Australian dollar squeeze underway

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Macro Afternoon

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  1. A bit of market “poisoning” for the bears, hey Greg?

    But, yes, it’s all a turkey shoot.

    There are no markets anymore, just interventions.

    We play at our peril.

    • “There are no markets anymore, just interventions”

      And on equities as well. I only have one stock left, and every filing I read shows the massive buying/selling by US investment banks while the price has lost 35%, so it’s clear as substantial holders they are market maker who are happy to trade the volatility which they might just be part of stimulating.

  2. Yes the AUD sitaution is ridiculous, as with equities. At the moment, it seems they will go up regardless of the outcome. If things are bad that means more printing and everyone is happy. If things are good, then risk-on as the safe-have USD will be dumped. I guess only a total catastrophe that could offset the printing could bring things down.

  3. Surely the assumption that government authorities will sit by and do nothing in a time of crisis is faulty?

    QE3 is coming and the Euro is not going to collapse on the weekend, so the bears are just going to have to accept it

    • I think most bears understand that much. The market optimism however is severely misplaced. After all, if we assume that leaders will always do something, then shouldn’t German bonds be worthless as well? They will eventually become a basket case after their people allowed their government to annihilate them in the future.

    • I would have thought the most faulty argument Ben is assuming that government authorities WILL ALWAYS do something if X, Y or Z happens?

      Isn’t that part of Australian Hubris 101 class?

    • But isn’t QE3 an indication that QE2 and QE1 have failed?

      You will do well to drop the hubris and estimate the half-life of QE3’s feel good factor before the markets swoon yet again.

    • I’m convinced the G20 CB’s will do something like 2008 as it’s their role to stabalise the monetary system if Greece votes to leave the EZ, but that does not mean it fixes any of the fundamental problems, and eventually the EZ might be smaller still. Where is the growth/employment coming from for a start. Without political and fiscal union the EU is not going to a growth zone for quite a while IMO.

    • Here’s an email I just wrote to my mother in the US, in response to an article she sent regarding the Euro’s prospects. It seemed apropos…

      “Something” will happen this weekend. The Greek election is this weekend and could end up with their leaving the Euro. But this is the known issue, and may well be avoided (by either a scared population voting back in a pro-Euro government, or a stolen election like both of Bush2’s).

      The “something” may well be QE3 in the US and some form of super-ultra-mega bailout across Europe announcement. Neither of these would solve anything, just throw more money on the fire. But these may buy a few more weeks. Of course, the last super-ultra-mega bailout anouncement of $100 billion Euro for Spain lasted about 2 hours, with the down slide resumed in earnest within 6. So if 6 hours now costs $100 billion (after Spain, the cost has likely doubled again, so $200 billion for 6 HOURS)… how much for a few more weeks?

      Will the break happen this weekend? Possible, but I doubt it. The “break” will happen from somewhere on the periphery; somewhere no one is looking at. The “break” is always a “surprise”, and the Greek election is known. We may well see capital controls (they have already been talked about across the EU when Greece leaves), but the break will come not from Greece, not from Spain and probably not even from Italy (which is now in the headlines as being in trouble). It will come from Cyprus, or the former Eastern block countries, or Portugal, or France, or Germany, or China.

      In any case, we are now back firmly in the WaMu failure days of 2007; now is the time to get 2+ weeks of food in the house. Now is the time to get 6+ months of medications on hand. To get a number of small denomination bills out and at the ready. It’s the time to be aware, but not quite the time to be worried.

      Today, I spent some time moving most of the remaining cash out of ING both in the US and Australia. I also printed out our balances for later reference. It would be a good idea to do the same.

      I would venture to guess that despite the lust to make it to the presidential election, the wall will be hit for it (as it happened in 2008). We have already had the “little tremors” in MF Global, in Spain, in Greece. We will probably get another mid-range tremor before the big one hits. But who knows? More people are aware of what is going on this time around thanks to 2008, so the events may well be swifter then in 2008.

      • That’s the thing. You cannot assume things will happen the same as last time because people now expect what happened last time and will act differently to avoid the problems that they encountered last time.

      • OK, so what’s not priced in?

        Some guesses:

        China/Russia/others announce new gold/oil-backed currency and SWIFT system

        Risk assets don’t rally on next overt QE

        Fukushima total melt down

        US invades Syria and Russia doesn’t stand by idly

    • Load of old cobblers MacroBear, I’ve been long AUD since the pascometer waffled on it on the 1st of June. And, lonf GBPJPY from 120.

      Its a bear market rally and worth trading.

      I’m still bearish on the globe. Expect massive deleveraging and a deflationary spiral.

      Go ‘risk on’ (for a few hours more).

      Sucks having to get up at 5 tomorrow to tweak stops etc (Greek insurance).

  4. MsSolarFelineAU

    And, I’ve been rabbitting on about “au & ag” and the vege patch for a while now…. (Mebbe ’cause I’m a girl??)

    QE3 = au goes off like a stung cat. It also means inflation, and savers like my old duck are slaughtered.