[ob] Why Interest Rates Will Explode Higher Starting Later in 2010
Why Interest Rates Will Explode Higher Starting Later in 2010 Financial pundits have been cheering the declining U.S. trade deficit, but they should be careful what they wish for. Once the U.S. is no longer running a huge trade deficit, then all those exporter nations will no longer have hundreds of billions of dollars floating around, looking for a home in Treasury bonds. Interest rates are about to start rising, and will continue rising for a generation. Words: 782 In further edited excerpts from the original article* Charles Smith (www.oftwominds.com) goes on to say: The Fed has created massive artificial demand for more U.S. debt in two ways: 1. by direct purchase of bonds being auctioned and 2. by secretly buying Treasury bonds from “primary dealers” (banks) which give the appearance that some private parties are actually buying T-bills to hold, when in fact they are only temporary proxies for cloaked Fed purchases. Now, however, as the Fed ends some of its lavish support of the Treasury debt and Congress and the Obama Administration are stepping up their borrowing to unprecedented levels it begs the question as to who will be the “buyer of last resort”. It won’t be China for a number of reasons: 1. When China’s trade surplus with the U.S. was expanding into the hundreds of billions every year, the Chinese needed a place to park all those dollars. U.S. Treasury bonds were liquid, supposedly safe and available in limitless quantities. Keeping interest rates cheap for their American “consumer” debt junkies made good sense as well. Now, however, the gargantuan trade surpluses are shrinking, and the torrent of dollars has diminished. Financial pundits have been cheering the declining U.S. trade deficit, but they should be careful what they wish for. Once the U.S. is no longer running a huge trade deficit, then all those exporter nations will no longer have hundreds of billions of dollars floating around, looking for a home in Treasury bonds. 2. China holds about $2.27 trillion in foreign reserves, about two-thirds of it in US dollars, making it the world’s largest holder of US Treasuries outside the United States, according to the US Treasury Department. Now, however, it has fewer dollars to park in T-bills and has started trimming its holdings of long-term Treasury debt. OK, let’s add this up: the two primary sources of demand for new Treasury debt are scaling back or even dumping their holdings, while supply of new Treasury debt is increasing at record levels. Thus, according to the laws of supply (increasing rapidly) and demand (falling), the Treasury’s ability to palm off hundreds of billions in new debt every few months is about to outstrip demand by a long shot. The only way to increase demand will be to raise interest rates, which will then spread to all layers of the economy. All interest rates will rise, including mortgages. There really is no escape from this conclusion and this is about 2010 through 2035, as bond rate cycles tend to run between 18 and 26 years. Just as interest rates fell for 26 years, now they will rise for a generation or so. For those who think the newly frugal American household or corporation will step up and buy the $1.4 trillion in new debt and the $2 trillion in debt being rolled over each and every year–dream on. American households were, in fact, net sellers of Treasuries in the second quarter of 2009, and on a massive scale. Purchases by mutual funds were modest, while purchases by pension funds and insurance companies were trivial. The key, therefore, becomes the banks. a) U.S. banks’ asset allocation to government bonds is about 13 percent, which is relatively low by historical standards. If they raised that proportion back to where it was in the early 1990s, it’s conceivable they could absorb about $250 billion a year of government bond purchases but that’s a big “if.” b) That just leaves two potential buyers: the Federal Reserve, which bought the bulk of Treasuries issued in the second quarter; and foreigners. Morgan Stanley’s analysts have crunched the numbers and concluded that, in the year ending June 2010, there could be a shortfall in demand on the order of about a third of projected new issuance. If the Fed and Chinese cut back, due to not having more dollars to squander on T-bills or from various other constraints, then the pressure to sell Treasuries at whatever the market demands could cause rates to explode higher, to the surprise of virtually all observers. Source: http://www.intermoney.org
[ob] Why gold price will plunge to $800 per ounce
Why gold price will plunge to $800 per ounce Davos 2010: George Soros warns gold is now the 'ultimate bubble' Gold is now the ultimate bubble, billionaire investor George Soros has declared, sparking fears that prices for the precious metal may soon suffer a tumble Mr Soros, arguably the most famous hedge fund manager in history, warned that with interest rates low around the world, policymakers were risking generating new bubbles which could cause crashes in the future. In comments delivered on the fringe of the World Economic Forum, Mr Soros said: When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold. At the World Economic Forum two weeks ago, George Soros dubbed gold “the ultimate asset bubble.” Some commentators insist that the most recent rise in the gold price, beginning in late 2008, has been driven primarily by the single factor that has caused nearly all other assets to rise during this time: the weakening U.S. dollar. Indeed, the dollar’s renewed strength over the last 60 days has coincided with the decline in the gold price from its all-time high of $1,226.50 per ounce in early December. LONDON (Commodity Online): In the last few months, we have been reading predictions and forecasts from bullion analysts who insisted and argued that gold price is booming to touch $2,000, $3,000, $5,000, $10,000 per ounce in the coming years. These forecasts have caught people’s attention who have been pouring money into gold and other precious metals all these months. But after the big surge of gold price to $1,227 per ounce some two months back, the yellow metal has been climbing down the ladder of speculation. Despite speculators going on the 'boom-in-gold-price predictions', the yellow metal price has been sinking in the last two months. If the gold price fall continues like this way, it is certain to touch down to $1,000 per ounce or below this level in the next one month, says bullion analyst Mark Robinson. Robinson, who is not a great bull on gold, says even if gold price falls to $900 or $800 per ounce, people should not complain. For those who have invested in gold some years back, even $900 or $800 per ounce is a great price tag. So, there is no room for complaints even if gold price falls to realistic levels, he said. Robinson, a keen bullion watcher focusing on China, says that the Chinese government wants gold price to plunge to $800 per ounce level. China's biggest ambition these days is to build up gold reserves. For this, the best thing that China wants is a big fall in gold price so that it can buy more gold from IMF, gold miners and from the physical bullion market, argues Robinson. It is not just Robinson who is a bear in gold price forecast. On Monday, a senior analyst with Citigroup came out with purely bearish prediction on gold. Citigroup bullion analyst Alan Heap said that gold prices could sink to $820 an ounce by 2014. Here is that interesting article that TheStreet.com published on the bearish prediction on gold: NEW YORK (TheStreet) -- gold prices could sink to $820 an ounce by 2014, in the absence of inflation or strong demand from China, says a Citigroup analyst Alan Heap, an analyst at Citi Investment Research, adds a bearish voice to a crowded debate over where the precious metal is headed. Billionaire investor James Rogers and perma-bear David Tice say gold will hit $2,500. James Turk , Author of GoldMoney, predicts $8,000, while author Mike Maloney is betting on $15,000. Over the last decade, gold prices have soared from $250 an ounce to an all-time high of $1,227 an ounce, with many analysts believing that gold is in a continued bull market despite short-term pullbacks. Heap broke with this bull view by saying in a research analysis, Gold: Paper Problems, that prices will sink to $820 by June of 2014 and head lower long term to $700 an ounce. As global economies print more money and lower interest rates to survive financial crises, gold becomes popular to own. As paper money loses value, investors turn to gold as an alternative safe haven asset. As gold prices hit a record high of $1,227 an ounce, the U.S. dollar started to move towards its all-time low of $71.40. As the dollar loses value, commodities become cheaper to buy in other currencies. Many analysts expect low interest rates, President Obama's $3.8 trillion budget plan, a raised deficit ceiling and money printing pressure the dollar and buoy gold prices. Over the last 10 years, investors have been diversifying into gold more than any other asset class. You no longer have to be a doom and gloom analyst or store gold bars in a bank in order to own the precious metal. Average institutional investors and world central banks have been increasing their gold holdings supporting high prices. Helping investors buy gold is the emergence of gold ETFs.
[ob] Why US Dollar Is Likely To Remain Weak for Awhile - Forex Currencies
Why US Dollar Is Likely To Remain Weak for Awhile - Forex Currencies Published by CNBC - November 2009 Why the US Dollar Will Likely Remain Weak for Some Time Albert Bozzo, Senior Features Editor The dollar is weak. Get used to it. The U.S. currency's fate is tied to market speculators, geopolitics and economic-trade crosswinds and will remain weak for both the short-term and mid-term, unless major governments take unusual steps to intervene. “There's been a very dominant trend since 2001,” says economist Chris Rupkey of Bank of Tokyo-Mitsubishi. “The foreign exchange market often deals with themes and it sometimes difficult to change those.” And those themes, or trends, often remain in place for years. Since 2000, for instance, the dollar has slid from a record high against the Euro to a record low. Though the U.S. currency is now very weak by historical standards, it has been this weak before. On a trade-weighted, inflation-adjusted basis, the dollar was actually weaker at two points in the 1970s, once in the 1990s and as recently as the first quarter of 2008. Of course, it was much stronger for much of the early 1980s, when it hit a record high. (see chart below) “The charts suggest this is the new reality for awhile, says Robert Brusca, chief economist at FAO Economics. “Clearly, the dollar has to be weaker. That's rational. Most economists are unwilling to declare that this is, in effect, a new dollar—weaker, of little stature and at immediate risk of losing its status as the world's reserve currency. At the same time, the greenback is unlikely to make a roaring comeback, as it did in the mid 1990s, the last time the doom-and-gloom quotient was high and market and political analysts galore were bemoaning the debilitating drag of the twin deficits (trade and budget). At that time, then-Treasury Secretary Robert Rubin essentially launched the we-want-a-strong dollar mantra, which though very effective at first, has since become empty political rhetoric. That’s where the national pride comes in. The world’s only superpower (for now) should have a powerful currency, reflecting its economic and military might. The difference this time is that a new economic-military superpower with a huge trade surplus is emerging: China. Given all this, it may be difficult, if not impossible, to achieve a strong dollar again. Nor will it become some sort of Banana Republic peso, even with the federal borrowing binges of the Bush and Obama administrations. “I don’t think there’s a new norm, or era, dollar,” says Rupkey. Interest Rates: Changing Dynamic Conventional wisdom says that exchange rates are mostly a reflection of interest rates. The higher the rate, the more attractive the currency, as investors seek the best return on their investment. Many of those dollars get used to buy Treasurys or other U.S. assets. Right now, not only are official U.S. rates at rock bottom, they are about a full percentage point lower than those set by the European Central Bank. Though many expect the Federal Reserve to be among the first to raise interest rates as the global recovery kicks, that is unlikely to happen until late next year. “This environment automatically allows leverage speculators to short the dollar and buy gold short-term,” says veteran Fed and dollar watcher David Jones of DMJ Advisors. “Then there’s the carry trader—you borrow in low-interest dollars and invest in commodities currencies, like the Australian Dollar and Brazilian Real, and that makes the dollar even weaker. That will happen as long as Fed is easy.” What's more, the economies of both those countries have grown enormously during the recent commodities boom, which has cushioned the blow of the global recession. Australia, for instance, raised rates months ago. In the current post-crisis environment, there may be more than meets the eye to the classic interest-rate dynamic. Veteran Wall Streeter Ram Bhagavatula, now managing director at the hedge fund Combinatorics Capital, recently analyzed the major economies since 2008, looking at GDP, payrolls, productivity and interest rates. Next to Canada, the U.S. had the mildest recession. At the same time, payrolls here were cut the most, while productivity surged. Which currency should be going up? It's the dollar, says Bhagavatula. There's an issue with policy structure. An analysis of central bank policy showed the Fed stands out as the central bank with the most explosive stimulation. This accommodation was a substitution for rate cuts. In other words, the accommodation is a proxy for interest rates and the accommodation is much bigger than it appears. The policy of accommodation has outlived its usefulness, Bhagavatula says. Still, other economists say any interest rate differential in favor of the U.S. may be both fleeting and modest. Since it’s inception around the turn of the century, the ECB has erred on the side
[ob] why??
hari ini hampir semua index di eropa mengalami kenaikan juga di asia index hangseng dan shanghai , nikei juga di tutup ijo royo royo terus kenapa ihsg kita koq ada di zona merah yaa??
Re: [ob] why??
kasih discount dong, masak dikasih discount malah curiga?... 2009/10/26 Yeremia Djoe richd...@ymail.com hari ini hampir semua index di eropa mengalami kenaikan juga di asia index hangseng dan shanghai , nikei juga di tutup ijo royo royo terus kenapa ihsg kita koq ada di zona merah yaa??
Re: [ob] why??
hahhahaha kalo itu si setubuh bro From: Heru Susanto h3ru.sus4...@gmail.com To: obrolan-bandar@yahoogroups.com Sent: Mon, October 26, 2009 4:13:36 PM Subject: Re: [ob] why?? kasih discount dong, masak dikasih discount malah curiga?. .. 2009/10/26 Yeremia Djoe richd...@ymail. com hari ini hampir semua index di eropa mengalami kenaikan juga di asia index hangseng dan shanghai , nikei juga di tutup ijo royo royo terus kenapa ihsg kita koq ada di zona merah yaa??
[ob] Why the Markets Are Up
Why the Markets Are Up To understand the rally, recognize that the GDP statistics you are reading are already out of date. By Barton Biggs | NEWSWEEK Published May 2, 2009 From the magazine issue dated May 18, 2009 Equity markets around the world are surging in the face of the sickest global economy in more than half a century, a crippled banking system that needs billions of dollars of equity capital, a flu scare and house prices that are still falling at a dizzying rate. On April 30, the front page of The New York Times read ECONOMY SLIDES AT FASTEST RATE SINCE LATE 1950S. That same day, the German finance minister said his country would suffer the worst recession since the Second World War and that other European economies were in dire straits. The declines have been even more severe in Asian economies such as Japan, Korea and Singapore, and most experts are skeptical about the better numbers from China. The great minds of the investment world and the most highly regarded economists are preaching gloom and doom and a generation of wealth destruction. The question now: why are stock markets going up when so many economic numbers are going down? First, recognize that the statistics you are now reading are already out of date. The U.S. government reported on April 29 that real GDP fell 6.1 percent in the first quarter after a 6.3 percent drop in the fourth quarter, the steepest six-month decline in 50 years. Yet U.S. stocks rallied to a new recovery high the same day. Why? Because beginning in mid-March, there were signs of what Ben Bernanke called green shoots in the real economy, namely that the rate of decline, or the so-called second derivative, was decelerating. Some investors began to believe the world economy was bottoming out. Now those green shoots are budding into foliage. In the last couple of weeks, there have been signs that the U.S., Germany and Asian economies are on the verge of not just bottoming, but rebounding. It's beginning to appear that real GDP growth could be positive in the second half of the yearmaybe even sooner. Leading indicators, including new orders and the purchasing managers survey, are rising. New home sales, the best leading indicator of the price of existing homes, seem to be stabilizing. Historically, the steeper the GDP decline, the stronger the rebound. Ed Hyman, the most highly regarded Wall Street economist, is talking about 4 percent real growth in the third quarter. The second key reason markets are up is that most of the gloomy news that is on television and the front pages is already discounted in stock prices. Equity markets are looking ahead, not behind. Remember, this brutal bear market began in the summer of 2007, when the world still appeared to be booming. As for the great minds, once they become celebrities they are wedded to their views. These newly minted heroes dash off books, and get paid big speaking fees. They become committed to their forecast. This is not just true of bears; it happens in bull markets, too. The point is that it is very hard now for the bears to reverse their position. Only the really good ones will. The third reason equity markets are rising is the unparalleled amount of cash on the sidelines, which will eventually have to be invested. Money-market-fund cash is at a record 40 percent of the total U.S. market capitalization. Professional sentiment, which we monitor systematically, has risen some in recent weeks, but it is still extremely pessimistic. Major pension funds and endowmentswhich for decades have automatically sold stocks when they went above a preordained portfolio level, and then bought back into them when they went below the minimumhave suspended automatic buying out of fear. The 25 percent rise in prices we have already experienced puts immense pressure on them to at least get back to their minimums. The pain of missing a bull market is very severe. My guess is they will soon be buyers. We are talking about billions of dollars here. The fourth reason for the rally is that credit and money markets have improved dramatically. Spreads on everything from high-grade corporate credit to junk bonds have narrowed. The three-month interbank lending rate, which affects so many other rates, has fallen from its recent high of 4.82 percent (right after Lehman failed) to 1.02 percent. And, of great importance, a large number of high- and low-grade credit deals are getting done. Many analysts call this just a bear-market rally, which has about run its course and should be sold. Instead, I believe this is a cyclical bull market within a broad trading range, which means prices could go up another 10 percent to 20 percent. One signal to do some selling will come when you're hearing about how much better the world is looking on CNBC television and from your friends. Another warning will be when the market no longer goes up on good news. We've still got huge legacy
[ob] Why metal rules this week?
SN 3M 13450 13550 +1000 NI 3M 12495 12595 +545 Smart money enter first even against fundamentals as they anticipated there will be better earnings in the coming months as metal prices climbs
[ob] Why Wave Analysis Beats Out Fundamental Analysis...
http://www.elliottwave.com/freeupdates/archives/2009/04/09/Why-Wave-Analysis -Beats-Out-Fundamental-Analysis.aspx Why Wave Analysis Beats Out Fundamental Analysis http://www.elliottwave.com/images/dotted_line.gif http://www.elliottwave.com/images/transparent_spacer.gif By Susan C. Walker Thu, 09 Apr 2009 15:00:00 ET http://www.elliottwave.com/images/icons/email.gifEmail http://www.elliottwave.com/features/email_to_friend.aspx | http://www.elliottwave.com/images/icons/printer.gif Print http://www.elliottwave.com/freeupdates/archives/printer/2009/04/09/Why-Wave -Analysis-Beats-Out-Fundamental-Analysis.aspx | RSS Feeds Generated by Elliott Wave InternationalRSS http://www.elliottwave.com/rss/info.aspx | http://www.elliottwave.com/images/icons/newspaper.gif My Updates http://www.elliottwave.com/free_newsletters/update.aspx?articleid=835 Bookmark and share It! http://www.addthis.com/bookmark.php http://s9.addthis.com/button1-share.gif http://www.elliottwave.com/images/transparent_spacer.gif http://www.elliottwave.com/images/dotted_line.gif As the major stock markets turned down in late 2007 and then started to rally in recent weeks, many people who believed in fundamental analysis have begun to question its validity. Bob Prechter has long called for the bear market we are now in the midst of. (Yes, the current market move is a bear-market rally, not the beginning of a new bull market). And along the way, his methods have been criticized. Here are his most succinct arguments as to why wave analysis outdoes competing forms of analysis. * Excerpted from Prechter's Perspective, re-issued 2004 Q: Suppose everyone agreed, The Wave Principle is not always right, but it really is the answer? Bob Prechter: Well, let me begin my answer with a quote from a national financial magazine dated October 1977. Over the last few years, the Wave Principle has gathered too much of a following and, therefore, it has less value today. Almost invariably, you can write off a technique when it gets too much of a following. How does this statement look in light of the decade that followed it? Elliott had one of its greatest successes. Like the Energizer Bunny, it keeps going and going. And I believe its next success will be its biggest ever. The Principle itself is undoubtedly on an upward spiral of acceptance: three steps forward and two steps back. Now let's suppose that a large number of educated people accepted the Wave Principle, which is not an impossible idea for, say, a thousand years from now. There would still be room for differences of opinion on the market and the future. And there are countless other factors. Even people who practice the craft don't necessarily take action when they get a signal. Unconscious doubt and worry often foil people's actions. Very few traders have the emotional strength to turn even good analysis into profits. _ How http://www.elliottwave.com/single-issues/ff/0904FF_Analyzing_a_Bull_Move_In _a_Bear_Market.aspx?code=frcparticleid=835 To Keep Up With a Bull Move in a Bear Market. When financial markets turn up in a bear market, it's tempting to think that a new bull market has started. Elliott wave analysis tells us, though, that the latest moves are a bear-market rally. Rather than being swept away by wishful thinking, take a moment to subscribe to the latest Elliott Wave Financial Forecast. Read http://www.elliottwave.com/single-issues/ff/0904FF_Analyzing_a_Bull_Move_In _a_Bear_Market.aspx?code=frcparticleid=835 more here. _ Q: The Wave Principle is intrinsically contrarian. Does it have some built-in defense against becoming the consensus? Bob Prechter: I think so. The Wave Principle is a description of natural human behavior. This is what human beings are; this is part of their nature -- how they behave. In order for markets to continue to go through these stages, a part of human nature must be to believe that such theories of mass psychology are incapable of being true -- that is, something not worth examining. They must be primed to accept bullish arguments at tops and bearish arguments at bottoms. That means they have to be ever open to bogus theories of market behavior. How else will they create the patterns that fear, greed and hope produce? Q: How big us the pool of analysts who rely on the Wave Principle? Bob Prechter: I think there are quite a few people who are proficient in applying Elliott to past and present markets, say, perhaps 1% of all technical analysts, which is a pretty good number of people, I suppose. A lot of those are my subscribers, and they learned it through studying the Theorist. However, as far as the number of people proficient at applying the Wave Principle for forecasting market turns, which is significantly more difficult than applying it in real time, I think there are very few. Q: This has been the basis of some criticism. To quote one critic, relying on arcane methods does have
