Australian Bear Raid

Reports now that the PBOC are to inject a combined CNY 395bln in 7day & 28day reverse repo's...here we go again!

Can you explain how / why this will be good / bad for AUD if possible? Thanks JP!

The PBOC plans to borrow money from banks, thus taking money out of the economy. Why? Because the PBOC needs to take some of that money(stimulus possibly from 08) back out of the economy or prices (and interest rates) will skyrocket. If they don’t, we’re out of the proverbial frying pan only to roast in the proverbial fire.


Normally, when you borrow money, you pledge collateral against it. Say you have $10,000 in Treasury bonds and you want to borrow $10,000. You can use the Treasury bonds as collateral, no? As long as you and your lender agree that you can’t sell those Treasuries, they make great collateral.
Better yet, you could effectively borrow the $10,000 dollars by selling the $10,000 in Treasury bonds to the lender and agreeing to repurchase them, say, in a year, at $10,700. This sale with a contract to repurchase at a price $700 higher than the original sale is essentially identical to borrowing $10,000 for one year at 7% interest.


T
hat’s a repo or repurchase agreement. It’s how banks borrow most of their money when they are temporarily shy of their reserve requirements. But just to complicate matters, we’re being told that the PBOC is contemplating removing money from the system using “reverse repos.”
A “reverse repo” is exactly the same as a “repo,” just from a different perspective. When PBOC is putting money into the system by buying from and then agreeing to resell securities to a bank, that’s a repo from the PBOC perspective and a reverse repo from the bank’s perspective. When the PBOC is sucking money out of the system by selling and then agreeing to repurchase securities from a bank, that’s a reverse repo from the PBOC perspective and a repo from the bank’s perspective.




So when you read that the PBOC is contemplating an unknown amount of $$ in reverse repos, that means that they’re trying to suck out possibly billions from the economy by selling Treasuries to the banks with agreements to repurchase them later at a higher price.
T
rying to understand the PBOC and several other central banks can make one go mad so I will leave this to the market media and ‘economist for their guesswork and feel-goodies. When the PBOC actually starts putting reverse repos out there, then you know they’ve decided the economy’s growing and it’s time to lower the money supply heat. No huge PBOC reverse repo program: we’re still heading south. The PBOC chasing down hundreds of billions of dollars of reverse repos: the economy’s growing.




Still Early on all of this although this could be a further uptick for China but we will wait for more numbers as always.

Back to 120 on ore. Could be interesting how RBA talks about this in their minutes and their forward looking guidance on Mining.

http://2.bp.blogspot.com/-wyBEVR3JCF...k/s320/iro.png

ANOTHER Banksia investment fund has collapsed, owing nearly $10 million to investors.
http://www.theaustralian.com.au/news...-1226506728175



Even though this is on a smaller scale still reminds me of some interesting days before the REAL storm hit




· June 2007 - Amid losses in its portfolio, the Bear Stearns High-Grade Structured Credit Fund receives$1.6 billion bait out from Bear Stearns, which would help it to meet margin calls while it liquidated its positions.


· July 17, 2007 - In a letter sent to investors, Bear Stearns Asset Management reported that its Bear Stearns High-Grade Structured Credit Fund had lost more than 90% of its value, while the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund had lost virtually all of its investor capital. The larger Structured Credit Fund had around $1 billion, while the Enhanced Leveraged Fund, which was less than a year old, had nearly $600 million in investor capital.



· July 31, 2007 - The two funds filed for Chapter 15 bankruptcy. Bear Stearns effectively wound down the funds and liquidated all of its holdings.
· Aftermath - Several shareholder lawsuits have been filed on the basis of Bear Stearns misleading investors on the extent of its risky holdings.

From SMH: let see if the market will force RBA to take action...



The Reserve Bank of Australia (RBA) says the conditions are not right for it to intervene in currency markets to reduce the value of the Australian dollar.

Reserve Bank of Australia (RBA) deputy governor Philip Lowe told the Commonwealth Bank's Australasian Fixed Income Conference in Sydney the Australian dollar is not overvalued.
"The major influence on the currency is the terms of trade, the commodity prices," Dr Lowe said.
"That's why the exchange rate is high."
Dr Lowe said in answer to questions at the conference that the current conditions were not right for an intervention.
"While it's a bit surprising that the currency hasn't come down - the outlook for the world economy has softened and interest rates have gone down - the currency is still not at a point where I think you can make a strong conclusion that it is fundamentally overvalued," he said.

He should tell George Soros. Wasn't it the Bank of England that made a similar statement and then Soros made a billion or so shorting the pound just over the weekend.

Typical of the 'Extend and Pretend' mentality in the marketplace.

do the PBOC engages in re-hypothecation of their collateral like western countries does? because that will further mess things up.

--skynet

You on this JP?

BTW thinking about buying your brothers book on options... What you think?

i think he has currently higher prorities than to respond to your idea.

lets hope so Macro-man...

Hope you're growing your bet size to acceptable rates of interest. Trade well my friend.

I know my brother has an options website but not sure about a book. The options book I recommended 'Trading options as a professional' in my opinion is the best one out there came from a former MM and he knows his stuff about pricing and strategies.

I will start back up more on this thread its just been really dead in AUD for some time and I just recently bought a road cycling bike which has been interesting and eye opening on how out of shape I am lol

I wont be excited until RBA Nov or until we break AND CLOSE above the 50% YTD

Amazed at JP calmness.
i surely could not stand this quietness so calmly with position where risk represensts decent % of your account.

i am growing bet size okay. currently ytd at +35%. but i can't get rid of the feeling that i am trying to squeeze water out of stone this year. Sooo hard ! It will change eventually. So, i am more worried not to lose. Maybe Yen will be next where all the action will be with break to new low. large trends, impressive reversals.

It's something that took me along time to accept that there is SO much noise in the markets and there are only a few Key data points or 'events' that cause a position to be re-examined or cut. I Am in at various levels but the big shorts are at 1.04-1.0410 when we had the last sell down now I am only waiting for two events to occur in order for me to liquidate

We break the last walls of Confluence at 1.0435 and close on the DAILY. Even though I have a stop Loss at 1.05 I will cut almost immediatly before then because this congestion area can't maintain for much longer.

RBA does not cut I am out and Will look to focus on Dollar increase in shorts going into 2013 (will wait for a better opp in AUD if we are much higer)

Or...

They do cut and my thesis is still valid in that they are worried a bit more about their retail sector and its affect on consumer behavior going into Holiday season.

We break below the lower confluence walls and watch the dam break.


As for right now and as I stated last week and a bit before I don't expect a major bid spike or sell spike before RBA meeting and any news that comes out with the Spikes will be filled in short order. If anything we could be trading at the Hourly bar right at the Oct cut 1.03655

As for right now just going over excel sheets of holes in my argument and I will fully acknowledge that the premise for the short in the beginning on this trade has lost some merit now I just need the RBA to confirm my view or I will cut out

hope u fine and far away from the disaster that recently and trade smooth!

Sincere, Michelle

I did as I was here in Arizona back home, I can't say the same for some friends offices, homes ect.

Just waiting here patiently big couple days are upon us for releases

October 31 - November 1

 

1. Japan: Markit/JMMA Manufacturing — 46.9, down from in September 48. 0
2. 8:01 PM South Korea: HSBC Manufacturing PMI — in September 45.7
3. 9:00 PM China: NBS Official PMI — in September 49.8
4. 9:00 PM Netherlands: NEVI Manufacturing PMI — in September 50.7
5. 9:45 PM China: HSBC Manufacturing PMI — in September 47.9
6. 10:00 PM Taiwan: HSBC Manufacturing PMI — in September 45.6
7. 10:00 PM Vietnam: HSBC Manufacturing PMI — in September 49.2
   
8. 11:00 PM Indonesia: HSBC Manufacturing PMI — in September 50.5
9. 1:00 AM India: HSBC Manufacturing PMI — in September 52.8
10. 1:00 AM Russia: HSBC Manufacturing PMI — in September 52.4
11. 3:00 AM Ireland: NCB Manufacturing PMI — in September 51.8
12. 4:00 AM Turkey: HSBC Manufacturing PMI — in September 52.2
13. 5:00 AM Greece: Markit Manufacturing PMI — in September 42.2
14. 5:30 AM UK: Markit / CIPS Manufacturing PMI — in September 48.4
    
15. 6:00 AM Australia: AiG Manufacturing PMI — in September 44.1
16. 8:00 AM Brazil: HSBC Manufactuing PMI — in September 49.8
17. 9:00 AM US: Markit Manufacturing PMI — in September 51.1
18. 9:30 AM Canada: RBC Manufacturing PMI — in September 52.4
19. 11:30 AM Mexico: HSBC Manufacuring PMI — in September 54.4
    

November 2

 

1. 4:15 AM Spain: Markit Manufacturing PMI — in September 44.5
2. 4:45 AM Italy: Markit/ADACI Manufacturing PMI — in September 45.7
3. 4:50 AM France: Markit Manufacturing PMI — in September 42.7
4. 4:55 AM Germany: Markit/BME Manufacturing PMI — in September 47.4
5. 5:00 AM Eurozone Manufacturing PMI — in September 46.1

South Korea: HSBC Manufacturing PMI — 47.4, up from 45.7 in September

Ok was thinking your bro wrote that book you posted the link to.

Hey GL with the trade, lets hope they drop this rate soon get out of this range anyway.

So far here is the list.

Japan: Markit/JMMA Manufacturing — 46.9, down from in September 48. 0
South Korea: HSBC Manufacturing PMI — 47.4, up from 45.7 in September
China: NBS Official PMI — 50.2, up from 49.8 in September
Netherlands: NEVI Manufacturing PMI — 48.9, down from 50.7 in September
Australia: AiG Manufacturing PMI — 45.2, up from 44.1 in September



Next up is HSBC China