Financial Crisis

[sokal]

Anyway I am up 48% so far this year, how are you guys doing?

i am up a pittance since jan 1st. a mere 15.4%, which pays for dog food and some of my pocket money

Well to be fair, I was only talking about my stock portfolio - once I include all my Thai properties (up hopefully 0%), quite a lot of worthless fiat, shiny baubles etc, I doubt mine is really any higher. Still I am sure you will agree that you can make decent returns out of asset 'selection'. Sometimes prices are just so ludicrous that you really need to be incredibly unlucky not to double your money.

So your up 48% ? how much where you down in 08 ? or did you just start your investment career on March 9 2009 ?

[Naam]

if you can hedge with just 10 basis points cost besides interest rate differential i admit it's an excellent deal IF you don't pay each and every time again when you renew/rollover weekly because that is the what my freaking bank demands. i gave up hedging a long time ago and keep THB ~12mm offshore on a monthly basis at 0.90% p.a. which is still more than the 0.25% SCB pays me on the balance of my current account. however, i don't mind the pittance in interest rates as the Baht appreciation vs. EUR is in my case presently between 12 and 15% in 3 to 5 months. anyway, for EUR and USD i am getting ZERO

Wow they do? How much must that cost in real terms?? Let's all of us just give up all this and become a bank - that would be huge margins and the best bit is that it doesn't matter if we screw up; taxpayers are very generous!

Gambles, i have never heard (before you mentioned it) that anybody hedges a currency on a weekly basis. and... with all due respect i think you either misinterpreted what your currency chaps are cooking or they don't have any bloody idea about currency hedging

my reasons:

-any transaction costs money

-that applies to small private investors and to big financial institutions,

-we all know there is no free lunch, the cost for 52 transactions a year add up,

-normally one hedges by buying/selling forward for a longer period and covers the forward when things do not work out instead of rolling over or closing extremely short periods.

please clarify, it could be that i misinterpreted what you wrote

[Gambles]

it also reflects the fact that over 90% of the additional money supply created is being held in bank excess reserves rather the circulating in the broader economy

This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

http://economicedge.blogspot.com/2010/03/m...of-century.html

[Gambles]

if you can hedge with just 10 basis points cost besides interest rate differential i admit it's an excellent deal IF you don't pay each and every time again when you renew/rollover weekly because that is the what my freaking bank demands. i gave up hedging a long time ago and keep THB ~12mm offshore on a monthly basis at 0.90% p.a. which is still more than the 0.25% SCB pays me on the balance of my current account. however, i don't mind the pittance in interest rates as the Baht appreciation vs. EUR is in my case presently between 12 and 15% in 3 to 5 months. anyway, for EUR and USD i am getting ZERO

Wow they do? How much must that cost in real terms?? Let's all of us just give up all this and become a bank - that would be huge margins and the best bit is that it doesn't matter if we screw up; taxpayers are very generous!

Gambles, i have never heard (before you mentioned it) that anybody hedges a currency on a weekly basis. and... with all due respect i think you either misinterpreted what your currency chaps are cooking or they don't have any bloody idea about currency hedging

my reasons:

-any transaction costs money

-that applies to small private investors and to big financial institutions,

-we all know there is no free lunch, the cost for 52 transactions a year add up,

-normally one hedges by buying/selling forward for a longer period and covers the forward when things do not work out instead of rolling over or closing extremely short periods.

please clarify, it could be that i misinterpreted what you wrote

no you're right - I was over simplifying for the sake of brevity. With Baht (and it's only Baht where we have to operate like this) we take a longer term hedge contract of up to 12 months with a weekly option to close it out, but the reality is that it's intended to be a mechanical not discretionary hedge (except in extremis) so the weekly option is just used to vary the size of the hedge to match the size of the positions

with Baht in my experience that way is better than having to try to cover such an illiquid currency and we have to structure in a way to allow weekly inflows and outflows. My point was that for yourself, if you don't need to provide that liquidity, did they really need to charge you for 52 transactions a year???

[sokal]

it also reflects the fact that over 90% of the additional money supply created is being held in bank excess reserves rather the circulating in the broader economy

This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation's output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

http://economicedge.blogspot.com/2010/03/m...of-century.html

This is the road to stagflation. The economy has lost its ability to profitably absorb capital.

[Naam]

1. no you're right - I was over simplifying for the sake of brevity. With Baht (and it's only Baht where we have to operate like this) we take a longer term hedge contract of up to 12 months with a weekly option to close it out, but the reality is that it's intended to be a mechanical not discretionary hedge (except in extremis) so the weekly option is just used to vary the size of the hedge to match the size of the positions

2. with Baht in my experience that way is better than having to try to cover such an illiquid currency and we have to structure in a way to allow weekly inflows and outflows. My point was that for yourself, if you don't need to provide that liquidity, did they really need to charge you for 52 transactions a year???

1. HA!

2. of course any bank would charge me AND YOU or anybody else for each transaction (as you described it initially), but nobody in his right mind would use weekly transactions for a currency hedge except on rare occasions. by the way, i don't understand "weekly option" the possibility to cover a straight forward, within its maturity, partially or fully ANY day during that period does not require an additional option. this is standard procedure and one pays only for the initial transaction plus any increase or decrease of that forward as these are additional transactions.

summary: hedging any currency pair by straight forwards is a simple procedure but it still does not solve Churchill's problem of "goldmines>SGD>hedgingTHB". to the best of my knowledge gold mines do not exist in Singapore nor are any goldmines denominated/quoted in SGD except perhaps ADRs; the latter moving with their underlying currency vs. SGD = zero sum game.

[Abrak]

with Baht in my experience that way is better than having to try to cover such an illiquid currency and we have to structure in a way to allow weekly inflows and outflows. My point was that for yourself, if you don't need to provide that liquidity, did they really need to charge you for 52 transactions a year???

I am slightly surprised that the baht is actually a very illiquid currency. I mean buckets of trade flows through the economy. The BoT with net forward positions of US$15bn. I guess an unestablished proper yield curve counts against it. BTW, when I say illiquid I was wondering roughly relative to what. For instance what would the liquidity be like verses the SGD.

[Naam]

apropos "AUD = basket case"

Credit Suisse: "We noticed there were a quite number of new A$ transactions recently from major financial institutions. This is likely in respond to increasing demand of AUD denominated products as investors who were traditionally dollar based are now seeking to diversify their currency exposure and are actively seeking for investment instruments in A$."

[churchill]

Goldman says buy the Budget (a bit)

http://ftalphaville.ft.com/blog/2010/03/24...e-budget-a-bit/

Just as they said buy Sterling at 1.6 and buy Euro at 1.37

So a very good sell signal

[churchill]

Portugal downgraded to AA- by Fitch

http://www.marketwatch.com/story/portugal-...itch-2010-03-24

whos next /

[Naam]

Portugal downgraded to AA- by Fitch whos next /

overdue since a long time. the same applies to all other PIIGS and of course to UK.

[Abrak]

Rather than you & I trading (or should that be investing insults about each other's philosophy.

Actually everyone has their own investment philosophies and lots of them work. It is largely the 'only game in town' idea that I dont like.

(1) What I regard as an investment you see as a trade

(2) What you regard as an investment - say like gold - I regard as a speculative trade

(3) And if you wish to argue that gold is a better investment now because it has outperformed the SET by 300% over the last 10 years, I dont even regard that as an investment argument of a sentient human being.

[midas]

I know there are many people like me that visit this thread to search for news regarding the financial crisis.

If you don’t already know about a website called " wikileaks " – I didn’t know about this website before today- you should

see it !

They can avoid being shut down because they created an elaborate system of servers in less restricted countries like Iceland and Sweden and with use of mirror sites.

It will certainly make it much harderfor people to suppress vital information and for others to claim " it’s just a conspiracy theory " !! At last we might get closer to the truth onsome things………………………please spread the word.

The beauty of the internet

" We have received hundreds of thousands of pages from corrupt banks the US detainee system, the Iraq war, China, the UN and many …………………………………………”

See :- http://wikileaks.org/

[churchill]

I know there are many people like me that visit this thread to search for news regarding the financial crisis.

If you don’t already know about a website called " wikileaks " – I didn’t know about this website before today- you should

see it !

They can avoid being shut down because they created an elaborate system of servers in less restricted countries like Iceland and Sweden and with use of mirror sites.

It will certainly make it much harderfor people to suppress vital information and for others to claim " it’s just a conspiracy theory " !! At last we might get closer to the truth onsome things………………………please spread the word.

The beauty of the internet

" We have received hundreds of thousands of pages from corrupt banks the US detainee system, the Iraq war, China, the UN and many …………………………………………”

See :- http://wikileaks.org/

'The Pentagon is spying on us,' claims whistleblower website Wikileaks after leaking top secret documents

Read more: http://www.dailymail.co.uk/news/worldnews/...l#ixzz0jAuuC9uI

Governments like North Korea and ???????? have also tried to prevent access to the non-profit site, claiming it was revealing information criticising their policies.

Edited March 25, 2010 by churchill

[Naam]

conspiracy times are back again. cheers!

[midas]

conspiracy times are back again. cheers!

I could ( should ) have bet money on this response from you Naam

Why do you trivialise things that you define as a " conspiracy "?

What conditons must prevail for you to cease to consider something as being

a " conspiracy theory " in your words and what must happen for you to start giving credence to

these claims ?

Edited March 25, 2010 by midas

[AlexLah]

Oh no Midas, you have just revealed where I get some of my highly secretive information from.

Very bad indeed, luckily I have some other sites that are really not public.

[Naam]

conspiracy times are back again. cheers!

I could ( should ) have bet money on this response from you Naam

Why do you trivialise things that you define as a " conspiracy "?

What conditons must prevail for you to cease to consider something as being

a " conspiracy theory " in your words and what must happen for you to start giving credence to

these claims ?

all crisis-irrelevant!

[midas]

conspiracy times are back again. cheers!

I could ( should ) have bet money on this response from you Naam

Why do you trivialise things that you define as a " conspiracy "?

What conditons must prevail for you to cease to consider something as being

a " conspiracy theory " in your words and what must happen for you to start giving credence to

these claims ?

all crisis-irrelevant!

Why do say it is " crisis-irrelevant " ?

How can a site that releases such documents as those about the failed Icelandic Kaupthing Bank ,

and about a loan is to be used for refinancing existing liabilities held by FirstCaribbean & Citibank etc ?

Are these not related to the financial crisis ?

Where do you obtain your information on which you rely to make your investment decisions

and why are those souces any more credible than the documents on the wikileaks site ?

In fact i no longer believe anything in the MSM

If the market goes up or down isnt that a form of conspiracy ?

Edited March 25, 2010 by midas

[Naam]

"Why do say it is " crisis-irrelevant " ? ohmy.gif

How can a site that releases such documents as those about the failed Icelandic Kaupthing Bank ,

and about a loan is to be used for refinancing existing liabilities held by FirstCaribbean & Citibank etc ?

Are these not related to the financial crisis ?"

the names of Kaupthing's creditors as well as their individual claims are irrelevant. irrelevant as far as crisis is concerned are loans to refinance existing debt. that happens dozens of time each and every day (except on weekends).

next!

[midas]

"Why do say it is " crisis-irrelevant " ? ohmy.gif

How can a site that releases such documents as those about the failed Icelandic Kaupthing Bank ,

and about a loan is to be used for refinancing existing liabilities held by FirstCaribbean & Citibank etc ?

Are these not related to the financial crisis ?"

the names of Kaupthing's creditors as well as their individual claims are irrelevant . irrelevant as far as crisis is concerned are loans to refinance existing debt. that happens dozens of time each and every day (except on weekends).

next!

as are your misanthropic comments

[Naam]

"Why do say it is " crisis-irrelevant " ? ohmy.gif

How can a site that releases such documents as those about the failed Icelandic Kaupthing Bank ,

and about a loan is to be used for refinancing existing liabilities held by FirstCaribbean & Citibank etc ?

Are these not related to the financial crisis ?"

the names of Kaupthing's creditors as well as their individual claims are irrelevant . irrelevant as far as crisis is concerned are loans to refinance existing debt. that happens dozens of time each and every day (except on weekends).

next!

as are your misanthropic comments

if anybody here is misanthropic than it is you with your apocalyptic forecasts that mankind will face chaos, wars, famine and various other horrors. your reasons are getting lamer and lamer by the day (e.g. refinancing a peanuts amount = financial crisis). reading these kind of ignorant arguments raise doubts that you ever (as claimed) ran a successful business. besides, a fact is "the ship did not sink" and it will not sink but you "missed the boat" in all respects and when you are cornered you sidestep with rubbish accusations like "misanthropic" which is ridiculous.

[midas]

Oh no Midas, you have just revealed where I get some of my highly secretive information from.

Very bad indeed, luckily I have some other sites that are really not public.

very sorry Alex but the Daily Mail blew the cover well before me

Have you seen this ?

Some of his comments crack me up..........." like putting Al Cappone in charge of law enforcement "

[midas]

"Why do say it is " crisis-irrelevant " ? ohmy.gif

How can a site that releases such documents as those about the failed Icelandic Kaupthing Bank ,

and about a loan is to be used for refinancing existing liabilities held by FirstCaribbean & Citibank etc ?

Are these not related to the financial crisis ?"

the names of Kaupthing's creditors as well as their individual claims are irrelevant . irrelevant as far as crisis is concerned are loans to refinance existing debt. that happens dozens of time each and every day (except on weekends).

next!

as are your misanthropic comments

if anybody here is misanthropic than it is you with your apocalyptic forecasts that mankind will face chaos, wars, famine and various other horrors. your reasons are getting lamer and lamer by the day (e.g. refinancing a peanuts amount = financial crisis). reading these kind of ignorant arguments raise doubts that you ever (as claimed) ran a successful business. besides, a fact is "the ship did not sink" and it will not sink but you "missed the boat" in all respects and when you are cornered you sidestep with rubbish accusations like "misanthropic" which is ridiculous.

Yes Naam and I feel exactly the same about your claims that you are a “ scientist “.

I have never met any scientists who have such an egotistic and myopic perception of things regarding the discussions in this thread.

You are also in the corner because you are even unable to answer my question rationally- come on “ Dr “ –

at what point does a “ conspiracy theory “ ( only by your definition ) cease to be so?

[Naam]

"at what point does a “ conspiracy theory “ ( only by your definition ) cease to be so?"

there was never a conspiracy except for the one you and AlexLah invented.

[midas]

Oh no Midas, you have just revealed where I get some of my highly secretive information from.

Very bad indeed, luckily I have some other sites that are really not public.

very sorry Alex but the Daily Mail blew the cover well before me

Have you seen this ?

Some of his comments crack me up..........." like putting Al Cappone in charge of law enforcement "

Alex don’t miss listening to this audio clip of Celente aslo…………including his experience of being on the

18th floor of a hotel in Santiagio, Chile during the recent earthquake. It says so much

about human behavior in this financial crisis ……………I like the way he articulates.

http://www.youtube.com/watch?v=OC1y6exRDFc&NR=1

Yes I am called a doom and gloomer but I dont believe in an all ending apocalypse-

but I do agree with Gerald when he says

“ people are doing the same thing……they are not finding the truth within themselves

there will be chaos but that doesn’t mean total destruction – something new will be born from it “ .

But maybe that is what scares people

Edited March 26, 2010 by midas

[midas]

if anybody here is misanthropic than it is you with your apocalyptic forecasts that mankind will face chaos, wars, famine and various other horrors. your reasons are getting lamer and lamer by the day (e.g. refinancing a peanuts amount = financial crisis). reading these kind of ignorant arguments raise doubts that you ever (as claimed) ran a successful business. besides, a fact is "the ship did not sink" and it will not sink but you "missed the boat" in all respects and when you are cornered you sidestep with rubbish accusations like "misanthropic" which is ridiculous.

I have been thinking about your statement from this morning and I remembered

what Moody's said just a few days ago…………………………

“Achieving the fiscal consolidation necessary to avert a downgrade

will test “social cohesion” .“People have to decide what level of pain

they are willing to accept to have a healthy economy.”

Of course testing and maintaining “social cohesion” can mean many things

and if I see tangible evidence of people being willing to accept

the level of pain that is going to be required and not keep doing the same things

I will relinquish my doom and gloom tin foil hat……………..but I dont see that - just

more ad more BS from governments in Europe and the US govt so until then I will remain

ready to go in the bunker very promptly.

http://www.bloomberg.com/apps/news?pid=206...id=a0a8xAghPS8I

Edited March 26, 2010 by midas

[Gambles]

if you can hedge with just 10 basis points cost besides interest rate differential i admit it's an excellent deal IF you don't pay each and every time again when you renew/rollover weekly because that is the what my freaking bank demands. i gave up hedging a long time ago and keep THB ~12mm offshore on a monthly basis at 0.90% p.a. which is still more than the 0.25% SCB pays me on the balance of my current account. however, i don't mind the pittance in interest rates as the Baht appreciation vs. EUR is in my case presently between 12 and 15% in 3 to 5 months. anyway, for EUR and USD i am getting ZERO

Wow they do? How much must that cost in real terms?? Let's all of us just give up all this and become a bank - that would be huge margins and the best bit is that it doesn't matter if we screw up; taxpayers are very generous!

I am generally bemused by interest rates and real rates. How come we can all sit on some of this cash that Governments are making virtually the greatest attempt to render worthless and not even be paid interest. And just remember we are essentially giving it to the most hated, worthless individuals on earth to supplement their bonuses.

I dont really understand what is going on (looks like an incredible magic trick by Bernanke) but it is bound to end in tears. And if it doesnt it bloody well should. Just think about it we had the financial and economic collapse of the US due I believe to various structural problems (1) overborrowing (2) overconsuming (3) bad lending (4) lack of savings (5) large fiscal deficit - I am sure there are a bunch of others. Two years later we find 0% deposit rates 2% lending rates and 3% inflation and -3% real rates. Economists are often incredibly crafty and subtle with their ideas. To me it sounds like one of Sokal's ideas that everyone laughs at.

I mean (1) overborrowing solved by the lowest nominal rates probably since the war lowest real rates for forty years (2) overconsumption solved by low nominal rates negative real rates for the first time in 40 years (3) well lending at 2% when the inflation rate is 3% is just not bad it just sound ridiculous (4) lack of savings by lowest real rates in 40 years (5) large fiscal deficit that it is getting so bad people are worried it wont be paid financed for free. This inherently sound like Greek economics to me. Did anyone actually suggest this as a policy? Finally I thought the last crisis was caused by keeping rates too low too long. Now they are just too low.

Personally the only thing that will make me feel better about the whole thing is if they sack Tarisa at the BoT. Just what was the BoT thinking when it shorted US$60bn worth of baht against the US$.

Anyway this why I think it must end in tears. Deposit rates I dont think will below 0%. One rational person should not lend to another rational for 2% interest so nominal lending rates will fall. Inherently negative interest rates must be unsustainable over the medium term. Why would a bank lend? Shouldnt there be a real interest rate for foregoing consumption today to next year and if there isnt why not buy an asset. Now it promotes inflation so real interest rates might go further negative but it is still not sustainable. I dont believe you could be either a long term economic model or banking model on negative rates.

The one thing we can absolutely definitely say is it creates an asset bubble. You cannot think of any better way of creating a asset bubble but lowest possible lending rates combined with negative real rates. In fact it is by definition an asset bubble (So point no.6 Caused by an asset bubble solved by the most conducive asset bubble conditions eve.) Eventually positive real rates must assert themselves.

Maybe Midas is right and we will see deflation. But if inflation increases negative real rates will increase to excerbating all the problems and increasing the bubble and as rate changes will have to increase further the bigger will be the bust. As I see it there is something terribly artificial about the current scenario.

Average real rates have been 2.5% over the last 100 years. So purely an adjustment to real rate norms would mean that lending rates would have to increase 140% to 5.5%. If we blow the bubble up further the adjustment could be far more. Interest rates at 5.5% would presumably collapse everything.

So deposit rates arent going to fall, lending rates arent going to fall and the more inflation was to rise the harder the landing.

This mainly stems from US policy rates and the fact that The Fed believes that it can generate long term 'controlled inflation'. You can always create inflation says Ben - well that involves controlling people's and companies' spending patterns and in the past intervention hasn't worked nearly so well, neatly or tidily as bankers and economists would like. This has always been the biggest weakness in the monetarist view of the world. Circuit theory of money makes sense to me. If this is once again proven to be the case then maybe in a couple of years we'll have a US president scrtahcing his head and wisfully saying "we're all neo-Keyesians now..."

[Gambles]

None knew this guy Chris Martenson a couple years ago....

Although I listened to his crash course back when the crisis started....

Amazing though that he has gone on to speaking in front of Parliament & London School of Economics, and to councilors and members of the Scottish Parliament

http://www.chrismartenson.com/blog/getting-story-right/36727

interesting.

Thanks Flying. Hadn't encountered before.

[Gambles]

1. no you're right - I was over simplifying for the sake of brevity. With Baht (and it's only Baht where we have to operate like this) we take a longer term hedge contract of up to 12 months with a weekly option to close it out, but the reality is that it's intended to be a mechanical not discretionary hedge (except in extremis) so the weekly option is just used to vary the size of the hedge to match the size of the positions

2. with Baht in my experience that way is better than having to try to cover such an illiquid currency and we have to structure in a way to allow weekly inflows and outflows. My point was that for yourself, if you don't need to provide that liquidity, did they really need to charge you for 52 transactions a year???

1. HA!

2. of course any bank would charge me AND YOU or anybody else for each transaction (as you described it initially), but nobody in his right mind would use weekly transactions for a currency hedge except on rare occasions. by the way, i don't understand "weekly option" the possibility to cover a straight forward, within its maturity, partially or fully ANY day during that period does not require an additional option. this is standard procedure and one pays only for the initial transaction plus any increase or decrease of that forward as these are additional transactions.

summary: hedging any currency pair by straight forwards is a simple procedure but it still does not solve Churchill's problem of "goldmines>SGD>hedgingTHB". to the best of my knowledge gold mines do not exist in Singapore nor are any goldmines denominated/quoted in SGD except perhaps ADRs; the latter moving with their underlying currency vs. SGD = zero sum game.

yes but don't forget the pecularities of our local currency

onshore NFDs are non-existent (unless that's changed recently, I don't follow onshore that closely)

offshore the liquidity pool is pretty small

so fixed offshore forward into US$ and then you can do just about anything you want to hedge US$

or alternatively some times you can get terms quoted on SGD

but the reality with what I understood Churchill was saying was bullion (US$) hedged to THB for an offshore forward. Should be easy enough - mini version of us wrapping a US$-THB hedge around a portfolio for 6 months to a year and adjusting weekly shouldn't it?

No need to get that ladder of yours, just walk in the front door with your hedge contract in nyour back pocket!!