EurAnalysis

Dog Day Afternoon Happy December

Jim Sinclair’s Commentary
The little one, Ditty, is the security siren system, and Angel is head of security.
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Jim Sinclair’s Commentary
For those with staunch patience, high courage, and pure logic a big payday will come.
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Jim Sinclair’s Commentary

maybe

http://www.forexfactory.com/showthre...74#post6211074

Small piece of news from China.....





Might make things interesting on Sunday....

Hi lumesh. I think we need a clear neckline which we do not yet have. if we did it would be at 1.35

Please no 1.35, I'm more for 1.25

Important event I am watching on Tuesday. If RBA announce rate cut this might spike up EUR and JPY crosses.

If no rate cut will also boost EUR due to dollar weakness. Short USD, long AUD. Becareful.

This aligns perfectly with projections for a new round of QEIV!

I just posted the following on an AUD thread but thought I would post it here for others to read:


Anybody (BEARS) who is not factoring in the consequences of "QEIV" is going to be extremely disappointed this month! I don't understand how people are over looking this HUGE event which is going to weaken the USD yet again...

Here are two articles written by very credible financial research companies who have an excellent track record . They are right more than not and I definitely take what they write very seriously.

1) http://www.moneyandmarkets.com/bens-...50995?FIELD9=2

2) http://sovereign-investor.com/2012/1...-dollar-cliff/


RBA Rate Cuts and Problems in Europe have nothing on what the FED can (and will) do at their next meeting! The FED's actions will trump any other monetary policy by any other central bank which is why I see more upward movement for the rest of this month for risk assets.

This is exactly what I'm thinking.

Ken,

Did you see the monthly Hammer on the EUR/AUD? I got long on Friday and will look to add positions as we go up. First target 1.28

Me too. actually a decent technical argument for 1.35, but I just can't see year end money flows rushing to Europe to invest.

Seems a huge sell-off during week-end.

People taking price projections and signals from this thread or another are likely to lose money.

Actually price was at 2987/85 through the weekend and just few hours back started to slide down a little.
2973 atm..

Good Day

I agree with the overview and here is some other views with charts to bring some reality home. All comments are welcome.

http://www.businessinsider.com/a-who...#ixzz2DqUi4DYv


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http://static4.businessinsider.com/i...k-sun-rail.jpg
Flickr/Jim Larson
United States public debt—though currently affordable—is a lumbering giant haunting the shadows of public policy and popular concern.
However, while few question the idea that such debt is unsustainable in the long term, with Treasuries at record lows many believe this demon can be subdued before it gets out of control.
Well, this presentation by Gregory Weldon of Weldon Financial might convince you otherwise. In the following series of charts, he shows just how precarious major economies' sovereign debt positions are, particularly in an environment of monumental deleveraging, and explains why we're at the dawn of a "New Macro-Monetary Era."


http://static6.businessinsider.com/i...0001b-900/.jpg






Read more: http://www.businessinsider.com/a-who...#ixzz2DvZEH1wA

Another Confirmation For You...

http://www.financialsense.com/contri...in-the-details

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Real Final Sales

Lastly, the annual rate of change in real final sales of domestic product continues to decelerate and currently sits at 1.88%. Historically, when the annual rate of change of real final sales has been below 2%, the economy has been or was about to be in a recession.

http://imagesize.financialsense.com/...les-112912.jpg

The combination of rising levels of unsold goods (inventory), slowing sales growth and declining incomes all point to weaker GDP growth in Q4 and into the early quarters of 2013. Look for GDP growth in the 4Q to decelerate to 1.5% to 1.7%.

While there is currently not an official recession in the U.S. economy, as of yet, the details of the current economic growth are not ones of robust strength. Furthermore, we will have to wait for revisions to the current data until next year where we will see some of these anomalies revised away. With recent weakness in industrial production, capacity utilization rates and exports it is likely that there will be further deteroration of economic growth in the months to come.

If I am correct in my assumptions the economic underpinnings will continue to negatively impact fundamental valuations as profit margins continue to be compressed. Furthermore, the outlook by corporate CEO's for the next couple of quarters are not optimistic as top line sales and revenues slide. Any impact from the "fiscal cliff" or "debt ceiling" debate, a resurgence of the Eurozone crisis or some other exogenous event could quickly impact the markets.

While most of the media, and mainstream analysts, continue to focus on the state of the economy from one quarter to the next - the trend of the data clearly shows the need for concern. Of course, this also why Bernanke is already considering QE4. As I stated previously, while economic growth did pick up this quarter it is the makeup, and more importantly the sustainability, of that growth is what we need to continue to focus on.

Source: Street Talk Live


http://www.financialsense.com/sites/...icture-717.jpg
Lance Roberts
General Partner & CEO at Streettalk Advisors
Primary Tel: (281) 822-8800
streettalk @ streettalklive.com
http://www.streettalklive.com

http://kylebassblog.blogspot.ca/2012...ve-war-is.html

War is Inevitable and 2013 will be unique for us all. The world will not end on December 21, 2012 however it will change after December 31, 2012.

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Kyle Bass New Letter: We Believe War Is Inevitable



Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.”
. . .
“Thus we might aim in practice (there being nothing in this which is unattainable) at an increase in capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus[.] (emphasis added) “
This is nothing more than a chilling prescription for the destruction of wealth through the dilution of capital by monetary authorities

Central banks have become the great enablers of fiscal profligacy. They have removed the proverbial policemen from the bond market highway. If central banks purchase the entirety of incremental bond issuance used to finance fiscal deficits, the checks and balances of “normal” market interest rates are obscured or even eliminated altogether. This market phenomenon does nothing to encourage the body politic to take their foot off the spending accelerator. It is both our primary fear and unfortunately our prediction that this quixotic path of spending and printing will continue ad?infinitum until real cost?push inflation manifests itself. We won’t get into the MV=PQ argument here as the reality of the situation is the fact that the V is the “solve?for” variable, which is at best a concurrent or lagging indicator. Given the enormity of the existing government debt stock, it will not be possible to control the very inflation that the market is currently hoping for. As each 100 basis points in cost of capital costs the US federal government over $150 billion, the US simply cannot afford for another Paul Volcker to raise rates and contain inflation once it begins.

Hayek was, of course, right:
The current modus operandi by central banks and sovereign governments threatens to take us down Friedrich von Hayek's “Road to Serfdom”. Published in 1944, its message, that all forms of socialism and economic planning lead inescapably to tyranny, might prove to have been prescient. In the 1970s, when Keynesianism was brought to crisis, politicians were vociferously declaring that attempting to maintain employment through inflationary means would inevitably destroy the market economy and replace it with a communist or some other totalitarian system which is the “perilous road” to be avoided “at any price". The genius in the book was the argument that serfdom would not be brought about by evil men like Stalin or Hitler, but by the cumulative effect of the wishes and actions of good men and women, each of whose interventions could be easily justified by immediate needs. We advocate social liberalism, but we also need to get there through fiscal responsibility. Pushing for inflation at this moment in time will wreak havoc on those countries whose cumulative debt stocks represent multiples of central government tax revenue.

The non?linearity of expenses versus revenues is what will bring them down.
"Pavlov's Party" is ending, and when it does, it will happen so fast no reac

Through travel and meetings around the world, it has become clear to us that most investors possess a heavily anchored bias that has been engrained in their belief systems mostly through inductive reasoning. Using one of the Nobel Laureate Daniel Khaneman's theories, participants fall under an availability heuristic whereby they are able to process information using only variables that are products of recent data sets or events. Let’s face it – the brevity of financial memory is shorter than the half?life of a Japanese finance minister.

Humans are optimistic by nature. People’s lives are driven by hopes and dreams which are all second derivatives of their innate optimism. Humans also suffer from optimistic biases driven by the first inalienable right of human nature which is self?preservation. It is this reflex mechanism in our cognitive pathways that makes difficult situations hard to reflect and opine on. These biases are extended to economic choices and events. The fact that developed nation sovereign defaults don’t advance anyone’s self?interest makes the logical outcome so difficult to accept. The inherent negativity associated with sovereign defaults brings us to such difficult (but logical) conclusions that it is widely thought that the powers that be cannot and will not allow it to happen. The primary difficulty with this train of thought is the bias that most investors have for the baseline facts: they tend to believe that the central bankers, politicians, and other governmental agencies are omnipotent due to their success in averting a financial meltdown in 2009.

In the end, the EMU won't look the same, if it exists at all.

The overarching belief is that there will always be someone or something there to act as the safety net. The safety nets worked so well recently that investors now trust they will be underneath them adinfinitum. Markets and economists alike now believe that quantitative easing (“QE”) will always “work” by flooding the market with relatively costless capital. When the only tool a central bank possesses is a hammer, everything looks like a nail. In our opinion, QE just doesn’t stimulate private credit demand and consumption in an economy where total credit market debt to GDP already exceeds 300%. The UK is the poster child for the abject failure of QE. The Bank of England has purchased over 27% of gross government debt (vs. 12% in the US). UK bond yields have all but gone negative and are now negative in real terms by at least ?1%. Unlimited QE and the zero lower bound (“ZLB”) are likely to bankrupt pension funds whose expected returns happen to be a good 600 basis points (or more) higher than the 10?year “risk?free” rate. The ZLB has many unintended consequences that are impossible to ignore.

Despite reading through Keynes’ works, we didn’t find a single index referencing the ZLB or any similar concept. In his General Theory, there are 64 entries in the index under “Interest” but no entry for the ZLB, zero rates, or even “really low rates”.

Our belief is that markets will eventually take these matters out of the hands of the central bankers. These events will happen with such rapidity that policy makers won’t be able to react fast enough.

On the lunacy of such "modern" "economic" "theories" as MMT (which may or may not stand for "Magic Money Trees")

The fallacy of the belief that countries that print their own currency are immune to sovereign crisis will be disproven in the coming months and years. Those that treat this belief as axiomatic will most likely be the biggest losers. A handful of investors and asset managers have recently discussed an emerging school of thought, which postulates that countries, as the sole manufacturer of their currency, can never become insolvent, and in this sense, governments are not dependent on credit markets to remain fiscally operational. It is precisely this line of thinking which will ultimately lead the sheep to slaughter.

The inevitable end of that supremely flawed monetarist experiment - the Eurozone:

Each subsequent “save” of the European debt crisis has been devised by the Eurocrats coming up with some new amalgamation of an entity that is more complex than its predecessor that is designed to project size, strength, and confidence to investors that the problem has been solved. Raoul, a friend of mine who resides in Spain, put it best:

“Let’s just clear this up again. The ECB is going to buy bonds of bankrupt banks just so the banks can buy more bonds from bankrupt governments. Meanwhile, just to prop this up the ESM will borrow money from bankrupt governments to buy the very bonds of those bankrupt governments.”

The EFSF, the IMF, the ESM, and the OMT (and who knows what other vehicles they will dream up next) have all been developed to serve as an optical backstop for investors globally. The Eurocrats are sticking with the Merkelavellian playbook of hiding behind the complexity of these various schemes. All one has to do is review the required contributions to said vehicles from bankrupt nations to realize that the circular references are already beginning to show in broad daylight. Does anyone stop to consider that the two largest contributors to the IMF are the two largest debtor nations in the world? Are things beginning to make sense now?

And finally, a less than rosy outlook for the entire "developed" world.

Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.

http://www.dailyfx.com/forex/fundame...olatility.html

1000 Posts Later...

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Fundamental Forecast for US Dollar: Bullish



Just a cursory look at the US Dollar chart and we can feel the pressure building. On an activity basis, the benchmark currency index (ticker = USDollar) is carving out its smallest range (using a two-week ATR reading) in years. In contrast, the fundamental risks are lining up with the Fiscal Cliff rhetoric escalating and Euro-area crisis resolution skepticism reaching new heights.


The ingredients are there for a serious breakout, but there is a critical catalyst that must make an appearance first: volatility. Normally, we would look at the economic docket or event risk that can stir the bigger fundamental themes. However, this time around, our focus must turn to a far more elemental aspect of market activity. Without it, the dollar will remain stationary, risk trends will flounder and volatility will continue to deflate to fresh five year lows.

The elusive factor for tipping speculative appetite and driving a clear trend is participation (‘volume’ or ‘open interest’ in trader parlance). If market depth thins out, there are fewer investors available to drive a move that sees a buildup in risk assets or feed a steady risk aversion move. On one hand, it is difficult to attract bids to buy at higher highs (pushing a bullish trend higher). On the other, if there isn’t a significant pool of uncommitted traders (ready to unwind their exposure under relatively mundane losses); a deleveraging initiative will just as quickly run out of steam.


For traders, a strong historical correlation between volume, volatility (the VIX Index) and risk trends marks a clear causation chain. For the US dollar to catch traction, we need to leverage its reserve and safe haven value. In other words, we need to see a risk aversion wave sweep over the market. A plunge in sentiment generally leads market participants to buy up ‘insurance’ in the form of derivatives – as it is sometimes unfeasible to simply liquidate. That insurance cost is reflected in our traditional volatility measures (most often backed out of options prices as the only unknown variable). That is why we the VIX and FX VIX indexes are considered ‘fear’ indexes. From there, the more exposure there is and higher (volume) the market levels, the more insurance is needed.


Incorporating the tepid participation factor into the equation, the five-year lows in the Forex volatility and stubbornly buoyant S&P 500 (and other risk benchmarks) makes more sense. It also presents a major hurdle to pulling overextended markets back to more reasonable levels to entice sidelined capital back in to the market.


Heading into the end of the year, the stability of the dollar and broader markets will grow even more tense than what we have seen in previous months under these distortions. Historically, speculative participation evaporates until the middle of January as market holidays and year-end accounting typically sideline investors. On the other hand, the fundamental risks to global economy and financial markets continue to multiple.


Top risk for sentiment (and oddly enough, boon for the US dollar) moving forward is that the US is forced over the ‘Fiscal Cliff’. A combination of automatic tax increases and spending cuts in the absence of a palatable budget deal by the end of the year, this $600 billion gouge to US GDP would tip the largest economy into research and pull rest of the world down with it. Though this may infer downgrade risk to the United States’ credit rating, even a step down won’t supplant its reserve standing in the near future. Unfortunately, there are few clear dates and times for meetings on this topic. Even more problematic, the market has grown suspiciously unresponsive to clear signs that both sides of the debate are moving further away from compromise. Other threats to keep tabs on are the ongoing Euro-area crisis (far from solved, despite what officials say) and a packed economic docket. The Fed decision next week is particularly big. - JK

A step back in time to 25th April 2011

The Federal Reserve will maintain interest rates at extremely low levels for the next few months, but is likely to decide against further quantitative easing. There will be further speculation over medium-term reserve diversification away from the dollar and it will also be vulnerable to being used as a funding currency, especially with confidence very weak.

The Euro-zone economy will continue to be led by strong German growth in the short term. The ECB will consider further tightening, but the plans are liable to be over-shadowed by debt restructuring needs and fresh concerns over the banking sector.

The point?

A week later the Euro hit it's 2011 peak at 1.4939 and less than a month later the Euro was trading almost 1000 pips lower at 1.3968.

Sometimes, all the optimism in the world produces the exact opposite of what is expected. Don'y buy into the hype... Just stick with the facts. Definitely prepare for the unexpected with proper positioning and trade planning, but never go all in on a speculative move.

My view...

QE4 is highly speculative, but the hard economic numbers don't lie. Europe is heading into a double dip recession and the US will probably avoid one as it shows sluggish yet consistent growth. Right now the market has almost priced in a complete avoidance of two high risk events. Number 1 is the fiscal cliff and number two is a Greek debt restructuring/haircut. So even if both the above risks are avoided, since it's almost all priced in anyway (and may continue to be priced in over the next few trading session), the risk is still to the downside. Why? Because if all goes well, it's profit taking time and if the manure hits the fan, it's welcome to hell.

My advice...

Position yourself accordingly

Thanks PT for your insightful view and wise advice.