Midwinter Days

Tue, 2010/12/14 - 7:56am | Your editor

If you blink you find that the dollar has fallen. It did yesterday while I was travelling to and in London with plans to spend money in cheap sterling. The move was, probably, related to the Fed's meeting to determine whether or not quantitative easing will continue despite the latest congressional compromise over further government deficits. The fear is that the Bernanke bond-buying and money creation will continue, given that housing and jobs remain deeply depressed in the USA.

While the Greenback fell against most currencies despite the higher yields on US Treasury bonds, sterling, which is what I am spending this week, followed the dollar down. Phew. But it turns out that British inflation at 3.3% will zap my ability to spend. The target missed was 2%.

The yen rose despite Japan announcing a QE2 all its own. The Australian dollar is at parity. Other commodity exporters are up too because of the Chinese decision not to raise interest rates short term.

The euro also rises. This Hemingwayesque outcome is subject to revision when it becomes clear that nobody in the EU has any idea of what will come next. This will be when the policy-makers return from their ski junkets or Caribbean holidays. Or when they have done buying cheap Florida apartments for their future vacations. Or whatever they are doing now.

Yuletide cheer is intended to make up for the freezing cold of Northern European Decembers. The Lewis perch by the River Thames is Absolutely Freezing despite 24 hours of full blast from the boiler at Mudchute Manor fighting against the icy blasts off the river and the howling winds from the garage under my feet. If I could type with woolly gloves on I would. The super says to hammer at the radiator, which sounds like exactly what my mother would have done when I was a kid growing up in New York City. I always assumed she was banking to make the super stoke up the boiler, but no, it removes air bubbles or dropped valves.

 

Meanwhile it is only the prospect of bibulous meals, mince pies, eggnog, greasy great puddings, and shopping that keeps me from hiding under the eiderdowns. This is the last full trading week of the year 2010 with maximum 3 ½-day trading on bourses next week and the week after. So I type on, thinking of the souks of Marrakesh for my Christmas and New Year.

It is even worse for Frida Ghitis, deputy editor, in Paris, suffering not just from the cold, but from the need to do her tourist stuff in high places like the Sacré Coeur and the Eiffel Tower and the roof of the Pompidou Center. Moreover, as a Latina, she is used to clement climes. She will be on call in Amsterdam while I bask in the sun. Until then, I skip tourism when it is this cold and just cultivate friends.

Which leads to a sad conclusion: I mourn the most brilliant internationalist of my generation of U.S.-born offspring of German-Jewish refugees, Richard Holbrooke, diplomat, journalist, head-knocker negotiator, mentor. Our paths first crossed when Dick was in purdah during the Nixon Administration, editing the then-fledgling Foreign Policy magazine, after dissenting over the Vietnam War. I was on Capitol Hill working for a liberal Republican dissident, Sen. Clifford P. Case. Back then there were liberal Republicans. Dick got back into the diplomatic dance dealing successfully with post-breakup Yugoslavia and the UN, and most recently bringing his considerable talents to trying to resolve the Pakistan-Afghan mess. He will be missed.

 

Today's blog is (surprise, surprise) mainly about British companies, with the odd note from more exotic places which may be warmer like India, Israel, and South Africa, and one where it should be colder, Russia. I sure hope that Marrakesh will be cozy over Christmas and New Year's when we go there for a deep investigation of the phosphate market. But with all this global warming who knows?

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Marxist Home Schooling

Sun, 2010/12/12 - 3:16pm | Your editor

Contrary to what you might think, home schooling is an extreme left-wing idea. And it is not only protective parents worried about moral decay and children being swayed by others who want to keep their offspring out of the classroom.

No less a leftist than Karl Marx wrote in his 1875 critique of the Gotha program that "elementary education through the state is altogether objectionable".

Marx went on to write that governments, aside from setting qualifications for teachers, setting up branches of instruction, "and supervising the fulfillment of these legal prescriptions.. should be excluded from any influence on the school."

I am indebted to Prof. David L. Bruch, of the University of Puerto Rico, San Juan, for this startling information posted in The Bronx High School of Science Alumni News. I was not home-schooled and attended Science. 

More for paid subscribers as I prepare to sail off into the sunrise, for a semi-working holiday in London and Marrakesh over Christmas and New Year's.

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Gagging

Sat, 2010/12/11 - 11:25am | Your editor

This is a note for paid subscribers only.

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Trading Alert

Thu, 2010/12/09 - 1:57pm | Your editor

The Bernank

Thu, 2010/12/09 - 12:12pm | Your editor

 

Yesterday the US 10-year bond rose 14 basis points to 3.33%, a very significiant rise given the current low yield levels. Then the price fell back as buyers appeared, down 9 bp.

A combination of factors is to blame, like the likely extension of the Bush tax cuts, a tax break and absolutely no spending cuts coming but more spending in view. This means a biiiig US Federal deficit. European disarray spilling over onto US bond markets is a factor. And some observers who hate the Federal Reserve will blame the QE2 policies it is pursuing, for higher interest rates. Frankly, QE2t is stale news not moving markets now.

More likely, methinks, it's realization that the recovery is on track so there will not be much more printing of money, boosting intererest rates. Yields going up as bonds are harder to sell causes a lot of money to flow into dollars. Our Greenback long position remains sustained.

Adam Carr writes with an overnight view from ICAP in Australia:

 

It looks like those tax cuts have caused a bit of a long squeeze and there is plenty of chatter about how the additional stimulus, well the continuing stimulus, may result in the Fed cutting short their QE2 plans, which is awesome if you live in fairyland and think Bernanke was actually targeting growth or inflation (or whatever).

For others, the Bernank is just monetising debt and trying to force a rebalancing of global growth, in which case the tax extension is unlikely to force a re-think of QE2 (quite the opposite). Either way, treasuries are a sell, although how much further they can go is unclear. I thought 3.25% would be the upper limit in this new range although we're there already. And then of course global data continues to surprise on the upside. It's pretty obvious that material 2H slowing didn't eventuate and Q4 growth is looking rock solid; it not inconceivable that 10yrs [T-bond] could be closer to 4% over coming weeks.

Check out global industrial production, recovering at a rapid clip. German industrial production, out last night, again surprised on the upside. At 2.9% the October production figure was almost 3 times the market expectation. German exports dipped in the same month, yep sure, but this comes after a very strong September figure. It's all good. Even the Brits are having a good run with their manufacturing output and according to the Confederation of British Industry, this may get better still with the new orders index rising to -3 (highest in over 2yrs) from -15 and a median expectation of -13. With all that to consider I think there is only one way for bonds to go (medium term).

 

He means lower in price as yields go up. Professionals never spell it out. Do not buy Treasuries. You do not have to short them although my former Economist colleague John Thomas, the Mad Hedge Fund Trades, is selling short Treasuries on the wolrd's economic pickup.

More for paid subscribers in my last NY note for 2010 follows from Canada, Switzerland, Brazil, Greece, Israel, Sweden, and Australia. Tomorrow is my Confucius SUNY event, not related to the Confucius Prize China just invested to undermine the Nobel Prize. Sunday I fly to London.

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The Bernank

Thu, 2010/12/09 - 12:12pm | Your editor

 

Yesterday the US 10-year bond rose 14 basis points to 3.33%, a very significiant rise given the current low yield levels. Then the price fell back as buyers appeared, down 9 bp.

A combination of factors is to blame, like the likely extension of the Bush tax cuts, a tax break and absolutely no spending cuts coming but more spending in view. This means a biiiig US Federal deficit. European disarray spilling over onto US bond markets is a factor. And some observers who hate the Federal Reserve will blame the QE2 policies it is pursuing, for higher interest rates. Frankly, QE2t is stale news not moving markets now.

More likely, methinks, it's realization that the recovery is on track so there will not be much more printing of money, boosting intererest rates. Yields going up as bonds are harder to sell causes a lot of money to flow into dollars. Our Greenback long position remains sustained.

Adam Carr writes with an overnight view from ICAP in Australia:

 

It looks like those tax cuts have caused a bit of a long squeeze and there is plenty of chatter about how the additional stimulus, well the continuing stimulus, may result in the Fed cutting short their QE2 plans, which is awesome if you live in fairyland and think Bernanke was actually targeting growth or inflation (or whatever).

For others, the Bernank is just monetising debt and trying to force a rebalancing of global growth, in which case the tax extension is unlikely to force a re-think of QE2 (quite the opposite). Either way, treasuries are a sell, although how much further they can go is unclear. I thought 3.25% would be the upper limit in this new range although we're there already. And then of course global data continues to surprise on the upside. It's pretty obvious that material 2H slowing didn't eventuate and Q4 growth is looking rock solid; it not inconceivable that 10yrs [T-bond] could be closer to 4% over coming weeks.

Check out global industrial production, recovering at a rapid clip. German industrial production, out last night, again surprised on the upside. At 2.9% the October production figure was almost 3 times the market expectation. German exports dipped in the same month, yep sure, but this comes after a very strong September figure. It's all good. Even the Brits are having a good run with their manufacturing output and according to the Confederation of British Industry, this may get better still with the new orders index rising to -3 (highest in over 2yrs) from -15 and a median expectation of -13. With all that to consider I think there is only one way for bonds to go (medium term).

 

He means lower in price as yields go up. Professionals never spell it out. Do not buy Treasuries. You do not have to short them although my former Economist colleague John Thomas, the Mad Hedge Fund Trades, is selling short Treasuries on the wolrd's economic pickup.

More for paid subscribers in my last NY note for 2010 follows from Canada, Switzerland, Brazil, Greece, Israel, Sweden, and Australia. Tomorrow is my Confucius SUNY event, not related to the Confucius Prize China just invested to undermine the Nobel Prize. Sunday I fly to London.

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Feeding at the Trough

Wed, 2010/12/08 - 12:50pm | Your editor

 

My strictures against HSBC Bank yesterday turn out to be part of a trend. Irving Picard, trustee for the Madoff victims, accused the British bank of “institutionalized greed” for failing to notice anomolies in the Madoff reports like trades taking place on Sat. or at price levels not reached during the day when the trades were booked. Yet the bank apparently continued to channel customers to the Madoff Ponzi scheme. Mr. Picard is seeking $9 bn from HSBC for allegedly assisting the fraud.

Meanwhile Wiki Leaks is targetting Mastercard because they have blocked donations to Assange's outfit using credit cards. As Kissinger said about the Iran-Iraq War, “it is a pity they cannot both lose.” Or Oscar Wilde's "the unspeakable in pursuit of the inedible" which is how he described fox-hunting.

Meanwhile I am trying to get the bank and Mastercard to pay a final $295.83 in charges made converting the fraudulent bill paid to Europcar from euros to dollars. And to get them to report the refund to three rating agencies that they contacted to try to blacked my credit rating, Equifax, Experian, and Trans Union.

There will be no blog Friday because I am going to the opening of the Confucius Institute for Business at State University of NY. Also I will be out of the country from Monday to Jan. 6th. The deputy editor will be working, not when I am in London on a mission of mercy (re my brother-in-law's hip replacement operation) but over the holidays when I will be in Morocco.

 

I will not go to Tangiers. A US Arabist ambassador whose first posting was there told me the former embassy (now a cultural center and museum) was given to the infant USA by the Sultan of Morocco in 1821, in appreciation for the US Marines clearing out pirates from “the shores of Tripoli”. I go to Marrakesh, Fez,and Meknes. Rabat is now the capital where the embassy is located. Having only been to Casablanca to date, changing planes, this will be a real adventure. And it's nice to go to a country where they liked Americans so long ago. Maybe they still do.

China is going to build more homes for people in the provinces, among other things to stop them migrating to the cities. China's Vice President Li Kequiong called today for massive building of “affordable housing” in the interior over the next few years.

How to play this and other news from Chile, Britain, Sweden Canada, Japan, and China follows.

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Whoops

Tue, 2010/12/07 - 6:10pm | Your editor

To paid subscribers only.

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Trading Alert

Tue, 2010/12/07 - 5:53pm | Your editor

 

Trading alerts are not for pre-subscribers, only for those who have paid for subscription.

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Uruguay Note

Tue, 2010/12/07 - 2:27pm | Your editor

The following note is for paid subscribers only Read more »