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Global insights audio-slides-08-05-11
1. This chart is from the discussion recordedAugust 5th, 2011 WEEKLY WRAP Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
2. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #1: HEAD & SHOULDERS PANIC Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
3. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #2: MAJOR SUPPORT VIOLATION Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
4. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #3: EUROPEAN BANKING PANIC Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
5. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #4: OUTER CORE - ITALY, SPAIN Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
6. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #4: OUTER CORE - ITALY, SPAIN GERMAN 2 YEAR NOTES BNY Mellon to charge on $50m-plus deposits. Response to ‘sudden’ rise in cash holdings Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
7. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #5: BOJ FORCED TO GO IT ALONE YEN CARRY TRADE The Global Cash Spigot is Jammed! Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
8. This chart is from the discussion recordedAugust 5th, 2011 PROBLEM #6: US LEADERSHIP Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights
Editor's Notes
When you start getting your investment advise from CNBC you are in trouble!
This mornings announcement: Dow Likely to Drop to 10,600: Charts (http://www.cnbc.com/id/44027577)
Sarkozy To Discuss Crisis with Merkel, ZapateroThe cost of insuring European sovereign and corporate debt against default using credit default swaps jumped higher in early trading Friday, as the intensifying euro-zone debt crisis and fears of a global slowdown hit financial markets around the world.The SovX Western Europe index, which investors can use to buy or sell default protection on a basket of 15 sovereign borrowers, was 12.5 basis points wider at 305/311 basis points, according to index owner Markit.The iTraxx Crossover index of 40 mostly sub-investment grade corporate borrowers was 39 basis points wider at 549/553. And the Europe index of 125 investment-grade borrowers was six basis points wider at 137/138.The rise in default-insurance costs comes as stock markets around the world tumble on euro-zone debt fears and worries about a slowing world economy, even after the European Central Bank Thursday bought sovereign bonds for the first time since March.“Today’s U.S. nonfarm payroll figures will be pivotal for market sentiment,” said Christian Weber, strategist at UniCredit Bank.
Ineffective Intervention is worse than no intervention at all! Media reports had suggested that the central bank was about to re-open its Securities Markets Program and buy peripheral debt. This appeared unlikely given the proposed reforms to the EFSF – which include the power to buy bonds in the secondary market. But Jean-Claude Trichet clearly thought that the time to implementation of the EFSF was too long and the ECB was given little choice but to act. Trichet used his press conference to announce that the six-month long-term refinancing operation (LTRO) would be reactivated from next week. Trichet even denied that it had closed, stating that the programme had never closed and was ongoing. He then issued a challenge to the market: “you will see what we do”.The inference wasn’t subtle; the ECB was intervening in the market. Reports swiftly emerged from traders confirming that the ECB was buying Irish and Portuguese bonds. This exchange highlights one of the likely causes of the recent correction. There seems to be a consensus in the markets that the size of the EFSF needs to be increased dramatically if it is to be effective in stemming the debt crisis. But the political will to implement such a policy appears to be lacking in several eurozone countries. Police raid Milan offices of Moody's and Standard & Poor's
FLIGHT TO SAFETY => GERMANYItaly owes German banks 116 Billion eurosYesterday news German Economy was slowing
The Fed has three intermediate options:The first stop for the Fed is almost assuredly its communication strategy. Simply, the Fed could commit to making its extended period even more extended. The expectations hypothesis would suggest that by committing to keep short term rates lower for even longer, rates further out on the curve would similarly decline. If the Fed believes that lower interest rates are stimulatory, then this is one way to achieve such an endThe Fed could lower the Interest on Excess Reserves (IOER). During the crisis, the Fed obtained the ability to pay interest on newly created excess reserves in the banking sector, the argument being that doing so would help the Fed control inflation. With loan generation running at fairly low levels, some have speculated that the Fed could cut the rate it pays on IOER in order to spur lending. The SNB has at times imposed negative interest rates for several reasons and so perhaps, in order to spur lending, the Fed might increase the cost of holding these reserves by reducing the rate it paysThe Fed could play with its balance sheet. On the one hand, the Fed is in the process of reinvesting maturity MBS into treasuries. They could push these reinvestments – currently running about $10-$14 billion per month – further out the curve to lower medium to longer term interest rates. They could also initiate a new program of buying bonds however there is considerable uncertainty, expressed by Bernanke himself, as to what effects a new plan may have. Further, any new plan would have to be quite large in size, at least $1 trillion, in order to get a significant reduction in interest rates. A purchase plan of that size could lower rates by as much as 100 bps. Read more: http://www.businessinsider.com/what-the-fed-can-do-2011-8#ixzz1U9fx5TJt
