Tuesday, December 27, 2011

Euro Bearish ?

*source - Societe General Research


Hedge funds have been building short positions on Euro. position of this scale has not been observed in while. it seems the fund managers are unanimous about the direction of Euro against dollar. but we can see that the last time when market was such bearish about Euro , what followed next was a complete reversal. i think one needs to be extremely cautious going short at this stage .

FT Alphaville awards


Wednesday, December 21, 2011

Shifting Trends in World Trade


An enterprising Englishman in 1850s famously said that if the "could add an inch of material to every China man's shirt- tail, the mills of Lancashire could be kept busy for a generation " - Economist 






The next decade will see a role reversal in world trade. The devloping countries would be consuming and they will form the major chunk of reports .



MF Global Bankruptcy - The real reason

MF’s main business was executing and clearing trades for clients. The company was a dinosaur. It still took most of its orders over the phone, long after the industry had shifted to electronic trading. Not surprisingly, MF reported net losses for each of the past four fiscal years. Its $186.6 million loss last quarter was its biggest.
Most of the quarter’s red ink came from writing down something called deferred-tax assets. Basically this item represented the money MF had thought it would save on taxes in the future, assuming it would be profitable. Net deferred taxes stood at $108.3 million as of March 31, according to MF’s 2011 annual report, which was the last time the company provided a detailed tax footnote.
MF wrote down that figure entirely last quarter. In essence, MF’s executives were admitting they couldn’t figure out how to make money. 

Interesting take on the real reason which led to the fall of MF Global. Read the complete report here 

Tuesday, December 20, 2011

Joseph Stiglitz: On Depression

One of the best insights in to depression. Please read the complete article here

Joseph Stiglitz: “A Banking System is Supposed to Serve Society, Not the Other Way Around


Many have argued that the Depression was caused primarily by excessive tightening of the money supply on the part of the Federal Reserve Board. Ben Bernanke, a scholar of the Depression, has stated publicly that this was the lesson he took away, and the reason he opened the monetary spigots. He opened them very wide. Beginning in 2008, the balance sheet of the Fed doubled and then rose to three times its earlier level. Today it is $2.8 trillion. While the Fed, by doing this, may have succeeded in saving the banks, it didn’t succeed in saving the economy.

 Reality has not only discredited the Fed but also raised questions about one of the conventional interpretations of the origins of the Depression. The argument has been made that the Fed caused the Depression by tightening money, and if only the Fed back then had increased the money supply—in other words, had done what the Fed has done today—a full-blown Depression would likely have been averted. In economics, it’s difficult to test hypotheses with controlled experiments of the kind the hard sciences can conduct. But the inability of the monetary expansion to counteract this current recession should forever lay to rest the idea that monetary policy was the prime culprit in the 1930s. The problem today, as it was then, is something else. The problem today is the so-called real economy. It’s a problem rooted in the kinds of jobs we have, the kind we need, and the kind we’re losing, and rooted as well in the kind of workers we want and the kind we don’t know what to do with. The real economy has been in a state of wrenching transition for decades, and its dislocations have never been squarely faced. A crisis of the real economy lies behind the Long Slump, just as it lay behind the Great Depression.

 For the past several years, Bruce Greenwald and I have been engaged in research on an alternative theory of the Depression—and an alternative analysis of what is ailing the economy today. This explanation sees the financial crisis of the 1930s as a consequence not so much of a financial implosion but of the economy’s underlying weakness. The breakdown of the banking system didn’t culminate until 1933, long after the Depression began and long after unemployment had started to soar. By 1931 unemployment was already around 16 percent, and it reached 23 percent in 1932. Shantytown “Hoovervilles” were springing up everywhere. The underlying cause was a structural change in the real economy: the widespread decline in agricultural prices and incomes, caused by what is ordinarily a “good thing”—greater productivity.

Monday, December 19, 2011

USD BreakOut

USD on the higher side can forebode more downside for commodities

Tuesday, December 13, 2011

The Curious Case Of Correlations

Did Facebook led to Greece default ? ... Interesting take on correlations.

Gold Correction

Gold, on charts is making a symmetrical triangle pattern. The pattern suggest a big price movement in near future or a break out on either side. Gold has an equal probability of moving on the higher side as well as the lower prices Case for higher prices - The bull market in gold is still intact. Gold is still trading on the higher side of all its long term movie averages. All the dips in Gold were bought into , which does reminds us bull phase of gold markets. Crisis in Europe deepens and flight to quality ensures higher prices for gold. QE 3 arrives pushing USD to lower values, fueling gold rally. Case for lower Prices. Europe Crisis resolved would push gold prices down. Low growth and low inflation makes gold unattractive as inflation hedge

Monday, December 12, 2011

The Great Euro Escape Plan

Markets were very volatile last week, featuring European Central bankers, the EU summit, potential credit rating downgrades, falling demand for eurozone government bonds and downward revisions of economic growth, all related to the on‐going sovereign debt crisis. After the downgrades of Belgium, Hungary and Portugal two weeks ago Standard and Poor did not beat around the bush. They placed 15 out of 17 of the eurozone bloc on watch for possible downgrade. On Friday, Moody's downgraded the three biggest French banks SocGen, Credit Agricole, and BNP Paribas by one notch. On global growth the IMF warned that it could lower estimates in January, just as the OECD did two weeks ago, lowering 2012 to 3.4% from earlier estimates of 4.6%, then 3.8%. The ECB, in cutting its interest rate to 1%, also cut its eurozone GDP growth for 2012 to 0.3% from 1.3% in September. The attempts to solve the eurozone problems and save the common currency continue to struggle. Last week's summit ended up with 23 out of the 27 EU members agreeing to treaty changes, with three more ‐ Hungary, Sweden and the Czech Republic ‐ expected to join once their parliaments approve. Britain was left as the odd one out, but David Cameron had no choice after he was unable to persuade his EU colleagues to drop the Financial Transaction Tax that they believe is essential. Presumably we will now see financial firms moving to the UK, or Switzerland now that the tax is destined to be implemented just about everywhere else in Europe. The European Stability Mechanism ceiling will be 500 billion euros, but because of German opposition, the facility will not receive banking licence, and therefore will not be able to borrow from the ECB to lend to troubled EU states. However, the EU did manage to find an additional 200 billion euros from individual central banks to lend to the IMF for onward lending. Serious efforts are being made but the progress is slow and the markets do not seem to be convinced yet

Wednesday, December 7, 2011