Read Links and Update yourself

  • China turns tables on AAA debt time bomb nations (Bloomberg)
  • Gold at new record high after Saudi reserves double (FT)
  • Germany and France examine two-tier euro (Telegraph)
  • So that’s why investors can’t think for themselves (WSJ)
  • Failed AAA-deal rated Rembrandt spurs outcry (Bloomberg)
  • Medvedev sees chance for new world order (FT)
  • Amid the crisis, Wall Street touted BP stock (Reuters)
  • Gold reclaims its currency status as the global economy unravels (Telegraph)


Marc Faber Discusses Chinese Economic Cooling Off, Sees Day Of Reckoning Delayed

Nothing notably new here from the man who has called for a Chinese crash in as little as 12 months. Now that the Chinese PMI came at the lowest level in 17 months (in line with the drop in the US ISM but completely the opposite of Europe’s PMI as everyone makes up their own data on the fly now with no rhyme or reason), Faber seems to have mellowed out a little on the Chinese end-play. He now sees the China government stepping in and prevent a collapse of the economy when needed, as the economy has dropped from a near 12% GDP growth to a collapse in the PMI in the span of a few months, even as Chinese banks lent another quarter trillion renminbi billion in July, and issued who knows how many hundreds of billions in CDOs to keep the ponzi afloat.

From Bloomberg TV:

On the cooling of China’s economy:

“I mean I’ve been arguing this year that the economy would inevitably slow down, because the impact of the stimulus would diminish. But having said that, the economy hasn’t crashed yet. It could still crash. But on the other hand, if you look at the performance of equities worldwide, it seems that the worse the economic news is, that the more the markets go up, because the market participants expect further easing measures, and maybe further stimulus. So altogether I would say it’s not going to be a disaster for stock investors yet. It’s interesting. The Chinese stock market began to discount the slowdown in economic growth actually precisely a year ago, in August, 2009. The market peaked out. And then drifted lower, but now that the bad news is essentially out, the market has started to rebound.”

On whether the property market is the biggest weakness in China:

“I’d like to make the following observation. We have a global economy, and an economy has different sectors. And you can have recession in some sectors of the economy. You can have a crash, say, in the property market, and you can have other sectors expanding. [Bolton: That’s the biggest weakness, right Marc, as far as you’re concerned, in the Chinese economy right now, it is the overheating in the property market?….] Well, I’m not sure. Because if they ease again, the speculation will go on. But we have credit problems in the property market undoubtedly. We have Ponzi schemes like loan sharking operations all over China. That’s a very dangerous. But what I would like to point out is that the agricultural sector, the rural sector in China and everywhere in the world is doing relatively well, because agricultural prices have started to rebound. And that was also seen in Thailand. In Thailand, new car sales are up very strongly.”

On whether the Chinese government will delay increasing interest rates this year:

“I think even if they increase it marginally it’s meaningless. Because interest rates are far below nominal GDP growth, and in my opinion far below inflation.”

The Devil's Dictionary Of Financial Terms

dictionary1agency, n. A criminally negligent organization that purchased and securitized mortgages; a criminally negligent organization that rated mortgages and mortgage securities. The agencies were late in downgrading the Agencies.


 bailout, n. A notorious regressive tax; the public underwriting of stupid bets made by overpaid morons. Can you believe their bonus pool was $16 billion a year after the bailout?

bail out, v. To selflessly save the global economy from depression and mass unemployment. If we hadn’t bailed out AIG, the unemployment rate would be 25% right now!

bubble, n. Part of the dual mandate; the monetary policy goal of the Federal Reserve and the People’s Bank of China.

carry trade, n.  A financial proposition that concludes with its adherents supine, carried out on a stretcher.

CDS, n. The simultaneous purchase of kindling, lighter fluid, matches, and fire insurance on your neighbour’s house.

conspiracy, n. The only possible explanation for certain types of irrational price action. There’s a government conspiracy to support the stock market; how else could it have rallied 70% since March? A crackpot theory held by nutjobs who can’t admit when they’re wrong. Have those conspiracy theory whackos never heard of an oversold bounce before?

credit, n. An asset universally reviled by financiers during a crisis and claimed by politicians after it.

crisis, n. A frequently occurring one-in-a-lifetime event, generally deemed impossible by those under the age of 28.

exotic, adj. Strange; unusual; rarely-seen. I didn’t think it was possible to lose $200 million in fifteen minutes, but the exotics book just did.

hedge, n. A line of closely-grouped shrubberies; a clever way of adding correlation and volatility risk to one’s portfolio.

hedge, adj. A type of investment fund generally accepted to be dedicated to the proposition of ignoring hedges of every description.

house, n. An abode; an investment. Formerly an asset, now a liability.

leverage, n. The act of turning your problem into our problem.

mine, adj. Trader-speak for a desire to make a purchase. 50 EUR/USD mine, shagger. The sole source of responsibility (and thus the rewards) for a successful trade.

option, n. A financial instrument that offers multiple ways of losing money. If being long vega doesn’t kill you , the decay will.

quantitative easing, n. An unorthodox monetary policy that targets increases in high-powered money rather than interest rates; the act of throwing sufficient sums at the financial system to ensure that the stock market starts to rally.

restraint, n. An undesirable spending habit rarely observed in public; an offense punishable by a targeted taxation regime.

risk, n. A binary analytical framework for the simpleminded; can be either off or on. A characteristic of investment that was largely forgotten in the mid-Noughties

SAFE, n. An organization dedicated to perpetuating dangerous global imbalances.

sales, n. The art of separating a customer from his money.

seat, n. The world’s most valuable furniture; a place at a market-making franchise desk at a bank. Fred made $15 million quoting prices last year, but the seat is worth $25 million!

subprime, n. An ingenious method of granting credit to the poor, thereby narrowing the wealth gap between the classes. Dick Fuld lost $650 million after Lehman’s subprime bets went sour.

volatile, adj. The temperament of your average trader on a bad day; the likely future state of financial markets after long periods of low interest rates.

Warren Buffett, n. Ebenezer Scrooge with better PR.

yacht, n. A monetary black hole; an aquatic trophy rarely seen in close proximity to banking customers.

yours, adj. Trader-speak for a desire to make a sale. 500 e-minis, yours!! Whose responsibility the average bank, insurance company, or housing agency thinks it is to pay for the financial crisis.

Hendry takes a big bet on China crash

Hugh Hendry, the voluble hedge fund manager well known for his bearish but highly successful calls on the global economy over the past two years, has taken a big position that is designed to profit from a crash in China.

Mr Hendry’s London-based Eclectica Asset Management has constructed a “short credit” portfolio that stands to make gains of 250 per cent for his flagship fund in the event of a slump in China’s growth.

Eclectica is also poised to launch a standalone fund to benefit from the strategy next month, the Financial Times has learned.

The new fund will stand to deliver even larger gains than those for the main fund if successful.

“The investment team and I have carefully constructed a short credit portfolio made up of over 20 single-name industrial, cyclical businesses that have the dubious distinction of suffering from gigantic financial leverage and Asian/commodity overdependence,” Mr Hendry wrote to investors in his monthly letter this week. (more…)

Livermore: Follow The Leaders

“For a new age of markets has been ushered in – an age that offers safer opportunities for the reasonable, studious, competent investor and speculator.” – Livermore

In the third chapter of How To Trade in Stocks, Livermore discusses the importance of following the leading stocks in the leading groups. He argues that a speculator needs to be in tune with the general trend of the market and to only follow leading stocks from leading groups so that he is not overwhelmed with unnecessary data.

The Trend Is Your Friend

“It is not good to be too curious about all the reasons behind price movements. You risk the danger of clouding your mind with non-essentials. Just recognize that the movement is there and take advantage of it by steering your speculative ship along with the tide. Do not argue with the condition, and most of all, do not try to combat it.” – Livermore


If you don’t understand what Livermore is talking about here, you can find an example on your TV almost around the clock. If you tune in to one of the business news cable channels at just about any time, day or night, you will find journalists and so-called experts breaking down even the slightest details of the global economy or an individual stock.

Livermore argues that this obsession with analyzing the reason behind a price movement is completely unnecessary. He says that we should simply recognize that there is, in fact, a price movement and align our investments to profit from that movement. This is pretty much the definition of trend following.

Focus Your Investments (more…)

World Bank Sees Dollar Reserve Status Ending Over Next Decade


In a report released yesterday titled “Multipolarity: The New Global Economy“, that other “bailout” organization, the World Bank, says that due to the developing world’s pronounced greater growth curve through 2025 (expected to grow at 4.7% compared to 2.3% for the developed countries), the outcome will be that “The balance of global growth and investment will shift to developing or emerging economies.” More importantly, as the FT summarized, a “different international monetary system will gradually evolve, wiping out the US dollar’s position as the world’s main reserve currency.”  As a result of these “inevitabilities” (which will be interested to see how they are attained considering according to a recent report, the world will need to double its debt to double it GDP, so where all this new debt will come from we don’t really know), there are three potential scenarios: i) A status quo centered on the US dollar, ii) A system with the Special Drawing Rights (SDR) as the main international currency, iii) A multicurrency system. And while this obviously covers every possible outcome so absolutely no value added there, the WB is focused on outcome iii and believes that the dollar will gradually shift away from its current position of reserve currency prominence. This is not surprising: after all it is none other than World Bank president Robert Zoellick who recently predicted a return to the gold standard and an end to USD hegemony. Our advice to Bob: stay away from penthouse suites at the Sofitel. (more…)

Job Losses Accelerate


Good morning. The long-awaited jobs report is out and it came as worse than expected (as Goldman predicted). 263,000 jobs were lost and unemployment rate came in at 9.8%. Futures were trading lower ahead of the report and have stayed that way since.

Other news include the World Bank’s warning of a wobble ahead for the global economy, a strong dollar is very important to Geithner, Bernanke suggests a Board of Regulators, Meredith Whitney says small business credit crunch continues and Comcast & NBC are apparently in deal talksAt 10:AM we have Factory Orders for August and news of the Chicago Olympic Bid will also come out today between 12:30PM to 1:PM EST.

Already this fall I had expected and written to have cautious approach.Now just will watch S&P 500.Below 1031 will take to 1014-1009 level and there after retest of 991 level.

Will update more about DOW ,Nasdaq Compostite and S&P very shortly.

Iam personally Bearish for Stocks/Commodity from last 15 days and will not buy anything.

Technically Yours

Anirudh Sethi



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