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Showing posts from January, 2015

Crisis, fear and crying wolf

So looking at US news coverage Sunday and Monday left the impression that NY is entering a new ice age, when in fact they got a whole 12cm of snow.  Granted 12cm of snow for us Canadian is nothing much, but that the winds made things interesting at JFK, still one days Newyorkers are going to get fed up of all this "fear mongering" in the media (I hope).

I mean really, the whole thing was so overblown it demonstrates the limitations of 24/7 news coverage; Each station outbidding its ability to exaggerate the situation... one day a real bad storm will occur and then people will die, because once too many time the end of the world has been predicted.

Does anyone remember in 2004 and 2008 election cycles, the "red alert" for terroriste activity was going up almost every other day.  until at one point no one paid attention.  Especially once it was revealed that the one "red alert" had been declared based on two year old evidence.  Clear evidence that the &qu…

Ok Greece now what?

A new prime minister has been sworn in as of this morning, his #1 goal is to negotiate new terms with ECB and all its creditors.  As of now, Greece outstanding foreign debt is around Euro 250 320 billion. which was a problem when the country was doing OK, but has become a bit of joke for a country that has seen its GDP shrink by nearly 33% over the past 7 years.

Greece is a shadow of its former self -- when money was free, and credit was available, they were able to spend nearly Euro 15 billion on olympic installation that were shut down the day after the olympics.  Now that's "olympic" spending.

To say that the Greece were profligate would be an understatement, but when you are spending other people's money...who cares.  Now, and this is an old saying: when you owe the bank $100 you have a problem, when you owe the bank $1 million, they have a problem.  Guess what, the ECB and all of Greece's creditors have a problem.  Over the past 4 years, European banks have…

Bad Bad news for Canada -- Surprise rate drop to 0.75%

Well that's a shocker, the Bank of Canada just decided to cut interest rates by 0.25% to 0.75% -- until recently, the BoC was talking of rate hikes.  Needless to say that the CAD took a bath this morning, its down to 0.80c to the USD.

The issue is that oil is a massive component of Canada GDP, inflation is about to get crushed into negative territory and Canada's housing bubble is about to hit home in a most unpleasant fashion.  Talking to banker friends they are very concerned, 14,000 jobs were lost last week, mostly in the oil patch, mostly high paying jobs, and mostly with guys who will be unable to recycle their skills (at the same salary).  Alberta, Saskatchewan and Vancouver are about to get hit with difficult housing markets.  On top of all that fun, the crackdown on Chinese fraud may hit the Canadian housing market -- Canada was/is a favorite destination for mainland Chinese looking for a bolthole -- demand for these high priced properties may be coming to a screechin…

Negative Interest Rates

Unless you live under a rock, you will have noticed that last Thursday the Swiss central bank decided to remove the Euro peg.  The shock was massive in the F/X complex, especially the retail side that got "wacked" for using massive amount of leverage -- the end result several F/X brokers have gone bust (and at least one hedge fund).  The fact that the Swiss said, until the very last minute, that they would support the peg is normal;  the Bank of England did the same until two hours before it exited the Euro (Ok this goes back a few years -- decade maybe).  Bottom line the Swiss gave up when the could no longer afford the strain.

Little noticed by the punters at large is that the Swiss also reduced interest rates on deposits to -0.75% (yes Dorothy, NEGATIVE).  The is first mover advantage didn't last long already by the end of Monday (Europe time -- America is closed today) several other central banks had made the same change.  This is the rate the central bank charges th…

$48.20!

Never mind $55, oil prices are now down to $48/bbl which is the lowest it has been in nearly 13 years (ok in 2009 it also dropped to these levels).  looking at the press its hard to figure out what is going on, some say its the Saudi trying to either screw with Tar sands and fracking or playing political games with Iran others are saying its the collapse of the global GDP and others are saying that that its the Russians.

Others again say its a massive conspiracy by the banks and the futures markets...

One thing for sure, no one knows for sure, there is no doubt that Saudi have increased production, but did they do it to increase revenues or lower prices?  There are massive financial forces at play int he oil complex, but these are rarely long dated, and oil prices have been dropping for some months -- a trader that goes against the prevailing winds usually ends up jobless -- his positions get cut by risk management.

The most likely scenario is a global slowdown -- in fact what is stra…