“The historian should be a hanging judge, for the Muse of history is not Clio but Rhadamanthus, the avenger of innocent blood.”
-Lord Acton
And journalists too…
Let The System Die..
The current financial crisis is the best opportunity we have had in a very long time for a bloodless revolution against the faceless fascism under which we have been living, unaware, for much too long. Let us seize the day….”
Douglas Rushkoff in Arthur Mag
Comment:
I won’t quibble about calling what we have fascism. I think that’s true in some ways.
But I’ll quibble about other things. The system didn’t turn people into debtors or the real world into speculative assets. The real world has always had a speculative angle to it. When people hoard, buy in bulk, store, buy cheap and sell high, they are speculating. People have always speculated. But it used to be that not everyone could speculate, because not everyone had access to cash or the savings needed for it. Or the knowledge and tools to do it. But now, the banks have sold everyone the possibility of risk-free speculation with other people’s money. They sold us on the notion that risk can be taken out of life. And we bought it. That every loss can be made good. That 1+1 can equal 3 or anything else, but that 1-1 can never be 0. That has nothing to do with business. It has to do with the desire for comfort, for being looked after and for having someone else do your thinking, your acting, your good deeds, your fighting, your spending and your saving for you.
That someone is the state.
And so I think this isn’t the end of the “machine” of statism at all. I think it’s just another stage – the death throes of the overly imperial nationalist form, leading to another, more internationalist….
A Call To The Plagiarized
If you are a writer, blogger, or journalist whose work has been used without attribution, distorted, plagiarized, or stolen, I would be interested in hearing from you.
All letters should include a brief description of what happened and a way to contact you.
If you post on this blog, please post anonymously and I will contact you at the email that my admin panel displays.
Capital Flowing Out
Here’s the Treasury’s January report on international credit flows that was released this past Monday (3/16):
“Net foreign purchases of long-term securities were negative $43.0 billion.
- Net foreign purchases of long-term U.S. securities were negative $18.8 billion. Of this, net purchases by private foreign investors were negative $10.2 billion, and net purchases by foreign official institutions were negative $8.5 billion.
- U.S. residents purchased a net $24.2 billion of long-term foreign securities.
Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been negative $60.9 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $30.9 billion. Foreign holdings of Treasury bills decreased $15.4 billion.
Banks’ own net dollar-denominated liabilities to foreign residents decreased $118.9 billion.
Monthly net TIC flows were negative $148.9 billion. Of this, net foreign private flows were negative $158.1 billion, and net foreign official flows were $9.2 billion. .”
The whole report can be found at the Treasury website.
Comments
The only US securities foreigners are purchasing are short-term, and it looks like only foreign governments are doing that.
For comparison, here’s the TIC report for January 2008, (release 3/17/08)
Monthly net TIC flows were positive $37.4 billion (compared to negative $148.9 billion this year). Of this, net foreign private flows were negative $38.2 billion, and net foreign official flows were positive $75.5 billion. That means on a net flow basis, only foreigners were really buying last year as well.
Avinash Persaud – The Currency Expert
34 year old Avinash Persaud, Managing Director and Global Head of Research for the Global Markets Group of State Street Bank and Trust Company. in England, one of the world’s leading financial services for institutional investors ( nearly 12% of the world’s securities under custody), is a top ranked analyst in global surveys of currency research. Persaud has won the major awards in international finance including the Jacques de Larosiere Award from the Institute of International Finance and an Amex Bank Award.
Some career highlights:
During 2000/2001, the first private-sector, Visiting Scholar, of the IMF.
Non-Executive Director of the Overseas Development Institute.
In 1999, Head of Currency Research at JP Morgan.
Mr Persaud and his Morgan team developed an indicator for currency crashes in emerging markets which predicted a Russian devaluation four months before it occurred and a “regime machine,” which gauged which macro-economic factors and behavioral sentiments were most influencing currency movements at a given point in time.
Graduate of the London School of Economics
Former governor of the LSE as well (19988-1989).
Comment:
(Check back later)
Dante on the Reasonableness of the Universe
Ché la luce divina è penetrante per l'universo secondo ch'è degno, sì che nulla le puote essere ostante.
Because the light of God so penetrates the universe according to the worth of every part, that no thing can impede it.
Paradiso 31, La Commedia Divina,
Paradise, Canto 31, The Divine Comedy
Dante Alighieri
Dollar Index Imponderables
“The nightmare scenario that is staring us in the face, right here, right now isn’t hyperinflation. It is in fact a collapse of monetary systems driving demand for dollars through the roof in a crescendo of attempted redemptions into collapsed (“no bid”) asset prices – a demand that Ben will not be able to meet, as the collateral backing those dollars will have all been exchanged for toilet paper. Whether Bernanke holds all this trash on his balance sheet or manages to scam Treasury into exchanging it for T-bills, the result is the same – there is no collateral behind Bucky and as employment collapses no production to replace it with either.
The mad scramble will be on, and as it happens trade will be choked off by not a collapsing dollar but other currencies collapsing around the world.
Paradoxically, the DX, or dollar index, will skyrocket – not go through the floor – as this plays out….”
– Karl Denninger
Comment:
Glad to know there’s one person who worries on the same lines as I do…but on different grounds.
Mine is from purely technical instinct. I still feel GLD is not performing the way it should given the economic scenario. I still think if hyperinflation is bad here, it will be worse in countries that will also be compelled by central bank policies to suffer inflation. I still think the Euro is a mighty strange animal. I still think gold prices are manipulated and economics statistics are massaged. I think the stock market indices are sometimes manipulated to create panic reactions. We’ve proof from l’affaire Madoff that paper can be printed up that is meaningless as far as revealing actual trades, or buy or sell orders.
And if everyone is telling you to sell dollars, hey, someone out there is buying, right? So, diversify by all means, and ditch the dollar if its prospects don’t look sound – and they don’t. But remember we’re living in a world of managed perceptions, rigged markets, phony alerts, white ops and black ops. Ours not to figure out each of the details – that’s a pure waste of time.
Ours is to defend ourselves, observe, keep our money in our shoes, our heads down and our powder dry. And wait.
And on that note, I observe that gold is trading right where it began before the whole AIG bail- out stuff started cluttering up the papers (just above 950) and the dollar index is above 84 (which means it got knocked down 3-4 points)
above 83 (which means it got knocked down 4-5 points).
I’ll leave you to figure out whether that is good, bad, or ugly, in the circumstances.
Supporting my view also here’s another of my favorite analysts, Puru Saxena, recommending that you don’t add to gold right now, at least not quite. And he’s also recommending oil/energy/pm stocks in emerging markets. Well, I’ve just nibbled at a few of those last week. [I don’t give out too many details on this because I’m not a professional financial adviser and don’t want my errors to become yours. My beat here is different. This is a commentary on the media and the markets].
Oracle of Omaha Moodily Silent
Our Billionaire In Omaha, the virtuous Warren, who wisheth us all to pay our taxes with the same glee as he doth, hath not spoken? Wherefore?
Wherefore is he moody? Or, it Moody’s?
Wherefore art Warren’s fingers to be found in so many pies? Including AIG and its corrupt dealings with General Re…..and Goldman, of which we need say no more…..and now Moody’s?
Tell us it ain’t so!
Excerpt from the International Herald Tribune piece on Buffet’s ties with Moody’s:
“Berkshire owns a stake of roughly 20 percent in the Moody’s Corporation, parent of one of the three rating agencies that grade debt issued by corporations and banks looking to raise money. In recent months, Moody’s Investors Service and its rivals, Standard & Poor’s and Fitch Ratings, have featured in virtually every account of the What Went Wrong horror story that is the financial crisis………
…Moody’s rated Lehman Brothers’ debt A2, putting it squarely in the investment-grade range, days before the company filed for bankruptcy. And Moody’s gave the senior unsecured debt of the American International Group, the insurance behemoth, an Aa3 rating — which is even stronger than A2 — the week before the government had to step in and take over the company in September as part of what has become a $170 billion bailout.
Mr. Buffett, 78, one of the world’s richest men, is known for piquant and unsparing criticism of his own performance, as well as the institutional flaws of Wall Street. But on the subject of the conflict of interest built into the rating agencies’ business model, Mr. Buffett has been uncharacteristically silent — even though that conflict is especially glaring in his case because one of the companies that Moody’s rates is Berkshire. (Its Aaa rating, for the record, is the same as the one from Standard & Poor’s. Fitch downgraded Berkshire for the first time last week.)”
UN Panel Recommends Ditching Dollar
From Reuters:
“Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.
Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.”
[my emphasis]
Comment:
OK, that’s why we’ve seen such a slide. Yesterday’s bombshell followed by this…and, you have to admit, the dollar has had a long run up.
Notice how Persaud phrases the request (it’s later in the piece). It goes something like – the US is sick of all this foreign savings that’s making us run deficits…or to quote him: “Today the Americans complain that when the world wants to save, it means a deficit.”
Meanwhile, I am berating myself for again trying to squeeze the last drop out of a trade. I did move a bit into Aussie and NZ last week but I really didn’t see that FOMC announcement coming.
I can’t believe that Bernanke would be so gung-ho. I thought he’d at least make some nod to prudence. But I guess that announcement on Sunday was his preparation of the public. Also, an important item missed me. Which was declining Chinese exports, to the US and in general.
But in my defense, I still think that was an incredible, historic move on Bernanke’s part.
Which just shows you that in trading you shouldn’t be predicting, you should be preparing.
Sigh.
Meanwhile, I still think we’ve been subjected to a propaganda drama the past few weeks (aren’t we always?) – mainly to take our eye off the ball. And having that suspicion, I’ll hunt around to figure out what this was all about
Here’s Kathy Lien on some advantages of a weak dollar
“McDonald’s is not the only company to warn about weaker earnings due to foreign currency fluctuations. This morning, United Technologies announced plans to lay off 11,600 workers as a rising dollar and deteriorating economic conditions force the company to cut back. Last week, Burger King Corp and Estee Lauder also announced that their profits dropped as international sales translated into fewer dollars.$3.60….. A strong dollar also negatively impacts U.S. companies selling products abroad because it reduces their competitiveness…..
As for merger and acquisitions, a strong dollar reduces the cost for U.S. companies to takeover foreign companies but increases the cost of foreign companies buying U.S. companies. The reason why we consider it a disadvantage at this time is because M&A flow could go a long way in supporting the U.S. stock market, which even with today’s rally is down almost 25 percent year to date.”
OK, Lila here again.
What if this dollar take-down was intended? Why do I say this?
1. The report about declining bond purchases from China came out on Monday only this past week. But I think they must have had it for some time. There’ s been incessant posturing and tough talk toward China in a rather coordinated way.
2. Unemployment is rising rapidly and businesses are shrinking.
Here’s the Bureau of Labor Statistics report of March 19
“Unemployment rates were higher in January than a year earlier in 371 of 371 metro areas and unchanged in 1 area. 14 areas recorded jobless rates of at least 15.0 percent today. Fourteen areas recorded jobless rates of at least 15.0 percent, while 23 areas registered rates below 5.0 percent. The national unemployment rate in January was 8.5 percent, not seasonally adjusted, up from 5.4 percent a year earlier.”
3. The only way to get foreigners to pump money into the economy is to encourage them to buy US assets and businesses (that’s what this is for).
4. It offsets all the criminal rot in the financial sector which turns off foreign investors..
So – was this another shot fired in the currency wars? I suspect something like that.
Given all that, the dollar really didn’t do that badly. (I told you I’m a contrarian)
Ever since that slide to 71 or so, I’ve gotten a stomach of cast iron. So what if this was the dollar index’s biggest one-day drop in 20 years? It’s been around twice as long. What the Benny-Bama team has been sticking to the markets is the worst in our history.
Helicopter Ben Drops A Money Bomb
Peter Grant notes that the currency markets were taken by surprise and anticipates global debt monetization and currency depreciation (expected but not so soon and so fast):
“The Fed did indeed announce that it would seek to buy up to an additional $750 bln in MBS, bringing the total projected purchases of such assets up to $1.25 trl. They also announced that they would buy up to an additional $100 bln in agency debt, bringing that total up to $200 bln. On top of all that, the FOMC decided that late next week the Fed would begin purchasing up to $300 bln in longer-term Treasuries, with emphasis on the 2 to 10-year segment of the yield curve. Purchases will be conducted by primary dealers two to three times per week through competitive auctions….”
Karl Denninger warns that the bond market will sell into the purchase:
“The BOE executed their first “QE” operation today.The “bid to cover” was an astonishing 7.35 This means that for every bond purchased 7.35 were tendered, or made available by willing sellers……the BOE now has seen exactly what happens when you promise as a government to overpay for something – everyone hits your bid immediately!”
Meanwhile, Boris Schlossberg notes that the bond market here has so far accepted the stunning move with yields on the 10 year bond falling by 50 basis points in 24 hours, while the dollar collapsed across the board. He explains Bernanke’s decision as reflecting the fact that foreign capital flows are going to be hard to sustain (i.e. the Chinese aren’t going to be buying treasuries for much longer).