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Lets focus on Back to the Future. Part 1: stress test.

 

http://www.urbandigs.com/stress-test.jpg

stress-test.jpg

 

Now, think about official 10.2% Unemployment..

 

 

However, It must be admitted that other parameters are better in reality.

 

GDP

1Q09 -6,4%

2Q09 -0,7%

3Q09 +3,5%

 

Baseline stress

1Q09 -5,0%,

2Q09 -1,2%,

3Q09 +1,4%

 

 

House prices didnt fall also so much (thanks to first time buyers etc). Take a look at that

http://tinyurl.com/y9sof34

http://2.bp.blogspot.com/_pMscxxELHEg/SucA...ressTestAug.jpg

CaseShillerStressTestAug.jpg

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Interesting piece. I also think short GBP/USD is not a bad trade since they are both the "printer" countries - but USD has the advantages of size and a much larger short position( carry trade). Moreover UK has just expanded their printing while the Fed on the margin seems to be withdrawing some liquidity. Last but not least the huge Treasury auctions coming up without the Fed bellyin up to the bar may further dry up Dollar liquidity.

Although a purer bet on the Dollat short unwind( but more risky) would be short AUD/USD or short EUR/USD.

I found the FT pieces on the huge short USD building in China dirving up short term USD borrowing costs to 175bp over USD Libor!! So some risk aversion setting in in Chinese stocks could set off the long awaited Dollar short covering rally.

I diasgree that gold is a "safe-haven" asset. It has been rallying along with all the junk assets and will probably sell off with them too. Not a comment on the intrinsic worth or beauty of gold - but more a function of who the recent buyers are. Seems to me hedgies and retail specs are the big players in gold recently - shallow pockets, short term horizons, pure momentum and deep sophomoric convictions about hyperinflation - and easily shaken out.

 

 

Gold - what about those central bank buyers. India, china, Sri Lanka, maybe the arabs soon. When the fundamentals & technicals are lined up, don't fight the tape.

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Prepare yourself for tobin tax....

 

Brown Says G-20 Should Consider Tax on Speculation

Nov. 7 (Bloomberg) -- U.K. Prime Minister Gordon Brown said the Group of 20 nations should consider measures such as taxing financial transactions to penalize excessive risk taking and limit the burden on taxpayers of bank failures.

?€œIt cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,?€? Brown told G-20 finance ministers and central bankers at a meeting today in St. Andrews, Scotland. Tighter capital rules and pooled bank resolution funds could also be considered, he said.

[...]

The debate over whether to implement a global levy on speculation has mounted in recent months with the G-20 asking the International Monetary Fund in September to study it. Twelve nations including Britain, France, Germany and Brazil agreed last month to set up a panel of economists to research its feasibility.

http://www.bloomberg.com/apps/news?pid=206...aLk04&pos=1

 

 

If they bring in this tobin tax - effectively 1% tax on all trades- a lot of us here will be out of business. Saw an article in the paper here recently about how much money they would raise with such a tax. Foolishly they left out that fact that this would kill short term trading and therefore raise only a small fraction of their estimates.

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everyone is playing forex now...

 

http://ftalphaville.ft.com/blog/2009/11/02...00bn-fx-hustle/

The $100bn FX hustle

$100bn — that’s the daily figure for trading volume in the retail foreign exchange market, where amateur plungers play the dollar and the like.

The IPO prospectus for Gain Capital, one of the scores of firms tapping into this area of explosive growth, sets out the juicy business on offer

Foreign exchange, or forex, trading is one of the fastest growing areas of retail trading in the financial services industry. According to its most recent report, the Aite Group, a financial services industry market research firm, reported that by the end of 2008, average daily trading volume in the retail forex market reached approximately $100.0 billion, a 900% increase from 2001. Our total annual customer trading volume, which is based on the U.S. Dollar equivalent of notional amounts traded, grew from $120.3 billion in 2004 to $1.49 trillion in 2008, representing a compounded annual growth rate of 87.6%. Our annual customer trading volume from customers residing outside of China grew from $114.3 billion in 2004 to $1.32 trillion in 2008, representing a compounded annual growth rate of 84.3%.

http://ftalphaville.ft.com/blog/2009/11/02...00bn-fx-hustle/

 

 

My forex trader friend who works in the business tells me retail forex trading in the US is dying due to regulatory issues. I don't know the details.

 

 

FXCM have their US clients open a/c's in the UK.

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Interesting piece. I also think short GBP/USD is not a bad trade since they are both the "printer" countries - but USD has the advantages of size and a much larger short position( carry trade). Moreover UK has just expanded their printing while the Fed on the margin seems to be withdrawing some liquidity. Last but not least the huge Treasury auctions coming up without the Fed bellyin up to the bar may further dry up Dollar liquidity.

Although a purer bet on the Dollat short unwind( but more risky) would be short AUD/USD or short EUR/USD.

 

GBPUSD has wild swing usually news driven.

 

However USDCHF & USDJPY (close to monthly support) could be poised for a multi-month run in favor of the dollar.

 

SSI is not yet supportive of this. http://www.dailyfx.com/technical_analysis/sentiment/

 

Probably a lot of traders looking for the bounce in the dollar.

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This is a rare exception. However, that being said, 16.3% is horrific. It's up from 12% in October 2008.

 

I don't get the positive spin some claim in unemployment numbers.

"You can see even though these estimates are way off each month, the overall trend is improving which is correlated to the stock market." Karl Eggerss http://keggerss.wordpress.com/

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Latest Story

 

Crunch Time- Professional Edition Fed Report

Saturday, November 7, 2009 By Lee Adler With Fannie paper now selling at a lower yield than Treasury paper, the Fed made a concession and reduced the size of its GSE purchase program, in essence tacitly admitting that it had skewed the market too far. The reduction from $200 billion to $175 billion doesn’t sound like much, but most of the paper has already been acquired, leaving little left to be acquired by the currently stated “deadline” of March 31, 2010. So the Fed is removing another of its props from the market, and especially from the Primary Dealers. Without this constant flow of cash for depreciated and damaged goods, the Primary Dealers will not be able to hold their securities inventories at current levels. We began to see some evidence of cutbacks in their holdings in this week’s data. We also saw it in the market swoon of the week ended October 30.

 

Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.

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Inverse ETFs:

 

I am looking through the Proshares annual report(5/31/09) and was surprised at the huge underperformance of the Unleveraged Inverse etfs over longer periods( 1 yr): eg: PSQ was up 15.2% vs nasdaq100 down 28.9% .

Of course we all know the Leveraged etfs have horrendous bleed over longer periods but you would think the Unleveraged inverse etfs should track reasonably closely?

No acknowledgement of this in the management's writeup.

I wonder if the events of late 2008 - disruptions in markets - were the cause and therefore these results are an anomaly?

Any thoughts?

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