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Saturday, February 16, 2013

Your forexlive.com ENewsletter

Link to ForexLive

Back off giant asteroid – I’ve got white paint!

Posted: 15 Feb 2013 10:55 PM PST

Apparently the best way to avoid a collision between the Earth and a giant asteroid is to send up tins of white paint. By painting the asteroid white it would reflect sunlight, so altering its path through space’s vacuum enough to avoid a collision.

I vote for sending the smug presenters of those tedious home-renovation TV shows up into space to do the painting, hopefully never to return.

Scientists say giant tin of white paint more use against asteroid hit

Looks like Japan has escaped without even a slap across the wrist

Posted: 15 Feb 2013 10:41 PM PST

Its a bit early in the weekend for much new news, but as a catch-up for those out of the market on Friday it looks like Japan is going to escape a remark in the G20 communique (not to mention the Lionel Ritchie Dancing on the Ceiling in the CHF from the Swiss National Bank).

Finance ministers meeting at a G-20 summit in Moscow appeared to be nearing an understanding that would allow developed economies, including Japan, to continue to try to use monetary stimulus, while emerging-market countries would still be able take steps to slow the inflow of capital from investors in wealthy nations seeking higher returns.

Wall Street Journal: Yen Weakens on G-20 Silence (may be gated).

More at Reuters: Yen retreats as Japan not singled out in draft G20 statement

and Bloomberg G-20 Resists Currency War Crackdown

Again, none of this is new news, we were bringing you this information from the Asian afternoon, through European and US day on Friday.

More for the equity people (dont say we don’t love, OK?)

Posted: 15 Feb 2013 10:40 PM PST

A brief article in The Australian Financial Review has comments from Australian billionaire and fund manager, Kerr Neilson. I found this the most interesting, countering a very popular equity market meme at present:

According to Neilson, reports of a "great rotation", where money is pouring out of cash and term deposits back into equities, are exaggerated. He says while mutual funds have been bleeding money for some time, the exchange traded funds (ETF) sector have been experiencing significant growth. …
"Talk of a great rotation is being driven by people who would like to induce people into equities but it's not as simple as that and the full picture shows ETFs have been gaining popularity," Neilson says.

Financial Review (may be gated)

Bernanke in Russia … and the sky really is falling

Posted: 15 Feb 2013 10:40 PM PST

OK, well maybe not the whole sky, just some lumps of rock. Did a lot of damage though and some reports put the injury toll higher than 1000.

Bernanke was at the G20 summit and had some comments reported. This is just a recap, Adam brought the news when it hit the wires Friday in New York:

Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is far from operating at full strength and reiterated his commitment to record easing.
"With unemployment at almost 8 percent, we are still far from the fully healthy and vibrant conditions that we would like to see," Bernanke said today at a meeting in Moscow of his counterparts from the Group of 20.

In December the Fed. committed to keeping its foot on the gas until unemployment fell to 6.5% or inflation got up above 2.5%.

More on hedge funds profits from the yen trade

Posted: 15 Feb 2013 10:40 PM PST

An article in the Financial Times talking about the profits made by big speculators such as George Soros, Paul Tudor Jones and Louis Bacon as the yen weakened. The FT is referring to them as ‘currency warriors’ (because of all the talk about ‘currency wars’ – get it?). It also talks about some of the popular themes in the markets at present:

shorting sterling is a popular wager in anticipation of a dovish governorship for the Bank of England under Mark Carney. Shorting the Swiss franc against the euro is also in vogue, reflecting a belief that the eurozone's systemic challenges are behind it.
And more broadly, in the expectation that international currency disputes will worsen: funds are long palladium, long TIPS and long FX volatility options.

Forex 'warriors' mine gap in consensus (may be gated)

Something for the equity- and equity-related traders

Posted: 15 Feb 2013 10:39 PM PST

Adam brought you this news on Friday afternoon on New York, it isn’t fresh. Just a little more on that Wal-Mart sales slump scare.

From Bloomberg:

Wal-Mart slipped 2.2 percent amid the worst sales start of a month in seven years.

And, even The Huffington Post got in on it: Walmart Sales Are A ‘Total Disaster’: Report

News of secret US – North Korea talks in 2012

Posted: 15 Feb 2013 10:37 PM PST

The Asahi Shimbun has detailed dates of secret talks held between US and North Korean officials in 2012.

U.S. military planes flew from an air base in Guam to Pyongyang and back on April 7, 2012, and again on a longer visit lasting from Aug. 18-20, the sources said.

Apparently the US did not inform its security partner Japan of the talks. This is messy, coming after the North Korean nuclear test this week. The headline to the article in the paper says a lot, especially the part in capitals … LEFT IN THE DARK: Secret U.S. military flights carried officials, equipment to N. Korea

Japan weekend press: Abe to visit Obama on February 22

Posted: 15 Feb 2013 10:37 PM PST

They’ll be discussing a range of issues, including:

  • The U.S.-Japan security alliance (particularly in reference to Japan’s dispute with China over the Senkaku/Daioyu Islands)
  • North Korea (and especially the response to this week’s nuclear test)
  • Japan’s possible entry into regional free trade talks (the Trans-Pacific Partnership), although Abe faces difficult internal Japanese opposition to the TPP

Obama to meet Japan’s Abe on Feb 22

Louise Cooper: UK isn’t strong enough to indulge Carney’s ego

Posted: 15 Feb 2013 06:00 PM PST

It is an indicator of my age that Sade's Smooth Operator sprung to mind after watching the new Governor of the Bank of England — Canadian Mark Carney — perform last week. He was polished, slick and assured. So assured, in fact, he turned up 20 minutes late to meet the elected politicians of this country….

He's been compared to a rock star as well as the brilliant but flawed Don Draper from Mad Men and clearly, his handsomeness is somewhat unusual in the world of monetarists. However, I think I prefer my central bankers dull. He is making me nervous (and it's not his good looks). At the ECB, Jean-Claude Trichet was replaced by Mario Draghi. With his LTRO and his OMT and his "whatever it takes" speeches — action-man Draghi has "saved Europe". Mark Carney wants a bit of that reputation. And it's not just Europe. This is the age of an omnipotent central bankers (but sadly not omniscient).

Mark Carney was clearly a political appointee. The UK's Finance Minister George Osborne wanted his man. He was interviewed only five days after the initial approach by Osborne when the deadline for applications was passed. To stand any chance of re-election in 2015, the Conservative party desperately needs growth. The options for doing that with government cash are limited and so it's up to the Bank of England to do more. Clearly, Osborne thinks Carney is the man to do that.

In Japan, the brand new Prime Minister is clearly frustrated with the BOJ and has already forced a doubling of the inflation target. Now we await the brand new head of the Bank which is likely to be more of the political appointees than in the past.

The problem with these new political and populist central bankers is that the repercussions of their actions take many years to show. Short term they can be hailed as heroes and yet long term, only after they've left, do we know if that is justified. Alan Greenspan's once God-like status has long gone. And of course, central bankers have the power to impoverish or enrich generations.

Mark Carney spent thirteen years at Goldman Sachs and has only been a Canadian government official for just over eight years. He is more of an investment banker than a central banker. And we know of course that the former prioritizes short-term profits no matter what and the later obsess about long term inflation. The head of the ECB Mario Draghi is also Goldman alumni.We are now in the era of the investment banker central banker and that makes me worry (not surprisingly).

What Mark Carney does have is great market timing. He left investment banking just a few years before the financial crisis at the end of 2004. He also seems to be leaving Canada just as its property market is beginning to implode with painful consequences for Canadian banks (and potentially taxpayers). He is coming to the UK for just five years and not the more normal eight. He wants to make his mark and then go elsewhere. So given he seems to be rather good at picking his spots, maybe we all need to worry in five year’s time when he leaves….

Be under no illusion, Carney is coming to the UK to make his name. He will do whatever is required to get the UK economy past “escape velocity.” Many will cheer this approach at the end of the conservatism of Mervyn King. However, it will be years after Carney has left his five-year appointment, that we know if his expected-to-be-radical-actions saved the UK or destroyed it. And this is the wider problem with populist and political central bankers.

And so returning to Sade.

The lyrics remind me of many investment bankers I have known.

I just tweeted "Carney is an ex-GS investment banker and so will have a big ego, will want to make an impact and will leave before the s**t hits the fan". I have thought about this and wondered if it was unfair and then remembering all the meetings I've had with the species, concluded it is a fair assessment.

The problem is that "Heaven help him, when he falls" does not reflect the risks and rewards. The politicized central bankers will be long gone when their actions start destroying the people who they were supposed to protect. I want my central banker to worry about the wealth of my children's children.

ForexLive Americas wrap: US economy rebouding… or not

Posted: 15 Feb 2013 01:17 PM PST

  • Empire Fed +10 vs -2 exp
  • Wal-Mart warns of ‘disastrous’ Feb sales
  • US Jan industrial production -0.1% vs +0.2% exp
  • U Mich consumer sentiment 76.3 vs 74.8 exp
  • Canadian Dec manufacturing sales -3.1% vs -0.8% exp
  • G20 statement makes no mention of commitment not to target FX
  • Draghi: Market conditions have improved since summer
  • Bernanke: US economy is recovering
  • Pianalto says Fed could taper asset purchases by year end
  • Cyprus needs just over 16 billion euros – German press
  • Gold hits 5-month low below $1600
  • S&P 500 down 2 points to 1519, down 0.1% on week
  • GBP leads, NZD lags

The euro bottomed at the outset of US trading at 1.3305. Upbeat comments from Draghi helped a recovery to 1.3365.

USD/JPY surged higher on the Empire Fed, eventually jumping more than a cent. Bernanke talking about the recovery and Pianalto about tapering asset purchases added to the momentum. Technicals may have played a part as support from last Friday at 92.00/20 launched the move.

The commodity currencies lagged throughout US trading. The soft manufacturing number hurt CAD, sending USD/CAD to 1.0080 which once again proved to be solid resistance. Last 1.0067.

Gold hit stops on the drop below $1625. It fell as low as $1597 but has rebounded to $1608.

Have a great weekend and remember that Monday is a holiday in the US.

Futures traders cut euro longs in weekly CFTC data

Posted: 15 Feb 2013 12:41 PM PST

Weekly speculative futures positioning data from the CFTC Commitments of Traders report, collected at the close on Tuesday:

  • EUR net long 24K vs 38K last week
  • JPY net short 61K vs 68K last week
  • GBP net short 16K vs 1K net long last week
  • AUD net long 54K vs 81K prior
  • CAD net long 27K vs 28K last week
  • NZD net long 21K vs 23K last week

The speculative market has finally discovered the short GBP trade. Another thing that jumps out is the swift decline in AUD longs.

Carney warns of more housing ‘adjustments’

Posted: 15 Feb 2013 12:36 PM PST

Bank of Canada Governor Mark Carney was on Canadian TV warning about the cooling housing market.

“We've seen adjustment in the housing market, we think there's a bit more to come in the next few years. Again, I think Canadians have listened to the message and they are adjusting,” Carney told CTV.

Nothing earth-shattering there.

Stocks dropping on Wal-Mart emails

Posted: 15 Feb 2013 11:46 AM PST

The meteor seems to have passed safely past the earth but stocks are feeling some heat after Wal-Mart emails showed a drop in consumer spending.

Soundtrack for the meteor passing by earth

Posted: 15 Feb 2013 11:22 AM PST

It passes by any moment. We would have to call Bruce Willis if it were any closer.

Japan’s fin min told G20 agressive policies designed to end deflation

Posted: 15 Feb 2013 11:19 AM PST

Taro Aso is speaking in Moscow at the G20.

Wal-Mart warns of ‘disastrous’ Feb sales

Posted: 15 Feb 2013 11:04 AM PST

Bloomberg has obtained emails from Wal-Mart where an executive calls Feb sales a ‘total disaster’

"In case you haven't seen a sales report these days, February MTD sales are a total disaster," Jerry Murray, Wal-Mart's vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. "The worst start to a month I have seen in my ~7 years with the company."

Executives blame the weakness on the expiration of the payroll tax break and delayed tax returns.

This flies directly in the face of the recent commentary about improvement in the US economy. An unexpected Q1 slowdown in the US consumer would hurt CAD and could take the wind out of trades that benefit from less QE, like USD/JPY longs and gold shorts.

I would classify this as big news and it’s not getting much traction right now because it’s coming out late on a Friday afternoon. Wal-Mart probably has the best real-time data on the US economy.

Come for the meteor, stay for the Russian music

Posted: 15 Feb 2013 10:41 AM PST

Everyone in Russia has a dash cam. Here is some of the footage of today’s meteorite.

In about 40 minutes, at 1924 GMT, another huge asteroid will fly past earth.

If you skip ahead to about 30 seconds on this video, you hear the huge shockwave.

French fin min says G20 converging toward G7 on FX

Posted: 15 Feb 2013 10:37 AM PST

  • He declined to disclose details of the full G20 communique

Enough of the communique has now been leaked that it’s extremely unlikely to cause a stir once it arrives.

Warning signs pile up for gold bulls

Posted: 15 Feb 2013 10:12 AM PST

Some interesting tidbits from the WSJ.

George Soros sold more than half his gold holdings in Q4. They also note that a death cross on the gold chart is imminent.

Best trade this week: Short GBP/NZD

Posted: 15 Feb 2013 09:55 AM PST

This trade has rebounded today but it was down sharply the first four days of the week. The cumulative drop this week is 2.87% or a whopping 532 pips.

This pair hit an all-time low on Thursday and the weekly chart shows no reason to expect a change in momentum.


at 6:06 PM

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