Will the Hong Kong Dollar Peg Buckle Under Attack? Errrr, No

The high profile US Hedge Fund group Pershing LLP has recently launched an ‘attack’ (of sorts) on the HKD. Pershing has amassed significant call option positions on the HKD/USD, reasoning that the inflationary spillover from Bernanke’s ultra-loose monetary policy will not be tolerated by the monetary authorities. Pershing expects the Hong Kong Monetary Authority to […]

Bear Market Turning Points and Trading Volume

While bull markets end with a bang, bear markets end with a whimper. Investors looking for signs of a turning point might well consider trading volume as an indicator. Relatively low trading volume indicates a market is bottoming out. There is some science to this. Many years ago it was observed that volume growth was […]

How Low Can Long-Term US Interest Rates Go?

Reports that several Federal Reserve board members are contemplating ‘additional stimulus’ (whatever that means) prompts the question as to just how low the US 10yr yield can go? While the Fed can only effectively control the short rate, which is zero, long-term interest rates are mostly market determined. The 10yr yield is currently 1.78% – […]

Asian Reserves Accumulation: Yesterday’s Villians are Today’s Unwilling Saviours

After many years of criticising the build up of foreign reserves by Asian countries, who do the Europeans turn to for help bailing them out of their excessive spending and debt accumulation? The Asians of course!!! Guilt is the attack being taken by Europe (and the IMF) to try and secure cheap loans from Asian […]

Stark, the Suissie and the Yen

Today’s post has two parts: Jurgen Stark’s resignation Jurgen Stark officially resigned from the ECB for personal reasons. Stark had been a critic of ECB bond purchases from the troubled states of Greece, Ireland, Spain and Italy. His resignation on Friday prompted rumours that this could presage an imminent Greek default with financial markets falling […]

EU Market Turmoil Strengthens Peripheral Credits

Ironically, the market turmoil in the EU peripheral bond markets this week will have the effect of forcing Europe’s hand to speed up implementation of the 21 July bailout accord. While bond markets are falling to ‘crazied distressed levels’ (six month maturity Greek bonds now yield over 100% annualised), Central Bankers and Finance Ministers can […]

Tobin’s Trading Tax Raises Volatility!

Every financial crisis brings forth calls for a tax on financial transactions. Sarkozy and Merkel are backing the current push. The rationale for this is based on James Tobin’s argument that trading leads to volatility – therefore, a tax on trading should reduce turnover and in turn reduce volatility… Wrong! The counter to this argument […]

Presidents Hu and Sarkozy Take Tea

The gravity of the moment was no doubt lost on French President Sarkozy last Thursday when he was summoned to ‘stopover’ in Bejing to take tea with President Hu on his way to New Caledonia. China has close to USD 800B invested in European Government bonds, which effectively makes President Hu Europe’s private banker. Hu […]

S&P’s CEO is the First to Go … ‘Letter-Ratings’ Should Be Next

The war declared by the US and EU governments on the ratings agencies has drawn blood. Standard &Poor’s CEO, Dewen Sharma, was yesterday replaced and the business placed on a ‘strategic review’. This follows an 11% drop in the value of the parent company McGraw Hill since S&P downgraded the US Treasuries’ credit rating. The […]

Can Bernanke Commit for Two Years?

Charlie Plosser, the President of the Philly Fed, was my thesis adviser. He is a well-respected, thoughtful professor who does not seek attention. Imagine my surprise when he openly criticises Bernanke’s latest experiment announcing that the Fed will keep rates at zero for two years! But Charlie is right…his argument is that the US is […]