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EurAnalysis Kindergarten 24 replies

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  • #55,481
  • Sep 20, 2012 4:00am Sep 20, 2012 4:00am
Quoting PipTrapper
You got it the wrong way. If they request a bailout, I expect a rally on E/U as more capital will flow into Spanish debt thinking that the ECB will back stop it all.
That's what i said...sorry for my retarded english from time to time....By pulling off shorts i meant that you are NOT gonna LIQUIDATE your current shorts and probably will add to them. Of course, without the bailout there's no hopium
  • #55,482
  • Sep 20, 2012 4:02am Sep 20, 2012 4:02am
lol at new h4 bar openinig
  • #55,483
  • Sep 20, 2012 4:06am Sep 20, 2012 4:06am
Quoting lumesh
That's what i said...sorry for my retarded english from time to time....By pulling off shorts i meant that you are NOT gonna LIQUIDATE your current shorts and probably will add to them. Of course, without the bailout there's no hopium
LOL I thought you might have been confused.

Anyway, regardless of bailout or not, my shorts will get covered.

1. If Spain applies for a bailout, the euro will rally into macro sellers and then head down (EZ QE effect).

2. If no bailout request, it will be a slow grind down until such time as they are forced to request a bailout, then see #1.
Those who say it cannot be done should not interrupt those who are doing it
  • #55,484
  • Sep 20, 2012 4:10am Sep 20, 2012 4:10am
2935 - QE3 breakout level
69
  • #55,485
  • Sep 20, 2012 4:10am Sep 20, 2012 4:10am
Quoting PipTrapper
10 Year Spanish bond auction Bid to cover 2.8 vs 2.4. Yield 5.7% vs 6.7%
Don't expect Spain to apply for aid any time soon
morning PT

I was just reading a very interesting take on the EZ from Rabo Bank. their analyst felt that participation in the bailout mechanisms will increase euro zone unity and be bullish for fx long term. italy is the next stepping stone to further fuse the zone into a stronger fiscal union. this is a perspective that I had never considered in this fashion (bailout participation being directly bullish).

fundamentally, I am still holding my ground as a long-term bear. however, for, probably, the remainder of this year, I am long at this time through a few different mediums.

despite nasty manufacturing & china data, the spanish debt cost easing is proof of the psychological medicine from draghi. while current interest rate levels on 10y spanish notes are not sustainable from a government financing perspective, i view the current pullback is necessary for the larger daily/weekly rally to push closer to 140. based on enormous deleveraging and tax woes facing the US in the next 4 months on top of a major presidential election, i am far more bullish on the eurodollar than i am on the USD. what do you think liquidity and market sentiment will look like if obama is re-elected? i feel pretty confident it won't be increasing, that is for sure.
Any prices quoted are futures
  • #55,486
  • Sep 20, 2012 4:11am Sep 20, 2012 4:11am
Apart from the huge problem with Spain's Banks - their "official" property loan situation is way understated - the creation of 17 Autonomous Regions some 30 years ago brought in a whole new layer of local government which now employ ~1,350,000 civil servants. Most of these Regions are in serious trouble and unable to raise the cash they need to pay their bills, so they have their begging bowls out for the Central Government to fill - again!

When you see these local beaurocrats with their G4 mobile phones, IPads and chauffeur driven Audis, BMWs and Mercs huge expenses etc etc you start to get an idea of Spain's problem.
Trading Levels with WRBs
  • #55,487
  • Sep 20, 2012 4:19am Sep 20, 2012 4:19am
Quoting redteamgo
morning PT

I was just reading a very interesting take on the EZ from Rabo Bank. their analyst felt that participation in the bailout mechanisms will increase euro zone unity and be bullish for fx long term. italy is the next stepping stone to further fuse the zone into a stronger fiscal union. this is a perspective that I had never considered in this fashion (bailout participation being directly bullish).

fundamentally, I am still holding my ground as a long-term bear. however, for, probably, the remainder of this year, I am long at this...
Well I cannot say I agree with Rabobank on this one. Unity is one thing but at the end of the day it is the economic factors that matter the most. If Spain and Italy apply for official aid, they will be subjected to harsh anti-growth austerity measures which will only yield benefits in the long term and worsen the short to mid term economic condition.

The whole question of EZ unity has already been addressed and the risk of a breakup is now completely priced out. So increasing the prospects of unity should only yield a knee-jerk reaction.

As for the US fiscal cliff woes, if it comes to that, it would spur a massive risk-off sentiment and the clear winning currencies would be the USD, JPY and CAD. All other risk assets (including the Euro) will be slammed.
Those who say it cannot be done should not interrupt those who are doing it
  • #55,488
  • Sep 20, 2012 4:21am Sep 20, 2012 4:21am
Quoting Islander
- the creation of 17 Autonomous Regions some 30 years ago brought in a whole new layer of local government which now employ ~1,350,000 civil servants.
When you see these local beaurocrats with their G4 mobile phones, IPads and chauffeur driven Audis, BMWs and Mercs huge expenses etc etc you start to get an idea of Spain's problem.
That is a common problem in the whole Eurozone. We all know that the government (structure) has to downsize. And I don't mean teachers etc... . It will happen but no politician is gonna do this without serious market pressure. It will get worse before it gets better.
Inflation in things we need, Deflation in things we want.
  • #55,489
  • Sep 20, 2012 4:22am Sep 20, 2012 4:22am
Quoting Islander
Apart from the huge problem with Spain's Banks - their "official" property loan situation is way understated - the creation of 17 Autonomous Regions some 30 years ago brought in a whole new layer of local government which now employ ~1,350,000 civil servants. Most of these Regions are in serious trouble and unable to raise the cash they need to pay their bills, so they have their begging bowls out for the Central Government to fill - again!

When you see these local beaurocrats with their G4 mobile phones, IPads and chauffeur driven Audis,...
yeah. bloomberg pointed out that 10% of total outstanding loan assets were distressed. 170b on 1.70t
Any prices quoted are futures
  • #55,490
  • Sep 20, 2012 4:22am Sep 20, 2012 4:22am
Quoting Likerty
But.. is it common logic or it is markets logic? I mean - if everything will be quiet on the Western front for some time - everybody (politicans) may leave hot topics for a while..?
I think it's market logic
don't ask me questions I can't answer lol. I am not good @ FA but I learn by watching and reading
That Bailout day was Sunday and the EURUSD rallied more than the Greek election results (70 pips i think) which everyone expected to shoot 300-400 pips
ADD: Watching charts
  • #55,491
  • Sep 20, 2012 4:24am Sep 20, 2012 4:24am
Quoting Islander
Apart from the huge problem with Spain's Banks - their "official" property loan situation is way understated - the creation of 17 Autonomous Regions some 30 years ago brought in a whole new layer of local government which now employ ~1,350,000 civil servants. Most of these Regions are in serious trouble and unable to raise the cash they need to pay their bills, so they have their begging bowls out for the Central Government to fill - again!

When you see these local beaurocrats with their G4 mobile phones, IPads and chauffeur driven Audis, BMWs and Mercs huge expenses etc etc you start to get an idea of Spain's problem.
and that is precisely the problem with Greece. Look where they are after 2 bailouts. Spain is many time larger than Greece (GDP wise) so a similar situation in Spain would spell a near disaster for the Euro currency. The risks may be mitigated by the ECB backstops in place, but that doesn't solve the fiscal problems.
Those who say it cannot be done should not interrupt those who are doing it
  • #55,492
  • Sep 20, 2012 4:25am Sep 20, 2012 4:25am
Quoting PipTrapper
s for the US fiscal cliff woes, if it comes to that, it would spur a massive risk-off sentiment and the clear winning currencies would be the USD, JPY and CAD. All other risk assets (including the Euro) will be slammed.
time will tell on that one. the risk on/off relationship is undeniable but not set in stone. I would bet the opposite simply because the risk/reward ratio is so great for such incredible return. i would gladly put out a sell stop in the cash market and buy calls on the fringe of the week in which these matters become more imminent.
Any prices quoted are futures
  • #55,493
  • Sep 20, 2012 4:30am Sep 20, 2012 4:30am
Report: Iran ships arms, personnel to Syria via Iraqi airspace

Looks like Iran is getting ready to "wipe Israel off the face of the map"
Those who say it cannot be done should not interrupt those who are doing it
  • #55,494
  • Sep 20, 2012 4:36am Sep 20, 2012 4:36am
Quoting redteamgo
time will tell on that one. the risk on/off relationship is undeniable but not set in stone. I would bet the opposite simply because the risk/reward ratio is so great for such incredible return. i would gladly put out a sell stop in the cash market and buy calls on the fringe of the week in which these matters become more imminent.
Well, that's your call. Obviously I have my view on the risk-on/risk-off concept. It makes no sense that the US will lose their safe haven status if they are the ones with the liquidity to support it. In order for Europe to become the safe haven, it's export economy will have to be destroyed and then it won't matter how much the Euro is worth because the whole world would be on its way to hell in a hand basket.
Those who say it cannot be done should not interrupt those who are doing it
  • #55,495
  • Sep 20, 2012 4:42am Sep 20, 2012 4:42am
Quoting PipTrapper
Well, that's your call. Obviously I have my view on the risk-on/risk-off concept. It makes no sense that the US will lose their safe haven status if they are the ones with the liquidity to support it. In order for Europe to become the safe haven, it's export economy will have to be destroyed and then it won't matter how much the Euro is worth because the whole world would be on its way to hell in a hand basket.
i cant speculate on doomsday, but like Europe, the US's liquidity is the printing press. we have no real liquidity at all, just the belief that we have liquidity.

sure, US can price yields on short term notes. but on mid/long term notes and bonds, the market will price effective yields. i feel that it is inevitabe the US will be downgraded again. where will money flow? what will happen when the market realizes that the fed is propping up its own debt? this is my gut feeling. we'll have a nice bullish move up a few handles and then down down down, which will likely coincide with downgrades.

when the bond big boys step away from treasuries, markets will move in a big way. if the euro is not viewed positively for investment at that time, it will suffer like you said due to the risk on/off relationship since risk positions will be liquidated to cover. however, if it is positive, then the opposite will occur. major money will move into what were risk assets while notes sell off. i could be wrong; probably am
Any prices quoted are futures
  • #55,496
  • Sep 20, 2012 4:52am Sep 20, 2012 4:52am
Quoting redteamgo
i cant speculate on doomsday, but like Europe, the US's liquidity is the printing press. we have no real liquidity at all, just the belief that we have liquidity.

sure, US can price yields on short term notes. but on mid/long term notes and bonds, the market will price effective yields. i feel that it is inevitabe the US will be downgraded again. where will money flow? what will happen when the market realizes that the fed is propping up its own debt? this is my gut feeling. we'll have a nice bullish move up a few handles and then down...

Okay I'll give you this much. Capital may flow to Germany, Sweden and Canada. However, it will be to the global economy's detriment and CBs everywhere will intervene.

ADD: Remember that the US is enjoying growth (albeit less than 2%) and Europe is in severe contraction (-2% annualized GDP). Where would you want your money? If the US takes a 1% hit on GDP due to the fiscal cliff, then they would still be in positive GDP, whereas Europe would suffer even more setbacks through deeper contraction.
Those who say it cannot be done should not interrupt those who are doing it
  • #55,497
  • Sep 20, 2012 5:10am Sep 20, 2012 5:10am
Quoting PipTrapper
Okay I'll give you this much. Capital may flow to Germany, Sweden and Canada. However, it will be to the global economy's detriment and CBs everywhere will intervene.

ADD: Remember that the US is enjoying growth (albeit less than 2%) and Europe is in severe contraction (-2% annualized GDP). Where would you want your money? If the US takes a 1% hit on GDP due to the fiscal cliff, then they would still be in positive GDP, whereas Europe would suffer even more setbacks through deeper contraction.
http://seekingalpha.com/article/8735...cro_view&ifp=0

Snippet

"The market values currencies based on the current price and three main aspects of economic data:

 

  1. Risk differentials consisting of risk appetite/risk averseness, debt and current account balances
  2. Interest rate differentials
  3. GDP growth differentials

Always, when new economic data comes out, the market compares it with previous data and other countries. If a state shows better economic data than another, then its currency will appreciate against the other....."

Apart from rate differentials which should soon be converging more (future ECB rate cut), US scores better v EU imo.

The spoken word is your master, the unspoken word your slave.
  • #55,498
  • Sep 20, 2012 5:13am Sep 20, 2012 5:13am
DXY Daily
Attached Image
Those who say it cannot be done should not interrupt those who are doing it
  • #55,499
  • Sep 20, 2012 5:14am Sep 20, 2012 5:14am
Quoting CommercialB
http://seekingalpha.com/article/8735...cro_view&ifp=0

Snippet

"The market values currencies based on the current price and three main aspects of economic data:

 

  1. Risk differentials consisting of risk appetite/risk averseness, debt and current account balances
  2. Interest rate differentials
  3. GDP growth differentials

[i]Always, when new economic data comes out, the market compares it with previous data and other...

Those who say it cannot be done should not interrupt those who are doing it
  • #55,500
  • Sep 20, 2012 5:26am Sep 20, 2012 5:26am
Quoting PipTrapper
In case of any misunderstandings I forgot I also should have added a to my comment re your previous post too ... so here it is ..
The spoken word is your master, the unspoken word your slave.
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