The Credit Crisis Financial Stocks Short Journal

Assange on the rape charges
"Q: No. It is happening because a couple of women have alleged that you seriously assaulted them, sexually assaulted them.
JA: No. One of the witnesses. One of the friends of one of those women, she says that one of the women states that she was bamboozled into this by police and others. These women may be victims in this process."

This is truly sickening
http://news.bbc.co.uk/today/hi/today/newsid_9309000/9309320.stm
 
eurchf to below 1.30 & all time low, eurjpy falliing close to all time low, chinese tightening ...

Also noticed marked fall in asking prices for luxury goods.

credit squeeze back with a force, at least for chf and jpy borrowers, plenty of these i believe. Stock market no reaction yet.

if one gets 10+ % yield in europe, this will surely force yields up globally and squeeze indebted nations and people.

Yield inflation coming in my opinion Any excuse will be good enough to increase lending rate for couple points. Similar story to OIL to 150.

I will materialize my view with some positions in currncies and maybe IR.

Daal, what is your view?
 
Quote from macroman:

eurchf to below 1.30 & all time low, eurjpy falliing close to all time low, chinese tightening ...

Also noticed marked fall in asking prices for luxury goods.

credit squeeze back with a force, at least for chf and jpy borrowers, plenty of these i believe. Stock market no reaction yet.

if one gets 10+ % yield in europe, this will surely force yields up globally and squeeze indebted nations and people.

Yield inflation coming in my opinion Any excuse will be good enough to increase lending rate for couple points. Similar story to OIL to 150.

I will materialize my view with some positions in currncies and maybe IR.

Daal, what is your view?
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Not quite sure I understand you. I'm short EUR against USD, JPY and CHF, playing that EU crisis that way
 
sorry, was thinking too quick.

take example of borrower pre '08 borrowing CHF fixed 30 years at 3%, interest only. EURCHF rate around 1.65. Idea was to avoid EUR (or some other ccy) higher borrowing rates 5+%.

Roll forward to today. EURCHF rate is 1.25. Swelling borrower's amount of CHF to pay back for 32% and also interest only payments.

Increase in value of CHF to compensate for low yield. As EURCHF trend is clearly down.

Equivalent yield of variable loan with removed FX component would be 3.96% = 3% * 1.32. Increase for 1%.

Even more deadly was borrowing in YEN.

Efffectively CHF increasing is same as interest rate increasing for borrowers.

Therefore decreasing quality of loans and banks and countries that guarantee deposits. Therefore giving lenders excuse to charge more to loan money.

My speculation is that increasing loan rates will become new trend. Longerterm. Regardless of damage. will not necessary happen but it is hightened probability and will reshuffle portfolio to benefit if that scenario unfolds.

This is opposite to popular belief that cash on sidelines will jump into markets and save indebted.

Evidence of that can be seen with some luxury items sharply discounted to sell quick in last couple of months.

Must be good reason for that as noone wants to sell loving item for 50% discount
 
Quote from Daal:


The Federal Reserve is buying Treasury securities in order to lower interest rates, which in turn helps people buy houses and cars and promotes investment by firms. That leads to a stronger economy. These policies are not leading to increases in the amount of currency in circulation.
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If this is true, then surely it is a moral outrage for the world's central banks not to keep interest rates permanently at 0% across the yield curve? Why give up on the massively stronger economy, private investment, and purchases of houses and cars that would ensue?

It is rather worrying that the Fed Chairman thinks that buying a house leads to a stronger economy.
 
Quote from Ghost of Cutten:

If this is true, then surely it is a moral outrage for the world's central banks not to keep interest rates permanently at 0% across the yield curve? Why give up on the massively stronger economy, private investment, and purchases of houses and cars that would ensue?

It is rather worrying that the Fed Chairman thinks that buying a house leads to a stronger economy.
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not all debt can be controlled by central banks. If you live in EU and borrow CHF, EURCHF will set your 'rate' and as we see they are rising with extra problem that one has to swallow 32% loss on closing position, so cant even go off the hook ! Same issue if banks depend on foreign borrowing like here in AU.

I do not believe that central banks will print themselves out of power. It was too hard to get to that position. To give all that up for some overstretched borrowers, rght ! :D :D
 
qe1 ,2 3, ...is about printing enuf dough to buy back bonds sold to borrow money from china and smaller buyers,taking out our biggest risk of a run on U S global debt... not wiping out the ponzi scheme that our economy is imminently robust and one should never question/doubt the safety of investing here
 
One interesting thing I learned from the Shiller book 'animal spirits' is that the labor markets are different from other markets. I used to be quite domatic with regards to things like the minimum wage, 'if it was good to raise $1 per hour, why not raise $100 per hour and make everyone rich?' I thought. I now realize there IS a argument why raising it a little bit might actually be good for the economy and raise employment(thats right)

Shiller explains that role that 'fairness' play in labor markets, if employees don't feel like they are being treated fairly they just wont work as hard and this will hurt the employer, they tend to be aware of this(Which leads them to overpay employees, creating unemployment, thus the UR doesn't reach 0%). This is also why that wages tend to be 'sticky', employees tend to feel that wage cuts are 'unfair' even if that makes no rational sense(because deflation in consumer goods might be bigger than the cut)and can hurt the macro picture('Money illusion' is playing a role here, another point raised by Shiller)

So raising the minimum wage in some situations can help if the employees are feeling like they are being uncompensated for their work because the employer failed to adjust to a 'fair' wage level. This also might lead to more work because some people might just not be willing to be working under 'unfair' conditions but with a rise in the minimum wage be willing to. Indeed there is some empirical US evidence of rises in the minimum wage leading to more employment

This is not to say that raising the MW is the road to prosperity but it simply shows that issues are a bit more complex that bumper sticker libertarian advice would lead one to believe
 
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