist Marc Faber, publisher of The Gloom Boom & Doom report, says the Western standard of living won’t recover, let alone rise. “Government debt is rising everywhere,” Faber tells Yahoo Finance. “We have stimulus packages, we have central banks that will print money (because) there is no other option to keep the system going,” he said. “The stimulus today is a fiscal deficit of around $2 trillion. It will go up…” Read full article… RT China is the world’s fifth-largest holder of gold and seems to be in the market for more. Analysts believe Beijing snapped up around 500 tons of gold in 2011, double what it bought in 2010. China does not release official gold trade figures, but the Hong Kong Census and Statistics Department announced last month that in November alone, China imported 102,779Kg of gold from Hong Kong which comes as a significant [...] by Martin Feldstein European political leaders may be about to agree to a fiscal plan which, if implemented, could push Europe into a major depression. To understand why, it is useful to compare how European countries responded to downturns in demand before and after they adopted the euro. Consider how France, for example, would have responded in the 1990’s to a substantial decline in demand for its exports. If there had been no [...] ONLY ON BLOOMBERG TELEVISION: Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian told Bloomberg TV’s Betty Liu and Dominic Chu this morning that U.S. economic conditions are “terrifying” as the nation struggles to recover from recession. El-Erian also said the odds of the U.S. returning to recession are as high as 50%. **SEE BELOW FOR TRANSCRIPT.** **BLOOMBERG TELEVISION** On the U.S. going into a double-dip recession:
“I am worried. We’ve had [...] 1) Italian borrowing costs reach breaking point “Italian borrowing costs reached breaking point on Wednesday after Prime Minister Silvio Berlusconi’s promise to resign failed to raise optimism about the country’s ability to deliver on long-promised economic reforms. Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors’ concerns that they may not get their money back, a fear reflected in a jump in the cost of [...] by Alexander Gloy of Lighthouse Capital Management Portugal: Fiddler Paid, Music Stops While Greece is pretty forthcoming with its apocalyptic fiscal data, the same cannot be said of Portugal. When it comes to inquiring about monthly fiscal deficits you bite on granite. Banco de Portugal has limited quarterly figures. The “Instituto Nacional de Estatistica” has conducted a study about population growth in Angola. It supplies data series on important topics as the “self-sufficiency ratio [...] From Brian Rogers of Fator Securities All Glory Is Fleeting “For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph – a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains [...] sfgate.bloomberg.com By Tomoko Yamazaki – Sep 13, 2011 Sept. 13 (Bloomberg) — Nassim Nicholas Taleb, author of the best-selling book “The Black Swan,” said he’s more concerned about prospects for the U.S. than Europe because the country lacks awareness of its fiscal woes. “The difference between Europe and the U.S. is the consciousness of the problem,” Taleb, a New York University professor, said today at a news conference in Tokyo organized [...] The latest note from Nomura’s Richard Koo is chock full of insight, which is not surprising since talk of fiscal consolidation, misguided ratings agencies, and balance sheet recessions is his wheelhouse. As he’s famously observed before, in such recessions like these, spending cuts actually make deficits worse, and so he’s particularly dismayed by the counter-productive actions of S&P. Fiscal stimulus will reduce budget deficit in balance sheet [...] Summary: In the deflationist scenario, you don’t want to be in US govt. bonds & cash. In that scenario, the fiscal deficit would deteriorate greatly. If the Dow went below 1000, we would be in a total economic collapse where tax revenues would fall off a cliff. So even in the deflationist scenario you don’t want to be in the long end of the government bond market. From GoldCore Gold is trading at $1,501.60/oz, €1,052.35/oz and £941.09/oz. Gold is marginally higher in all currencies and 0.7% higher in sterling after a downward revision of UK GDP from 1.8% to 1.6% growth saw sterling decline. Stagflation appears to be taking hold in the UK with soaring food and energy costs eroding household incomes and economic growth continuing to decline. Cross Currency Rates Despite UK inflation being 4.5% [...] From Reuters, quoting Bill Gross, who previously did not believe in another round of QE: PIMCO’S GROSS SAYS WILL CHANGE HIS MIND ON SHORTING US TREASURIES IF THERE IS POTENTIAL FOR ANOTHER RECESSION And of course, another recession will mean more QE, which means more debt monetization, which means that naturally, the first and last buyer for Treasury bonds, the Fed, will be there for ever and ever, which [...] By Peter Garnham in London Hedge funds and forex dealers are betting record amounts against the dollar, reflecting a growing belief that the US currency has lost its haven appeal and that eurozone interest rates will soon rise. As the crisis in the Middle East has worsened, the latest exchange data show that traders are selling “short†the currency. The big US fiscal deficit and concerns about the effect of [...] People only accept change in necessity and see necessity only in crisis. The economy is doing better, and we will survey some of the highlights. But does this From the latest Greed and Fear The news of an estimated €80-90bn bailout for Ireland this week raises the issue of when a bailout will turn into a default or debt restructuring. Greece’s goal to reduce its fiscal deficit [...] by Saxplayer00o1 1) PBOC Researcher Calls on U.S. to Sell Gold Reserves, People’s Daily Says “The U.S. should cut its government spending and sell some gold reserves to balance its budget and fund its recovery, the People’s Daily overseas edition reported, citing Xia Bin, an adviser to the People’s Bank of China. The U.S. has to resolve its “twin deficits†in the government budget and the current account, Xia [...] by David New Jersey Governor Chris Christie says he cancelled the second rail tunnel under the Hudson River because the state can’t afford it, but Paul Krugman says it’s a “terrible, short-sighted move… We have the need… we have the resources… and the price is right.” With interest rates on debt at near-record lows, Krugman says it’s a great time to borrow for long-term investment. But American politics these [...] “We’re involved in a dangerous game,” former Fed chief Greenspan warns, referring to the “scary” deficit. “We’re increasing the debt held by the public at a pace” that will soon dwarf U.S. borrowing capacity. Yesterday, Treasury restructuring chief Jim Millstein castigated Greenspan for falling asleep at the wheel on bank oversight. Former Federal Reserve Chairman Alan Greenspan said the U.S. fiscal deficit is “scary†and the federal government [...] |
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