Sunday, August 7, 2011

US Downgraded

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Friday, August 5, 2011

Goldman Revises All FX Pair Forecasts With Emphasis On USDJPY and USDCHF: Complete List Inside


Since our EUR/$ forecast tends to receive a lot of attention, we think it is worth noting that our unchanged forecast of 1.45, 1.50, 1.55 in 3, 6 and 12 months implies a EUR TWI appreciation of 2.7%, so that our EUR/$ forecast is to a significant degree a reflection of our view of broad USD weakness. That said, while additional policy steps in Europe are clearly and urgently needed in Europe at the current juncture, as pointed out by Dominic Wilson in the latest Global Market Views published earlier today, we believe that these will ultimately be taken, reinforcing our view that the 12-month direction for EUR/$ is in line with our forecast.

In the case of $/JPY, three factors drive our forecast change:
  • We expect Japan’s trade balance to improve as supply-chain disruptions continue to fade. When we looked at the empirical links between the Yen and Japanese BBoP flows in the 2009 Foreign Exchange Market, we found that the trade flows were important drivers of the Yen. Thus, the improvement in the Japanese trade position is likely to be positive for the Yen. 
  • Our examination of Japanese portfolio flows shows stronger than usual inflows relative to history. This suggests that the earthquake has changed Japanese appetite for foreign assets. On the assumption that a small proportion of these flows are unhedged, this does point to Yen strength. Less appetite for foreign bonds/repatriation could be a reflection of the need to keep funds at home for the rebuilding effort; therefore, outflows are only likely to increase again once the rebuilding effort is complete. Again, we see this as JPY-positive on our forecast horizon. 
  • Lastly, a key element of our global forecast changes is the downward revision in our US 10-year Treasury yield forecast, which brings our forecasts for December 2011 and December 2012 to 3.00% and 3.50% from 3.75% and 4.25% previously. We see this as reinforcing our Dollar-bearish bias, also in line with this forecast change. Of course, it is also the case that—as part of all this—the probability of intervention has increased, as highlighted this week by Japan’s first intervention since March. However, the fact that the intervention was unilateral and found little policy support among the G-7 suggests to us that it will not be sufficient to reverse the $/JPY down trend. Fiona Lake has discussed the JPY dynamics in detail in a Global Markets Daily this week.
With respect to our EUR/CHF forecast, we have argued extensively for CHF appreciation but the recent rally has gone beyond our original
expectations. Given the significant appreciation pressures, we recognize the potential for the CHF to rally further in the near term to 1.05. And, of course, if Euro-zone tensions escalate further, parity should not be excluded. This is, however, not our baseline view. Ultimately, we think that European policymakers will take needed policy steps to meaningfully reduce the Euro-zone risk premium weighing on the EUR. As a result, we see the risk premium that weighs on EUR/CHF fading somewhat on a one-year horizon. This will allow EUR/CHF to head somewhat closer towards its ‘fair value’, which our GSDEER model currently puts at 1.44.

Elsewhere, our forecast revisions reflect a combination of weaker growth and a marking-to-market. Notable changes are for the TRY, which we revise weaker on a 12-month horizon ($/TRY from 1.55 to 1.63), reflecting the results of the newly introduced monetary easing by the CBRT.
In Latam, the notable forecast change is for the MXN, which we revise weaker on a 12-month horizon ($/MXN to 11.90 from 11.50) on the back of our downgrading of Mexico’s growth from 4.4% to 4.1% this year and from 4.5% to 3.9% in 2012.

Finally, in non-Japan Asia, our forecast changes generally reflect a marking-to-market in the near term. The exception is India, where we are upgrading our forecast to 44.00, 43.70, 43.00 in 3, 6 and 12 months from 46.00, 46.20 and 47.00 previously, on a more favourable balance of payments, and in particular a pick-up in FDI inflows.
And the summary table:
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Market panic spreads

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Violent crime increases as economy collapses

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Monday, August 1, 2011

House passes debt bill

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Sunday, July 31, 2011

WSJ Live Blog

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Debt Deal Done?

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Friday, July 29, 2011

Banks invest in Bulldozers to demolish foreclosed homes


Bank of America Corp., faced with a glut of foreclosed and abandoned houses it can't sell, has a new tool to get rid of the most decrepit ones: a bulldozer.
The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are conducting or considering their own programs.
Disposing of repossessed homes is one of the biggest headaches for lenders in the United States, where 1,679,125 houses, or 1 in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping.


Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/07/28/BUBG1KFN1U.DTL#ixzz1TWC14al9
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Thursday, July 28, 2011

Debt bill debated in Congress

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Wednesday, July 27, 2011

Worthless Currency Art Collection


Jeff Clark of Casey Research has created a wonderful historical "art" album which addresses the number one question which most people living in the US right now are unable to fathom: how can one's currency go from X to 0. It is impossible. It certainly can not happen to the dollar. Right? Well, as Jeff says: "History has a message for us: No fiat currency has lasted forever. Eventually, they all fail. You might suspect this happened only to third world countries. You’d be wrong. There was no discrimination as to the size or perceived stability of a nation’s economy; if the leaders abused their currency, the country paid the price." We may add one other thing: no country in the history of the world has imploded from hyperdeflation. Not one. At the point where the debt load was insurmountable and not enough cash flow was being generated to sustain it, the authorities would always find a way to step in and be the terminal source of dilutive fiat demand: from ancient Rome, to Weimar, to the collapse of the Soviet Block, to, inevitably, the unwind of the failed (neo) Keynesian model, where we are right about now. Sure, we can all come up with goalseeked theories that validate our perspective but they are all meaningless at the end. Past a given threshold debt money ceases to function as backed by the full "faith and credit" of the backstopper and is nothing but paper. Yes. Even the abstract concept of so-called "reserve" currencies. Quote Clark: "As you scroll through the currencies below, you’ll see some long-ago casualties. What’s shocking, though, is how many have occurred in our lifetime. You might count how many currencies have failed since you’ve been born." There are many more where these came from. Thousands in fact. Which brings us to the title of this post. What are all these images, which is really all they are now - fancy paperweights (no pun intended) from near and far history, worth now? Precisely.

Yugoslavia – 10 billion dinar, 1993
Zaire – 5 million zaires, 1992
Venezuela – 10,000 bolívares, 2002
Ukraine – 10,000 karbovantsiv, 1995
Turkey – 5 million lira, 1997
Russia – 10,000 rubles, 1992
Romania – 50,000 lei, 2001
Central Bank of China – 10,000 CGU, 1947
Peru – 100,000 intis, 1989
Nicaragua – 10 million córdobas, 1990
Hungary – 10 million pengo, 1945
Greece – 25,000 drachmas, 1943
Germany – 1 billion mark, 1923
Georgia – 1 million laris, 1994
France – 5 livres, 1793
Chile – 10,000 pesos, 1975
Brazil – 500 cruzeiros reais, 1993
Bosnia – 100 million dinar, 1993
Bolivia – 5 million pesos bolivianos, 1985
Belarus – 100,000 rubles, 1996
Argentina – 10,000 pesos argentinos, 1985
Angola – 500,000 kwanzas reajustados, 1995
Zimbabwe – 100 trillion dollars, 2006
Clark concludes:
So, will a similar fate befall the U.S. dollar? The common denominator that led to the downfall of each currency above was the two big Ds: Debts and Deficits.
With that in mind, consider the following:
Morgan Stanley reported in 2009 that there’s “no historical precedent” for an economy that exceeds a 250% debt-to-GDP ratio without experiencing some sort of financial crisis or high inflation. Our total debt now exceeds GDP by roughly 400%.
Investment legend Marc Faber reports that once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for.” On our current path, analyst Michael Murphy projects we’ll hit that figure by October.
Peter Bernholz, the leading expert on hyperinflation, states unequivocally that “hyperinflation is caused by government budget deficits.” This year’s U.S. budget deficit will end up being $1.5 trillion, an amount never before seen in history.
Since the Federal Reserve’s creation in 1913, the dollar has lost 95% of its purchasing power. Our government leaders clearly don’t know how – or don’t wish – to keep the currency strong.
Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the possibility of the greenback being added to the above list grows every day. And this will lead to serious and painful consequences in our standard of living. While money is only one of many problems we’ll have to deal with, you can protect your assets with the one currency that can’t be debased, devalued, or destroyed by irresponsible leaders.
Because when it comes to money, worthless is not a fun word.
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Monday, July 25, 2011

BBG: Singapore surpassed Tokyo as the busiest market for currency trading in Asia

More active trading of USD/Asians and selling of Major/Asians? And more trades done in Singapore now? BBG: Singapore surpassed Tokyo as the busiest market for currency trading in Asia, spurred by growth in the region's emerging markets that has led FX traders to shift more of their top staff to the city state. Singapore FX Market Committee rose to $314.2 billion in April, according to a survey published today. Average volumes in Japan's capital the same month were $277.9 billion, a survey by the Tokyo FX Market Committee showed. Banks in Singapore accounted for 5% of the global $4 trillion-a-day FX market in April 2010. On FX, GBP/USD back down below 1.6300, vs 5-wk highs above 1.6340, with EUR back near day lows, weighed by ongoing concerns in eurozone despite the deal. GBP/SGD at 1.9700-10, focus still on all time lows of 1.9400, as USD/SGD hit new lows of 1.4079 despite talks of aggressive MAS interest. Key 1.20.WL
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Sunday, July 24, 2011

Fed planning for potential default

http://uk.reuters.com/article/2011/07/20/us-usa-debt-fed-idUKTRE76J6IT20110720

(Reuters) - The Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government's $14.3 trillion borrowing limit looms, a top Fed policymaker said on Wednesday.
Charles Plosser, president of the Philadelphia Federal Reserve Bank, said the U.S. central bank has for the past few months been working closely with Treasury, ironing out what to do if the world's biggest economy runs out of cash on August 2.
"We are in contingency planning mode," Plosser told Reuters in an interview at the regional central bank's headquarters in Philadelphia. "We are all engaged. ... It's a very active process."
Plosser said his "gut feeling" was that President Barack Obama and Congress will come to an agreement to increase the Treasury's borrowing authority in time to avert a default on government obligations.
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Wall St. Prostitution Ring involves NY's wealthiest

After 17 people were busted yesterday for running a prostitution ring that catered mostly to Wall Street clients, word is that the Brooklyn DA is considering charging the "Johns," the clients who ordered the ladies, too.
So far, only 30 people total have been charged.
But everyone expects more people to be arrested, because basically, besides how the prostitution ring worked, all the Brooklyn DA (Charles Hynes) spoke about at a press conference covered by NBC is how this case involves some of "New York's "wealthiest," most "sophisticated" and "high class" people on Wall Street.
It seems like he's dying to tell us some of these names. In a press conference yesterday, he said:
"For people like that, money is irrelevant."
"Everything was about people who have unlimited money. Instead of paying $20 for cocaine, they were paying $170 for cocaine."
Those who used credit cards - many charging $10,000 per night - are at risk. So was it worth it?


Read more: http://www.businessinsider.com/brooklyn-da-might-charge-clients-in-wall-street-prostitution-ring-2011-7#ixzz1T2zCz8i3
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Who owns US Government Debt?



Percentage of total U.S. debt, according to Business Insider:
  • Hong Kong: $121.9 billion (0.9 percent)
  • Caribbean banking centers: $148.3 (1 percent)
  • Taiwan: $153.4 billion (1.1 percent)
  • Brazil: $211.4 billion (1.5 percent)
  • Oil exporting countries: $229.8 billion (1.6 percent)
  • Mutual funds: $300.5 billion (2 percent)
  • Commercial banks: $301.8 billion (2.1 percent)
  • State, local and federal retirement funds: $320.9 billion (2.2 percent)
  • Money market mutual funds: $337.7 billion (2.4 percent)
  • United Kingdom: $346.5 billion (2.4 percent)
  • Private pension funds: $504.7 billion (3.5 percent)
  • State and local governments: $506.1 billion (3.5 percent)
  • Japan: $912.4 billion (6.4 percent)
  • U.S. households: $959.4 billion (6.6 percent)
  • China: $1.16 trillion (8 percent)
  • The U.S. Treasury: $1.63 trillion (11.3 percent)
  • Social Security trust fund: $2.67 trillion (19 percent)
So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.
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GAO Fed Audit Report

GAO Fed Investigation
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