Archive for category Uncategorized
Pimco Talks About US Treasuries: Yields Are Going Up
Posted by blodmell in Uncategorized on March 21st, 2011
Will Japan buy fewer US Treasuries?
beyondbrics reader: Will the Japanese disaster be an important factor for Treasuries? Will it result in less demand from Japan?
A great question, that speaks directly to how Japan will fund its reconstruction program.
After the required focus on human rescue operations and the stabilization of the nuclear reactors, the attention of the Japanese authorities will shift to a massive reconstruction programme to offset the impact of the terrible earthquake and devastating tsunami. The funding can come from three major sources: borrowing, debt monetisation, and the repatriation of the considerable Japanese investments held abroad.
The impact on US Treasuries will depend on the exact mix of these three. The larger the repatriation, the greater the upward pressures on US treasury yields (and, also, the implications for some other assets classes).
As regards demand, yes there will be a reduction in the Japanese component as the country’s current account surplus will fall significantly. Since global balances need to add up, the reduction in Japan’s surplus will be accompanied by a higher surplus/lower deficit in other countries. The net impact is what counts for US Treasuries.
Note that, according to the data issued by the US government, we have had periods in which Japan has been a net seller of Treasuries. The impact was offset by purchases by other countries, most notably China, with similar asset preferences for Treasuries.
Based on all this, and in considering the level and composition of the various marginal propensities to save that are in play, we are inclined to the view that this demand effect would be also place upward pressures on the existing level of US Treasuries yields.
Japan Worries Will Continue To Depress Prices Until the Crisis Is Resolved
Posted by blodmell in Uncategorized on March 16th, 2011
We had a lot of limit orders tick off these days and I am very comfortable about it. Build positions and lower the average price per share. I think the crisis will pass and the Japanese and global economy will absorb the shock but it sure is nerve racking process. Hold the line.
They Should Get Control Of The N Reactors In Japan. Markets Should Rise As A Result
Posted by blodmell in Uncategorized on March 15th, 2011
As nerve racking as these kind of crisis are….we have to keep our discipline and use them as buying opportunities, or simply stay cool. No pun intended.
For Tokyo Electric Power Co.’s stricken nuclear reactors to release catastrophic amounts of radioactive material into the atmosphere, a rare chain of events needs to happen.
Averting a full-scale meltdown — which scientists say isn’t likely — depends on cooling the uranium-containing rods at Fukushima Dai-Ichi’s Reactor No. 2, said S.K. Malhotra, a scientist at India’s Department of Atomic Energy in Mumbai. A worst-case outcome may occur if overheating in the reactor culminates in the rupture of the steel lining protecting radioactive material.
“In the worst scenario, an explosion could occur inside the steel pressure vessel, fuel bundles melt down and the radioactivity is exposed,” Malhotra said in a phone interview. “I would say there is a 10 percent probability still.”
A 10% probability is still uncomfortable.
The Japanese Nuclear Plant Is The Quintessential “Black Swan”
Posted by blodmell in Uncategorized on March 15th, 2011
Watching closely.
The Economist Magazine Believes The Euro’s Future Is Simply In Merkel’s Hand
Posted by blodmell in Uncategorized on March 11th, 2011
Here is the least two paragraphs of their leader:
In her memoirs, Mrs Merkel might well say that Mr Cameron was to blame if it came to this. But she would have helped. In the past she resisted the idea of regular euro-zone summits precisely so as to ensure that the British, Poles and Swedes had seats at the table. By giving way now, she may soothe her voters’ current anxieties about the euro, but the future price could be large. If the euro zone moves to greater fiscal and economic-policy harmonisation, it may make the entire club less congenial to liberals—and less appealing even to those in Britain (including Mr Cameron) who want to stay in.
The European project has long had at its heart a tension between an economic liberalism that favours openness to the world and an economic nationalism that prefers a fortress. The Economist has always been on the first side of that argument; so, usually, has Mrs Merkel. As Europe’s most powerful politician, she should make clear that this week’s euro-only meeting is a one-off emergency summit rather than the start of something much more permanent—and more damaging.
We Build On Positions When There Is Crisis Driven Volatility
Posted by blodmell in Uncategorized on March 11th, 2011
Again, I know it is frustrating to watch our market gains slip away. We watched 60% gains in Geely Auto literally disappear in the last 2 months. But that doesn’t change our long term story. Geely is a winning long term story. Period. This is why we must stay the course. Brazilian Banks are being beaten up on rate hikes but it doesn’t change their long term story. We have cash and must use it when our prices are down. Build positions and lower average price per share on our great assets. That is mantra!
Here is JP Morgan’s comments on Brazil rate hikes:
All in all, we maintain our interest rate and exchange rate forecasts unchanged but consider the risk of fewer hikes in the pipeline greater than that of more tightening. This could translate into 50bp and 25bp hikes at the next meetings. The result should be some negative short-term pressure on the BRL (not likely to break below 1.65 to the dollar) and a steeper yield curve out to 2 years, with ST yields likely to compress further as the market is still expecting 120bp of tightening in 2011. The curve inverted after 2yr also reflects expectations for moderate rate cuts from next year on.
Easing Global Tensions, US Jobs Data and Markets Bounce Back
Posted by blodmell in Uncategorized on March 4th, 2011
, but it shows we are still living in volatility. Volatility is here to stay. I often joke that these darn markets are going to force us all to become traders, not investors. I noticed Dang E commerce bounced up 10% yesterday. One day. 10%? Akbank bounced up 5.15% I thought banking was boring?
Another Ugly Day In The Markets, Oil In the News and Turkey Is Oversold
Posted by blodmell in Uncategorized on March 2nd, 2011
Our clients are battle hardened veterans of volatility already, so this is nothing new. I suspected 2011 wouldn’t be dramaless but gee whiz? Akbank, the Turkish financial giant is simply oversold and I’ll be encouraging many to build on positions. The holders of Turkey ETF’s should also be buying. Turkey’s long term growth story is still intact. Don’t allow the Arab revolts to frighten you about Turkey.
The Economist Magazine’s Profile On “Feeding The World” Has An Optimistic Conclusion
Posted by blodmell in Emerging Markets, Uncategorized on February 26th, 2011
Feeding 9 billion people in our lifetime is the challenge. I’ve been reading a lot of pessimistic reviews about the coming “food crisis”. It’s interesting the usually grim economist came to this conclusion, “There are plenty of reasons to worry about food: uncertain politics, volatile prices, hunger amid plenty. Yet when all is said and done, the world is at the start of a new agricultural revolution that could, for the first time ever, feed all mankind adequately. The genomes of most major crops have been sequenced and the benefits of that are starting to appear. Countries from Brazil to Vietnam have shown that, given the right technology, sensible policies and a bit of luck, they can transform themselves from basket cases to bread baskets. That, surely, is cause for optimism.”
Brasil truly is an example for the world. Brasil Foods has been a big benificiary.
http://www.economist.com/node/18200642?story_id=18200642&CFID=157283308&CFTOKEN=43958148
www.crinvestmentadvisors.com
Colombia Of All Places Is Raising Rates. That’s A Signal About Regional Growth
Posted by blodmell in Uncategorized on February 25th, 2011
I think Latin America is poised for long term growth. Colombia has been an exciting story but it’s now concerned about heated domestic demand. Just imagine?
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