22 replies to this topic

[arbman]

No bashing, this is just economic picture, US may have all the unemployment and debt, but Europe is bankrupt in comparison... US Treasuries are headed higher as European debt is doomed, USD is headed higher as Euro is doomed, US Equities are headed higher as European markets will undoubtedly suffer or underperform... I don't know... The last time Euro looked so weak was 1996... US soared for 4 years thereafter with the deregulation magic of Greenspan (translation: easy money), now we have a new wizard in town; Heli-Ben (translation: overtime in printing)... Fundamentally, Ben can inflate all he wants as US Treasuries will be stable, USD will be stable and the equity markets are doing better and better with every pump... I want to be bearish about this depressed economy, but I r-e-a-l-l-y can't... The leadership in tech will come back in spring as the seasonal weakness in tech will be over shortly from here and a lot of easy money to follow... The banks and industrials have been already outperforming, the materials are slowly lagging, these are great news, the investors may be getting ready to go into the right growth assets... I still think we will complete the major cycle down into early March with some more downside, but a miracle may be in the making for spring that may last much longer than anyone predicts for 2010... Do not overstay any short positions?

Edited by arbman, 24 February 2010 - 11:40 AM.

[Data]

Yesterday, the Fed announced a POMO for today while the market was falling. He's done several in the last couple of weeks in the middle of 15-point selloffs instead of sticking to his Friday schedule of the last 6 months. The Fed is almost done with the agency debt purchase. There are only 55 billion dollars left in the MBS purchase.

[andiron]

my my..how have things changed..only few months back we have people cheering EURO fiscal rectitude & stringent monetry policy as a paragon of virtue.... A short term buy of EUR.USD a good R/R here..i am waiting for 1.35 to snoop up some..

[arbman]

Exactly, Ben raised the rates, this is cynical a bit, but this almost feels like getting back even with Trichet who kept calling for tougher monetary policies, Ben did not really have to raise the rates last week like that... It is crazy... All currencies are BS, and not that much really changed, but I think there may be a new perspective for the stability toward USD and USD based assets...

Edited by arbman, 24 February 2010 - 11:55 AM.

[andr99]

No bashing, this is just economic picture, US may have all the unemployment and debt, but Europe is bankrupt in comparison... US Treasuries are headed higher as European debt is doomed, USD is headed higher as Euro is doomed, US Equities are headed higher as European markets will undoubtedly suffer or underperform... I don't know... The last time Euro looked so weak was 1996... US soared for 4 years thereafter with the deregulation magic of Greenspan (translation: easy money), now we have a new wizard in town; Heli-Ben (translation: overtime in printing)... Fundamentally, Ben can inflate all he wants as US Treasuries will be stable, USD will be stable and the equity markets are doing better and better with every pump... I want to be bearish about this depressed economy, but I r-e-a-l-l-y can't... The leadership in tech will come back in spring as the seasonal weakness in tech will be over shortly from here and a lot of easy money to follow... The banks and industrials have been already outperforming, the materials are slowly lagging, these are great news, the investors may be getting ready to go into the right growth assets... I still think we will complete the major cycle down into early March with some more downside, but a miracle may be in the making for spring that may last much longer than anyone predicts for 2010... Do not overstay any short positions?

I am not sure Europe is in a worse situation : here we have not seen the price of houses cut in two and then in two again. Apart maybe Spain that based his latest years' growth on the real estate bubble. On the other hand if the Euro is going to crater, I don' t see how thw american stock market can go up, given that since march it has surged thanks to the USD weakness. I think it will be a global meltdown and also think the USA real estate will be in great troubles again together with the banks and everything else. The only lucky thing we have here is that banks didn' t give money to everyone to buy home as it happened in america

Edited by andr99, 24 February 2010 - 12:02 PM.

[arbman]

I am not sure Europe is in a worse situation : here we have not seen the price of houses cut in two and then in two again. Apart maybe Spain that based his last years' growth on the real estate bubble. On the other hand if the Euro is going to crater, I don' t see how thw american stock market can go up, given that since march it has surged thanks to the USD weakness. I think it will be a global meltdown and also think the USA real estate will be in great ytroubles again together with the banks and everything else. The only lucky thing we have here is that banks didn' t give money to everyone to buy home as it happened in america

Tell it to the judge (market), in my opinion, European banks hold a lot of the American MBS paper even today and they also hold trillions of debt issued and not really adding much to the real economy at the moment. Europe could not do what US did because it was already in deep debt. When I look at the numbers, it sure looks like the debt simply multiplied 2 fold in the PIGS over the past 3 years... Clearly something funny going on there...

What I am saying here is if Euro weakens, Fed will print more to keep USD weak (relatively) as well. So, as long as there is enough demand in the US Treasuries due to the problems in Euro zone, US govt can lie and cheat all it wants about the inflation since USD AND US Treasuries will remain stable. US equities soar as long as there is easy money...

It is just the fundamentals for another bubble.

Edited by arbman, 24 February 2010 - 12:03 PM.

[hiker]

hi Arbman, your change of "tone" about a 2010 potential for a sustainable price advance is noticed! this seems to be a change from your long-held views stated here for many months. thank you for the update, and appreciate your posts here. PM me when you have time please, for scheduling a brief conversation about another matter. Thanks. - hiker

Edited by hiker, 24 February 2010 - 12:29 PM.

[andr99]

Arb, You must look not just at the per capita debt that we have here in Europe, but also at the per capita savings we have. If you keep in count both, the USA are worse positioned, imo. If you divide the USA public debt for the number of USA citizens and add that number to the average individual debt of each USA citizen......(used to buy home and anything else in these latest years)........you will obtain a greater number than that of most european countries. Do the same with Japan that has a public debt of 160% their annual GDP and you will obtain the same. The USA are worse positioned than Japan itself even if Japan has a debt of 160% their GDP. I don' t see how the USA may be stronger. The proof is that The USA debt is held by others, while we could easily hold our debt with our savings. In the latest years the USA have lived on debts more than us in Europe and this tells who is now weaker, imo. And where the next coming crisis will start from. ''What I am saying here is if Euro weakens, Fed will print more to keep USD weak (relatively) as well. So, as long as there is enough demand in the US Treasuries due to the problems in Euro zone, US govt can lie and cheat all it wants about the inflation since USD AND US Treasuries will remain stable. US equities soar as long as there is easy money...'' It would have no sense if the FED begins printing again. Printing money creates inflation as more money circulates while the amount of goods is the same. They are increasing rates right now to reduce the amount of money circulating because their measures indicate inflation at the doors. Why should they print money if they want less money in circulation to discourage inflation ?

Edited by andr99, 24 February 2010 - 01:10 PM.

[andr99]

Inflation is not a thing they can hide for long and inflation + unemployement means ......disaster

[arbman]

Andr99, I agree with your view in a lot of ways, but consider the following;

Europe has more per capita debt than US, this impedes its growth overall and if the debt implodes, it is even a bigger problem. US debt is not imploding at the moment as fast as European debt, it still can accelerate, but not right now. However, many European countries are already having difficulty in refinancing their external debt and many have more than 100% of their GDP, so adding more debt is not a solution for these countries, they have to be written off, but how?

It is true if the crisis deepens in US, the consumers here may be less prepared than the ones in Europe due to the lack of savings. However, this means that Fed will print in any way it can to prevent a depression, the inflation is not a problem when you are telling yourself that there is not enough money people can spend. Most money in US is locked in the unproductive assets, not much different in Europe either. However, US largely restructured the debt and even though this will impede the growth in the future, it doesn't seem to be the main source of problems in US...

The problem in US is the lack of jobs and growth right now, if Fed can print and attract more investments and encourage the risk taking, the job growth may return, the people do not need to save, but remain employed at this time... The administration and Fed's solution is to spur growth, rather than being defensive to protect the assets against the deflationary forces, it is clear and the weakness in Euro and Euro zone now may give the Fed a permission to print easier...

Finally, Fed will continue probably to raise the rates to prevent the speculative investments flowing into the commodities in general, they should rather go into tech instead, this is definitely not March 2009 era anymore and the emergency liquidity has already been removed from the table...

Edited by arbman, 24 February 2010 - 01:22 PM.