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Archive for the ‘Global Finance’ Category

Dollar Carry Trade ‘Still’ Drives Global Equity Markets

Posted by Larry Doyle on November 9th, 2009 3:10 PM |

Has anything truly changed in our economy or markets over the last two months? Market analysts would attempt to gain credibility by overanalyzing each and every piece of data that comes along, but the very simple fact is that little has truly changed since I wrote “Dollar Carry Trade Drives Global Equity Markets” on September 16, 2009.

With the equity markets making new highs for the year, I am not so foolish as to ‘fight the Fed’ or ‘fight the tape’ while fully appreciating that the foundation of our markets and economy remain extremely fragile. In that spirit, what is driving the market ever higher? I resubmit my post mentioned above:

All aboard!!

As the U.S. Dollar Index makes new lows, equities make new highs and the momentum continues. Where is the ‘juice’ coming from? Is this cash that had previously exited the market now reentering? Is this people who had gone short now being forced to cover? Is this ‘new’ money finding value? Is this a pickup in short term day trading? The answer to all of these questions is yes, albeit to varying degrees. However, the most widely held belief for the rally in the market is the dollar ‘carry trade.’

I highlighted this trade last week in my September 12: Month to Date Review of the Markets. On that day, I wrote about the U.S. dollar: (more…)

Mum’s the Word

Posted by Larry Doyle on April 10th, 2009 12:40 PM |

shhhhThe movie Goodfellas provides a wealth of material for comparative analysis of the markets. The “insider activity,” the “fooling around,” “the payoffs,” and “the gambling” all make for great drama on the screen. Truth be told, one does not have to look all that hard to find striking similarities to certain activities in the world of Wall Street, and for that matter, Washington.

One of my favorite scenes in the movie occurs after the boys make the big heist. Immediately, the word is put out to keep your mouths shut and no indications of newfound wealth.

Back to reality. In terms of “putting the fix” into the world of our major money center banks, isn’t the relaxation of the mark-to- market the “newfound wealth”? Isn’t the “keep your mouths shut” the equivalent of the Treasury telling the banks not to comment on results of the Bank Stress Test? Speaking of the Bank Stress Tests, Bloomberg reports:

The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.

Clearly the Fed and Treasury are trying to keep their “boys” quiet and lay low while the real regulators of the market, that being honest investors, are walking the beat.

If any of the boys talk, then the leaders of the family won’t be able to coordinate the stories and hoodwink the public.

Whatever happened to, “as long as you tell the truth, you don’t have to worry about having a bad memory”?

It seems we are operating much more in the realm of, “well, I can tell you but . . . ”

The Goodfellas: Henry Hill, Jimmy Conway, Paul Cicero, and Tommy DeVito

The Goodfellas: Henry Hill, Jimmy Conway, Paul Cicero, and Tommy DeVito

Henry . . . Jimmy . . . Paulie . . . Tommy . . .

Please let me know who in our government and world of finance are most appropriate to play each of these individuals? Let’s have some fun.

From The Archives: “Where’s The Money??”

Posted by Larry Doyle on April 10th, 2009 8:16 AM |

On a quiet Good Friday morning, brief reflection never hurts. In that spirit, I thought it may be worthwhile to go into the archives for our year-end piece 2008. This piece was originally published on December 29, 2008:

I thought about providing an outlook for 2009. I considered offering further opinions on Obama’s economic plans. Perhaps a review of the Bush economic program would be well received. Then yesterday, the lead editorial in my local newspaper asked “Where did the bailout money go?” I had my answer. In previous pieces I have touched upon why I thought there was a very good chance this money would not flow through the system. I hesitate to continue to refer back to my piece published on November 12th (The Wall St. Model is Broken…and Won’t Soon be Fixed), but for new readers I do firmly believe it is as good as anything I have read or seen in any publication in explaining how we find ourselves in our current position.

Please allow me to digress for a second. I will admit that I am not a movie buff, but I do enjoy films that focus on the success of underdogs, have a measure of financial intrigue, or perhaps a combination of the two. Not surprisingly, a few of my favorite movies are, Rocky, Jerry Maguire, and The Sting. (more…)

Things You May Have Missed

Posted by Larry Doyle on April 7th, 2009 10:08 AM |

The stream of data and market moving news is non-stop. I found these items of interest and look to share them with you as I believe they provide interesting insights and perspectives from around the world. I beg your indulgence if some of these items are not news to you, but if they are I hope they help you “navigate the economic landscape.”

1. Australia’s central bank cut its overnight lending rate to 3%, the lowest level in 49 years. While that rate is one of the highest rates in the developed world, it was widely expected to be left unchanged.  Australia has had one of the strongest economies in the world. This cut is an indication the Australian central bank believes their economy is slipping into a recession.

2. Japan’s exports are reported to be down 40% versus a year ago. Additionally, Japan’s industrial production is reported to be down 30+% during the same time period. These economic figures are significantly weaker than most other developed economies. As a frame of reference, most other developed economies’ industrial production is down 10-15%. Clearly, Japan is so dependent on exports and it is now paying the price of not having more fully diversified its economic foundation.

3. Gold is now trading near $880/oz. A month ago this precious metal was trading slightly above $1000/oz. Why is gold down recently? Coming out of the G-20, there are expectations that the IMF may sell some gold reserves to raise funds for low-income countries. I commented the other day that gold is not perfectly correlated with inflation due to changing fundamentals and technical variables in the gold market. This development with the IMF is a perfect case in point of my assertion. (more…)

G-20: Commitments, Comments, Questions!!

Posted by Larry Doyle on April 2nd, 2009 1:14 PM |

British Prime Minister Gordon Brown just delivered a statement highlighting the results of the G-20 conference in London.  There must have been a lot of work done behind the scenes over the last few months because it’s hard to imagine there was a lot of debate over issues within a 36 hour time frame at this conference.  I will grant the world’s political leaders their due as it is most important at times like these to convey a strong, uniform front. 

Let’s review the objectives and commitments, each followed by questions and/or comments that I have:

1. Address countries providing tax havens.
My question:  who will police?

2. Develop a Financial Accounting Stability Board to regulate currently unregulated financial entities, primarily hedge funds. 
My questions: how will it be staffed, operated, and judgments adjudicated? (I don’t like FASB as the acronym to be confused with Federal Accounting Standards Board)

3. Develop global policies and outline to address compensation
My questions: who and how will this be implemented? how will it be regulated? will there be punishments for those not participating?

4. Develop a global systemic risk oversight body. 
My Question: who and how? (more…)

The Modern Day Fall of the Roman Empire?

Posted by Larry Doyle on March 27th, 2009 1:36 PM |

I have focused on the problems in western and eastern Europe over the last few months. Those problems are not abating. Who would have thought that the host of next week’s G-20 may need the greatest amount of aid of all. 

Should Prime Minister Gordon Brown look to increase the room rates for world leaders in attendance next week? Perhaps a slightly higher fee for the mini-bar? Every little bit helps. 

In all seriousness, the U.K has spent proportionately almost three times as much in bailing out their financial institutions as the United States. 

For those unaware, the U.K. was unable to fully place 40 year debt this week. That experience, known as a “failed auction,” is financially and politically embarrassing, aside from being fiscally frightening. If a country is not able to finance itself . . . (more…)

Dr. Edwin Vieira’s Amazing Crystal Ball, 2006

Posted by Larry Doyle on March 24th, 2009 9:52 PM |

I will admit that I am not a student of the Great Depression, but I have started reviewing that period. Obviously I, like every American, hope our economy stabilizes and we regain our footing and return to prosperity. While the pragmatic optimist in me believes that can happen, the trader and risk manager in me tells me to review the Depression, understand the dynamics, assess the risks of our current period, and prepare accordingly.

I hope and believe people who have been reading my work for a while appreciate that I am not an alarmist.  Whether working on Wall Street as a trader and salesman or now writing for Sense on Cents, a measured, analytical approach has always generated the best results. In that vein, I discount speculators and salesmen who attempt to make a buck from heightened levels of anxiety. That said, the elevated levels of risk in our economy, markets, and global finance require an equally elevated sense of risk analysis and historical analysis.

Given some of the economic saber rattling emanating from China and the lessened fiscal support emanating from Europe, the threats of global protectionism are clearly growing. That scenario also occurred during the Depression.   (more…)

Let’s Revisit Europe: The Weakest Link

Posted by Larry Doyle on March 17th, 2009 5:15 AM |

I thank our loyal reader in Michigan, Mr. Fiscal Liberal, for sharing with us a piece written by Simon Johnson, the former chief economist of the International Monetary Fund, a professor at the MIT Sloan School of Management, and a senior fellow at the Peterson Institute for International Economics.

Mr. Johnson writes about the growing problems in Europe. I am hard pressed to see how the European situation, both in the East and West, can not end badly. There are too many economies that are effectively insolvent or on the brink of insolvency. I believe this is the region of the world which will experience increased economic strife leading to social unrest and political change. Can the problems in Europe be contained given the massively interconnected world of global finance? 

Thank you again FL for sharing this very enlightening piece from Simon Johnson!!   

G-20s Real Agenda Should be Saving Europe from Itself
By Simon Johnson
Last Updated: 10:28AM GMT 16 Mar 2009

The media coverage of the G20 finance ministers meeting this weekend was dominated by the apparent battle between those who support more fiscal stimulus and those who want to impose more regulations on the financial system.

This, we are led to believe, is the big debate facing the full G20 heads of government summit early next month: the US is pushing for a bigger global fiscal stimulus (2pc extra government spending from everyone, to be monitored by the IMF), while the continental Europeans are holding out for greater regulation. Gordon Brown is trying hard to cast himself as the broker for any apparent deal.   (more…)

In 30 Minutes, Join us for “No Quarter Radio’s Sense on Cents with Larry Doyle”

Posted by Larry Doyle on March 15th, 2009 7:30 PM |

SAME GREAT SHOW, BRAND NEW NAME! Join me this evening from 8:00 to 9:00 p.m. ET on No Quarter Radio for Sense on Cents with Larry Doyle. These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere! With the stock market near 12 year lows, what is driving the flows? What is truly going on in the economy? Where are markets headed? What is happening in Washington and how is that impacting Wall Street? So much to cover.

The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and month and what do they mean for the weeks and months ahead? What is happening overseas and how does that impact us here at home? What is happening in the municipal sector and how will that impact the markets and our personal finances?

Let’s Meet David Darst

Posted by Larry Doyle on March 14th, 2009 6:00 PM |

David Darst may not be a household name for the general public, but for those involved in the world of finance he is held in very high regard. In fact, I think so highly of David that in the Sense on Cents Reading Room, I included his book:

The Complete Bond Book: A Guide to All Types of Fixed-Income Securities
by David Darst
– the Wall Street insider’s Bible to all types of fixed income securities.

David was interviewed yesterday on Bloomberg News. He touches on issues I have recently addressed here at Sense on Cents. I appreciated his commentary on the fact that the equity market rally this week was a “psychological” bounce in the context of a bear market. I addressed the particulars of the current market psychology in my piece, Is the Market Oversold? UPDATE.

Darst also offers enlightening color on overall market outlook, inflation, and places to hide amidst this turmoil.  I know you will not be disappointed in viewing Morgan Stanley’s Darst Sees Psychology Driving Stocks. It’s a 5 minute clip from a man with a lifetime of experience!! I am happy to bring it to you as we collectively navigate the economic landscape.


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