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March 10, 2011

3 Months From Now, US Fed Will Stop Buying

Filed under: Uncategorized — bigcapital @ 5:43 pm
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3 Months from now, US Fed Will Stop Buying.

Thursday, March 10, 2011 — http://marketpin.blogspot.com

== US Fed bond buys to finish, greenback and global stocks on radar ==

Fed’s Fisher warns could vote to stop bond buying

WASHINGTON (Reuters) – A senior U.S. Federal Reserve official warned on Monday that he would vote to scale back or stop the central bank’s $600 billion bond-buying program if it proves to be “demonstrably counterproductive.”

Dallas Federal Reserve Bank President Richard Fisher, who has repeatedly said he would not support any more bond buying after the program ends in June, said he was doubtful the purchases were doing much good.

“I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it,” Fisher said in remarks prepared for delivery to an Institute of International Bankers’ conference in Washington.

“The liquidity tanks are full, if not brimming over. The Fed has done its job,” he said.

The Fed launched its bond buying program in November to help an economic recovery that was struggling with high unemployment after the worst recession since the 1930s.

But since then, the economy has shown signs of strengthening with the jobless rate falling to a nearly two-year low of 8.9 percent in February.

Fed officials are due to meet March 15 to discuss the bond purchase program. In January, Fisher voted with the rest of the central bank’s policy-setting Federal Open Market Committee to continue it.

In comments to the bankers’ conference, Fisher said he did not feel that further monetary accommodation would help put more Americans back to work.

“It might well retard job creation, should it give rise to inflationary expectations,” he said, adding that perhaps the Fed’s policy has compromised the central bank by implying it is “a pliant accomplice to Congress’ and the executive branch’s fiscal misfeasance.”

== How About U.S dollar ? ==

Stretching out Treasury purchases past the end of June while reducing the monthly amount would help bond dealers adjust to the Fed’s withdrawal from the market, said Lou Crandall, chief US economist at Wrightson ICAP in Jersey City, N.J

NEW YORK – The Federal Reserve’s $US600 billion bond purchase program will be completed as planned, top Fed officials signalled, though they saw heightened economic uncertainty from unrest in the Middle East.

US central bank officials from Atlanta, Chicago and Dallas said they were keeping an eye on the risk higher oil prices could feed through into broader inflation, as well as their potential to hurt growth.

Atlanta Fed President Dennis Lockhart said he would not rule out more bond buys if the recovery dwindles. Dallas Fed President Richard Fisher said he would vote to end the program early if higher oil prices fed into broader inflation.

The program, announced in November to bolster a fragile economic recovery, is due to end in June. Since it began there have been signs the recovery is picking up steam.

Mr Lockhart, a policy centrist, said he was more concerned about the risk to growth from the oil price rise. He said he would be “very cautious” about increasing the size of the purchase program.

“Given the emergence of new risks, however, I prefer a posture of flexibility,” Mr Lockhart said.

He expected overall price pressures to remain subdued and warned it is too early to “declare a jobs recovery as firmly established”.

Mr Fisher, an inflation hawk, said he “fully expected” the $US600 billion program to “run its course.”

Mr Fisher told an international bankers’ conference he would vote to curtail or stop the program, however, if it proves to be “demonstrably counterproductive.”

The Fed meets on March 15 for its policy-setting meeting, at which it is expected to reaffirm its purchase plan. Fisher is a voter on monetary policy this year, Mr Lockhart is not.

In a CNBC interview, Chicago Fed Bank President Charles Evans said the Fed was closely watching rising oil prices, adding that they were “obviously” a headwind for growth.

Revolutions beginning in Tunisia and Egypt have spread to other countries in the region, including Libya and Bahrain. This has pushed the price of oil above $US100 a barrel, complicating the Fed’s objective of stimulating economic growth while keeping prices under control.

That said, Mr Evans pointed to the improving job market and said he expected economic growth of four per cent this year and next. He called the size of the purchase program “good”.

“I continue to think the hurdle is pretty high for altering our currently announced” program, Mr Evans, seen as a monetary policy dove and one of the most outspoken proponents for quantitative easing, said. Mr Evans does not have a vote on monetary policy this year.

Mr Fisher said the question will be whether the oil price rise is sustained.

“It is really a question of how that works its way through,” he said. “We have already seen very high gasoline prices. That’s one of the ways that it most affects the consumer.”

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February 25, 2011

Fed’s Bullard says it’s time to debate completing QE2

Filed under: Uncategorized — bigcapital @ 7:52 am
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Fed’s Bullard says it’s time to debate completing QE2

Friday, February 25, 2011 – http://marketpin.blogspot.com/

BOWLING GREEN, Kentucky (Market News) – A senior U.S. Federal Reserve official said on Thursday he thinks it is time to consider tapering off or scaling back a $600 billion bond-buying program because of an improved economic outlook.

“The natural debate now is whether to complete the program or to taper off to a somewhat lower level of assets,” St. Louis Federal Reserve President James Bullard said at a Chamber of Commerce breakfast held at Western Kentucky University.

Bullard said that he expects the topic to be discussed at a Fed meeting in March. He said he would be ready to scale back the program then.

“If it was just me, I would make small changes to account for the fact that the outlook is better than it was at the time of the November decision,” he told reporters after his speech.

Bullard, an academic economist, is not a voting member this year of the panel that sets interest-rate policy. He is seen as a centrist on the spectrum of Fed officials, which ranges from opponents of aggressive actions to support growth to advocates of accommodative policies at the other.

The Fed launched its bond buying program in November to buttress a weak recovery, struggling with high unemployment after the worst recession since the Great Depression of the 1930s.

The purchases are due to end midyear, and the Fed at its most recent policy meeting showed no sign as a body of backing away, although several policymakers have questioned the need for or the efficacy of the program.

Minutes of the Fed’s January meeting showed a few officials wondering whether data showing a strong recovery would make it appropriate to consider reducing the pace or overall size of the program.

But other officials at the meeting said the outlook was unlikely to improve dramatically enough to justify any changes. There were no dissents from the Fed policy at that meeting.

Despite his confidence in the rebound, Bullard said that events in the Middle East and lingering worries about European government fiscal soundness plague the outlook.

“We’ve got plenty of concerns out there about supply developments in oil markets, and you’ve still got brewing issues in Europe with respect to their sovereign debt crisis,” he said. “But I am saying that looking at the outlook today, it’s better than it was in November.”

Bullard said that despite his rosier outlook, further easing could never be ruled out. markets-stocks

The bond purchases are the Fed’s second round of quantitative easing, dubbed QE2. Bullard said it has been an effective tool when interest rates are near zero.

“Real interest rates declined, market expectations rose, the dollar depreciated and equity prices rose,” he said.

The Fed cut short-term interest rates close to zero in December 2008.

Bullard said a jump in food and energy costs around the world could impact U.S. prices.

“Perhaps global inflation will drive U.S. prices higher or cause other problems,” he said.

U.S. inflation is near historic lows and Fed officials have until recently been worried that the U.S. economy could slip into an outright deflationary spiral. Bullard said he believes the disinflation trend has bottomed.

“Inflation expectations are higher, which I think was a success of QE2 and if we do too much and don’t pull back in time, then we can get more inflation than we intended,” he said.

Bullard said adopting an explicit inflation target would be a better way of conducting monetary policy.

Friday, February 25, 2011 – http://marketpin.blogspot.com/

February 23, 2011

Fed’s Fisher Says More Stimulus Unnecessary

Fed’s Fisher Says More Stimulus Unnecessary

(RTTNews) – A top Federal Reserve official declared on Thursday that we would not back more monetary easing when the Fed’s $600 billion quantitative easing program winds to a close.

Richard Fisher, President of the Federal Reserve Bank of Dallas, was quoted as saying that he could not foresee any circumstances that would warrant more stimulus and suggested that the central bank should turn its attention to unwinding support.

Fisher’s comments contrast with those made by the Chicago Fed President Charles Evans, who backed the Fed’s extremely loose monetary policy and assured that it had the tools to tighten quickly if needed should inflation rise faster than expected

February 2, 2011

Bernanke: The Dollar System Is Flawed

Filed under: Uncategorized — bigcapital @ 9:18 am
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Bernanke: The Dollar System Is Flawed

Federal Reserve Chairman Ben Bernanke’s speech in Frankfurt may be one of the most important and underreported events since America abandoned the gold standard. In it, he said the dollar standard was flawed and that America’s trade deficit was imperiling America.

 “[I]t would be desirable for the global community, over time, to devise [a new] international monetary system,” he said.

 Never before has a Fed chairman made such an admission. Never before has one ever disparaged his own currency in such a way.

“The speech was a radical departure from the status quo and a major signal for a looming policy change. It means that trade war is virtually guaranteed and the dollar will soon be devalued. Dramatic global economic upheaval is on the way. “

 On November 19, Ben Bernanke told a room full of bankers in Frankfurt, Germany, that the world’s sense of common purpose had waned. Tensions among nations over economic policies are intensifying, he said. It threatens the world’s ability to find a solution.

 U.S. unemployment rates are high, he told the gathering, and given the slow pace of economic growth, likely to remain so. Approximately 8.5 million jobs have been lost so far, and when you take into account population growth, the size of the employment gap is even larger, he said.

 Unemployment may get even worse before it gets better.

 “In sum, on its current economic trajectory the United Sates runs the risk of seeing millions of workers unemployed or underemployed for many years,” lamented Bernanke. “As a society, we should find that outcome unacceptable.”

 In an effort to win European allies, America’s most powerful banker then went on the attack—blaming China for causing much of the economic and trade imbalances destabilizing the current dollar-centric economic order and threatening the world’s economy.

 China is manipulating the market to keep its currency undervalued, he charged. This has led to imbalances.

 Each month China sells tens of billions of dollars more worth of goods and services to America than it purchases in return. Many American economists claim this is because of China’s undervalued currency, which makes Chinese goods less expensive in America and American goods more expensive in China.

 Coupled with China’s low-wage, low-taxation, low-regulatory, non-union environment, resulting in the relocation of millions of American jobs overseas, China has received a huge economic boost at America’s expense.

 This is a primary reason nations like China have fully recovered from the recession while America is still mired in it, noted Bernanke. America can no longer afford to let China drain the U.S. economy.

But what to do about it?

 “As currently constituted, the international monetary system has a structural flaw,” said America’s chief banker. The dollar system is broken. “It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances” (emphasis mine throughout).

“In the meantime, without such a system in place, the countries of the world must recognize their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity.”

 Thus Bernanke told his German audience to prepare for “market-based or otherwise” unorthodox—even radical—action by the Fed to try and force China to revalue its currency and rebalance the global economy.

 The “flaw” has been declared. But what is Bernanke going to do?

 “Bernanke is alerting the world to the most important shift in U.S. trade policy in more than a generation,” writes economic analyst and author Richard Duncan. “The world has been put on notice that the United States will take steps to correct this defect and the destabilizing trade imbalances it permits.”

 “If the flaw cannot be corrected through international coordination, then unilateral actions by the United Sates should be anticipated,” Duncan warns.

 And if history is a guide, that means tariffs and trade duties.

 The first major shots of trade war may be about to be fired—and the Fed has just given its blessing. If you look back on the 1930s and that disastrous time period, protectionism is lethally contagious and predictable. Global trade and commerce will contract. Import prices will rise. Unemployment will skyrocket. And that is just for starters.

 During the Great Depression, America was not burdened under record debt. The economy entered that age of trade warfare from a position of strength, and still the economy got ruthlessly battered.

 A trade-war-induced depression today would potentially be far worse—and not just because the United States has become the greatest debtor nation in all history, but because this time, the credibility of America’s government, its central bank and its currency, are all now in question.

 Besides tariffs, Mr. Bernanke’s declaration that the international monetary system is broken also means the Fed will engage in as much “quantitative easing” as necessary to compensate for what he sees as its “structural flaws.”

 During the G-20 meeting in South Korea two weeks ago, President Obama and Treasury Secretary Timothy Geithner were forced to defend the Federal Reserve’s decision to print dollars to finance government spending and depreciate the value of the dollar.

 Foreign nations saw it as a way for America to renege on its debts.

 Bernanke’s Frankfurt defense of the Fed’s “quantitative easing” will do little to reverse that sentiment. “Fully aware of the important role that the dollar plays in the international monetary and financial system, the [Fed] believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in the context of price stability in the United States,” Bernanke said.

 In order for America to support the value of the dollar, it will devalue it, said Bernanke. The incongruity is palpable—and surely wasn’t lost on America’s bond holders. Every time the Federal Reserve hits the “print” button, creating money out of thin air, it devalues the dollars in existence. America’s lenders (of which the Chinese are the largest) have been put on notice that they will be paid back in depreciated dollars.

 Be prepared for more quantitative easing—or, as it has become known overseas, quantitative fleecing.

 And be prepared for the Federal Reserve’s antics to succeed all too well.

 Foreign nations, and America’s foreign creditors, grow more dissatisfied with the dollar as the world’s reserve currency every day. The move to adopt a new reserve currency system is gaining momentum. When this happens, the Federal Reserve will get a whole lot more international cooperation in meeting its goals than it could have ever wanted.

 The Fed won’t be trying to devalue the dollar anymore—it will be doing everything it can to prop it up.

 Unfortunately, with faith in the dollar broken, the government unable to borrow money and a global trade war ravaging the U.S. economy, America will pine for the structurally “flawed” but comparatively good old days.

 “The speech was a radical departure from the status quo and a major signal for a looming policy change. It means that trade war is virtually guaranteed and the dollar will soon be devalued. Dramatic global economic upheaval is on the way.”

– MARKET TALK –

December 31, 2010

Estonia Joins Euro Club Currency 2011

Filed under: Uncategorized — bigcapital @ 10:21 am
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Estonia Joins Euro Club Currency 2011

via Bloomberg.com – Dec 31, 2010

Estonia Joins Euro Club as Currency Expands East Into Former Soviet Union

Estonia tomorrow becomes the first former Soviet republic to join the euro, putting at least a temporary cap on the currency bloc’s expansion as the sovereign debt crisis ripples through Europe.

Wedged between Russia and Latvia on the Baltic Sea, Estonia will at midnight become the 17th country to switch to the currency. Gross domestic product of 14 billion euros ($19 billion) makes it the second smallest euro economy after Malta.

As Europe grapples with the financial crisis, Estonia is likely to be the last addition to the euro club for several years. Lithuania and Latvia, the next in line, are aiming for 2014 and bigger eastern countries have shied away from setting target dates.

“The euro is still generally seen as a positive for the applicant countries as long as the conversion rate is somewhat competitive,” Elisabeth Gruie, an emerging-markets strategist at BNP Paribas SA in London, said in an email. High deficits are keeping Poland out and an “inner desire for independence” is the obstacle in the Czech Republic, she said.

Debt estimated by the European Union at 8 percent of GDP in 2010 will make Estonia the fiscally soundest country in a currency bloc plagued by budget woes that forced Greece and Ireland to fall back on European and International Monetary Fund aid.

Confidence in Euro

“It is a sign of the confidence of Estonia toward the euro, despite the current difficulties, which will be a positive signal to the markets,” Joseph Daul of France, floor leader of center-right parties in the European Parliament, said in an e- mailed statement.

Estonia’s central bank chief, Andres Lipstok, 53, will join the European Central Bank’s policy-setting council, taking part in his first interest-rate vote on Jan. 13 in Frankfurt.

Some 85 million euro coins featuring a map of Estonia and 12 million banknotes go into circulation tomorrow, according to the central bank, starting a two-week phase out of the national currency, the kroon. One euro buys 15.6466 krooni.

The 1.3 million Estonians have little experience of monetary autonomy. In June 1992, less than a year after regaining independence from the Soviet Union, Estonia shifted from the Russian ruble to a national currency that it immediately pegged to the German mark. The exchange rate was locked to the euro when the first 11 countries began using it in 1999.

Source: http://marketpin.blogspot.com/

Goldman Sachs Boosts Global Growth Forecasts 2011

 

Goldman Sachs Boosts Global Growth Forecasts 2011

 Economists at Goldman Sachs Group Inc., the most profitable Wall Street firm, increased their forecasts for U.S. and global growth in 2011, predicted an acceleration in 2012 and recommended investors buy banks.

 The U.S. economy will grow at a 2.7 percent rate next year, up from a previous forecast of 2 percent, and 3.6 percent in 2012, economists led by Jan Hatzius in New York said in a report today. The global economy will grow 4.6 percent in 2011 and 4.8 percent in 2012, Dominic Wilson, senior global economist, said in a separate report.

 They recommended U.S. bank stocks, junk bonds, commodities, Japanese stocks and China’s currency as the first of the firm’s “top trades” for 2011. The forecasts are a departure from the pessimism that characterized Goldman Sachs’ projections since 2006.

 “This outlook represents a fundamental shift in the thinking that has governed our forecast for at least the last five years,” Hatzius said in the report. “The hand-off from policy stimulus to private demand — which seemed elusive just a couple of months ago — now appears to be developing.”

 U.S. stocks started what is historically their best month with a rally today after ADP Employer Services data showed companies added 93,000 jobs last month, the Federal Reserve said the economy gained strength across most of the nation and manufacturing in China expanded at the fastest pace in seven months. The Standard & Poor’s 500 Index advanced as much as 2.3 percent, the most since Sept. 1.

 Underlying Demand

 The Goldman Sachs economists said underlying demand, a measure of growth that excludes the effects of fiscal stimulus and inventory restocking, has strengthened and is on track to expand at a 5 percent rate in the fourth quarter.

 On average, economists surveyed by Bloomberg expect the U.S. economy to grow 2.5 percent next year and 3.1 percent in 2012. The Organization for Economic Cooperation and Development lowered its forecast for global growth last month to 4.2 percent for 2011 from 4.5 percent, and predicted 4.6 percent for 2012.

 Even as growth accelerates, U.S. unemployment will remain elevated by historical standards, declining to 8.5 percent by the end of 2012 from 9.6 percent in October, the economists said. The jobless rate increased to 10.1 percent in October 2009, the highest monthly figure since 1983.

 Inflation, Unemployment

 Core inflation, which excludes food and energy prices, is likely to be 0.5 percent in each of the next two years, Goldman Sachs said. The combination of high unemployment and low inflation is likely to keep the Federal Reserve from raising interest rates, the economists said.

 Conditions will be “positive for risky assets,” they wrote. The S&P 500, the main benchmark for American equities, will likely end next year at 1,450, up 20 percent from 1,206.07 at 4 p.m. in New York.

 The S&P 500 has gained 8.2 percent this year and recouped three-fifths of its decline from a record in October 2007. Concerns about the economic fallout from government debt reduction by some European countries caused rallies to stall in April and November and are the principal risk to Goldman’s outlook, the economists said.

 Growth in emerging markets may slow next year as acceleration in the U.S. prompts China, other Asian economies and Brazil to tighten monetary policy, the economists said.

 For its top trades, Goldman recommended betting on a decline in the value of the U.S. dollar against the Chinese renminbi via two-year non-deliverable forwards for an expected return of 6 percent.

 Bets on the KBW Bank Index will return 25 percent, and selling protection on high-yield corporate bonds via credit- default swaps will return 8.7 percent, they predicted.

 Japan’s Nikkei 225 Stock Average is likely to return 20 percent next year, while a basket of crude oil, copper, cotton, soybeans and platinum will gain 28 percent, they said.

December 30, 2010

The Federal Want To Pressure Down U.S Dollar Worldwide

Filed under: Uncategorized — bigcapital @ 9:23 am
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The Federal Want To Pressure Down U.S Dollar Worldwide

There is a saying in the investment business, “don’t fight the Fed.”

Fed Swap Lines Purposely Keeping Dollar Weak

Central banks provided two pieces of market supportive news in the past 48 hours.

China announced its intent to buy Portuguese bonds, and the Federal Reserve extended its “swap lines” deep into 2011:

# China Ready to Buy Up to $6.6B in Portugal Debt (Reuters : http://www.reuters.com/article/idUSTRE6BL0Y220101222 )

# Fed Extends USD Swaps With Major Central Banks (Reuters : http://www.reuters.com/article/idUSTRE6BK3PS20101221 )

Via Reuters, the swap lines, at first set to expire next month, will now run til August 1st.

The lines were first opened to the ECB and SNB — the European and Swiss central banks respectively — and were later expanded to multiple additional central banks, including those of Sweden, Mexico and Brazil.

The August extension applies to the Fed’s counterparts in Europe, Japan, Canada, England and Switzerland.

So why is the Fed doing this? Straight from the horse’s mouth (official Fed statement):

“[The swap lines] are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets.”

That’s the official justification. A between the lines reading is slightly more self serving: The Fed wants to keep the dollar weak — or otherwise keep it from rising too much.

As you can see, from 2002 onward the $USD had been declining — a trend perceived as good for everyone. As Americans gorged on “stuff,” the vendor finance arrangements put in place by China and Middle East oil exporters allowed the party to continue unabated.

Long term interest rates were kept low via the recycling of $USD back into treasury bonds, in turn keeping mortgage rates low and perpetuating the housing bubble. Meanwhile many emerging markets enjoyed rapid growth — courtesy of a binging U.S. consumer — as the leverage and credit boom radiated outward.

But then, as things fell apart in 2008, the $USD saw a dramatic surge. A wave of panic swept the globe as the supernova debt boom collapsed. Trillions of dollars in credit flows evaporated, and American investors effectively “short” dollars (via overseas investments and ‘carry trade” type arrangements) had to cover with a vengeance.

As the chart shows, the $USD saw another upward surge in early 2010, first on China fears, and then eurozone sovereign debt fears as the Greek situation ignited. (This is when the Economist’s Acropolis Now cover was published — a keepsake to be sure.)

So, as you can guess, one of the many fears keeping Ben Bernanke awake at night is the possibility of a surging $USD.

Not only is the dollar a “risk-off” fulcrum, balanced against “risk on” for all other paper asset classes, a rising buck is also a political headache for the Obama White House and other American interests seeking a U.S. export revival.

So, back to those swap lines. Why and how would they be an attempt to keep the dollar down?

Well, first consider what a swap line actually is. From the Federal Reserve website:

In general, these swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve. Dollar liquidity swaps have maturities ranging from overnight to three months.

In layman’s terms, we can think of a swap line as a standing guarantee of U.S. dollar liquidity. If you (as a central banker) ever need greenbacks in a pinch, you know you’ll be able to procure them instantly, no matter how “tight” the open market may be.

This standing guarantee reduces the odds of another violent $USD spike of the type we saw in late 2008. In a way, one can think of it as “short squeeze insurance.”

The many players around the world who are “short” U.S. dollars — by way of lending arrangements denominated in dollars and so on — have spiking dollar risk implicit in their positioning.

What the Fed has essentially said to these players is, “It’s okay for you to keep borrowing in dollars, because in the event of a new liquidity crisis we will create accessible dollars for you (via the channel of your local CB).”

Consider, too, the conditions under which all these central banks would be pushed to draw on their $USD swap lines at the same time.

By definition, these would be crisis conditions in which availability of $USD was scarce relative to near-term surging demand.

In such conditions, the Federal Reserve would have to create more dollars to meet existing outsized demand (as crisis-driven preferences for holding $USD, or covering short $USD obligations, would create a shortage).

So the liquidity promise is also a sort of printing-press promise: In the event of another crisis, the Fed will be on its toes and ready to “print” however much fresh $USD the world needs.

The really neat trick is, simply in making this promise, the Federal Reserve can achieve its aim of keeping the $USD down. This effect is produced even without the Fed doing anything.

How? Simple:

* The Fed has promised $USD liquidity will be there “if needed.”
* This promise can be “taken to the bank” — literally.
* Commercial institutions can thus rest easier with short-dollar liabilities.
* To wit, whether one is a bank, a commercial operator or a speculator, it’s very tempting to borrow in $USD these days — to leverage the greenback via some form of debt arrangement and participate in the “carry trade.”

But this move could also be considered risky due to the possibility of carry trade reversal and crisis-driven supply/demand crunch … and so, with the extension of the Fed swap lines, Uncle Ben has stepped up and said “Hey, no problem, carry trade away — we’ll be there in a tight spot (via printing press) to provide liquidity for you.”

And so the dollar stays suppressed, and everyone stays happy (apart from those pesky “non-core” inflation watchers, and anyone else feeling a cost of living crunch).

December 2, 2010

UBS Plans to Double Size of Its Commodities Staff

Filed under: Uncategorized — bigcapital @ 8:24 am
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UBS Plans to Double Size of Its Commodities Staff

UBS AG, Switzerland’s largest bank, plans to double its commodities team, a year after selling most of its raw-materials units to Barclays Plc.

 The expansion of the existing team of about 40 people will take place over the next 18 to 24 months, Hana Dunn, a London- based spokeswoman for the bank, said by phone today. Dylan Morgan, formerly of Goldman Sachs Group Inc., started last week as head of industrial metals and Taha Quertani, from Tudor Investment Corp., became head of agriculture, Dunn said.

The Zurich-based bank announced plans to withdraw from most commodities business in October 2008 and agreed to sell its industrial metals, oil and U.S. power and gas units to Barclays Plc three months later. UBS sought to cut investment banking risk after posting $48.6 billion in writedowns and losses related to the credit crisis.

 UBS AG, Switzerland’s largest bank, plans to double its commodities team, a year after selling most of its raw-materials units to Barclays Plc.

 The expansion of the existing team of about 40 people will take place over the next 18 to 24 months, Hana Dunn, a London- based spokeswoman for the bank, said by phone today. Dylan Morgan, formerly of Goldman Sachs Group Inc., started last week as head of industrial metals and Taha Quertani, from Tudor Investment Corp., became head of agriculture, Dunn said.

 The Zurich-based bank announced plans to withdraw from most commodities business in October 2008 and agreed to sell its industrial metals, oil and U.S. power and gas units to Barclays Plc three months later. UBS sought to cut investment banking risk after posting $48.6 billion in writedowns and losses related to the credit crisis.

– Bloomberg –

November 28, 2010

HSBC Eyes Australian Expansion

Filed under: Uncategorized — bigcapital @ 1:09 am
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HSBC Eyes Australian Expansion

SYDNEY—HSBC Holdings PLC, Europe’s biggest bank by stock-market value, will beef up its corporate-finance business in Australia, part of a strategy to increase its presence in an economy booming on the back of Asia’s demand for commodities, the lender’s local chief executive said.

“There’s a lot of interest in good corporate fundamentals coming out of Australia,” Paulo Maia, HSBC’s Australia head, said in an interview with The Wall Street Journal.

A greater emphasis in Australia comes as HSBC and other international lenders search for low-risk opportunities outside more traditional markets in the U.S. and Europe, which are recovering more slowly than Asia from the global financial crisis. Asia accounts for more than half the bank’s total earnings.

The bank plans to hire for its Australian debt capital markets team as well as expand its onshore leveraged acquisition and loan syndication operations, said Mr. Maia, who was previously deputy chief executive of the European bank’s Brazilian business.

HSBC particularly wants to tap into the growing market for leading local corporations and banks to borrow money offshore. Already this year, the volume of nonbank corporations issuing foreign-currency debt has grown by 35% to 13.97 billion Australian dollars (US$13.71 billion) split across 26 deals, according to Dealogic.

HSBC’s first-half pretax profits from Australia grew 28% compared with a year earlier to A$152 million. Still, that’s a slower rate of growth than seen at local rivals, including Commonwealth Bank of Australia, which in the same period recorded a 37% jump in pretax profits.

Compared with its Australia rivals, HSBC has a relatively small retail-branch network in the country. But Mr. Maia rulef out buying a smaller local bank to build its presence in big urban centers like Sydney, Melbourne and Brisbane.

“We haven’t been able to identify any bolt-on acquisitions that would make sense for us,” he said. “We want to play on the mass affluent; we don’t want to go too much downmarket.”

HSBC’s enthusiasm for Australia comes as the bank remains locked in a war of words with the British government over the rising cost of basing itself in Europe. The bank’s outgoing CEO, Michael Geoghegan, and his successor, Stuart Gulliver, have warned separately that new rules proposed to curb pay in the financial-services industry are putting it at a disadvantage to its U.S. rivals in international markets.

From The Wall Street Journal – WSJ.com

September 15, 2010

Citigroup: Is USD/JPY A ‘Buy On Dips’ Now ? the bank says

Filed under: Uncategorized — bigcapital @ 5:24 pm
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Citigroup: Is USD/JPY A ‘Buy On Dips’ Now ? the bank says

Will US reaction to the BOJ intervention dictate its success?
Citigroup reckons that investors may be overestimating external political concern, especially compared to the trade problems created by the CNY.

“If US authorities simply continue to decline to comment, this is implicitly turning a blind eye to the Japanese action and could serve to disappoint those looking for stronger opposition,” the bank says, suggesting that the intervention may well prove more successful than expected.

The bank recommends “maintaining short JPY positions and dips in USD/JPY associated with lulls in intervention could be opportunities to further build longs.

http://www.Intermoney.org – Market Talk

Wednesday. September 15, 2010

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