Bank of America would slash 30,000 jobs. More banks would follow the footstep soon. Reason: Banks took position on risky assets with no fundamentals. Toxic assets would kill many jobs in the banks/financial institutions in USA and in Europe. Get ready for financial turmoil for the next 2-years. What to do, unless the government takes swift and intelligent action, the number of unemployed could soar from 25 million to 40 million, and President Barack Obama's jobs plan doesn't cut it. President plan is a joke.
I would rather say that President Obama came up with a jobs plan that the Republicans would have opposed anyway, rather than the marginal plan" he proposed for the sake of getting Republican agreement. There is a jobs crisis in USA. Unemployment is a bubble that would burst very soon. USA is right now on the verge of a double-dip recession. The government must do more to avoid a deepening jobs crisis.
Ninety percent of economists would say the same thing. This is really mainstream stuff. This shouldn't be contentious. But it's very difficult to fight ideology with those who ... believe that the US government is the source of all our problems. President Obama’s jobs speech were “the scale of the package" and the fact that Obama's stimulus relies too much on Social Security and other tax cuts.
Tax cuts don't have big multiplier effects because people use them to pay down [existing] debt. Excluding those tax cuts leaves about $150 billion to create change.
And that's just not enough. According to tradingeconomics.com, the unemployment rate in the United States was last reported at 9.1 percent in August 2011.
From 1948 until 2010 the United States' unemployment rate averaged 5.80 percent reaching an historical high of 10.80 percent in November 1982 and a record low of 2.50 percent in May 1953. USA is on the verge of unemployment bubble.
Disclaimer: This is a just research piece and not an investment advice. All financial transactions carry a RISK.
Monday, September 12, 2011
Europe is few months away from disaster--By Shan Saeed
Europe is in real mess. Europe doesn’t have months, much less years, to resolve its crisis because it’s mere days away from disaster. At this point, it has only days to avert the worst. Greece is making the outlook gloomy and bleak for Europe. It is critical that leaders distinguish what must be done now from what can be left for later.
The first urgent task is for Europe to bulletproof its banks. Doubts about their stability are at the center of the storm. It is no coincidence that bank stocks were hit hardest in the recent financial crash. There are several ways to recapitalize Europe’s weak banks.
The French and German governments, which have budgetary room for maneuver, can do so on their own. In the case of countries with poor fiscal positions, Europe’s rescue fund, the European Financial Stability Facility, can lend for this purpose. If still more money is required, the International Monetary Fund can create a special facility, using its own resources and matching funds put up by Asian governments and sovereign wealth funds.
The second urgent task is creating breathing space for Greece, and the third is restarting economic growth, providing northern European governments are willing to act. Almost two years of fighting to contain the region’s debt crisis and providing the biggest share of three European bailouts, German Chancellor Angela Merkel is laying the ground for what markets say is almost a sure thing: a Greek default.
It feels like Germany is preparing itself for a debt default. Fatigue is setting in. Germany could be a first mover or other countries could be preparing too. Europe's mess is going to stay for a very long period of time. You bet. I have again proved my point that I predicted at the start of this year: i.e. 2011-2013 will be very volatile for global financial markets.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
The first urgent task is for Europe to bulletproof its banks. Doubts about their stability are at the center of the storm. It is no coincidence that bank stocks were hit hardest in the recent financial crash. There are several ways to recapitalize Europe’s weak banks.
The French and German governments, which have budgetary room for maneuver, can do so on their own. In the case of countries with poor fiscal positions, Europe’s rescue fund, the European Financial Stability Facility, can lend for this purpose. If still more money is required, the International Monetary Fund can create a special facility, using its own resources and matching funds put up by Asian governments and sovereign wealth funds.
The second urgent task is creating breathing space for Greece, and the third is restarting economic growth, providing northern European governments are willing to act. Almost two years of fighting to contain the region’s debt crisis and providing the biggest share of three European bailouts, German Chancellor Angela Merkel is laying the ground for what markets say is almost a sure thing: a Greek default.
It feels like Germany is preparing itself for a debt default. Fatigue is setting in. Germany could be a first mover or other countries could be preparing too. Europe's mess is going to stay for a very long period of time. You bet. I have again proved my point that I predicted at the start of this year: i.e. 2011-2013 will be very volatile for global financial markets.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
Sunday, September 11, 2011
Swiss Franc is gaining strength----By Shan Saeed
WHEN the going gets tough, the tough buy Swiss francs. That was true in the 1970s, when the Swiss were forced to impose negative interest rates on foreign depositors. And it has been true in recent years, with Switzerland’s currency rising by 43% against the euro between the start of 2010 and mid-August this year.
The Swiss National Bank (SNB) has decreed that it will target an exchange rate of SFr1.20 to the euro, a policy that it will apply with “the utmost determination” by being “prepared to purchase foreign exchange in unlimited quantities”. The announcement had its intended result, driving down the franc by 8.2% within minutes to the targeted level. Central banks have much greater scope to push down their currencies than they do to prop them up; whereas the Bank of England had to deplete its foreign-exchange reserves defending the pound in 1992, the Swiss can create francs without limit.
This is not generally in favour of policies that distort markets, but the Swiss deserve some sympathy. More orthodox measures aimed at limiting the franc’s rise have proved ineffective. The Swiss currency has been an innocent bystander in a world where the euro zone’s politicians have failed to sort out their sovereign-debt crisis, America’s economic policy seems intent on spooking investors and the Japanese have intervened to hold down the value of the yen. The Swiss franc has looked like the only paper currency that could act as a safe haven; a kind of Alpine gold.
Our rough-and-ready Big Mac index calculated in July that the franc was as much as 98% overvalued against the dollar. This has been causing problems for Swiss companies: several have recently released profit warnings and some have talked about moving operations out of the country. This is definitely not a case of a country trying to steal a march on its trade competitors by holding its currency at an artificially cheap level.
Nevertheless, the Swiss policy has its dangers. If the SNB fails to hold the line at SFr1.20, it could end up with a huge hit to its balance-sheet; losses on previous rounds of intervention have sparked calls for the president’s resignation. Alternatively, “unlimited” intervention could eventually provoke inflation, although that still looks a distant prospect.
The Swiss action will also put pressure on its euro-zone neighbours. The Swiss will probably end up buying French and German government bonds; that may widen the spread between the yields of such countries and those of weaker European countries like Italy and Spain. Wider spreads may be taken as a signal of greater risk aversion, the phenomenon that sparked the strength of the Swiss franc in the first place.
Given sluggish domestic demand, most countries in the developed world would like to see their currencies depreciate. But the foreign-exchange markets are a zero-sum game: some currencies have to go up. The most obvious candidate, the Chinese yuan, is rising regrettably slowly. That puts pressure on market favourites like the Swiss franc and the yen. It is rather like a game of deflationary “pass the parcel” in which the loser is whoever gets landed with the strongest currency. The danger is that the countries which get left with the parcel may decide that foreign-exchange intervention is not enough and resort to trade barriers instead. In the 1930s countries opted for tariffs not just beggar-thy-neighbour devaluations.
Though understandable, then, the Swiss action is nonetheless regrettable. A globally co-ordinated round of monetary easing would be far better than a series of tit-for-tat measures that simply pass the buck or franc.
Source: Economist
The Swiss National Bank (SNB) has decreed that it will target an exchange rate of SFr1.20 to the euro, a policy that it will apply with “the utmost determination” by being “prepared to purchase foreign exchange in unlimited quantities”. The announcement had its intended result, driving down the franc by 8.2% within minutes to the targeted level. Central banks have much greater scope to push down their currencies than they do to prop them up; whereas the Bank of England had to deplete its foreign-exchange reserves defending the pound in 1992, the Swiss can create francs without limit.
This is not generally in favour of policies that distort markets, but the Swiss deserve some sympathy. More orthodox measures aimed at limiting the franc’s rise have proved ineffective. The Swiss currency has been an innocent bystander in a world where the euro zone’s politicians have failed to sort out their sovereign-debt crisis, America’s economic policy seems intent on spooking investors and the Japanese have intervened to hold down the value of the yen. The Swiss franc has looked like the only paper currency that could act as a safe haven; a kind of Alpine gold.
Our rough-and-ready Big Mac index calculated in July that the franc was as much as 98% overvalued against the dollar. This has been causing problems for Swiss companies: several have recently released profit warnings and some have talked about moving operations out of the country. This is definitely not a case of a country trying to steal a march on its trade competitors by holding its currency at an artificially cheap level.
Nevertheless, the Swiss policy has its dangers. If the SNB fails to hold the line at SFr1.20, it could end up with a huge hit to its balance-sheet; losses on previous rounds of intervention have sparked calls for the president’s resignation. Alternatively, “unlimited” intervention could eventually provoke inflation, although that still looks a distant prospect.
The Swiss action will also put pressure on its euro-zone neighbours. The Swiss will probably end up buying French and German government bonds; that may widen the spread between the yields of such countries and those of weaker European countries like Italy and Spain. Wider spreads may be taken as a signal of greater risk aversion, the phenomenon that sparked the strength of the Swiss franc in the first place.
Given sluggish domestic demand, most countries in the developed world would like to see their currencies depreciate. But the foreign-exchange markets are a zero-sum game: some currencies have to go up. The most obvious candidate, the Chinese yuan, is rising regrettably slowly. That puts pressure on market favourites like the Swiss franc and the yen. It is rather like a game of deflationary “pass the parcel” in which the loser is whoever gets landed with the strongest currency. The danger is that the countries which get left with the parcel may decide that foreign-exchange intervention is not enough and resort to trade barriers instead. In the 1930s countries opted for tariffs not just beggar-thy-neighbour devaluations.
Though understandable, then, the Swiss action is nonetheless regrettable. A globally co-ordinated round of monetary easing would be far better than a series of tit-for-tat measures that simply pass the buck or franc.
Source: Economist
Saturday, September 10, 2011
US Dollar is becoming a challenge for the currency market ----Shan Saeed
At the start of 2011, I predicted that there would be lot of intervention in the currency market from the advance economies. Its happening now. Best position to take as an investment: Swiss Franc, Japanese yen, Chinese Yuan , Canadian dollar, Norway Krone, Brazilian Real and Indonesian Rupiah. Is currency war becoming going forward? I dont think so that would happen as it would be disastrous for the global economy.
What a week this has been already. Despite the Labor Day holiday, it has been an intense week in the currency markets globally. Lets start out last week when the Central Bank of Brazil shocked the markets with an interest rate cut. Investors, you read it right – an interest rate cut. And this is despite a high level of inflation in the country and excess liquidity in the real markets. To cut the rise in Brazilian REAL.
Granted, this is not the first shocking move by the Brazilian government which is trying to stop the rise of the real. They have taxed, restricted and controlled the currency markets. Basically, they have thrown the kitchen sink at this perceived problem. And yet the real has stayed strong, falling by only about 4 percent.
Next there has been lot of noise and heard the rumblings on and off about the possible slowdown of growth in China and India. While there are some signs of a slowing of the hot growth rates in both countries, it wont see a dramatic fall in their currency rates. In fact, the Chinese currency has barely moved.
JAPANESE YEN
The Japanese yen has also soared to new heights. While this has been a challenge to businesses, the Central Bank of Japan, which has tried currency market interventions in the past and failed, has stayed out of the market – so far. It has grumbled and threatened the world a bit, but has stayed on the sidelines – so far.
SWISS FRANC
Yesterday was the witness to one of the most strange acts in the currency markets in recent history. The Swiss National Bank [SNB] capitulated and gave up its sovereignty completely. They have effectively pegged the Swiss franc to the euro at 1.20. And with that, they have effectively announced that they will keep buying euros to manage their currency rising versus the euro. Gold, Swiss franc and agricultural products are becoming a safe haven.
I am not sure what benefit this will bring the franc or the currency reserves of Switzerland. The euro is under a cloud these days. And to peg your currency to that, in this day and time, seems like a very risky move. In any case, as a consequence of the SNB move, the franc-U.S. dollar rate fell by 10 percent immediately. But that will not help Swiss businesses which run their biggest trading relationships with Europe, not the U.S. The SNB move just ahead of this makes the decision of pegging to euro even more confusing and ill-timed.
GERMAN COURT DECISION.
Let’s also talk about the euro. Germany's high court on Wednesday upheld the country's participation in eurozone bailout funds, but ruled that lawmakers should be more involved in such decisions. The ruling means that while Germany's agreement to take part in the financial rescue of Greece will not be affected, participation in future bailouts might become more complicated.
Imagine, if the Federal Reserve and the White House had to get Supreme Court approval to print money, bail out private banks and car companies? What a novel idea to have some authority keep our runaway officials in check.
US DOLLAR LOSING VALUE
And yet, after all of these events, the U.S. dollar has risen by 1.35 percent in the past week (as measured by the U.S. Dollar Index). So in the race to be the cheapest currency, Central Banks are outdoing themselves to malign their currencies. And yet the U.S. dollar is not rising.
What does that inform us? What the market is conveying us, is that despite all of these well-meaning but ineffective moves, the U.S. dollar is still the ugliest belle at the ball, and that the U.S. dollar problems are much more deeper than all of the worries in the world.
And finally, what does gold at $1,900 per ounce demonstrate us? It is informing us that the markets have no faith in the U.S. dollar or the Federal Reserve Bank keeping the U.S. dollar safe. US Dollar has lost 98% of its value against Gold in the last 100 years. It is the biggest no-confidence motion against the Federal Reserve. DEAD DOLLARS DONT BOUNCE BACK. I am glad to see that I am not the only one who has no faith in the U.S. dollar. Diversification is the key and getting out of the U.S. dollar should be investors priority. Buy Gold & Silver to get insurance of your wealth.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
What a week this has been already. Despite the Labor Day holiday, it has been an intense week in the currency markets globally. Lets start out last week when the Central Bank of Brazil shocked the markets with an interest rate cut. Investors, you read it right – an interest rate cut. And this is despite a high level of inflation in the country and excess liquidity in the real markets. To cut the rise in Brazilian REAL.
Granted, this is not the first shocking move by the Brazilian government which is trying to stop the rise of the real. They have taxed, restricted and controlled the currency markets. Basically, they have thrown the kitchen sink at this perceived problem. And yet the real has stayed strong, falling by only about 4 percent.
Next there has been lot of noise and heard the rumblings on and off about the possible slowdown of growth in China and India. While there are some signs of a slowing of the hot growth rates in both countries, it wont see a dramatic fall in their currency rates. In fact, the Chinese currency has barely moved.
JAPANESE YEN
The Japanese yen has also soared to new heights. While this has been a challenge to businesses, the Central Bank of Japan, which has tried currency market interventions in the past and failed, has stayed out of the market – so far. It has grumbled and threatened the world a bit, but has stayed on the sidelines – so far.
SWISS FRANC
Yesterday was the witness to one of the most strange acts in the currency markets in recent history. The Swiss National Bank [SNB] capitulated and gave up its sovereignty completely. They have effectively pegged the Swiss franc to the euro at 1.20. And with that, they have effectively announced that they will keep buying euros to manage their currency rising versus the euro. Gold, Swiss franc and agricultural products are becoming a safe haven.
I am not sure what benefit this will bring the franc or the currency reserves of Switzerland. The euro is under a cloud these days. And to peg your currency to that, in this day and time, seems like a very risky move. In any case, as a consequence of the SNB move, the franc-U.S. dollar rate fell by 10 percent immediately. But that will not help Swiss businesses which run their biggest trading relationships with Europe, not the U.S. The SNB move just ahead of this makes the decision of pegging to euro even more confusing and ill-timed.
GERMAN COURT DECISION.
Let’s also talk about the euro. Germany's high court on Wednesday upheld the country's participation in eurozone bailout funds, but ruled that lawmakers should be more involved in such decisions. The ruling means that while Germany's agreement to take part in the financial rescue of Greece will not be affected, participation in future bailouts might become more complicated.
Imagine, if the Federal Reserve and the White House had to get Supreme Court approval to print money, bail out private banks and car companies? What a novel idea to have some authority keep our runaway officials in check.
US DOLLAR LOSING VALUE
And yet, after all of these events, the U.S. dollar has risen by 1.35 percent in the past week (as measured by the U.S. Dollar Index). So in the race to be the cheapest currency, Central Banks are outdoing themselves to malign their currencies. And yet the U.S. dollar is not rising.
What does that inform us? What the market is conveying us, is that despite all of these well-meaning but ineffective moves, the U.S. dollar is still the ugliest belle at the ball, and that the U.S. dollar problems are much more deeper than all of the worries in the world.
And finally, what does gold at $1,900 per ounce demonstrate us? It is informing us that the markets have no faith in the U.S. dollar or the Federal Reserve Bank keeping the U.S. dollar safe. US Dollar has lost 98% of its value against Gold in the last 100 years. It is the biggest no-confidence motion against the Federal Reserve. DEAD DOLLARS DONT BOUNCE BACK. I am glad to see that I am not the only one who has no faith in the U.S. dollar. Diversification is the key and getting out of the U.S. dollar should be investors priority. Buy Gold & Silver to get insurance of your wealth.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
Next recession will be one of the toughest for USA ------By Shan Saeed
History is repeating itself.
People/investors hear a lot about the last recession in 2009. Some say that it was the worst recession that the USA have had since the Great Depression. Certainly the depth of that recession was among the worst and the length of it was one of the worst as well. GDP stayed negative for 1 ½ years. It wasn’t pretty. But the one that is coming in 2012 is going to be very rough too. Here’s why.
USA ECONOMY.
At the start of the last recession, unemployment was arguably in the 4.5 - 5.5 percent range. Today it stands at more than 10%[ Gallup survey]…not a great starting point for the next recession.
In fact, if you look at most of the countries that have riots in the streets right now, one of the things they have in common is 11-13 percent unemployment rates.
Well if USA start the next recession at 10%, it wouldn’t take much for it to climb above the 11 percent mark. It could cause rioting in the streets like the world have seen in so many places in the world. USA is certainly not immune to it.
But it’s not just the unemployment issue that’s bad (although that’s got to be the worst part of it.) It’s also the fact that the Federal Reserve shot all of its “interest rate bullets” in the last recession to no avail. Helicopter Ben is running out of his ammunition. As the last recession was about to begin, U.S. interest rates were just above 5 percent. Today they stand within a range of 0 percent to 0.25 percent since Dec-2008. So it is essentially out of ammo in their most common recession fighting tool.
This means that they’ll have to invent a new “recession fighting gun”. Will that come through another round of ineffective Quantitative Easing? It may. But surely everyone realizes by now if the last two rounds didn’t turn things around that a third round is going to be just as futile.
Here’s another tough spot for the Federal Reserve.
The last time USA were in a global recession and it led the world downward. However, this time, Europe is leading the charge downward. Many of the smaller countries have sputtered out already really but the big one is coming…Germany. Europe is going down the drain and it will drag the USA further down.
GERMAN ECONOMY.
The German economy is slowing down considerably and their exports are slowing down all the more lately too. (The German economy grew at 0.1 percent in the 2nd quarter). This is a recipe for disaster. It won’t take long before that is fully realized. Additionally, last week it got further confirmation that the Eurozone’s manufacturing has now had two negative readings. I believe that all of this is one reason why European stocks have already been hit harder than U.S. stocks. In fact, I believe they are showing where U.S. stocks are heading. First week of August-2011 saw $3.1 trillion wiped off the equity market globally. Oouch, it hurts the wealthy investor.
However, here’s the deal with all of that. The Fed has more of a direct influence when the U.S. is catalyst for the global recession. However, with Europe leading the charge downward, they are a bit more “held hostage” to what the ECB and European governmental officials decide to do about all of it. Oh but there’s China right? They can save the day, surely right? Their growth rate is slowing down too. Chinese leadership is trying to control inflation and have raised interest rates 6 times during the last one year.
AUSTRALIAN ECONOMY
Chinese are buying lot of natural resources from Australia. In the last global recession their economy was still clicking along enough to keep themselves out of a recession and the country they buy from so much (Australia) out of a recession too.
However, this time Australia might join in on the global recession as China slows down considerably and fails to generate enough growth to make up for the lack of growth in the rest of the world.
CURRENCY MARKET.
The good news in all of this? The currency market is the answer to every recession. Why? It is one of the only markets that have the financial assets that still do well through a recession. It’s also the market that tends to have sufficient liquidity during those times too. Canadian dollar, yen and Swiss franc are some of the few financial assets in the world that “hold their own” or increase in value during recessions. If you analyse, in “good times” there are literally thousands of stocks, commodities, bonds, real estate investments, etc. that can be invested in. In economic downturns, most all of these markets struggle to have the needed liquidity and have the financial instruments that go up when everything else heads south.
This is why I advice clients who don’t lose sleep at night even though I know a recession is coming. It’s because I know that my clients have instruments that they can invest in that will help them to fend off the effects of the recession and their families. And it can be that way for other investors too. Make sure investors have exposure to currencies in their portfolio and understand the currency market dynamics. Investors will be glad that they protected themselves when the recession does get here.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
People/investors hear a lot about the last recession in 2009. Some say that it was the worst recession that the USA have had since the Great Depression. Certainly the depth of that recession was among the worst and the length of it was one of the worst as well. GDP stayed negative for 1 ½ years. It wasn’t pretty. But the one that is coming in 2012 is going to be very rough too. Here’s why.
USA ECONOMY.
At the start of the last recession, unemployment was arguably in the 4.5 - 5.5 percent range. Today it stands at more than 10%[ Gallup survey]…not a great starting point for the next recession.
In fact, if you look at most of the countries that have riots in the streets right now, one of the things they have in common is 11-13 percent unemployment rates.
Well if USA start the next recession at 10%, it wouldn’t take much for it to climb above the 11 percent mark. It could cause rioting in the streets like the world have seen in so many places in the world. USA is certainly not immune to it.
But it’s not just the unemployment issue that’s bad (although that’s got to be the worst part of it.) It’s also the fact that the Federal Reserve shot all of its “interest rate bullets” in the last recession to no avail. Helicopter Ben is running out of his ammunition. As the last recession was about to begin, U.S. interest rates were just above 5 percent. Today they stand within a range of 0 percent to 0.25 percent since Dec-2008. So it is essentially out of ammo in their most common recession fighting tool.
This means that they’ll have to invent a new “recession fighting gun”. Will that come through another round of ineffective Quantitative Easing? It may. But surely everyone realizes by now if the last two rounds didn’t turn things around that a third round is going to be just as futile.
Here’s another tough spot for the Federal Reserve.
The last time USA were in a global recession and it led the world downward. However, this time, Europe is leading the charge downward. Many of the smaller countries have sputtered out already really but the big one is coming…Germany. Europe is going down the drain and it will drag the USA further down.
GERMAN ECONOMY.
The German economy is slowing down considerably and their exports are slowing down all the more lately too. (The German economy grew at 0.1 percent in the 2nd quarter). This is a recipe for disaster. It won’t take long before that is fully realized. Additionally, last week it got further confirmation that the Eurozone’s manufacturing has now had two negative readings. I believe that all of this is one reason why European stocks have already been hit harder than U.S. stocks. In fact, I believe they are showing where U.S. stocks are heading. First week of August-2011 saw $3.1 trillion wiped off the equity market globally. Oouch, it hurts the wealthy investor.
However, here’s the deal with all of that. The Fed has more of a direct influence when the U.S. is catalyst for the global recession. However, with Europe leading the charge downward, they are a bit more “held hostage” to what the ECB and European governmental officials decide to do about all of it. Oh but there’s China right? They can save the day, surely right? Their growth rate is slowing down too. Chinese leadership is trying to control inflation and have raised interest rates 6 times during the last one year.
AUSTRALIAN ECONOMY
Chinese are buying lot of natural resources from Australia. In the last global recession their economy was still clicking along enough to keep themselves out of a recession and the country they buy from so much (Australia) out of a recession too.
However, this time Australia might join in on the global recession as China slows down considerably and fails to generate enough growth to make up for the lack of growth in the rest of the world.
CURRENCY MARKET.
The good news in all of this? The currency market is the answer to every recession. Why? It is one of the only markets that have the financial assets that still do well through a recession. It’s also the market that tends to have sufficient liquidity during those times too. Canadian dollar, yen and Swiss franc are some of the few financial assets in the world that “hold their own” or increase in value during recessions. If you analyse, in “good times” there are literally thousands of stocks, commodities, bonds, real estate investments, etc. that can be invested in. In economic downturns, most all of these markets struggle to have the needed liquidity and have the financial instruments that go up when everything else heads south.
This is why I advice clients who don’t lose sleep at night even though I know a recession is coming. It’s because I know that my clients have instruments that they can invest in that will help them to fend off the effects of the recession and their families. And it can be that way for other investors too. Make sure investors have exposure to currencies in their portfolio and understand the currency market dynamics. Investors will be glad that they protected themselves when the recession does get here.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
Thursday, September 1, 2011
QE-3 would start by Sept 21, 2011----by Shan Saeed
Get ready for QE3 to enter in the global financial market soon.
Minutes from the Federal Reserve Open Market Committee's most recent meeting shows that the monetary authority will likely roll out a third round of quantitative easing by Sept. 21, the day its next meeting concludes. The Fed has already launched two rounds of quantitative easing, known widely as QE1 and QE2. Both QE1/2 were disaster for the economy as they failed to stimulate the economy and bring confidence back in the consumers
QE1 saw the Fed buy $1.7 trillion in assets from banks, mainly mortgage-backed securities, while QE2 saw the central bank snap up $600 billion of Treasury bonds.
The aim of such measures is designed to pump banks full of money so they'll investment and fuel more sustained economic growth, although the economy remains stuck in the doldrums. While critics says such policy weakens the dollar and pressures inflation rates upward, some say Fed Chairman Ben Bernanke is ready to roll out some sort of easing in order to avoid recession which is certain now. Read Aug 24, 2011 New York times titled: "US May Back Refinance Plan for Mortgage By Shaila Dewan & Louise Story
Go back a week to an article in the New York Times. The guts of this story is that the Administration is working on a plan to ReFi residential mortgages on a massive scale.
When I first read this, I ignored it. The scope of the proposal was too large. There was also a fatal flaw. The thinking was that the jumbo ReFi would be made available to only those who had a mortgage that ended up with either Fannie or Freddie. I ask the question, "What about those poor odds and sods who have a mortgage with a community bank?" Do they get nothing while those who owe F/F big bucks get a break? Where is the fairness in that result?
But every day since the NYT story, I have heard the rumblings about some deal being done. It has already impacted MBS spreads. It's back in the news today with an article in the Wall Street Journal. I have to believe that where there is smoke, there is probably some fire.
Besides buying bonds, Fed easing could call for an extension of maturities of assets on the Fed's balance sheet. I believe the minutes lend themselves to my view that there is a somewhat better-than-even chance the Fed takes action at the next meeting to increase the average maturity of assets on their balance sheet.
Some Fed officials won't rule out further easing. Depending on future economic data QE3 is one choice, but US economy needs to gather information about how the economy will perform in the second half of the year.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
Minutes from the Federal Reserve Open Market Committee's most recent meeting shows that the monetary authority will likely roll out a third round of quantitative easing by Sept. 21, the day its next meeting concludes. The Fed has already launched two rounds of quantitative easing, known widely as QE1 and QE2. Both QE1/2 were disaster for the economy as they failed to stimulate the economy and bring confidence back in the consumers
QE1 saw the Fed buy $1.7 trillion in assets from banks, mainly mortgage-backed securities, while QE2 saw the central bank snap up $600 billion of Treasury bonds.
The aim of such measures is designed to pump banks full of money so they'll investment and fuel more sustained economic growth, although the economy remains stuck in the doldrums. While critics says such policy weakens the dollar and pressures inflation rates upward, some say Fed Chairman Ben Bernanke is ready to roll out some sort of easing in order to avoid recession which is certain now. Read Aug 24, 2011 New York times titled: "US May Back Refinance Plan for Mortgage By Shaila Dewan & Louise Story
Go back a week to an article in the New York Times. The guts of this story is that the Administration is working on a plan to ReFi residential mortgages on a massive scale.
When I first read this, I ignored it. The scope of the proposal was too large. There was also a fatal flaw. The thinking was that the jumbo ReFi would be made available to only those who had a mortgage that ended up with either Fannie or Freddie. I ask the question, "What about those poor odds and sods who have a mortgage with a community bank?" Do they get nothing while those who owe F/F big bucks get a break? Where is the fairness in that result?
But every day since the NYT story, I have heard the rumblings about some deal being done. It has already impacted MBS spreads. It's back in the news today with an article in the Wall Street Journal. I have to believe that where there is smoke, there is probably some fire.
Besides buying bonds, Fed easing could call for an extension of maturities of assets on the Fed's balance sheet. I believe the minutes lend themselves to my view that there is a somewhat better-than-even chance the Fed takes action at the next meeting to increase the average maturity of assets on their balance sheet.
Some Fed officials won't rule out further easing. Depending on future economic data QE3 is one choice, but US economy needs to gather information about how the economy will perform in the second half of the year.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.
Sunday, August 28, 2011
Whats the reason for this uprising? Next global reformation --By Shan Saeed
Its all about economics. When people dont have food, dont have jobs, dont have sense of purpose to their lives, its an excruciating agony. Let’s be honest– most history books are exciting. They have an amazing way of oversimplifying major cultural shifts, as if someone flips a light switch and society turns on a dime.
Take Martin Luther, for example. In 1517, Luther publicly posted a list of 95 grievances against the Catholic Church in Wittenberg, Germany, and history credits him with sparking the great ‘reformation’ that eventually created the Church of England and protestant movement.
This is mere historical convenience. There were hundreds, even thousands of people who came before Luther. Society was ready for a major shift and already moving in that direction. Luther gets credit for the spark.
Similarly, the history books of the future may look back on Tunisian fruit merchant Mohammed Bouazizi as the spark of the next ‘global reformation’. If you recall, Bouazizi lit himself ablaze in protest of Tunisia’s pitifully repressive economic conditions, and revolution ensued across the region.
Tunisia fell. Egypt fell. Libya was invaded by a peace-prize winning US president. Civil uprisings spread to Syria, Bahrain, Algeria, Morocco, etc. It would be fools to think this was all due to a fruit vendor.
Like Martin Luther, Bouazizi is a symbol… a metaphor for society’s pent up frustration that had been building for years. This frustration is worldwide. The entire world, which cheered the Arab Spring uprisings across the Middle East and North Africa, has been watching in complete shock as riots spread across Europe. Riots in London, riots in France, riots in Greece, riots in Spain.
Whatever excuse is laid to explain the upheaval, it’s just a superficial trigger. People are frustrated. They’re angry. They feel like they’ve been wronged, left behind to rot without any chance of a decent livelihood. And they’re so angry they’re willing to get violent and destroy property.
These are the same sorts of conditions that breed today’s terrorists. Someone who’s willing to strap a bomb to his chest has no economic prospects. He’s desperate… and much more easily influenced to do things that are destructive. You don’t see too many successful people making six-figures strapping any bombs to their chests.
Bottom line, when someone’s livelihood is taken away, all bets are off, and that’s precisely what’s happening right now. Deteriorating economic conditions are driving so much social unrest around the world, and the trend is definitely not our friend.
World governments recognize this, and they essentially have two responses from their canned playbook.
The first response is to “do something.” In the US, for example, Barack Obama recently announced a new wave of fiscal stimulus… because, hey, it worked out so well the first few times they dumped a bunch of money into the economy.
This is exactly the WRONG thing they should be doing. It puts the country deeper into debt and generates marginal return on investment. Even the Congressional Budget Office’s own analysis indicated that Obama’s first stimulus plan cost the American taxpayer between $225,000 and $631,000 for every job that it ‘saved’ or created after 18-months.
Even a complete moron can see that this is a waste of money, and ruinous for the economy. Hang on for round two to come very soon.
The second thing that governments are doing is curtailing freedoms. These people will take ANY STEPS NECESSARY to keep the party going. Sure, everyone cheered when Egyptians used Facebook and Twitter to launch a revolution… but when people do it in the London or San Francisco, they take immediate steps to shut off access.
San Francisco’s BART transit system spokesman Linton Johnson summed it up best in an interview with KRON-4 news when he said that transit passengers have “no right to free speech…” So much for the Constitution.
These two things– economic deterioration and the increasingly heavy hand of Big Brother– are the essential ingredients in revolution. When combined, widespread social upheaval is nearly a foregone conclusion.
Thinking people need to recognize the risks and consequences at stake, and formulate a plan to prepare for them. My ultimate recommendation is to set up a safe haven location outside of your home country– a crash pad in a stable place where you can feel secure in your family’s safety and watch the turmoil on television instead of from your front porch.
Disclaimer:
This is just a research piece and not an investment advice. All financial transactions carry a RISK.
Take Martin Luther, for example. In 1517, Luther publicly posted a list of 95 grievances against the Catholic Church in Wittenberg, Germany, and history credits him with sparking the great ‘reformation’ that eventually created the Church of England and protestant movement.
This is mere historical convenience. There were hundreds, even thousands of people who came before Luther. Society was ready for a major shift and already moving in that direction. Luther gets credit for the spark.
Similarly, the history books of the future may look back on Tunisian fruit merchant Mohammed Bouazizi as the spark of the next ‘global reformation’. If you recall, Bouazizi lit himself ablaze in protest of Tunisia’s pitifully repressive economic conditions, and revolution ensued across the region.
Tunisia fell. Egypt fell. Libya was invaded by a peace-prize winning US president. Civil uprisings spread to Syria, Bahrain, Algeria, Morocco, etc. It would be fools to think this was all due to a fruit vendor.
Like Martin Luther, Bouazizi is a symbol… a metaphor for society’s pent up frustration that had been building for years. This frustration is worldwide. The entire world, which cheered the Arab Spring uprisings across the Middle East and North Africa, has been watching in complete shock as riots spread across Europe. Riots in London, riots in France, riots in Greece, riots in Spain.
Whatever excuse is laid to explain the upheaval, it’s just a superficial trigger. People are frustrated. They’re angry. They feel like they’ve been wronged, left behind to rot without any chance of a decent livelihood. And they’re so angry they’re willing to get violent and destroy property.
These are the same sorts of conditions that breed today’s terrorists. Someone who’s willing to strap a bomb to his chest has no economic prospects. He’s desperate… and much more easily influenced to do things that are destructive. You don’t see too many successful people making six-figures strapping any bombs to their chests.
Bottom line, when someone’s livelihood is taken away, all bets are off, and that’s precisely what’s happening right now. Deteriorating economic conditions are driving so much social unrest around the world, and the trend is definitely not our friend.
World governments recognize this, and they essentially have two responses from their canned playbook.
The first response is to “do something.” In the US, for example, Barack Obama recently announced a new wave of fiscal stimulus… because, hey, it worked out so well the first few times they dumped a bunch of money into the economy.
This is exactly the WRONG thing they should be doing. It puts the country deeper into debt and generates marginal return on investment. Even the Congressional Budget Office’s own analysis indicated that Obama’s first stimulus plan cost the American taxpayer between $225,000 and $631,000 for every job that it ‘saved’ or created after 18-months.
Even a complete moron can see that this is a waste of money, and ruinous for the economy. Hang on for round two to come very soon.
The second thing that governments are doing is curtailing freedoms. These people will take ANY STEPS NECESSARY to keep the party going. Sure, everyone cheered when Egyptians used Facebook and Twitter to launch a revolution… but when people do it in the London or San Francisco, they take immediate steps to shut off access.
San Francisco’s BART transit system spokesman Linton Johnson summed it up best in an interview with KRON-4 news when he said that transit passengers have “no right to free speech…” So much for the Constitution.
These two things– economic deterioration and the increasingly heavy hand of Big Brother– are the essential ingredients in revolution. When combined, widespread social upheaval is nearly a foregone conclusion.
Thinking people need to recognize the risks and consequences at stake, and formulate a plan to prepare for them. My ultimate recommendation is to set up a safe haven location outside of your home country– a crash pad in a stable place where you can feel secure in your family’s safety and watch the turmoil on television instead of from your front porch.
Disclaimer:
This is just a research piece and not an investment advice. All financial transactions carry a RISK.
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