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  • #241
  • May 30, 2011 9:01am May 30, 2011 9:01am
Quoting Tilt
nice diagram
you can clearly see who owns the europe!

do you have a debt diagram betwen Germany,France & GB?
See attached image. If you want to make a diagram out of it then download the data direct from BIS --> click here. Make sure to use the left-most column for the most up to date figures.

Quoting lumesh
Do you have some kind of visual data for that? It would be interesting to see the relationship between them. Something like the debt exposure chart i attached.

thanks
All I have is the table attached below as an image. It took me a while to find the right data as I didn't have it ready for you, but I'm not going to spend more time on making a chart. I added Australia, Canada, Japan and the US into the table for comparison's sake. I think it's pretty obvious that European banks are heavily into EMs. If you want to make a chart on your own go ahead: link to BIS.

BTW, your flow chart is outdated by a year.

xXTrizzleXx,
My train of thought has suffered engine failure. I'll get back to you.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Germany, France and UK.PNG Size: 17 KB
Click to Enlarge Name: european banks EME.PNG Size: 18 KB
If you don't risk, you don't ever have to lose.
  • #242
  • Edited 9:40am May 30, 2011 9:05am | Edited 9:40am
Quoting bug
Although there are scores of traders who have burned their fingers trying to short Japanese sovereign debt it seems like things may be starting to move in the text-book economic direction. An aging population that is beginning to retire and draw down on their pensions, a natural disaster and a massive nuclear meltdown (according to latest reports it's now even worse than Chernobyl in terms of contamination, but you won't hear that on CNN or even Japanese news, see Spiegel story on why that is so), rising commodity prices and finally, an uptick in...

What i don't understand is why aren't the rating agencies downgrading the U.S. ?!

Yes, the % of gdp is twice as much in Japan than it is in the U.S. but the interest rate of the gov bonds are MORE than twice as LOW in Japan compared to U.S. making it actually harder for the U.S. to pay its debt (percentage wise anyway, all other things being equal).

Couple that with Japan being (most of the time) net exporter and that the majority of the debt is domestic (which IMO is better than having a lot of foreign debt holders).

Don't wanna sound conspiracy theorist but......what do you think ?


As far as the jpy goes then this (downgrade itself) shouldn't have any effect at all. JPY is (well, has been) a NEUTRAL (i'm saying that to simplify...IMHO it's actually more positive factors compared to usd for example) currency and it depends on economic conditions of other currencies. You can assume that the spending culture in Japan will not change by much meaning that interest rates aren't gonna rise significantly (as has been the case with Japan quite a while now). So, if you truly want to see jpy to "weaken" you need to have a catalyst from other countries which would be the shift in the economic conditions where series of interest rate hikes are to be expected. If Bernanke starts talking about rate hikes in terms of "when" not "if" then U/J rate above 90 shouldn't be a problem. And it could happen relatively quick as well.

It happens purely because of the different economic behaviour culture that allows investors to assume relatively safe that the borrowing costs aren't going to rise in Japan thus making it appealing to borrow from them and invest into countries where economic growth makes SERIES of rate increases inevitable. AND THAT is the textbook economics so to speak. Stable, steady, gradual growth. Today isn't that situation yet. Too many other issues present currently that make it a bit harder to build that confidence needed.

Your proposed aging population doesn't really mean a dick as long as it doesn't clearly weight on the economy (on trade balance?). That aging issue was present 5 years ago and will be an issue 5 years from today. Yes, the trend is there but it's too slow to develop any form of panic before it clearly has a negative impact. It's like saying: Hey, the world population is growing around 1% annually. How can we live after 100 years from today if this growth pace continues? Problem is noone gives a fck about it until it really weights on you when it's probably too late.
  • #243
  • May 31, 2011 4:30am May 31, 2011 4:30am
Quoting xXTrizzleXx
Heya bug,

Regarding the textbook economics definition, are you implying that those effects you listed above such as inflation, an aging population etc. would push yields upwards to compensate? (ie. Depressing bond prices?)

If so, then shouldn't rising yields be bullish for the Yen as investors seek to take advantage of the higher yields, in a similar manner to how rising US yields tend to bullishly influence the USD/JPY rate? I originally viewed it in the same light as you, but my inability to reconcile it with how rising US yields affect...
I'm not too sure about that. The factors listed above all serve to weaken the Japanese economy. People drawing down their savings decreases the funds available for the government to borrow. At the same time the government faces and ever-increasing dependency ratio (http://en.wikipedia.org/wiki/Dependency_ratio) which inevitable leads to an increasing mismatch between revenue and expenses. So far Japan has managed to evade higher input costs but the increase in commodity prices worldwide doesn't seem to be relenting (see my PDF thread for the GMO quarterly letter for a more in-depth understanding of the commodities price trend). Couple that with a crippled power supply, an increased reliance of fossil fuels and a decrease in the funds immediately available for the public sector to borrow Japan could see an uptick in inflation. Usually inflation is a sign of robust growth in the economy. Growth is what investors are attracted to and inflation is a signal of that. But what happens when there is inflation but no growth? You get stagflation. In that case, higher bond yields would not necessarily attract foreign investors, the opposite could actually happen. Indeed the only way I see foreigners having interest in buying JGBs once the Japanese public starts dumping them is if the increases in bond yields are bigger than the fall in the exchange rate of the yen. Japan's government debt to GDP ratio is already the highest in the developed world and I don't see them finding their way out of it without: a) sustained economic growth and b) a shift in debt burden from the government to the private sector.

Please bear in mind that I'm not a professional economist and this is just my observation. It is highly likely that I'm mistaken in my analysis as there are so many moving parts in a developed economy. Indeed there are very few people in the world who seem to understand what Japan went through in the last 25 years. One of them is Richard Koo and think it would be best to ask for his opinion. I haven't got the slightest idea of how you would contact him. All I know is that he works for Nomura now.

PS. In any case, these things will play out in the long run and while very interesting to observe they don't really influence my trading. I'm a short term speculator.
If you don't risk, you don't ever have to lose.
  • #244
  • May 31, 2011 4:37am May 31, 2011 4:37am
Quoting lumesh
What i don't understand is why aren't the rating agencies downgrading the U.S. ?!

Yes, the % of gdp is twice as much in Japan than it is in the U.S. but the interest rate of the gov bonds are MORE than twice as LOW in Japan compared to U.S. making it actually harder for the U.S. to pay its debt (percentage wise anyway, all other things being equal).

Couple that with Japan being (most of the time) net exporter and that the majority of the debt is domestic (which IMO is better than having a lot of foreign debt holders).

Don't wanna sound conspiracy...
The short answer is that it's political. However, you will note that the ratings agencies haven't downgraded Japan either (yet) even though Japan has a much higher debt to GDP ratio and a higher debt servicing cost as a percentage of budget expenses than the US does.

As for bond yields it is perfectly understandable why they are so low at least if you configure in deflation and follow the reasoning of Richard Koo's balance sheet recession theory (I'll be posting some resources later on if people are interested, let me know).

Some of the things you talked about I already covered in my reply to XX so see the post above. In terms of trading, let me repeat what I said earlier - I expect these things to play out in the long run and whatever influence it has on long term movements I am still a short term speculator. This means I don't have to be 100% right on long term trends.
If you don't risk, you don't ever have to lose.
  • #245
  • May 31, 2011 8:04am May 31, 2011 8:04am
Quoting bug

As for bond yields it is perfectly understandable why they are so low at least if you configure in deflation and follow the reasoning of Richard Koo's balance sheet recession theory (I'll be posting some resources later on if people are interested, let me know).
.
Thanks for the response.

however, i don't fully agree with everything. Bond yields are not low because price level (inflation/deflation) is low.

It's actually the opposite. Price level is low because bond yields are low (in Japan). Meaning that there are and has been constant high domestic demand for government bonds which means that instead of spending (which would create inflation) japaniese people tend to save. They don't give a fck about low yield environment cause their culture, traditions and values are different from the western spending logic. Deflation is NOT necessarily a bad thing. It depends how it develops and what are the underlying reasons. Japan is still an export country meaning that it is able to produce more real value to the world than other trade deficit countries.

Your Koo's balance sheet recession theory also doesn't apply here cause there are other reasons (what i just explained) for bond yields to be low. it might have been the case in the 90's for some time but not now.
  • #246
  • Jun 1, 2011 2:39pm Jun 1, 2011 2:39pm
Quoting lumesh
Thanks for the response.

however, i don't fully agree with everything. Bond yields are not low because price level (inflation/deflation) is low.

It's actually the opposite. Price level is low because bond yields are low (in Japan). Meaning that there are and has been constant high domestic demand for government bonds which means that instead of spending (which would create inflation) japaniese people tend to save. They don't give a fck about low yield environment cause their culture, traditions and values are different from the western spending...
You are wrong. Bond yields are driven by inflation and economic growth expectations. That's all I'm going to say at this point. Frankly I don't have the time nor the will to start a back and forth discussion on this topic. Forgive me for being so frank, but from my point of view you seem to have a lot of misunderstandings about how different markets work and influence each other (bond yields and inflation=obvious example). I would willing to discuss these things with you if (a) I had more free time on my hands and (b) the discussion were to take place in a proper thread and (c) if I was interested in continuing the discussion. A new thread can be created in an instant but the other points would still remain. Maybe in the future.


Note to others reading this thread
You may have noticed that I haven't been contributing over the last few days. I've been very busy and I haven't had a chance to trade my real account or read the news. Bloomberg, forexlive, Reuters, ifr and all the rest of the news sources are still up and running so I hope you can manage without me. I'm doing some research and it's going to take a while.
If you don't risk, you don't ever have to lose.
  • #247
  • Jun 2, 2011 5:42am Jun 2, 2011 5:42am
Quoting bug
You are wrong. Bond yields are driven by inflation and economic growth expectations. That's all I'm going to say at this point. Frankly I don't have the time nor the will to start a back and forth discussion on this topic. Forgive me for being so frank, but from my point of view you seem to have a lot of misunderstandings about how different markets work and influence each other (bond yields and inflation=obvious example). .
I understand what you are saying. It was probably a shitty example in terms of explaining it to YOU because you are a textbook kind a guy who takes everything in the light of "if x then y happens". You probably think that stock and bonds are directly linked as well (opposite way).

Let's go through it once more. Most of the Japan bond holders are japaniese themselves. THEY create that heavy demand for bonds. The SAME people who are "supposed to" create the economic activity in Japan. Now, you cannot do both - have a heavy appetite for bonds AND start spending. Mostly because you don't have any excess money to do both.

If you don't spend, then you can't induce economic activity and thus cannot create inflation. AND you don't spend because you put that "spending money" into savings account (into bonds). So, bond yields are not driven BY inflation in Japan. It is driven by japaniese being savers in their nature. Most of those who save don't even know what inflation means. Now, coming back to your point then of course you are right to assume that when inflation picks up then bond yields will be higher. But HOW can the inflation pick up ? When there's a shift in japaniese economic behaviour - when spending tops saving. Then it's only logical that the bond money goes into products and services demand. And by the time that happens you are late again to make a trading decision.

There is no "if x then y happens" situation in economic behaviour.

It's a bit difficult for me to explain things in full. YOU ARE RIGHT that when inflation is higher then bonds yields are higher and vise versa. But that knowledge doesn't make you any money. There's no leading/lagging relationship. I guess if i want to sum things up then i would say:

You cannot be a net demander WHILE being a net saver. It would be like ignoring gravity. If you get my drift.
  • #248
  • Jun 2, 2011 6:28am Jun 2, 2011 6:28am
lumesh,
the explanation you posted now makes sense. Your savings vs bond yield vs inflation logic is sound. However, what prompted my previous post was your statement that price level is driven by bond yields (you said "It's actually the opposite. Price level is low because bond yields are low (in Japan)"). The only explanation I can think of is that you misphrased your post (#245) in which case I would urge you to pay more do a check before you post (I always do a final check myself).

I would also appreciate if you'd stop saying things like this:
Quote
It was probably a shitty example in terms of explaining it to YOU because you are a textbook kind a guy who takes everything in the light of "if x then y happens". You probably think that stock and bonds are directly linked as well (opposite way).
You don't know anything about me and yet to claim to know that I'm a linear text book fellow who "probably think(s) that stock and bonds are directly linked as well".

In any case I'm not going to continue this discussion (see my previous post for reasons why).
If you don't risk, you don't ever have to lose.
  • #249
  • Jun 2, 2011 7:42am Jun 2, 2011 7:42am
Quoting bug
The only explanation I can think of is that you misphrased your post (#245) in which case I would urge you to pay more do a check before you post (I always do a final check myself).
you are right about that, i usually don't do check-ups before i post, so sorry about that. I think i have kept my mindset too casual most of the time.

Quoting bug
I would also appreciate if you'd stop saying things like this:
You don't know anything about me and yet to claim to know that I'm a linear text book fellow who "probably think(s) that stock and bonds are directly linked as well".
dude, those are only minor buggings (get it ? BUGgings )

But yeah, i guess i was a bit too hasty to jump into those conclusions.
  • #250
  • Jun 2, 2011 8:06am Jun 2, 2011 8:06am
Will EUR/CHF take a breath after making record low? Greece introduce new austerity measure in order to keep up with euro while ECB is to issue a joint statement on friday. Any more new surprise, we have to wait and see.

While on the other hand swissy, been the mot over valued currency in the world, showing no signs of deterioration at all, their latest SVME PMI was much stronger than expected last month at 59.2, up from 58.4 in the previous month,

Indicators, however, showing diffrent signs altogether. Stockhastic on h4 just came out of oversold while DMI+ has just cross DMI- and ADX i above 31.

Which way the pair is gonna move, my calculation says it just a conolidation, trend hasn't finih just yet which means punishment isn't over yet.
  • #251
  • Jun 3, 2011 1:38pm Jun 3, 2011 1:38pm
chf futures
Attached Image (click to enlarge)
Click to Enlarge Name: chf_001.jpg Size: 79 KB
  • #252
  • Jun 3, 2011 4:45pm Jun 3, 2011 4:45pm
Quoting ingmarforex
chf futures

CHF IS one crazy mtherfcker i'll give you that

I'm not trading that currency (i think the last time i traded it was like million years ago) however, by the looks of it, it should be due for a retracement at least. But, as with everything, one needs a catalyst just to be safe....or another 200 point drop with the same pace
  • #253
  • Jun 5, 2011 7:03am Jun 5, 2011 7:03am
Hi All,

I've made a chart which might be (or not) helpfull for you. It is very simple graphical way of representing how i see the major theme intensity at the moment. Those events/themes are (will be) strong market drivers and putting them in this form might help to visualize the fundamental trends. Some of the themes might somehow overlap with others but i thought they should be included anyway........... OK...enough of this jibber-jabber... I am putting that here to spark some new ideas and enhance/improve this chart.
Attached Image (click to enlarge)
Click to Enlarge Name: Major Themes Intensity png.PNG Size: 54 KB
  • #254
  • Jun 5, 2011 2:25pm Jun 5, 2011 2:25pm
Quoting Greenhaze
Hi All,

I've made a chart which might be (or not) helpfull for you. It is very simple graphical way of representing how i see the major theme intensity at the moment. Those events/themes are (will be) strong market drivers and putting them in this form might help to visualize the fundamental trends. Some of the themes might somehow overlap with others but i thought they should be included anyway........... OK...enough of this jibber-jabber... I am putting that here to spark some new ideas and enhance/improve this chart.
Trading sentiment has one major drawback - it's sentiment. What I mean by that is sentiment changes rapidly and cannot always be trusted to give accurate signals (AAII investor sentiment is an example). However, this doesn't mean one shouldn't try. There's one thing I'd improve on that chart: I'd compare it to EURUSD for example and aggregate all of those factors into a single line. So factor A would be dollar specific and either have a dollar positive or dollar negative effect. Factor B would be either dollar pos or neg. Factor C would be euro pos or neg. I hope you catch my drift. All single factors would then be used to draw a master sentiment line that's on balance EURUSD bullish or bearish.

In any case developing this into something that can be used to make money will be very difficult. Sentiment if a subjective thing, unlike GDP or inflation figures.:nerd:
If you don't risk, you don't ever have to lose.
  • #255
  • Jun 6, 2011 2:09am Jun 6, 2011 2:09am
Quoting bug
Trading sentiment has one major drawback - it's sentiment. What I mean by that is sentiment changes rapidly and cannot always be trusted to give accurate signals (AAII investor sentiment is an example). However, this doesn't mean one shouldn't try. There's one thing I'd improve on that chart: I'd compare it to EURUSD for example and aggregate all of those factors into a single line. So factor A would be dollar specific and either have a dollar positive or dollar negative effect. Factor B would be either dollar pos or neg. Factor C would be euro...
I picked themes that i thought they will resonate mostly with eurusd. You are right about the sentiment being subjective thing but i cant agree on the rapid sentiment change becouse the major market movers like ECB interest rate policy or Greece default problem are very obvious and persistant in current market environment. Aggregating that to one line might be interesting idea but taking into consideration that sentiment is a subjective thing we would be left with oversimplified line that would take away overall purpose of that chart. I cant imagine making money using only this chart but it could end up as a valuable tool to gauge the sentiment direction. If You have any ideas about any major market movers or You dont agree with the way i draw those lines then just shoot straight away...

GH
  • #256
  • Jun 6, 2011 2:58am Jun 6, 2011 2:58am
Greenhaze,
I have one idea for you that would help you gauge the strength of a specific factor. You would do that by putting news releases on a price chart (see my 'Rear View Mirror Chart Thread' for examples). Let me emphasise again that this is not a science. However, what I described above is perhaps something that would allow you to improve your factor strength estimation.

These are just suggestions I came to in a few minutes without really putting much thought into it. Personally I'm not interested in trading sentiment and I'm afraid I'm not going to spend more time on it. But good luck on your ventures.
If you don't risk, you don't ever have to lose.
  • #257
  • Jun 7, 2011 5:57am Jun 7, 2011 5:57am
Quoting Greenhaze
Hi All,

I've made a chart which might be (or not) helpfull for you. It is very simple graphical way of representing how i see the major theme intensity at the moment. Those events/themes are (will be) strong market drivers and putting them in this form might help to visualize the fundamental trends. Some of the themes might somehow overlap with others but i thought they should be included anyway........... OK...enough of this jibber-jabber... I am putting that here to spark some new ideas and enhance/improve this chart.

That is the problem. What if I saw things differently ?
  • #258
  • Jun 9, 2011 8:52am Jun 9, 2011 8:52am
Although I have completed most of my time-consuming research I've decided to retreat from sharing fundamentals and news stories with the FF crowd. The feedback has been lacking in quantity and quality, the participation rate has been very poor (I was doing most of the posting) and there were numerous distractions. There was only one other participant who took this thread seriously and that was xXTrizzleXx. Cindy tried to help out as well but it looks like both of them had exams so it is perfectly understandable that they weren't here every day. At least they tried.

Let me make it very clear to you that I'm not angry or upset. I just don't want to share information that took time to extract, analyse, summarise and post with a crowd who refuses to reciprocate. 71 views per post on average tells me that there were quite a few visitors here. Maybe they didn't find the info useful or whatever. Beats me. Doesn't matter anymore anyway.

Bye!
If you don't risk, you don't ever have to lose.
  • #259
  • Jun 10, 2011 2:41am Jun 10, 2011 2:41am
Quoting bug
Although I have completed most of my time-consuming research I've decided to retreat from sharing fundamentals and news stories with the FF crowd. The feedback has been lacking in quantity and quality, the participation rate has been very poor (I was doing most of the posting) and there were numerous distractions. There was only one other participant who took this thread seriously and that was xXTrizzleXx. Cindy tried to help out as well but it looks like both of them had exams so it is perfectly understandable that they weren't here every day....
i READ AND TRY TO DIGEST/UNDERSTAND WHAT IS GOING ON. If i dont have anything intelligent to say, there is no reason to write stupid stuff. Oh well.
  • #260
  • Jun 10, 2011 2:58am Jun 10, 2011 2:58am
Quoting lumesh
What i don't understand is why aren't the rating agencies downgrading the U.S. ?!

Yes, the % of gdp is twice as much in Japan than it is in the U.S. but the interest rate of the gov bonds are MORE than twice as LOW in Japan compared to U.S. making it actually harder for the U.S. to pay its debt (percentage wise anyway, all other things being equal).

Couple that with Japan being (most of the time) net exporter and that the majority of the debt is domestic (which IMO is better than having a lot of foreign debt holders).

Don't wanna sound...
Hey, lumesh, stop beating up mr. bug.

(you are entitled to your opinion, of course. ) I thorougly enjoy your back and forth.

Crybabies leave.
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