The Credit Crisis Financial Stocks Short Journal

Any news in particular causing the big move up (in price) in the short end? Not complaining, just sayin' ...

 

Disregard last post. Apparently rumors are flying about a QE part deux announcement.

$ is getting crushed. The disintegration of the $, the jazzed up economic numbers, the Buffet pimping, etc. are all the sorts of things you see in Mexico prior to an election - juice the money supply, paper things over, talk up the economy. Don't expect to see any sort of significant stock pullback between now and November. If you do, it means that the authorities have lost control and you should look out below.

The AUD is soaring - within a couple of cents of its all time high, reached in 2008 at the peak of the oil and commodity bubble.

When I began buying Aussie short rate futures, I was worried that I could profit on the trade and still lose if the AUD collapsed in price. Well, the trade is somewhat profitable, but the AUD has actually strengthened quite a bit (at least against the $). My hope is that this AUD strength makes it less likely that the RBA has to tighten/more likely that they ease.

 

The idea that currency interventions dont work is wrong in my view(In particular for weaking a currency). Its a matter of how committed the central bank is, a fixed exchange rate is nothing more than permanent intervention. If the BOJ wanted JPY at 95 they could do it within hours, they would have to give up control of interest rates and the money supply though(the money supply would be whatever was needed to keep the Yen there)

That said I dont believe the BOJ will be agressive enough

 

Gross dumps USTs, thinks they are too high
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a.8LqP9Rv2M8&pos=7

 

Unlike in previous forays, the Bank of Japan will not drain the money flowing into the economy as a result of the yen selling, sources familiar with the matter said.

That indicated the central bank plans to use the sold yen as a monetary tool to boost liquidity and support the economy.

Authorities that sell their own currencies to weaken them often issue bills to “sterilize” the funds and keep the excess money from becoming inflationary. In Japan’s case, it wants to promote inflation since the economy has been dogged with deflation for much of the past decade.

“The government’s aim, and the aim of authorities in general, is to add monetary injections to the economy,” Callum Henderson, global head of foreign exchange strategy with Standard Chartered in Singapore, told Reuters Insider.

“Unsterilized intervention should be yen-negative, it should be very bullish for higher risk assets, very bullish for stocks in Japan and obviously it should add to the impact of the intervention of the yen,” he said.

Another name for this is Quantitative Easing. It was one of the options outlined by the Bernanke 2002 speech(printing up money to buy foreign exchange)

 

Unsterilized intervention would be a new policy for Japan. What is this guy's source?

 

dont know, got it from the Felix Salmon blog

 

I believe the people who are excited about QE, dumping dollars and buying gold are going to be quite disappointed next week. The Fed wont feed them candy in my view, unless the CPI figures are just terrible

 

Well bonds have gotten hammered in this recent move as well. Even the front end yields are up a few basis points. IF QE were driving the action of the past few weeks, one might have expected bond yields to drop, and without a doubt, the front end yields would have fallen.

In case you haven't been paying attention, the $ has been going down all summer, way before QE part deux was ever being discussed. Gold has been in a bull market for nearly a decade.

Whether the Fed makes some sort of QE part deux announcement or not is irrelevant. The fact is that monetary policy will continue to be extremely accommodative.

 

http://blogs.wsj.com/economics/2010...defaults-account-for-most-of-pared-down-debt/

After reading this I just realized that foreclosures decrease the M2 money supply. People can default to avoid paying the debt(in theory this would help the M2 to not decline) but when their home is foreclosed the bank will get some kind of money supply and deposit it at the Fed. So a lot of the pressure on M2 growth will come down the pipe as the efforts to prevent foreclosures have been big but that will have to occur otherwise people will live rent-free, also they will remain for many years in the system