Contrarian Stock Market Investing News - Featuring Bargain Stocks » Treasury Market

Yen, Dollar Gain vs Euro on Lower Equities

Contrarian Profits — Wed, 22 Jul 2009 15:30:31 +0000

The yen and the dollar edged up against the euro today, Wednesday, as falls in equities and oil prices dampened investors’ appetite for riskier assets.

U.S. S&P 500 equity futures were down 0.7 percent , which increased demand for those currencies which typically gain in times of risk aversion and weighed on higher risk currencies such as the Australian dollar.

Sterling pared earlier steep losses, however, after Bank of England minutes showed policymakers voted unanimously to maintain their quantitative easing target.

Analysts said Federal Reserve Chairman Ben Bernanke on Tuesday dented sentiment when he said U.S. interest rates would stay low for some time.

“The dollar has found a bit more of a stable footing, which is largely a function of what Bernanke said yesterday,” Bank of Scotland Treasury market economist Kenneth Broux said.

“There is no reason for the Fed to hasten its way out of QE, which should dampen some of the recent excitement on equity markets,” he added.

By 1208 GMT, the euro fell 0.5 percent to 132.55 yen , while it dipped 0.1 percent against the dollar at $1.4200 .

Traders reported hefty options activity in euro/dollar at $1.4200, set to expire later in the day. A holder of a digital option will get payout if spot is above $1.4200 at expiry, while other expiries at $1.4200 are thought to total 1 billion euros, market participants say.

On Tuesday the euro hit a seven-week high on Tuesday at $1.4278 , close to its peak for the year.

The dollar fell 0.3 percent against the yen to 93.36 yen .

Reaction in the euro was limited, however, after data showed euro zone industrial orders data unexpectedly fell 0.2 percent in May, compared with forecasts for a 1.9 percent rise month-on-month.

“It looks not really consistent with what we had seen for the euro area…so I have some doubts if we do not see a substantial revision of this May reading at a later stage,” said Juergen Michels, economist at Citigroup.

STERLING OFF LOWS

Sterling fell 0.2 percent against the dollar to $1.6410 , well above an earlier low around $1.6311.

The minutes from the Bank of England’s latest policy meeting showed a 9-0 vote to maintain the 125 billion pound asset-buying total and keep interest rates at 0.5 percent.

The market took this as a signal that UK quantitative easing could be at or near an end — suggesting the economy may be starting to recover — and sterling gained as a result.

“The MPC minutes should be bullish for sterling,” Bank of Scotland Treasury’s Broux said.

The Australian dollar fell 0.4 percent against the dollar to $0.8154 and by 0.4 percent against teh yento 76.14 , dented as oil prices fell below $65 per barrel.

“Levels look quite stretched for these big gainers,” said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

Investors awaited further comments from the Fed’s Bernanke later on Wednesday, this time before the Senate Banking Committee.

Bernanke will repeat his testimony before the Senate Banking Committee at 1400 GMT, and then take questions

July 22 (Reuters)

Why is the Fed Bailing Out Foreigners?

Russell McDougal — Mon, 20 Apr 2009 17:45:44 +0000

You may have noticed that most of my articles are pretty in depth and lengthy. A fellow IDE editor recently pointed that out and issued a challenge … “I bet you ten bucks you can’t write a one page essay.”

While no names will be mentioned I will soon document receipt of a $10 Federal Reserve Note (while it still holds value).

You know I write about the Fed a lot. They are at the epicenter of the American and global economic and monetary crisis. These same elitist powers now want to take their act world wide. The Fed’s 100-year reign has all but ruined this country. Only a second American Revolution that totally dismantles this monstrosity and strips away the power of those behind its curtain will allow us to once again function according to our founding roots.

In late 2007 I proclaimed 2008 would be “the year of the bailout”. What a dummy … thinking just one year would suffice. Neither did I suspect bailout money would find its way overseas. What do you expect from a mere dentist?

The Fed is busy handing over trillions of dollars to well-connected US based cronies. The sum of present promises is close to $13 trillion and counting. These are monstrous commitments on yours and your children’s behalf. Please reply at the bottom of this piece if any of this money has found its way to your doorstep.

Fed digital-entry funny money has also been sent to France’s Societe Generale ($11.9 billion), Germany’s Deutsche Bank ($11.8 billion), Britain’s Barclays PLC ($8.5 billion) and Switzerland’s UBS ($5 billion). Yep, these foreign elite banks were provided these funds through the perpetual AIG bailout. The overall plan includes sending hundreds of billions of dollars in “currency swaps” to foreign banks. The blood boils.

You can also rest assured that we are at the mercy of many foreigners at this point. If China, Japan or Middle Easterners dump the Treasuries they hold or refuse to buy more, the Treasury market and the dollar will tank. Nothing like compromising foreign policy.

Why do you think the Fed sends this unfathomable amount of money to foreign entities?

They are charitable.
The global system is so fragile that no domino can fall.
Blood is thicker than water. Elitist connections rule. Period.

Could it be that the Fed bails out foreign entities because the Fed itself is largely a foreign entity? Home and abroad, the Fed takes care of its own first and foremost. You’d better protect yourself.

Source: Why is the Fed Bailing Out Foreigners?

Sell These Assets Before The Ground Gives Way Beneath Them

Bill Bonner — Mon, 15 Dec 2008 16:03:53 +0000

The ground is giving way beneath our feet: Sell the dollar…Sell Treasuries. People still stand their ground…they do not panic. They do the right thing. But then, they go into work – but find they have no jobs. They look at their pension account – wisely invested in a diversified portfolio – and find that it has lost half its value. And their houses lose 20% of their value. In places such as San Diego, Las Vegas and Miami, the losses are more like 30%- 40%.

The ground gives way…and they find themselves in Hell.

Friday, the Dow registered a 61 point improvement, after much disappointment the day before. Is the rally on or off? We don’t know…

But what MUST happen, WILL happen. Fish gotta swim. Birds gotta fly. And bubbles gotta pop. The bubble in private debt has popped already. And now, the bubble in public debt has to pop too. And the dollar’s got to go down. That’s when the ground will really give way… For many people, the collapse of the dollar will wipe out what is left of their assets. Pension funds and insurance companies will be devastated. Savers will be unsaved.

Investors have rushed from risky investments of all sorts – emerging markets, mature markets, real estate, commodities – into the strong, welcoming arms of the US Treasury market. “Give me your tired, your poor huddled masses of dollars…yearning for protection from capitalism,” says Uncle Sam. “And I’ll give you 2.58% return over 10 years. Give me your money for 91 days, and I’ll give you nothing.”

Is that a good deal, dear reader? It depends on how solid the ground is under the US Treasury market. So far, as the ground gives way under other asset classes, the Treasury market has held solid.

But here is why the word “must” was invented. When something’s gotta happen, it’s gotta happen. The US Federal government already has an official national debt over $10 trillion. The deficit for next year will likely exceed $1 trillion…and could reach up to $2 trillion by 2010 – or more than 4 times the biggest deficit the country has ever run…and more than the entire US budget only 7 years ago. At this rate, in a couple of years, US debt will exceed US GDP.

Is it likely that the feds can so greatly increase the quantity of US debt without reducing the quality of it? Is it likely that the last IOU issued by the federal government will be as valuable as the first? No, it’s not likely. Something’s gotta give.

And we are talking about big money. A business or a small government can sometimes borrow more than its annual revenues. It’s borrowing can be funded by a small percentage of the world’s reckless savers. Lending to US government on such a scale is another matter. It takes up a large percentage of the world’s total savings, effectively shouldering other borrowers out of the way, and actually reducing the world’s capacity for economic growth.

Everybody, except bankers of course, knows that lending large amounts to a small country is extremely speculative. But lending to the US for ten years at 2.58% has a nasty stink of certainty about it. You can’t borrow that kind of money without some consequences…and the consequences of that much debt are bound to be bad.

To us, it seems almost inevitable that it will turn out to be a bad place to put your money. Because the ground is almost sure to give way beneath the feet of Treasury-market investors. How so? Ben Bernanke has already told us. When the borrowing gets tough, the Fed will turn to other forms of liquidity – buying US treasury bonds itself. In other words, instead of borrowing from savers – thus leaving the net money supply unchanged – the Treasury will borrow from the Fed. Where will the Fed get trillions of extra dollars? It will create them out of thin air.

That’s why the dollar has turned down.

“Greenback’s haven status thrown into doubt,” reported the Financial Times.

Last week, the euro jumped to $1.33 – a level it hasn’t seen in many months. And gold keeps edging up. It’s up to $820 an ounce as of last week.

The dollar is Hell-bound, dear reader. Sell it. And sell Treasuries too. We might be early with this advice. But we won’t be wrong.

*** If you want to own gold coins, you’ll pay $870 – $890 an ounce. Coins are scarce. People are looking for something solid to hold onto. Coins are solid. They are portable. They have no hidden liabilities.

And you won’t pick up the paper and find that a crook like Bernard Madoff has stolen away the value of your gold coins. The latest Wall Street desperado took investors for some $50 billion. And now the FBI, SEC and all the gumshoes and hacks are making a big deal of it.

Of course, in purely financial terms it is a big deal. The press has labeled it a “ponzi scheme.” But Charles Ponzi took in only $10 million. Peanuts compared Madoff’s scheme.

Another important difference. Ponzi took money from ordinary investors, widows and orphans. But Madoff went for bigger game – hedge funds, banks, and professionals. Today’s news tells us that the world’s largest bank – HSBC – was a victim. Banks in Geneva said they were out $4 billion. The Fairfield Greenwich Group said it had invested $7.5 billion with Madoff.

Of course, we don’t like to see widows and orphans get scammed. But hedge funds? Banks? Who can honestly say that they don’t enjoy seeing these mighty moneymen tripping over their own greedy delusions? Here at the Daily Reckoning…the news of Wall Street’s losses cheers us up…like reading the obituaries and finding no mention of our own name.

But when you own a gold coin you won’t have to wonder if the balance sheet is made up…or if the trades were fictitious…or why the SEC was asleep at the switch. A gold coin is what it is…no more, no less.

When the ground gives way…gold coins stay right where they were – or go up in value.

Not that we’re urging you to buy gold coins. We did that for the last 8 years. Now, you’re on your own.

*** Word from the Washington Post is that autoworkers are “angry.” Why should they be angry? They’ve been paid far too much (compared to autoworkers in, say, India) for far too long. Now their gravy train seems to be stalled on a sidling and they want the government to “do something” to get it going again.

It isn’t fair for the feds to bail out Wall Street but not Detroit, they say.

Elsewhere in the news, Bloomberg has asked the Fed to reveal what it did with the $2 trillion in emergency loans it passed out. Surely, the money went to the Fed’s clients – banks, and financial institutions generally. How? To whom? What were the terms? The Fed wouldn’t say. It refused the Freedom of Information Act petition on several grounds.

“Blank check for banks, pink slips for Detroit,” is how Gretchen Morgenson explains it in the New York Times.

The UAW (United Auto Workers) has a point, of course. Neither industry should be bailed out. But if you’re going to throw money around in Manhattan, why not toss some to Detroit?

But the autoworkers can stop kvetching. Detroit will get its bailout too. Just wait.

*** “What Hell Really is…” said the sign in front of a church in Arizona. “Choir practice at 4 PM!” was the next line.

Source: Sell These Assets Before The Ground Gives Way Beneath Them

Congress Berates, Rebukes and Ridicules Executives from Five Major Oil Companies

Chris Hancock — Fri, 06 Jun 2008 21:04:01 +0000

Gas prices hit another record high. Soaring food prices ignite riots the world over. It should come as no surprise that a 71% increase in food prices since 2006 has the good citizens of South Africa, Morocco, Egypt, Ethiopia, Bangladesh and Mozambique up in arms.

And if you thought things couldn’t get any worse, the Financial Times reported on Monday that U.S. mortgage rates soared last week amid a sharp rise in Treasury market yields. Make no mistake, inflation’s back. A Volker-like response may seem alarmist, even far-fetched, to many. However, investors are bracing for the Federal Reserve to raise rates going forward.

At least those rate increases could help U.S. Treasury Secretary Paulson fulfill his recent promise to “defend the dollar.” Secretary Paulson is on the final day of a four-day trip to Saudi Arabia, Qatar and the United Arab Emirates to negotiate currency and economic issues (i.e., a supply increase) from members of the OPEC cartel.

Shall we say America’s relationship with OPEC is a bit strained? Perhaps we’ve stayed a bit too long and expected a bit too much. The greenback keeps sliding down a cliff. Oil-producing states holding their dollar currency pegs are importing more and more inflation. At some point, both parties must reconcile that M3 – the fullest measure of U.S. money supply – can’t outpace a nation’s GDP forever.

Regardless, the Fed seemed content to exchange $16 billion worth of Treasury notes for mortgage- and asset-backed securities last Thursday. In its 10th Term Securities Lending Facility (TSLF), the Fed gave desperate investment houses another chance to dump their worthless derivatives for good ol’ American IOUs. To date, brokerage firms have dumped $175 billion on the Fed’s balance sheet.

Even holders of the mighty euro are feeling the pinch. We read in The Economist last week that customs seizures of counterfeit goods rose by 17% in the EU last year. Cigarettes and clothing accounted for more than half the sham gear seized.

It seems like desperate times call for desperate measures. And the masses, desperate for answers, call on politicians for help.

And any political production worth its salt has three main characters: the hero, the martyr and the villain. Heroes (politicians) need a martyr (America’s middle class) and a villain (oil companies) – and, if they’re lucky, a super villain (foreign oil companies).

Our colleague Eric Fry sums it up best: “When share prices soar, we call it a ‘bull market.’ When home values soar, we call it ‘healthy price appreciation.’ But when oil prices soar, we call it ‘speculation’ and ‘manipulation’…and then we gaze around for someone to blame.”

The members of Congress recently convened a special hearing to berate, rebuke and ridicule executives from five major oil companies. Each congressional inquisitor took a turn excoriating the oil companies for daring to earn a profit, especially when so many Americans have so little money. It just isn’t fair.

A few months earlier, you may recall, Congress invited the heads of America’s leading financial institutions to a little tête-à-tête. During that encounter, the congressional inquisitors took turns admonishing the finance CEOs for feathering their nests a bit too lavishly. But none of the execs in attendance drew much criticism for frittering away billions of dollars of shareholder wealth.

Therefore, the essential message from the nation’s top lawmakers is clear: Losing billions of dollars of shareholder wealth is a bad thing, but not nearly as bad as adding billions of dollars to shareholder wealth. In fact, earning billions for shareholders is such a bad thing that it must be legislated away or taxed into extinction.

Where were the nation’s top legislator-inquisitors when the NASDAQ bull market of 1999 and 2000 was powering higher? Where was the outrage over the “speculation” that produced obscene “windfall profits” for the Wall Street firms?”

We’re not so sure. But we continue to see that many in the West want to go through life pretending they’re still the greatest story never told.

It comes as no surprise. From Dutch tulips to dotcoms, people fool themselves into believing it’s “different” this time.

It’s never different this time.

Christopher Hancock
for The Daily Reckoning Australia

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Source: Congress Berates, Rebukes and Ridicules Executives from Five Major Oil Companies