Silent Service Method

They're between a rock and a hard place.

Keep rates low and the people can't afford to eat, put them up and they can't afford their houses.

To be honest the inflation coming through the food channel will be more manageable as the imported COGS is but a % of the total in store price. People can't afford to argue for higher wages because the job market is collapsing for anyone who's not in a decent role at a bank.

Loss of housing will be a lot more of a political problem than food in the near term. People in the UK still have cheaper substitutes that they can purchase, Iceland Frozen Chicken Pieces instead of Tesco's Finest etc whereas those in the Middle East/Pakistan and the rest of the third world having food riots are already buying the cheapest alternatives so they have no where to run.

They will continue to ignore inflation until it becomes a major public issue and the average punter here is still happy to enjoy a pint can and a jacket potato in front of Britain's Got Talent.

When the full impact of the NHS cuts, wider gov workforce cuts, VAT increase all come home to roost by mid year there will be a clearer picture on whether inflation is an issue in the medium term. If it is like last January's VAT increase though it will predominantly translate into margin compression as retailers try not to pass it on, however with the increases in raw material prices as well this may be the straw that breaks the camels back.

I can't make a case for prolonged GBP strength with the economy languishing like it is unless the retail consumer no longer matters in the UK.

I like your analysis style Condor. It's difficult to maintain focus when combining fundamental analysis with charting and you seem to be one of the few who can do it!

Taking the OANDA MetaTrader platform out for a test spin today...should be interesting, perhaps now I can combine my charting and order execution onto one platform!

Charting was always one of my biggest problems with Oanda. I wonder though - are they still going to have that stupid "3 hour" chart? Or are they moving to the 4?

Chris

Haha, nope...they still have it on their platform, but not on the MetaTrader version. They are standard like everyone else. OANDA to me has been great - customer service, execution, withdraws and deposits... the only downfall was the platform, hopefully the Metatrader can solve that!

I actually have heard many good things about them. I also understand that you can trade gold in other currencies than the USD. Interesting idea.

They are a decent broker, just rubbish around news. But if you are trading longer timeframes then they are great.

For those of you outside the USA you have to check out LMAX in the UK.

They are the same people who created Betfair the world's largest online betting exchange and they have just opened an exchange of their own for CFDs, Spot FX, Index and Commodity Futures and are getting ready to offer stocks.

They offer Direct Market Access straight into the liquidity pool provided by Goldmans, JPM and the other main players.

They aren't a broker so they do not take positions against you, they love high frequency scalpers and basically are the only conduit for trading that I can find who are not trading against their customers.

They charge fixed commissions and tiny spreads.

They are definitely worth a look. I am opening a live account with them in the next week or so. A friend of mine is one of the managers there and with their expansion plans into mainland Europe, Asia, Australasia and the Middle East in the next 18 months they will be a serious player. Also helps that the owners made half a $B floating Betfair.

Worth a look and nice to be able to place your own orders direct into the market without requotes for once!

4x.

I was rooting around the media attic again yesterday following the BoE sketch down at Threadneedle Street. I was doing so as I had in the back of my mind a previous heckle that I made regarding the yield on Portuguese debt hitting 7.5% and Spanish debt reaching almost 6%. Of course, the money men seem not to give a hoot for any short-term debt, and so I started to look at longer-term debt. In particular, the debt from the US, as it is here, I suppose one could say, that the buck stops.

There are many sources, but I chose:

http://www.bloomberg.com/markets/rat...ment-bonds/us/

It is argued that it is the longer-term bonds that provide for an indication of how the investors perceive the health of an economy, and of how much confidence they have in long-term investment within a country. Well, from the table available from Bloomy, doubts about the comfort of the bosom of the dollar seem to be happening: The UK likewise.

A few days ago I was reading of how quantitative easing has no effect other than to make us poorer, and the speculators richer. Consider the Zero Interest Rate Policy, and Quantitative Easing. QE appears to be a means for the banks to watch the taxpayer buy the toxicity from the banks. The piffle about how it would stimulate economies has been proven not to be the case, and instead has seen, with ZIRP, a rising inflation, rising unemployment, and freeze/lowering of interest rates. Let’s face it, with such uncertainty since 2008, many businesses and people are afraid to go to the bank to ask for the loan to fund the next expansion plan or extension to the home. Indeed, those fortunate enough have been using what capital they have to pay off, as much as possible, existing debts as the interest accrued on these is not offset with the pitiful interest rates now offered by the banks. Pff, when I was a lad I had a building society account paying 12% interest. Ah, those were the days.

If you are a bank, of course, it is different, as you can deposit in central banks overnight and receive a rather attractive interest rate; but of course, no such mechanism is available to us.

Now, although many – me included - would argue that central bankers live in their own world and are out of touch with common sense, I happen to believe that when it comes to their profession, they are totally absorbed, and are probably very smart within their working environment. So much so, that they have chosen, whether voluntarily, or by coercion, to pursue a course of action that is not conducive to the maintenance, for Joe on the street, of existing standards of survival. This is a shame, as Merv strikes me as a Grandfatherly figure that always has a Werther's Original stuffed in the pocket of his woollen cardigan, ready for a Grandchild to take.

Somewhere on FF recently I read a couple of members discussing a topping out of the DOW etcetera. Hmm, maybe, and this could explain the rise in the yield on the bonds as people jump ship and head for government debt. I’m also watching oil and gold begon a march north again, and am starting to read a little slower – in order to consider more – the financial rumour mill and its concerns about an imminent double dip scenario.

If we are to believe what is released by the banks, and infer from the bonuses that the releases are credible, then the banks are back to business as usual, and so one has to ask why central banks are maintaining a ZIRP policy? In the case of the US, why engage in more QE? Regarding interest rates; if increased, should not this act to placate the bond markets and settle the nerves within the indices?

Is there something else that we are not being told. Erm, how about derivative bets?

A few figures.
In 2008 the credit default swap market was worth $37T at the time of the meltdown. Bear Stearns and Lehman had around 7% of this when it crashed due to, as some speculate, dirty closed-door dealings between the FED and other big banks.

Currently, the derivative bet market is a whopping $342T!

Dear me, the global economy is approximately $58T. Global stock markets etcetera come in at approximately $36T. The following figure is subject to a small degree of inaccuracy depending on which source you take, but some 90% of all derivative bets are owned by the top five banks or so.

There are many sources to read about this, and so I won’t clutter this post with links. But here is one from the end of last year:

http://richardbrenneman.wordpress.co...-crash-records

So, in order to keep toxic debt/derivative bets affordable/profitable, institutions – the usual, GS, JP and so on – need low interest rates.

Ah, so am I being told that the usual suspects have existing bets that, should interests rates rise, would see them take a knock? Double ah, are the central banks aware of this, and so working in cahoots with the big institutions in order to save them, and not us? I think I am, and so proffer the following:

Until the likes of GS and JP can collect on their bets – that rely on prolonged low interest rates - we are not going to see any interest rate rises, and will endure rising inflation and unemployment. I am not saying that central banks and governments are being particularly malicious towards the public, or that they have only there own interest at heart (well, maybe a little), but in order for future generations of bankers and politicians to retain a profitable control over future Joes on the street, it strikes me that they are doing all that they can to protect the wealth, and avoid a double dip induced by the big banks taking a knock on their bets if interest rates rise.

A little off topic here
But I found this on Oanda page after reading some stuff about their brokerage etc from a few posts ago

http://fxtrade.oanda.com/analysis/open-position-ratios

It's cool! I just wonder how accurate it is and how many clients it includes, it would be fantastic if that data were available on all brokers.

Just a "heads up" - the blog will be down for about 36 hours as I move it to a new server.

Chris

One thing that kind of throws a monkey wrench in this scenario - people. I agree with everything that is posted here, but countries are starting to fall. I know it is a stretch, but sooner or later food inflation makes for rioting and such in a place that actually matters to the CB's. Maybe Europe? If it were America, everyone has a gun (some of us two) and that would be a much larger issue than a bunch of rapists and religious zealots in the streets of Cairo.

Of course, this would be the ultimate endgame scenario. I don't think it will happen of course, but the CBs have to be fully aware of what is happening in the Middle Eastern kingdoms. Oh, and by the way - it's not Eastern Europe in '89....and I am sure they know that as well.

The games that these people are playing are getting to be more and more dangerous. And to be honest, thieves of this magnitude a very intelligent - so they will only push as far as they can, and back of into the shadows from which they came.

Hi Clockwork,

Agree, and it does strike me as containment. Sinner gave some good comments to this post earlier.

Food riots in those regions where money is not really made is ignored. A somewhat sad reflection upon the concerns of big money these days.

I am interested to see what Saudi does considering the events unfolding in Bharain.

Your comment a day or so ago about becoming Americanized. Well, I'm a British citizen hiding in France, but if those idiots up in Brussels continue, I may well be asking for a bed at your place, and one of those guns.

Looking into some anti-chav artillery myself

Well, they can't help it - they are in Belgium. And you can't trust trust a country that takes on the personality of another, and uses the other country's language.

Oh. Wait. lol

You are welcome, I can't say our soccer/football will be anything above the Vauxhall League over there.....but our basketball is certainly better. As for beer - they import everything, so you will be good. Oh, and you will have to brush up on your Spanish/Arabic/Somali/Russian/Hindi/ if you want to communicate.

Funny...

Funny...

Much prefer rugby - although the last few years have seen this sport becoming big business - the price of tickets for internationals is a joke, and it's impossible to get anything reasonable for the NZ World Cup.

Football players - well, I won't go there as I fear many here enjoy watching.

Does anyone here trade in Options? I am looking to use it a hedging tool for my Currency trading. What do you guys think? Any experience with doing something like this?

If you get a broker like InteractiveBrokers or Saxo then you have access to plenty from memory.

I don't use options for FX myself.

I dunno what just happened, but whatever the hell it was it was good...
Could it be Friday closing position time I wonder

He is correct, however I don't use them myself.

More drama from the ECB

http://noir.bloomberg.com/apps/news?...HAC.lajY&pos=1