Germany is prepared to give a 4.5bn euros loan to Opel if its favoured suitor - Canada’s Magna - is chosen to take over the firm.
There are numerous imitation Forex trading systems available that pledge to hand you enormous returns exclusive of having to do a lot of work. There are a lot of these applications for sale however if they really produced as effectively as they are said to 95% of the traders would be generating money instead of losing it.
While Central Banks have always featured heavily in the minds of forex traders, their actions have taken on a whole new significance of late. Financial reporters have also been generous in doling out space to stories about Central Banks, writing stories with headlines like “Central bankers add to equities’ momentum” and “currency traders Hold Fire, Await Central Banks.”
Traditionally, forex traders eyed Central Banks for one reason: interest rates. The theory was simple: currencies with higher interest rates tended to outperform in the short term. This trend was especially reliable in the years leading up to the housing bubble, as carry traders ensured that high-yielding currencies rose while low-yielding currencies stagnated or fell.
Even in the context of the credit crisis, traders have continued to monitor the rate setting activities of Central Banks. Interest rates in every industrialized country are currently locked at record low levels, but anticipation is already starting to build that the beginning of a tightening cycle is just around the corner. Current expectations are for the US to lead the way (first to lower, first to rise), followed by Australia, New Zealand, and Canada. The Bank of England and European Central Bank are further away on the curve, while rate hikes are a remote possibility in Japan, a perennial favorite of carry traders.
Interest rates are now only a small part of the equation, however. Most Central Banks have implemented additional strategies, known variously as quantitative easing, asset purchases, liquidity programs, etc. The goal of all of these programs is to stimulate the money supply and stabilize financial markets, by injecting newly-minted money directly into capital markets. traders initially focused on which Central Banks were involved in quantitative easing. After nearly every bank introduced some version, it quickly became a question of scope. In this respect, the Fed and the Bank of England are in first and second place, respectively. Now, traders are waiting to see not only when these programs will end, but also when they will be unwound. If there is a perception (and even worse, a reality) that some Central Banks are waiting too long to draw funds out of the market, this could foster (concerns of) inflation, and consequently, currency depreciation.
Finally, there is the issue of direct currency intervention. The Swiss National Bank became the first western bank to intervene on behalf of its currency. Its actions are directly responsible for holding the Swiss Franc down. The Bank of England meanwhile has used its quantitative easing program to influence the Pound, while the Banks of Korea and Brazil are buying Dollars on the spot market to depress their respective currencies. Paranoia is clearly running high, and some traders are apparently concerned that the Fed could be next. Just when you thought the surprises were over.
In forex, timing is everything. If I had written this post a couple weeks ago, the headline would read “Euro Touches 2009 High.” Perhaps if I had waited another week, it would have read, “Euro Approaching 2009 High.” But alas, I chose today to write about the Euro, and the headline I chose is probably the most appropriate under the circumstances.
On August 5, “The euro hit a high for the year against the dollar as stocks trimmed their losses in afternoon trading Wednesday despite a generally cautious tone in currency markets.” Analysts were careful to point out that the markets remained cautious and the Euro eased past - rather than smashed through - its previous high. Technical analysts would and have argued that this paved the way for the subsequently rapid decline: “The euro is testing the base of an ascending channel with daily momentum charts showing a ‘double top in overbought territory.’ ”
This notion might have some merit, considering that fundamentals arguably favor a continued Euro appreciation. “The economy of the 27-country European Union shrank 0.3 percent in the three months ended June 30, for an annual rate of roughly 1.2 percent. The 16 countries that use the euro registered a 0.1 percent decline for the second quarter, or an annual rate of roughly 0.4 percent.” While output remains well below its 2008 levels, the slight contraction represents a tremendous improvement from the first quarter, when GDP shrank by 2.5%.
“Underlying the strong reading were solid performances in France and Germany, each of which grew 0.3 percent in the second quarter, government data showed.” This is helping to offset further contractions in Italy and Spain, which have turned into economic laggards as a result of the housing bust. In addition, exports in Germany grew by 7% last month, and “investor sentiment improved more than analysts had expected in August to its best level since April 2006.” On an aggregate basis, “the euro zone’s trade balance with the rest of the world rose to 4.6 billion euros (.5 billion) in June, compared to a flat balance in the same month last year,”
Still, explorers looking for bad news and/or cracks beneath the surface will have no difficulty finding them. German exports (and output in general remain down year-over-year. In addition, there are still trouble spots in the EU, notably in western Europe. “Already, the euro area’s unemployment rate stands at 9.4 percent, its highest level in 10 years, and the anemic growth of the coming quarters will not be enough to arrest the slide. That, in turn, could drag down consumer confidence or even generate political backlash in Europe, economists said.” Most worrying is perhaps that, “consumer prices in the euro area dropped 0.6 percent in July…” ‘Deflation is becoming entrenched in the euro area, which would be very bad for the economy.’ ” Good thing the ECB left some room to lower rates further.
PetroChina, Asia’s largest oil company, signs a bn deal to develop a gas field off Australia’s north-western coast.
Here are loads of applications available that profess to make Forex trading effortless, creating a cash flow with modest work on your part, yet these have a tendency to be inadequately made. There are loads of these applications for sale but if they in fact produced as effectively as they are alleged to 95% of the traders would be producing money instead of losing it.
US prosecutors charge a man with carrying out what they say is the largest case of identity theft in American history.
I got this letter a couple days ago from Mark that I want to share with everyone. He has a question about one of the 4M's from <a href=”http://www.philtown.com/phil_towns_blog/aboutruleone.html” target=”_blank” title=”About Rule #1 investing by Phil Town”>Rule #1 - Meaning.
Hi Phil. My name is Mark and I've been doing my best to learn as much as possible about Rule #1. One of your big tenets is Meaning. What does the company mean to me? I'm not entirely sure I'm all the way on board with this idea as my main goal is making money, and even an "Evil Empire" like Exxon or their ilk can make a guy a boat load of cash.
But I read one of your blog posts about how Karma can come back and haunt you. Have you ever read the book "The Secret" by Rhonda Byrne? If you have, do you agree with the idea about laws of attraction? Could this be why "Meaning" means so much in your <a href=”http://www.philtown.com/phil_towns_blog/aboutbook.html” target=”_blank” title=”the basics of Rule #1 investing”>investing model? If I see stocks that are doing well and have the right kind of numbers, do I say no to them just because I may have a moral qualm about them? Will the universe punish me for being greedy?
Anyway, I want to thank you for any time you can give me regarding this, and I hope that between your book, the blog and my own research I can get a better understanding of how to find these great companies.
Here's what I told Mark:
As you sow… So yeah, for me, what you put your attention to grows stronger in your life. money is all about values - financial and moral. The Secret has a bunch of my friends on the DVD and I agree with the basic idea.
You want money. So will you do anything, own anything to get it? Heroin factory ok? Slave labor? Scrooge managers? Squeeze your employees? Pollute? Steal?
If it's about the money, where do you draw the line? Are you, at some price, a whore in your soul? Do you expect to be happy without honor or values? Look at the rich who are like that. Hollywood is filled with them. So is New York and DC. Empty suits. Walking dead.
Don't go there. Make money investing in things you can brag to your kids about. It might not be Exxon. It's your values, what you are voting for in the world with your money. Really, you can't expect your world to change if you keep biting with your money for it not to.
Just when it looked like <a href=”http://www.forexblog.org/2009/08/yen-carry-trade-is-back-but-for-how-long.html”>the carry trade was back for good and all signs pointed to a Yen depreciation, out of nowhere came a series of surprise developments, propping the Yen back up. Spanning finance, economics, and politics - a Forex Trifecta - these developments moved swiftly through the markets, creating optimism for the Yen where before there was only pessimism. Of course, it’s possible that this bump will prove temporary, and a reversal could transpire just as quickly.
The biggest news, by a large margin, was a report that the Japanese economy had returned to growth. Similar in scale and in tenor to stories coming out of other countries, the data showed that Japan grew at an annualized rate of 3.6% in the second quarter of 2009, a sharp reversal from the 11.7% contraction in the previous quarter (which was itself revised upward from -14%).
The sudden sea change was brought about by a combination of government spending and export growth. “New tax breaks and incentives to help sales of energy-efficient cars and household appliances, coupled with lower gas prices and a rebound in share prices, spurred consumer spending. Prime Minister Taro Aso has pledged 25 trillion yen (about 3 billion) in stimulus money, including a cash handout plan and more public spending on programs like quake-proofing the country’s public schools, to revive the economy.” Meanwhile exports grew by a healthy 6.3% from the previous quarter, while imports fell, causing the trade surplus to widen.
The announcement of economic recovery was accompanied by a noteworthy reversal in capital flows, such that Japan’s capital account swung into surprise weekly surplus: “Foreign investors bought 292.9 billion yen (.1 billion) more Japanese stocks than they sold during the week ended Aug. 8 and domestic investors were net buyers of 125 billion yen in overseas bonds and notes.” Meanwhile, speculation is mounting that Japanese investors will move to repatriate some of the coupon and redemption payments they receive on their US Treasury investments.
While seemingly unrelated to the economic turnaround (it’s important not to read too much into weekly data), this could be a sign that Japanese investors are growing more optimistic about domestic economic prospects and are moving to invest more at home. It’s worth noting that such a shift could actually be necessary if the recovery is to be sustained, in order to increase the role of (capital) investment, relative to exports and government spending. Ironically, it could instead be a sign of excessive pessimism, if Japanese believe that prospects for US/global growth have been overestimated, in which case risk appetite and the carry trade would be due for a combined correction.
Domestic consumption could also play an increasing role in Japan’s economy going forward, as a result of imminent political changes. “To stimulate consumption at home, the Democrats have pledged to put more money in the hands of consumers by providing child allowances, eliminating highway tolls and making fuel cheaper. That marks a shift away from the long-ruling LDP’s emphasis on steps to help companies.”
Along similar lines, the Democratic Party (which has a wide lead over the incumbent Liberal Democratic Party), has also conveyed its opposition to currency intervention, since such tactics inherently prioritize export growth over domestic consumption. “Japan’s export-led growth is reaching its limits and Tokyo should not intervene in markets to weaken the yen as long as currency moves match fundamentals, the No.2 executive in the main opposition party said on Monday.” Could the carry trade be in trouble?
