Posts Tagged ‘US dollars’

China and the Goldfinger Syndrome

China and the Goldfinger Syndrome

Courtesy of JESSE’S CAFÉ AMÉRICAIN

I have had some interesting discussions recently with correspondents about the problem which China has with its very large US dollar reserves.

To summarize what I think, China is attempting to diversify their portfolio of US Treasury dollar holdings. They are obviously accumulating ‘real goods’ including stockpiles of basic materials, gold, silver, oil and investments in the means of production in their own region and in key regions around the world.

This is more difficult than it might appear on the surface. Real goods are often strategic, and governments are sometimes reluctant to allow them to be acquired by a government considered a potential threat. The first difficulty is the strategic importance of some assets, such as the China’s offer for the purchase of Unocal.

But there is also a need for confidentiality, stealthiness if you will. If word were to leak out that ‘China is dumping its Treasuries’ there would be a run on the market and the Chinese could lose a portion of their reserve wealth rather quickly.

Now, would it matter. Well, yes. It would matter because US dollars are still the currency of choice for most international trade including the all important international commodity, oil. If you think that philosophically dollars have no value because they are just paper, I would be more than happy to dispose of them for you. Limited time offer, of course.

I also posited that China, while accumulating its real goods quietly against the constraint of perturbing the markets, could do short term hedges against the less catastrophic scenario of further dollar devaluation by going into the very deep and liquid financial assets markets, and hedging risk with CDS and other obvious investments including shorts of various types.

As anyone who has attempted to acquire a company or take a substantial position in or out of an asset or company, at some point you can affect the price, making other participants aware that the asset is in play, and end up selling or buying against yourself. In the case of China it could also trigger a run on the bank of the US, which is an immediate endgame.

With regard to the use of financial instruments, someone raised the obvious issue of counter party risk. Well, of course it is an issue. But less so if you are merely hedging…
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Much Ado About TED, LIBOR, and Currency Swaps

Much Ado About TED, LIBOR, and Currency Swaps

Courtesy of JESSE’S CAFÉ AMÉRICAIN

There is some alarm being expressed about the recent increase in the TED spread from some quarters this week.

Here is a short term chart of the TED. It is definitely elevated expressing the accelerated demand for dollars in Europe. Although the BIS reports will not catch up with this action for quite a while, I suspect we are seeing a replay of a flight away from dodgy assets such as dollar denominated CDO’s that European customers had deposited with their banks that are now being liquidated again. Also, and undeniably, there is a flight to gold, Swiss francs, and US dollars from the Euro as the ECB and the EMU sort out their serious issues brought about by a single currency and monetary policy working across a wide diversity of localized fiscal conditions.

However, here is the longer term picture of the TED spread. As you can see, it is a bit too early to hit the warning sirens. But it does bear watching.

The long view is not very dramatic, and also not as useful for promoting short euro hedge fund trades, or for generating viewer clicks.

For some additional perspective, here is a chart of the one year LIBOR rate.

Here is a short term view of LIBOR in US Dollars. It is definitely elevated.

But here is a similar short term view of LIBOR expressed in ECU’s. By comparing the two LIBOR charts one might think that there is an elevated demand for dollars, probably attributable to a flight to safety. The DX chart indicates that it seems to be peaking. But it can always take a turn for the worse. 

And while we are at it, here is a reprise of a prior discussion of the Fed’s swap lines with Europe, designed to relieve imbalanced demand for dollars.

The US is indeed contributing to the bailout of Greece, via its membership in the IMF. But not through the currency swap lines, unless there is something else going on there behind the scenes. Since the US owns the biggest printing press in the world, at least for now, that would not be a shock.

There may be a time to worry about European insolvency. But quite a bit of what we are hearing about Europe these…
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Zero Hedge

The Fed And The Treasury Have Now Merged

Courtesy of ZeroHedge View original post here.

Submitted by Jim Bianco of Bianco Research

As I've argued, the Fed and the Treasury merged. Powell said this was the case today (from his Q&A):

These programs we are using, under the laws, we do these, as I mentioned in my remarks, with the consent of the Treasury Secretary and the fiscal backing from the congress through the Treasury. And we are doing it to provide credit to households, businesses, state and local governments. As we are directed by the Congress. We are using that fiscal backstop to absorb any losses we have.

Our ability is limited by the law. We have to find u...



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Phil's Favorites

The PhilStockWorld.com Weekly Webinar - 04-08-2020

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.

 

Major Topics:

00:01:34 - Checking on the Markets
00:04:32 - Current News
00:31:34 - LEVI
00:35:08 - AMZN
00:39:26 - Mark Mahaney's Stock Coverage
00:43:00 - Public Transportation & Disinfecting
00:48:08 - Petroleum Status Report & OPEC
01:00:24 - COVID-19 Update | WYNN
01:16:00 - Portfolio Projection: Income Portfolio
01:17:23 - FUTURES
01:18:49 - Earnings Portfolio
01:19:27 - STP | LTP
01:22:52 - S&P 500
01:30:05 - AAPL
01:34:15 - VIX
01:36:00 - M
01:42:56 - VIAC
01:47:02 - XOM
01:50:29 - LB
01:52:44 - IRBT
01:57:48 - Crude Oil WTI
02...



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Biotech/COVID-19

COVID-19 is hitting black and poor communities the hardest, underscoring fault lines in access and care for those on margins

 

COVID-19 is hitting black and poor communities the hardest, underscoring fault lines in access and care for those on margins

Nurse Shelia Rickman participates in an after-shift demonstration on Monday, April 6, 2020, in Chicago’s Hyde Park neighborhood, after media reports of disproportionate numbers of black people dying from COVID-19 in the city. AP Photo/Charles Rex Arbogast

Grace A. Noppert, University of North Carolina at Chapel Hill

As the COVID-19 epidemic continues to ravage the American public, an unsurprisin...



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ValueWalk

Coronavirus symptoms, causes, prevention and cure

By Jacob Wolinsky. Originally published at ValueWalk.

The best case situation for Coronavirus or COVID-19 is that in a few weeks it dies down and things get back to normal. However, we must entertain the possibility of a far more frightening scenario.

COVID-19 models continue to change for the better

April 9, 2020 Update: More than 1.5 million people around the world have been infected by the novel coronavirus, and nearly 90,000 have died. In the U.S., the death toll surpassed 14,000 on Wednesday. Tuesday alone saw a record 1,858 deaths. So far, approximately 425,000 people in the U.S. have tested positive for COVID-19.

Although researchers say the peak hasn’t been reached yet, the model in use by the White House and many other agencies was updated on Wednesday. The number of projected deaths from the virus in the U.S. declined to 60,415 by August, compared...



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Kimble Charting Solutions

Silver/Gold Indicator Creates Largest Bullish Pattern In Decades!

Courtesy of Chris Kimble

Is an important metals indicator sending one of the largest bullish messages in nearly 50-years? Very Possible!

This chart looks at the Silver/Gold ratio on a monthly basis since the mid-1970s. Historically metals bulls want to see the ratio heading up, to send the metals complex a solid bullish message.

The ratio hit the top of the falling channel (A) back in 2011, where it created a large bearish reversal pattern. Since creating the bearish pattern at resistance, the ratio has experienced a significant decline.

9 years after hitting the top of the channel the ratio hit the bottom of the channel at (1) last month, where it looks to have created one of the largest monthly b...



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The Technical Traders

Adaptive Fibonacci Suggests Much Lower Prices Yet To Come - Part I

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system suggests a much deeper price move is in the works and the current price rally will likely end near resistance levels identified by the Adaptive Fibonacci Price Modeling system.  We are posting this research post for friends and followers to help them understand the true structure of price and to allow them to prepare for what we believe will become a much deeper downside price move in the future.

Fibonacci Price Theory teaches us that price moves in waves within up and down price cycles. The recent peak in price, near February 25, 2020, has resulted in a very deep -36% price collapse in the S&P 500 (ES) recently. This dow...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







...

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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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