Monthly Archives: May 2012

by

The name of the game is Risk Aversion on Currencies !

No comments yet

Categories: Forex Capital Today, News Flash - Market today, Tags: , , , , , , ,

Earlier today, the Euro hit its weakest level since July 2010 to the Dollar. This followed a clash between European leaders over joint bond sales at a summit.

The Euro also declined for a third day against the Yen. This as a Euro area report is due, that economists predict will show that services and manufacturing industries have shrunk for a fourth month.

The Dollar and Yen have both climbed as against most of their major counterparts. Speculation still persists that Europe’s debt crisis is deepening and this has boosted demand from investors for safer assets.

The Euro stood at $1.2580 earlier from $1.2582 yesterday, when it touched its lowest level since the 13th of July 2010 at $1.2545. It dropped 0.3% to 99.71 Yen, while the Dollar stood at 79.48 Yen.

Bank of Japan (BOJ) Governor, Masaaki Shirakawa, today stressed the central bank’s resolve to maintain its ultra-loose monetary policy. He ruled out though, any easing solely for the purpose of weakening the Yen.

He went on to say that there was no clear historical evidence, that an expansion in Japan’s monetary base does lead to a weaker Yen. This countered views that the central bank can directly push down the Yen by injecting more money into the economy.

He considered, that the biggest factor affecting currency moves at the moment, is investors’ risk aversion and went on to stress, that monetary policy alone cannot influence Yen moves.

In February, the BOJ had eased monetary policy and set an 1% inflation target. It did so in order to show its determination to beat the deflation that has plagued Japan for over a decade.

The BOJ had followed up with even more monetary easing during April. Since then, it has remained under political pressure for further action to support the economy and counter the hardship resulting from a stubbornly strong Yen.

The BOJ has pledged to pursue powerful monetary easing until such time that an 1% inflation figure is in sight, and will likely continue with its efforts to beat deflation with its key monetary easing tool; its asset-buying program.

On the longer term time line surely the euro will have some export easing benefit from the Euro drop, even so as it continues fall down hill.

On shorter term we still have this contagious crisis…keeps popping out as popcorn on a micro..

I can promise one thing, it is going to be a very HOT summer, did you remember last years summer ?

Yes, same thing just bigger….

All the best!

Erik

by

Europe’s crisis has deepened dramatically for the last several days !

No comments yet

Categories: News Flash - Market today, Tags: , , , , , ,

Over the last several days, Europe’s crisis has deepened dramatically. The euro currency union has been coming apart at the seams … and the region’s banks are teetering on the verge of complete collapse!

Just take a look:

In Greece, the latest parliamentary elections ushered in a wave of anti-austerity candidates. They’re threatening to tear up agreements with richer euro-zone members that took several months to negotiate, and that formed the basis of the country’s $307 billion bailout.

German officials are strongly hinting that this could be the straw that breaks the camel’s back — meaning Greece could become the first country to be officially booted out of the euro!

Already, the country’s citizens have been stampeding to their local banks to pull out deposits as fast as possible — nearly 6.4 BILLION dollars in the past several days alone — with snaking lines at ATMs from Athens to Thessaloniki!

And that’s likely just the beginning … because I’ve seen estimates that peg the cost of an all-out Greek exit from the euro at hundreds of billions of dollars — spread throughout the European financial system!

Meanwhile, Greece Is Just the Epicenter of
This Impending Crash in European Banks …

In Spain, the government was just forced to commit ANOTHER $6 billion in bailout money to save one of its major banks from collapse.

There’s just one problem: Spain ITSELF doesn’t have the money to fund these bailouts!

Investors know this, and that’s why they’re dumping Spanish bonds like mad. The cost of financing the government for the next 10 years just surged above 6.3%, rapidly approaching the panic highs set in the fall of 2011. And the cost of Spanish default insurance also just hit an all-time record!

Translation: Even without the ripples from Greece, Spanish banks will probably drop like rocks!

Then there’s Italy, where Moody’s Investors Service just took the axe to its ratings on 26 major banks.

The cuts ranged from one notch to four notches, and in a classic case of understatement, the firm’s outlook on those banks remained “negative.”

If this sad, sorry process looks eerily similar to you, it should …

This is precisely the kind of “snowball rolling downhill” financial crisis we saw in the U.S. during the housing and mortgage crisis of 2007-2009!

That banking and financial crisis ultimately crushed global stock markets, and led to the failure or bailout of banks and brokers around the world.

Many investors lost fortunes.

And make no mistake — I think the same thing is going to happen this time around. In fact, I believe spillover from the European crisis will quickly come rolling back onto our shores, too.

Trade safe until then

Erik

by

Stocks are tumbling around the world !!!!

No comments yet

Categories: News Flash World Economy, Tags: , , ,

U.S. stocks are now getting hammered. Commodities are imploding. Bank stocks are falling worldwide, and some markets in Europe are at multi-year … and even MULTI -DECADE lows!

What’s most surprising about the breakdown of Europe is not how swiftly it’s happening, but how complacently US investors and others are responding …

This is what happens when you only
paper over a problem, rather than cure it!

How can this be happening? Didn’t central bankers print trillions of yen, euros, pounds, and dollars in the past couple of years to prevent and “cure” these problems? Weren’t we told repeatedly by both European and U.S. policymakers that the problems in the debt markets were contained?

Yeah, we were.

But hopefully, you’ve learned your lesson from the U.S. mortgage debacle. Some policymakers will outright lie to keep you from selling stocks, bonds, or otherwise taking steps to protect yourself from the fallout of a serious debt crisis. Others are just woefully ignorant of the severity of the underlying problems.

Think I’m off base?

Then look at what former U.S. Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke did during the subprime meltdown! They gave speech after speech saying the problem was “contained” and that it wouldn’t have a major impact on the U.S. economy. But you don’t need me to tell you those predictions weren’t just off by a small degree.

They were 100% dead wrong!!

Now we’re getting the same song and dance from Europe. The ESM. EFSF. LTRO. We’ve been told that all of these whiz-bang money printing and bailout programs would prevent a crisis, and that the crisis itself really isn’t that bad.

But try telling that to a Greek investor, who has now lost every single penny of gains he racked up in the last TWENTY YEARS! Here’s the chart of the Athens Stock Exchange General Index. You can see it’s trading around 610, a level last seen in November 1992.

It’s not just the Greek exchange getting hammered though. Spain’s main index is now at its lowest level since March 2009, while markets across Europe are slumping fast.

This just goes to show that when you paper over a crisis, rather than try to solve it directly, you might be able to gain a week, a month, or even a quarter or two of calm. But ultimately, your efforts will prove futile if you don’t get rid of the underlying problems!

 

Until next time, good trading

Erik