Aussie Dollar

[samuibeachcomber]

have been following the demise of the aussie dollar.not so long ago,i think august,it fetched 32 baht,i now see its down to 24.5 baht.That's a huge drop.

I know the aussie dollar is tied to the US dollar and at present the US dollar seems strong(34 baht).

Why is the US dollar so strong at present,when the UK pound is also in decline.

On a retirement visa i have to shift money over in 2 months time,and am currently getting the heebie jeebies about the lose i will incure.Even thinking of changing my visa status.

Anyone one else in a similar situation? And does anyone have any alternative ideas to ward off such a loss?

Advice would be appreciated.

[GungaDin]

I know how you feel, I had a little cry this morning when I heard the news.

I'd planned to rtn in late November, not so sure now!

I'm going for a type 'O' (investigating investment ops in Thailand)

Good for 15 months, I hope.

"I know the Aussie dollar is tied to the US dollar"

Not so sure about that.

cheers

[Old Croc]

The aussie dollar has gone from near parity a couple of months ago (approx 97 cents) to about 72 cents today.

It's not exactly tied to the USD!

Edited October 7, 2008 by Old Croc

[Old Croc]

The Australian reserve bank has just announced an interest rate drop of 1%,

That may affect exchange rates.

[patongster]

I was about to post a similar thread. I spent three months in Thailand May-June-July this year, and the aussie dollar was averaging 30+ baht during my stay. Ok I would not be keeping such a close eye on the exchange rate if I wasnt sending a little bit of money to my GF every month, but I am and the state of the Aussie dollar is pathetic. From my understanding the Australian dollar is a commodity-based currency, and because of the global financial slowdown commodity prices are falling and so is the aussie dollar.

[samuibeachcomber]

I was about to post a similar thread. I spent three months in Thailand May-June-July this year, and the aussie dollar was averaging 30+ baht during my stay. Ok I would not be keeping such a close eye on the exchange rate if I wasnt sending a little bit of money to my GF every month, but I am and the state of the Aussie dollar is pathetic. From my understanding the Australian dollar is a commodity-based currency, and because of the global financial slowdown commodity prices are falling and so is the aussie dollar.

so commodity prices are the reason,it does not look good.Anyone know why the US dollar is so strong while so many bad finanial things are happening there?

[patongster]

My question is why does the baht seem to remain constant.

[egg]

The Australian reserve bank has just announced an interest rate drop of 1%,

That may affect exchange rates.

,,, Jeez ,, thats a big drop ,,,, and your right ,,everybody will be selling the Aus $ because of better interest rates in other countries ,,,,,, good for some ,, not for others

cheers

egg

[junki3korean]

why dont you just changed your aussies dollars to US then come to thailand and covert your US into baht......shouldn`t that work out better???

[patongster]

why dont you just changed your aussies dollars to US then come to thailand and covert your US into baht......shouldn`t that work out better???

No that would not work, unless the aussie dollar was weak against the baht but equal to the US dollar.

[Mighty Mouse]

The Australian reserve bank has just announced an interest rate drop of 1%,

That may affect exchange rates.

Understatement. It will crush the exchange rate.

I've just come back to Oz from LOS. I was enjoying an exchange rate of 31 baht to the Oz $. I hate to think what the rate will be for my next trip. Thankfully I still have some money stashed in my Thai bank account but only enough to pay for my next tour.

A low exchange rate may force a lot of Aussies to re-think about traveling to LOS for the remainder of this year. Not good for the high season.

[Old Croc]

I know of someone reconsidering their travel plans to LOS because of the rates.

[samuibeachcomber]

"old croc" are you sure its a 1% drop in the rates and not 0.25%

[samuibeachcomber]

have just checked the australian online...............thats a huge reduction,where will that leave the exchange rate and interest on savings in OZ?TIME TO MOVE OFF SHORE PERHAPS

[GungaDin]

Aussie pensioners and 'supers' will be hard hit!

[samuibeachcomber]

time to tighten the belt,what else can you do

[pwills]

time to tighten the belt,what else can you do

Yes mate that's all we can do and hopefully the commodity prices will rise as long as there is demand for iron ore in China and India. It seems the central bank of Thailand keeps a rein on the baht as it is tied to the US $ so it can control the volatility. Anyway mate hang in there by the way the C.B.A has cut the rate by 100 basis point's (1%) and at last look the aussie has risen a little bit but the Baht has stayed steady.

[lannarebirth]

time to tighten the belt,what else can you do

Yes mate that's all we can do and hopefully the commodity prices will rise as long as there is demand for iron ore in China and India. It seems the central bank of Thailand keeps a rein on the baht as it is tied to the US $ so it can control the volatility. Anyway mate hang in there by the way the C.B.A has cut the rate by 100 basis point's (1%) and at last look the aussie has risen a little bit but the Baht has stayed steady.

You know, there never really was a "significantly higher" demand for commodities. There was significantly higher demand for the pricing mechanism of commodities, ie: futures and other derivatives. This piece might make your eyes glaze over, but it is exactly what is going on right now. It was written on Friday , so does not include yesterays market events.

The International Currency Crisis

by Dennis Gartman, Gavekal, and Wolfgang Munchau

The dollar and the Japanese yen reign absolutely supreme as the world continues the rush to exit from the EUR in whatever form it now holds them. Stock markets around the world are imploding it seems, and as they do, "risk" in any form is being unwound, forcing the Yen/EUR cross to move several "Big Figures" in the shortest span of time we have seen in our years of trading. Only in the "Russian/Emerging Markets Panic" in August of several years ago have we seen movements such as these. We stand in awe and we stand in fear.

Thus to begin, we say here this morning, mincing no words whatsoever, we are more frightened now for the future of the global capital markets than we have been at any time in our thirty+ years of watching, commenting upon and taking part in them. We are fearful... and we mean this fully... that we have passed the tipping point; that things are now spinning out of control; that forces have been unleashed that cannot be stopped without some truly massive, truly strong-handed, governmental action including the closure of markets and limits upon bank withdrawals, et al. These are troubling times, and our fear is palpable and growing. Worse, these concerns are giving rise to the likelihood that the Left shall be in ascension, and that manifestly left-of-centre, interventionist government lies ahead here in the US and in Europe. Higher, rather than lower taxes will be the end result. Greater... indeed very much greater... intervention in the capital markets lies ahead. Trade and act accordingly.

To put things into proper perspective, it is reasonable to see the Yen/EUR cross move within a 1 Yen range, high to low in any twenty four hour period of time. Beyond that, the situation becomes uncommon. 1.5 Yen movements, although not rare, are unusual, and 2 yen movements in the cross as "Black Swans" indeed. Now, it seems the world is filled with black swans, looking about for the few white ones that remain, for the Yen/EUR cross, having closed near 144.50:1 on Friday afternoon... which was already rather weak for the cross was trading 156 only a bit more than a week ago...is this morning trading 140.50!

We have long said that this cross relationship is the barometer of the relative health of the global capital markets, for over the course of the past several years as risk was embraced Mr. and Mrs. Watanabe would sell their Yen holdings and "swap" them for investments abroad that might return them more money. At the same time, foreign non-Japanese investors were very willing to borrow in Yen terms, take that low cost capital outside of Japan and invest elsewhere. This was the "Carry Trade" and it was one of the driving forced in the global capital market. Hedge funds around the world employed the "carry," borrowing cheap Yen and investing into anything, anywhere around the world where the returns were larger. Once confidence began to ebb, however, and once the losses on the carry trade itself began to wane, the pressure upon those exposed grew.

Now, not only are those who borrowed Yen and bought EURs, or Aussie dollars, or Russian Rubles, or gold, or equities anywhere around the world, or debt securities of almost any kind, finding that they are losing money on the "cross" itself, they are losing more and vast sums on the investments they made. It is horror story writ large and getting larger.

Is there any fundamental investment reason to be bullish of the Japanese Yen? No there is not. The demographics of Japan are horrid as her population ages and begins to actually decline. We have written often of this demographic time-bomb that is exploding consistently over time in Japan. The country's population is imploding and it continues to do so despite government policies aimed at changing that trend. However, once demographics as consequential as what is happening to Japan become entrenched, time... and very, very long periods of time,... decades certainly; centuries perhaps... are needed to reverse the course.

Thus, the only thing driving Yen higher is the panic liquidation of the "carry trade." This unwinding has been going on for several months, having begun in earnest in July when the cross touched 170:1 ever-so-briefly. It took years to build the trade up as Yen was borrowed and the EUR bought since the turn of the Millennium. It may take months yet to unwind these years of accumulation. The process is not pretty. The damage wrought is enormous. The panic lies still ahead.

Moving on, the unwinding of the long EUR/short Yen cross is being made all the more dramatic as investors find reason to shun the EUR and investments in Europe generally as confusion regarding the EUR's future has leaped dramatically to centre stage. As we pointed out last week, Dr. Milton Friedman once said regarding the EUR... in which he tended to have very little confidence...that he doubted it would last through its first real recession. His fears are being put to test today. The world is testing the very mettle of the European confederation experiment, and investors the world wide are watching to see just how well the officials in Brussels and Frankfurt can resolve their large and growing differences.

When the economic weather is mild, the "boat" that is a unified Europe runs pleasantly upon the water. The passengers may be a bit unruly, and they may argue amongst themselves, but their arguments rarely will tip the boat for at least the waters are calm. However, when the waters around the boat are riled, the least bit of unruly activity amongst the passengers is amplified and made serious. When the waters are riled, what would have passed for mere annoyance during periods of quiet become life-threatening instead. We are at that point.

The unravelling began last week when Ireland, fearful of a run on its capital markets, touched off by the frightening weakness of her stock market last Monday, moved to guarantee all deposits within the Irish banking system. The other nations of Europe, then fearful that capital would logically rush to Ireland to seek protection, said that Ireland's decision was at best unwise, perhaps un-European and unconstitutional, and simply downright wrong. They protested. Frankfurt and Paris led the way. Mr. Trichet said that Ireland's unilateral decision was wrong and that all decisions of this matter should be a pan-European decision, not a parochial one. Confusion, as we have always, said, breeds contempt, and with that confusion the EUR came under assault.

Matters have gotten worse... and indeed much, much worse over the weekend, for Germany, having taken Ireland to task only last week, moved to follow Ireland's lead as Chancellor Merkel moved to guarantee all deposits in Germany. She really had no choice. Acting to stem these swift changes in the European banking landscape, the EU's Competition Commissioner, Ms. Neelie Kroes, said that blanket guarantees on bank deposits by individual countries within the European Union shall be considered "discriminatory." Mr. Kroes made her comments on Dutch television over the weekend.

Ms.Kroes said that Ireland is moving to change its deposit insurance plan so that it will conform with European rules, although we have not seen in what ways Dublin is moving... or even if Dublin IS moving at all. Were we Dublin, we'd not change, for our first responsibility is to the depositors in Ireland's banks and to the Irish capital markets, not to depositors on the Continent. Ms. Kroes said that on television that

We are now in close contact. My people were in Dublin on Friday and Saturday and returned with reports that changes will be made.... A guarantee without limits is not allowed ... [but we expect] that it will be brought into a form for which we can together state that it is in line with the treaty.

Germany disagrees with Ms. Kroes and Brussels, apparently, for a spokesperson for Germany's Finance Ministry, Mr. Torsten Albig said over the weekend that "The state guarantees private deposits in Germany" while a second spokesman said the guarantee was and can be unlimited. Now that Ireland has moved in this fashion, and now that Germany has followed, Greece has said that it shall also. Others will follow, overwhelming Brussel's ability to protest Ireland's and Germany's decisions, and thus forcing Ireland to take other actions to continue to draw capital to her. Ireland's Finance Minister, Mr. Brian Lenihan, openly defended his government's plan to guarantee the deposits and debts of six Irish-owned banks for the next two years and pointed to the panic felt by investors over Irish financial stocks this week. We can find no fault whatsoever with Mr. Lenihan's position. Were we he, we'd do precisely the same thing... perhaps even a bit faster.

[GungaDin]

<h5 style="margin-top: 10px; margin-bottom: 1px;"></h5><h5 style="margin-top: 10px; margin-bottom: 1px;">We are Not Alone: Crikey newsletter, today.</h5>

<h5 style="margin-top: 10px; margin-bottom: 1px;">Global market wrap: Everywhere you look, carnage</h5> Compiled by Glenn Dyer and Thomas Hunter:

Our market was off 3% in early trading, the Aussie dollar was trading around 72 US cents, down six cents since Friday, but up almost 4 US cents from the lows hit overnight. Oil was under $US89 a barrel, copper was down, as were all other commodities, except gold. That was a five and a half year low on the Aussie dollar overnight, one also shared by the Kiwi currency.

In the US, the Dow Jones Industrial Average fell below the 10,000 point mark for the first since since 2004, while the Nasdaq tumbled nearly 5%. It was the biggest drop since Black Monday, 1987. The Guardian reports:

In six business days, the Dow has slumped by 11% - a fall kicked off by last Monday's record dive of 777 points. The Federal Reserve tried to shore up financial stability on Monday by doubling the amount of money available for short-term lending to banks from $300bn to $600bn.

The crisis shows no signs of abating in the US and is spreading beyond Wall Street. Two major state governments - California and Massachusetts - have now warned they may need loans from the federal government to tide them over.

The Russian stockmarket halted trading three times to slow the speed of share selling. The main index lost over 18%.

The Telegraph reports that "Brazil shut the Sao Paulo exchange after the Bovespa index crashed 15pc in panic trading"

The London stock market fell more than 7.8%, it's biggest fall since 1987, and the third worst percentage loss at closing in history.

France's CAC recorded its largest ever drop with more than 9% being wiped off the market's value. The CAC 40 fell 368.77 points, or 9.04 per cent, to 3,711.98 points.

In Germany, the benchmark DAX was down 410.02 points, or 7.07 per cent, at 5,387.01 points.

Japan's Nikkei and Topix indexes fell to their lowest levels in almost five years. The Nikkei dropped 4.25%, with the Topix falling 4.67%. The market opened much lower today, down 5.3% in the first hour of trading.

Bank of America:

• Will cutt dividend by 50% and raising $US10 billion in new capital. That was after a 68% drop in third quarter earnings.
  
• The earnings report showed earnings of $US1.8 billion in the quarter, ($US3.7 billion a year ago) a comparison made harder by the fact that the third quarter last year was close to the all time peak for financials. The news was a shock because just over two weeks ago, Bank of America was the rescuer of Merrill Lynch.
  
• But it was the comments by the bank's head, Ken Lewis, who said in the earnings release: "These are the most difficult times for financial institutions that I have experienced in my 39 years in banking. It is prudent to raise capital to very substantial levels in this uncertain environment ... Both economic and financial market conditions have changed significantly in the last two months." Lewis said that "recessionary conditions'' and the outlook for an even weaker economy will drive up credit losses and depress earnings, a warning that we will see come true for hundreds of major US companies on the S&P 500 as they start their reports for the third quarter tonight.
  

Meanwhile, in Iceland:

• Iceland remains the focus in Europe. Trading was suspended in banks, financial stocks and guaranteed bank deposits, joining Denmark, Ireland, Germany, Italy and Greece in doing so.
  
• But banks heavily sold the citizens and businesses foreign currency loans at low interest rates in recent years (shades of our Swiss Loans Affair in the 1990s). The plunge in the kronor, the country's currency, has seen the size and cost of those loans balloon: the currency shed 20% last week alone after the bailout of the third largest bank, Glitnir.
  
• The country has around $A180 million to cover billions of dollars of bank deposits (more than $A30 billion by some estimates). Many of those deposits are from people in other countries. These cross border deposits are a minefield and some may or may not be covered by the spreading regime of individual Government guarantees.
  
• In a national speech overnight, the country's Prime Minister Geir Haarde warned that the country was threatened with "national bankruptcy'' from the credit crisis as he introduced emergency legislation to give the government sweeping new powers over the financial sector.
  
• Iceland could be the first country to go broke in this crisis. It may need bailing out, not the banks which the Government and the authorities allowed to borrow short and lend domestically and internationally.
  

How the pundits see it

The bailout has not worked. It's official! The bank bailout has not worked. Global stock prices are in a panic rush to the bottom. The bank bailout cannot fulfill its primary mission to restore investor confidence, because it does only half the job. – Business Spectator

Words to calm the woozy investor. There's only one word for this market -- and it's on everyone's lips from London to San Francisco: "Aaaaaaaaaaaaarrrrggghhhh!" It's times like these you can't get your broker on the phone. But don't worry -- he's not avoiding you. He's avoiding everybody – Wall Street Journal

America and the New Financial World. In 1945, after an exhausting three decades of exertion against Germany, the United Kingdom emerged militarily victorious only to see itself economically exhausted. A year later, it was bankrupt, unable to find capital and on the verge of collapse. It had nowhere to turn but the U.S., which then dictated terms that amounted to a withdrawal of Great Britain from the world stage. The U.S. is not yet in the position of Great Britain, and our creditors in China are not yet as we were then. But absent a more humble and realistic attitude toward capital in Washington, that is the path we're headed down. -- Wall Street Journal

Fuld faces the music. Former Lehman Bros Chief Executive Richard Fuld, speaking to the House Oversight and Government Reform Committee: "Nobody, including me, anticipated how the problems that started in the mortgage markets would spread to our credit markets and banking system and now threaten our entire financial system and our country … Based on the information I had at the time I believe that [our] decisions and actions were both prudent and appropriate. With the benefit of hindsight, would I have done things differently? Yes, I would have." – New York Times

Iceland's economic situation worsens. Iceland risks plunging into national bankruptcy, Geir Haarde, the country's prime minister, warned on Monday as a mounting financial crisis and a 30 per cent dive in the krona forced the government to take emergency action. The ruling alliance and opposition parties united to approve legislation that gives the state sweeping powers over Iceland's battered banks including the option of nationalising them and sacking executives ... "We were faced with the real possibility that the national economy would be sucked into the global banking swell and end in national bankruptcy," he said. "The legislation is necessary to avoid that fate." – Financial Times

Germans sceptical about bailing out the rest of Europe. [German] Finance Minister Peer Steinbrück ruled out his country's participation in a broader European effort to help other faltering banks. "The chancellor and I reject a European shield because we as Germans do not want to pay into a big pot where we do not have control and do not know where German money might be used," he said in a radio interview. – International Herald Tribune

Is it 1929 again? Watching the slipping economy and Congress's epic debate over the unprecedented $700 billion financial bailout, it is impossible not to wonder whether this is 1929 all over again. Even sophisticated observers invoke the comparison. Martin Wolf, the chief economics commentator for the Financial Times, began a recent column: "It is just over three score years and ten since the [end of the] Great Depression." What's frightening is not any one event but the prospect that things are slipping out of control. Panic -- political as well as economic -- is the enemy. – Robert J Samuelson, Washington Post

The fall of America Inc. The implosion of America's most storied investment banks. The vanishing of more than a trillion dollars in stock-market wealth in a day. A $700 billion tab for U.S. taxpayers. The scale of the Wall Street crackup could scarcely be more gargantuan. Yet even as Americans ask why they're having to pay such mind-bending sums to prevent the economy from imploding, few are discussing a more intangible, yet potentially much greater cost to the United States—the damage that the financial meltdown is doing to America's "brand." – Francis Fukuyama, Newsweek

We must prevent a greater loss of confidence in the banks. Why have the prophets of doom been proved right, while the relative optimists, myself included, been proved wrong? Is it because house prices have suddenly fallen faster than expected or banks have suddenly discovered more bad mortgages on their books? On the contrary, the US economy and housing markets have stabilised over the summer, consumer confidence improved as oil prices corrected and credit losses on US housing have remained about $550 billion, a modest amount in relation to total US mortgages worth more than $11,000 billion. What, then, has suddenly gone wrong? -- Times Online

_______________________________

http://redirect.cmailer.com.au/LinkRedirec...8d-959a4e043059

My apologies for the lack of formatting. G.D.

[lannarebirth]

From Gavekal:

Was it just ten days ago that Peer Steinbruck railed at the US for the banking crisis and mentioned that, because of the pneumonia in the US, Europe may well have to endure a cold? Ten days later, a cold seems like wishful thinking. Instead, it looks as if the US pneumonia is inflicting a serious case of tuberculosis across Europe!

In the past ten days, not only have we seen European governments forced to offer blanket guarantees for depositors in banks (e.g., Ireland, Greece...) but we have also witnessed a number of banks coming hat in hands to their respective governments (Hypo Real Estate, Glitnir, Fortis, Dexia, Bradford & Bingley...). Which of course begs the question of what the respective European governments can do? Some (Finland, Holland...) with overall low government debt and small budget deficits, can afford bank bail-outs. For others, whose economies may already be in a recession (e.g., Italy, Spain, Ireland...), financing large-scale bailouts may be more of a challenge. Which brings us back to a long-standing GaveKal theme, namely how the (no) Growth and Stagnation pact (see The European Divergence Trade) hampers EU governments from taking necessary action in the face of a banking crisis. Worse yet, in Europe, investors simply have no idea who the lender of last resort is, or if there is one. And, as we are finding out, this question is no longer a rhetorical question. After all, if the numbers bandied about by Der Spiegel of a necessary €100bn to recapitalize Hypo Real Estate (and that is just one bank!) are even close to the mark, where will the money come from? As we see it, there are two possible options:

The first option is that the ECB prints money aggressively to finance a European-wide bank bailout. This could prove rather inflationary for the Old Continent as wages there tend to be very sticky. It would also entail an absolute collapse in the Euro.

The second option would be for the ECB to tell the various European governments that the banking mess is their own problem, and that they have to deal with it. This would most likely entail a continued divergence in the yields at which European governments borrow (currently standing at post-Euro introduction record highs).

And this brings us back to a long- standing GaveKal theme: for the Euro to survive, either a) it will have to be a structurally weak currency or some of the weakest links (i.e.: Portugal? Italy? Greece? Spain?...) may end up being forced out. The path of least resistance is, of course, for the Euro to a structurally weak currency.

Which seems to be where we are heading. Indeed, despite the baffling decision by the ECB to maintain rates unchanged last Thursday, the Euro has been in a serious freefall against the US$, CHF, Yen, etc... Of course, this weakness could also be a sign that the ECB, with its stubborn unwillingness to adjust monetary policy in the face of rapidly changing events, has seriously undermined investor confidence in the Euro area. After all, 48 hours after the ECB board met, the rescue plans for both Hypo RE and Fortis were struggling. Surely, the ECB had to know that two major banks were in dire straits? Or was the ECB board drinking the same Kool-Aid as Peer Steinbruck?

However one cuts it, it is hard to escape the conclusion that Europe is not only experiencing its own credit crunch, but will experience a nasty recession. This recession will put most European government budgets into serious deficits; foreign investors may thus start to question the logic of owning the debt of governments whose balance sheets and income statements keep on deteriorating, and whose currency is free-falling? Milton Friedman once said that the Euro would likely not survive its first major "bump in the road". We will soon find out. The great "European Divergence Trade" is no longer about theory; it is happening before our very eyes.

Edited October 7, 2008 by lannarebirth

[lannarebirth]

And from Wolfgang Munchau in today's Financial Times:

This has been a week of self-congratulation in Europe. We have saved a handful of banks. We have, in effect, started to cut interest rates. We even had a summit of European leaders that produced warm words of solidarity. It looks as though the Europeans have reached substantive agreement that no systemically important bank should ever be allowed to fail....The rescue of Fortis and Dexia last week, two large, but not too large, cross-border European banks, should be seen as a sign that our emergency procedures are working. Look, they say, we met quickly and decided what needed to be decided. It was fast and unbureaucratic. We do not need a European rescue fund, let alone any new institutional set-up to deal with this, they say. We can do it ourselves.

I agree that the few ad hoc rescues have worked. But do not fool yourself. They worked because they were the first wave of rescues and because they involved banks such as Fortis - of just the right size, based in just the right small- to medium-sized country where political leaders are sufficiently rational not to hold each other to ransom as midnight approaches on Sunday.

But what if this had been a bank with a name of a large European country, or an acronym that refers to a large European city, banks that are simultaneously too big to fail and too big to save? I shudder to think what would happen when Silvio Berlusconi, Angela Merkel, Lech Kaczynski and the next Austrian leader have to meet to discuss the future of a large cross-border European bank.

What worked for banking rescues numbers one to five may not work for rescues number six to 50 - the estimated number of systemically important banks in Europe. And that number does not include some banks we have already rescued, which politicians judged to be important for their domestic banking system, like Germany's IKB Bank, but with no European relevance whatsoever. We have been squandering money.

Nor does it include the likes of Hypo Real Estate, which is not even a bank at all....

The Europeans are of course right in their overall ambition not to allow systemically important banks to fail. They are also right in their scepticism about their ability to distinguish between illiquidity and insolvency during an emergency. But I fear we are still well short of a strategy. We might be lucky, and scrape through what could well become the most dangerous month of the crisis so far. If, for example, the credit default swap market were to blow up in the next couple of weeks - a non-trivial probability - we have no plan.

Nicolas Sarkozy, the French president, was therefore right when he appeared to back a €300bn rescue fund. Regular readers of this column will probably recall my somewhat constrained enthusiasm for his economic policies. But this had the makings of a good plan. He ended up distancing himself from it, when it became clear that Angela Merkel, the German chancellor, would not support it. But he was right and she was wrong. Of course, a European plan should not have been a copy of the bail-out that was finally adopted by Congress on Friday. The US plan failed to address the problem of an undercapitalised banking sector. That issue is even more important in Europe where many banks have an extremely weak capital base, with leverage ratios of 50 or more.

Europe does therefore not need any bail-out plan, but a plan that specifically addresses the capitalisation problem. Concretely, three things are needed: the first and most important is money. A sum of €300bn will not cover the EU in a worst-case scenario, but it is a sensible number to start with; secondly, you need a semi-permanent crisis committee empowered to take decisions; and finally you need a strategy to apply symmetrically and based on clear rules about when to recapitalise, and when not.

If you pursue a strategy of taking purely national decisions, you run the risk that at least one government will hit its own financial ceiling before this crisis is over, or that decisions have negative spillovers on the banking systems of other countries. Moreover, you end up with a beggar-thy-neighbour regulatory race, as we saw last week when Ireland and Greece unilaterally issued blanket guarantees for large parts of their banking sector. Last night, Germany was preparing a full deposit guarantee for its own banking system. Last but not least is the risk of violent political setback against a process that lacks transparency.

For Europe, this is more than just a banking crisis. Unlike in the US, it could develop into a monetary regime crisis. A systemic banking crisis is one of those few conceivable shocks with the potential to destroy Europe's monetary union. The enthusiasm for creating a single currency was unfortunately never matched by an equal enthusiasm to provide the correspondingly effective institutions to handle financial crises. Most of the time, it does not matter. But it matters now. For that reason alone, the case for a European rescue plan is overwhelming.

[samuibeachcomber]

thanks lannarebirth,scary indeed................time to move cash before you're not allowed to perhaps?

[samuibeachcomber]

gungaDin too thanks,as i read both reports i have the news on the box and things seem to be happening quicker than i can read your reports.Time to store some solid cash under thr the bed and go and have a few Singh's

[bendix]

No point in fretting. What happens happens. The antipodean and european currencies are taking a hammering now after being so strong for two years. They will bounce back in time. It's all cyclical.

[samuibeachcomber]

No point in fretting. What happens happens. The antipodean and european currencies are taking a hammering now after being so strong for two years. They will bounce back in time. It's all cyclical.

very true,but the bottom line i guess is "how safe is one's money in the bank" everyone must be at least thinking the same...........once its gone its gone,what then!

[Merlin]

with all due deference to the learned gentlemen who have posted before me in this thread...

I have to make the following humble submission:

it has nothing to do with America, or the price of various vague commodities or sub-prime rates or anything. It all comes down to the timing between when I buy my ticket to LOS and the date of the actual trip. This time around when I bought my ticket the AU$ was over 30 to the THB; this morning when I logged on here in CM I see it's under 25...

This has happened to me at least 4 times since 2000...

Maybe someone could put an alert on my passport number on some online travel booking monitoring site, and short sell the AU$, or whatever it is you guys do to make money when things are going down...

LOL

:-)

[samuibeachcomber]

with all due deference to the learned gentlemen who have posted before me in this thread...

I have to make the following humble submission:

it has nothing to do with America, or the price of various vague commodities or sub-prime rates or anything. It all comes down to the timing between when I buy my ticket to LOS and the date of the actual trip. This time around when I bought my ticket the AU$ was over 30 to the THB; this morning when I logged on here in CM I see it's under 25...

This has happened to me at least 4 times since 2000...

Maybe someone could put an alert on my passport number on some online travel booking monitoring site, and short sell the AU$, or whatever it is you guys do to make money when things are going down...

LOL

:-)

this thread was n't really about the timely purchase of airline tickets,but about the transfer of a large amount of money to fulfill visa obligations........a lot more to lose via the current exchange rate.But i take your point its not the end of the world yet,still time to enjoy thailand

[lannarebirth]

thanks lannarebirth,scary indeed................time to move cash before you're not allowed to perhaps?

I can not answer that question for you beachcomber. I would only say, that Dennis Gartman, the author of the first piece, is a markets/trading genius IMO and given that, I take what he has to say very seriously. Maybe you'll find the answer to your question in Mr. Gartman's Rules of Trading:

The 22 Rules of Trading

Dennis Gartman's 22 Rules of Trading, many of which you can apply to all sorts of life situations, as well as the markets.

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

6. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.

8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.

9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.

10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.

12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.

14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.

16. Bear markets are more violent than are bull markets and so also are their retracements.

17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.

18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.

19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.

21. There is never one cockroach! This is the "winning" new rule submitted by our friend, Tom Powell.

22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!

Edited October 7, 2008 by lannarebirth

[Naam]

I know the aussie dollar is tied to the US dollar and at present the US dollar seems strong(34 baht).

upgrade your knowledge and use version subslime 10.2008. by the way, the Aussie Dollar was not tied to the U.S. Dollar for the last quarter century

[RakJungTorlae]

So thoeorticly. If I had 25 mill Baht..transferd to a AU account. let it sit there for 2 year or so collection interest and hoping the dollar shall rise back to around 30 baht I made a sweet profit eh???? – tax and all that crap I guess to right??

Edited October 7, 2008 by RakJungTorlae