Monday, February 28, 2011

We've Moved

This blog has received great feedback and more traffic than originally anticipated.

There is a story that needs to be told and a typical blog format is no longer sufficient.

- Please visit us at our new home -


Check Back During The Day Today

- We'll be launching our new site sometime today -  


Fed's Bullard Hints At End To QE Early

I'm surprised at this but reading commentary from Bullard's interview on CNBC this morning one of his quotes says it all.  Bullard sees the economy improving and thus thinks an early end (not just an end in June as originally suggested) is in order.  Bullard has been the outspoken advocate for QE.  Very interesting comment if in fact it's true.  No reason to believe this is not a direct comment from him.

"Policy is a continuous process," he said. "I would see it as possibly finishing the program a little bit shy of where we intended initially then go on pause for a while, let more information come in on the economy, see how things develop.

"If things continue to go as well as I think they will in 2001 then we can start the process of getting the balance sheet back to normal and getting interest rates up there eventually."


USD Testing Multiyear Support

This does not look good for the USD as it tests multiyear support right now.  If this does not bounce today and breaks further then there is much downside ahead.


Sunday, February 27, 2011

Coming Soon

In a few days this blog will post a redirect to something I think many will find very useful and informative.  Make sure to check back.  We have a story to tell!


Interesting Commentary From China Regarding The RMB

Part if not all of the goal of quantitative easing is to force China's hand at revaluing the RMB, thus making US exports more competitive and bringing jobs back home.  China has refused to revalue and as a result has faced growing inflation at home.  Bernanke has even hinted at times that if countries do not like the results of "our" monetary policy they should adjust "their" currency.  That's about as direct a central banker can be without writing down a country's monetary policy for them.

The choices for China are rather difficult.  Inflation, especially in the face of the global unrest that has developed recently threatens instability within their country.  Rice has now started to move up in price as well adding further pressure.  Tiananmen Square was partly a result of inflation concerns and the last thing China wants as they try to become a more dominant player in the world are pictures of tanks rolling in the street at protesters.

Should China decide to raise the value of the RMB they can fight inflation, to some extent but they risk losing jobs.  Is there much of a difference between higher inflation with a job or lower inflation without a job?  Additionally China is trying to slow down its own economy to manage what many see as a bubble in asset prices.  Chinese Premier Wen Jiabao seems somewhat concerned with the precarious situation China finds itself in a recent speech (from Reuters).

"Rapid price rises have affected the public and even social stability," Wen said.

Wen said maintaining social stability was also central to the country's foreign exchange policy, requiring a step-by-step increase in yuan flexibility so that Chinese businesses could adapt to the changes.

"If the yuan saw a one-off large appreciation, that would cause many closures of our processing enterprises and make many export orders shift to other countries and many of our workers will lose jobs."

"Let them think about that: if businesses go bankrupt, workers become unemployed and rural migrant workers go home, then what do we have to expand domestic consumption, where will increased consumption come from?"

"I have in fact said before that if price rises become linked to the problems of graft and corruption, that will be enough to spark public discontent, and even create serious social problems," Wen said.

The war between Bernanke and China is clearly on per Wen's comments.  He seems to take a soft tone and almost concedes that China will revalue the RMB over time but I suspect their timeline is not that of Bernanke who needs jobs in the US immediately, not in two years.  No one ever holds all the cards in a negotiation but clearly Wen is showing a weaker hand, something  that may unfortunately inspire Bernanke to continue QE in June.

Lastly, another comment regarding growth forecasts was rather interesting and clearly shows China is concerned about an overheating economy and managing a goldilocks scenario which many have tried and I don't think any have succeeded.

Wen also said the official GDP target was 7 percent per year for the 2011-2015 developmental plan. That rate is significantly below the average annual 11.2 percent growth during the last five-year period, but growth targets tend to undershoot actual performance.


Saturday, February 26, 2011

COT Report Week Ending 2/22

For the period ending February 22, 2011, the weekly COT report showed very few surprises.  Commercial positions do confirm the move down in copper. Commercial traders continue to be positioned for pending SPX weakness and the divergence continues to expand.    The 30 year treasury did pullback in yield (higher price) this past week but commercial traders are positioned for further 30 year treasury price weakness (higher yield).  While oil did pullback after the Egyptian crisis,  commercial traders actually increased their net short position implying a further rise in oil prices.


Irish 2011 Elections And The Winner Is...

No one knows yet... They are still counting.  Do they hand count these things?  An exit poll was released though last night and shows Fine Gael and Labour together having enough of a majority to push back on the IMF and ECB bailout.  Both parties have already vowed to work towards senior bondholders taking a haircut.  Senior bondholders include to a very large extent German and French banks which means these bailouts of any PIIGS nation is a bailout of the German and French banks.  I'm working from memory here but I think Ireland exposure alone is north of 100 billion euros.

The Irish  Times released the following poll results last night.

According to the poll, Fine Gael is on 36.1 per cent, Labour is on 20.5 per cent, Fianna Fáil has slumped to 15.1 per cent, Sinn Féin is on 10.1 per cent, the Green Party were on 2.7 per cent and Independents and Others were on 15.5 per cent. The poll of 3,500 voters was carried out yesterday. The margin of error was 2.5 per cent.