Posts by "stationdealer"

Treasuries could be forming an interim top; if 30-yr bonds and 10-yr notes fail to make a new high this week aggressive traders could get short with stops above the recent highs. As it stands now clients are buying dips in the Loonie and have short exposure in the Swissie.


As of this post August is running into resistance at the 50% Fibonacci retracement at $74.50 on oil. On higher trade tomorrow we will have some bullish suggestions, if this serves to be an interim bottom we should see a fairly swift $3-5 move north from here. With out a dramatic fundamental shift or significant hurricane activity we expect to see a $70-80 range in the coming weeks. Natural gas gave up 1.64% today failing to get thru the trend line that has capped rallies the last four sessions. Remain long futures as long $4.50 supports in August. We prefer purchasing October 50 cent call spreads. Indices are higher by 3% as of this post and though we initial I know I said I would be a seller in the S&P at current levels but I pulled orders back thinking we could be a seller at higher levels. A 38.2% Fibonacci retracement is in the books with the September S&P trading above 1154. A 50% carries prices to 1066 and 61.8% would lift us to 1078. Now the market has our attention but after reading various newsletters and talking to some seasoned traders I would not rule out a sale above 1100 in the coming weeks..stay tuned....

Roger! Dodger!

Ashraf I liked those comments allot, I previously posted a question to you prior to world cup about stock valuation vs commodities and FX. I will look it up to ask you again, but I want to know more about Jpan and the state of Yen.

Plus I do agree CHFYEn pair positively will maintain its course and Swissie being considered as safe haven which it's been for a very long time vs the stocks. But the Yen story, what I am still unsure about really, is this what you would consider as Yen weakness or strength, in light of Japanese economy.

Now I've long being a student of plight of Japan's economic deflation and I realise some individuals in Japan express satisfaction with deflation, since they have seen falling prices for goods and services while their own incomes have held up. That is undoubtedly the case for someespecially academics and government officials with secure jobs and no pay cuts.

In Japan, blame for deflation is often placed on cheap imports from China. However, those imports are only 10 percent of total imports, and total imports are only 10 of GDP. Therefore, imports into Japan represent no more than one percent of GDP. The decline in prices is much too widespread to be accounted for by the impact of rising imports from China.

Deflation makes fixed debt harder to repay out of shrinking revenue or income. The corporate sector entered this period of deflation with excess capacity, low profit rates, and high debt levels, implying that even modest deflation could put them in trouble.

Nevertheless, the ratio of debt to GDP cannot rise indefinitely, which leaves economists wondering when and how the government can reduce its annual deficits. Doing so is dependent on recovery in the economy, which has yet to materialize. Economic recovery would also include a return of low but positive inflation rates, which will help erode the ratio of debt to GDP.

Since nominal interest rates cannot be forced much lower, conventional monetary policy (meaning policy focused on manipulation of interest rates) has reached its limit. This has led to a consideration of unconventional monetary policy

Deflation, even if mild, is proving stubbornly persistent, and has exacerbated the ability of debtors to repay their debts. Households initially liked the idea of falling prices, but they are experiencing falling incomes that offset the gains. Banks still have huge non-performing loans, and more loans continue to go sour. The government fiscal debt is not a problem now, but it is rapidly moving to levels never before seen in advanced industrial nations.

Meanwhile, the policies followed by the Japanese government over the past decade to rectify these problems have not inspired much confidence among economists. The government, for example, has moved forward with policies to deal with non-performing loans, beginning with the jusen crisis in 1995, but the piecemeal process has not been very aggressive given the large amount of non-performing loans still on the books as well as the incomplete resolution of many of the loans listed as written off. As a result, many economists believe that a financial crisis is a real possibility


My question being, in the longer run, can a fiscal crisis be possibility, if when bond markets finally balk at absorbing large volumes of new issues of bonds at low interest rates. The high level of private sector savings has enabled the financing of bond issues so far, but is there fiscal crisis is conceivable now or again in another decade. Since the government can print money, there is no risk of outright default on government debt, right?. But are there any worrying signs for investors that the very high level of debt will lead to inflation, at which point they will stop purchasing more bonds unless interest rates are moved higher. If that were to happen, then would the government be forced to monetize its debt, bringing about the inflation that the market feared and maybe for once continue raising rates. As was the case in the late 1940s, the level of inflation could be very high, with all the detrimental economic consequences that entails (such as wiping out the value of savings accounts).

http://www.zerohedge.com/article/china-promises-not-use-nuclear-option-buy-gold-dump-us-assets?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero)

Reuters:

"Any increase or decrease in our holdings of U.S. Treasuries is a normal investment operation," SAFE, the arm of the central bank that manages China's official currency reserves, said.

It said it constantly adjusts its portfolio to maximize returns, and any changes to its U.S. Treasury portfolio should be seen in that light and not interpreted politically.

"The U.S. Treasury market is the world's largest government bond market, and U.S. Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs.

"The U.S. Treasury market is a very important market for China," the agency said.

China held $900.2 billion in U.S. Treasuries at the end of April, according to U.S. Treasury data released on June 15.

Bankers say China's total holdings of dollar-denominated assets are much greater, accounting for perhaps two-thirds of its reserves.

"We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.

SAFE is an easy target for domestic critics who question why China has amassed a mountain of reserves instead of investing more at home. The elucidations on its website appear primarily aimed at disarming those critics.

"SAFE will never be a speculator. It mainly seeks to protect the safety of China's FX reserves and ensure a stable investment return," it said.

The agency said it was a financial investor and did not seek management control when it made equity investments.
SAFE also gave a qualified vote of confidence to the dollar.

The agency acknowledged that financial markets were very concerned at one point that massive U.S. government borrowing would drive the U.S. currency lower.

But it said economic conditions elsewhere were also a factor in determining the dollar's trend. The euro zone, for instance, was struggling with high government debt levels.

"We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.

One of the prime concerns of Chinese Internet commentators is that a long-term decline in the dollar or euro will erode the value of SAFE's portfolio.

To that end, SAFE called on the United States and other major countries to take "responsible measures" to maintain the value of their currencies. This meant withdrawing monetary stimulus in a reasonable manner and relying less on deficit spending.

Speaking of Chinese equity investments, whatever happened to those demands for extra funding after Chinese investments in US equities had suffered a dramatic loss in the past few months, and someone somewhere over in Beijing was scrambling to prevent a court martial. Surely, this is yet another indication of just how much China "trusts" the US.

EIA Oil Demand Oulk Unchnged;To Track Global Econ Grwth-2
WASHINGTON (MNI) The following is the first part of excerpts from
the Energy Information Administrations July Short-Term Energy Outlook
published Wednesday:
U.S. Petroleum Product Prices.
Projected regular-grade gasoline retail prices rise from an average
$2.35 per gallon in 2009 to an average $2.77 per gallon in 2010 and
$2.90 per gallon in 2011. Forecast regular-grade pump prices average
$2.80 per gallon this summer, an increase of 36 cents from the previous
summer. On-highway diesel fuel retail prices, which averaged $2.46 per
gallon in 2009, average $2.98 per gallon in 2010 and $3.13 in 2011 in
this forecast.
Natural Gas
U.S. Natural Gas Consumption.
EIA projects total natural gas consumption will average 64.7
billion cubic feet per day (Bcf/d) and 64.8 Bcf/d in 2010 and 2011,
respectively. Estimated year-over-year consumption growth averaged 2.8
Bcf/d (4.3 percent) in the first half of 2010, with significant
increases in the electric power and industrial sectors. This growth is
expected to continue at a slower pace in the second half of the year
with an increase of 1.5 Bcf/d (2.6 percent). EIAs projected
natural-gas-weighted industrial production index (a measure of
industrial activity in natural-gas-intensive industries) increases by
7.5 percent in 2010, leading to a 1.0 Bcf/d (5.9-percent) increase in
natural gas consumption in the industrial sector.
Projected natural gas consumption is virtually flat in 2011. The
projected 2.7 percent increase in the natural-gas-weighted industrial
production index and NOAA forecast of slightly colder weather next year
(1.4 percent increase in heating degree-days) contribute to consumption
growth in the residential, commercial, and industrial sectors in 2011.
However, this growth is offset by a decline in natural gas consumption
in the electric power sector because of the forecast increase in natural
gas prices relative to coal prices next year.
U.S. Natural Gas Production and Imports.
EIA expects total marketed natural gas production of 61.3 Bcf/d in
2010, an increase of 1.3 Bcf/d over 2009 levels. EIA projects a
continuing decline in Gulf of Mexico production, which is offset by
gains in onshore production. Forecast marketed production declines by
0.4 Bcf/d to 60.9 Bcf/d in 2011.
Federal Gulf of Mexico natural gas production falls by about 10
percent in both 2010 and 2011 as a result of hurricane outages, the
announced offshore drilling moratorium, and the decline in active
drilling rigs over the last 4 years. The estimated median outcome for
hurricane outages from June through November is a cumulative 166 Bcf
this year, compared with 19 Bcf in 2009. The offshore drilling
moratorium is projected to reduce Gulf of Mexico production by an
average of 0.05 Bcf/d for the last 6 months of 2010 and 0.25 Bcf/d for
2011.
Projected lower-48 onshore production increases by 2 Bcf/d (3.8
percent) in 2010 and 0.2 Bcf/d (0.3 percent) in 2011. According to
Baker-Hughes, natural gas rig counts have climbed from under 670 in July
2009 to about 950 in April this year and have remained relatively stable
since then.
Forecasted imports of liquefied natural gas (LNG) average 1.37
Bcf/d in 2010, a downward revision of about 0.14 Bcf/d from last month.
Projected imports increase to 1.52 Bcf/d in 2011. While imports are
expected to grow, higher prices in European and Asian markets will
likely divert LNG cargoes from the United States. EIA also forecasts
gross pipeline imports of 8.8 Bcf/d in 2010, a decrease of about 2.9
percent from 2009. EIA expects gross pipeline imports of 8.2 Bcf/d in
2011.
U.S. Natural Gas Inventories.
On June 25, 2010, working natural gas in storage was 2,684 Bcf.
This is 27 Bcf below last years level and 287 Bcf higher than the
5-year (2005-2009) average. EIA expects working gas inventories this
year to remain very near last years levels, reaching 3,810 Bcf at the
end of October 2010.
U.S. Natural Gas Prices.
The Henry Hub spot price averaged $4.80 per MMBtu in June, $0.66
per MMBtu higher than the average spot price in May. The forecast price
for the second half of 2010 averages $4.68 per MM Btu, $0.32 per MMBtu
higher than last months Outlook. The risk of hurricane outages and the
projected reduction in drilling activity combine to strengthen prices
through the year. A small decline in U.S. production alongside increased
consumption leads to higher prices in 2011; the projected Henry Hub
spot price averages $5.17 per MMBtu.
Uncertainty over future natural gas prices is lower this year
compared with last year at this time. Natural gas futures for September
2010 delivery for the 5-day period ending July 1 averaged $4.77 per
MMBtu, and the average implied volatility over the same period was 53
percent. This produced lower and upper