The Credit Crisis Financial Stocks Short Journal

Jim Grant better be right GDP growth is about to soar in a creditless society, otherwise he will be the one joinning the soup line
http://www.economist.com/blogs/freeexchange/2009/10/third_quarter_growth_not_nearl.cfm

"And he notes that 3.5% growth has historically meant only a slow decline in unemployment. To get to the point where the unemployment rate is falling by a percentage point per year, the economy needs to expand at a near 6% pace over the course of twelve months."
 
Quote from Daal:

Who is lending so risk assets can be bought?I believe that theory is wrong
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I agree that Roubini is wrong with the lending aspect, but the point is still valid. You don't necessarily need insane amounts of PB leverage for this to make sense.

I would be surprised if not only foreigners use the Dollar as the short half for their currency pairs, a lot of US owned capital is probably also seeking higher yields outside of the US. At some point these people will buy back their USD dollars and sell their AUD/ZAR/BRE/NZD/etc. Leverage can enhance yield, but at 0.25% it is certainly not necessary to convince many that higher yield is "better". AUD pays 3.25% yield, USD 0.25%. Add in a dollar downtrend and suddenly "investors" (speculators) can make 8-9% on their cash capital annualized rather than 0.25%. Of course, this entire thing blows up should the currencies reverse and suddenly those yield gains get crushed by losses in the currencies.

During the early 1990s, the currency movements in the JPY were quite interesting. There was a sharp drop followed by a sharp rally (as capital was repatriated), similar to the Dollar rally in 2008. Here's an article with charts (unfortunately only in Google cache) dated August 2009:

http://209.85.229.132/search?q=cach....htm+yen+fractal+safehaven&cd=1&hl=en&ct=clnk
 
Quote from makloda:

I agree that Roubini is wrong with the lending aspect, but the point is still valid. You don't necessarily need insane amounts of PB leverage for this to make sense.

I would be surprised if not only foreigners use the Dollar as the short half for their currency pairs, a lot of US owned capital is probably also seeking higher yields outside of the US. At some point these people will buy back their USD dollars and sell their AUD/ZAR/BRE/NZD/etc. Leverage can enhance yield, but at 0.25% it is certainly not necessary to convince many that higher yield is "better". AUD pays 3.25% yield, USD 0.25%. Add in a dollar downtrend and suddenly "investors" (speculators) can make 8-9% on their cash capital annualized rather than 0.25%. Of course, this entire thing blows up should the currencies reverse and suddenly those yield gains get crushed by losses in the currencies.

During the early 1990s, the currency movements in the JPY were quite interesting. There was a sharp drop followed by a sharp rally (as capital was repatriated), similar to the Dollar rally in 2008. Here's an article with charts (unfortunately only in Google cache) dated August 2009:

http://209.85.229.132/search?q=cach....htm+yen+fractal+safehaven&cd=1&hl=en&ct=clnk
More...

If thats your opinion then there is no disagreement. I accept that there is a certain market positioning in terms of carry trade taking the high yielders higher than otherwise due all the risk appetite revival. That was not the result of injected liquidity but simply of the correlations and herd mentality that everything was ok therefore tried to pick the yield, raising the equilibrium price of the high yielders

I also have a beef with the "if the USD rallies watch out", the FX value of the dollar is simply not that big deal in terms of macro outlook, the US economy is far more important, therefore if a USD rally 'leads' a decline in risk assets that will be simply a function of large money players using the current market correlations to initate large bearish positions in US equities(and the economy) through currency pairs due smaller liquidity in US equity futures, specially outside regular trading hours
 
Matter of fact if you think about it a rising USD should mean higher risk asset prices, a higher USD leads to a bigger US current account deficit which boosts global exports ex-US

I'm of the belief that the US stock market and the US economy is the global leader of everything and other asset classes are always looking at it for guidance. But sometimes the market can fool people, hedge funds using the USD to short or go long US equities can be one instance of that
 
For a decade or longer, many never believed the yen carry trade was occurring either. Yet it was occurring, just as the dollar carry is occurring now. As the man in Jurassic Park said, "Life will find a way"
 
The candlestick section of Education of a Speculator pg 390 is very good. I always found it amusing how the candlestick gurus just said "just believe on it, this is a long-japanese tradition, it works", yet almost never there is evidence presented showing it works. Even if there is, if you test in 50 markets you will invariably find one where it works better by randomness alone.

No wonder Steve Nison makes a living off speeches and seminars
 
Here's another VN argument against TF. There is simply no way to know that TF works by 'experience' or through 'gut feeling' because a randomly generated price chart produces the same kinds of trends that the market does
randomwalk01.gif


In other words, the folks who watch market action and see trends continuing will have the TF works reinforced in their mind. They will also likely to ignore when it doesnt, in the end they are being fooled by randomness
 
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