My OperaPeak Currencies
Friday, July 25, 2008 6:53:29 PM
The yen carry trade unwound Thursday January 24, 2008
The yen carry trade unwound as Martin Crutsinger Associated Press related the National Association of Realtor Report that sales of existing homes fell more sharply than expected in June. Sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units which left sales 15.5 percent below where they were a year ago. The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.
The unwinding of the yen carry trade can be seen in the EUR/JPY, FXE:FXY, which is the barometer of the yen carry trade, falling to 1.690 yesterday.
The EUR/JPY recovered today as the euro, FXY, rose against the dollar after European Central Bank council member Klaus Liebscher said policy makers have room to raise interest rates a second time this year even as economic growth falters; this caused gold, GLD to rise to 91.47, and the EUR/JPY, FXE:FXY, the barometer of the Yen Carry Trade, to rise to 1.704; while oil, USO, fell to 100.02. Industrial metals, JJM, sank 2% to 46.74. The USD/JPY zoomed back higher to 107.28; as the yen, FXY, fell to 92.46; note: amounts and percentages are intraday and are likely to vary before closing.
Yesterday, the stock market failed at major resistance -- the bear market is fully underway again
Kevin's Market blog graphically shows that The Dow fails at major riesistance.
The investment demand for gold remains resilient despite a faltering Aussie and Loonie
The Australian Dollar, FXA, fell; it will not be achieving parity; and it is no longer a yen carry trade interest rate differentially favored investment destination as Ron Harui and Candice Zachariahs of Bloomberg report Aussie Dollar Set for Weekly Loss as Banking Losses Mount .
The chart of the Canadian Dollar, FXC, is in a bearish pattern and it fell like a rock today as Bloomberg's Jamie McGee reports that Canada's Dollar Poised for Weekly Decline on Oil, Sales Data.
The Euro, FXE, The Australian Dollar, FXA, and the Canadian Dollar, FXC, have been the gold and natural resource currencies, that have been used to take gold higher; now that risk aversion to natural resource investing is rising; and oil prices are falling, lending liquidity from the Bank of Japan at 0.5% interest did not flow into these last two currencies today; this may hurt the traditional logic for investing in gold. However an investment demand for gold remains strong as the stock markets tanks; this is seen in the ratio of gold relative to stocks, GLD:VTI, remaining firm.
We have passed through Peak Currency; all currencies are now in a death spiral lower with the US Dollar
We are seeing disinvestment from traditional long the Aussie and short the Yen based on risk aversion to debt; and we are seeing disinvestment from long the Loonie and short the Yen due to risk aversion to stagflation.
The Yen, FXY, although down today, will be rising for a period of time before it begins to fall lower as well; the source of the rise being falling stock markets globally and investors buying yen to repay their 0.5% carry trade loans.
There is a reversal now of interest rate differential currency investing. For ever and ever, investors saw natural resources stocks rising. And therefore went long the Aussie. But now as referenced above, the natural resource stocks like Kinross Gold Corporation, KGC, which suffered eleven percent loss and manifested three black crows, have sold off. This means there will be deflation, not inflation in currency pair investing.
Gold, GLD, is rising; for the common investor and all investors for that matter, gold is the now sole means of maintaining wealth; even if it, for a time falls lower now that the gold currencies are failing.
Gold is likely to jump higher from time to time, as investors leap out of stocks and into gold, in a "desperation jump" to preserve wealth.
My heart really goes out to the retired fixed income investors living off of Treasuries, TLT, zero coupon bond funds, BTTRX, and utility stocks and ETFs, such as VPU; these will see not only their capital rapidly depleted but their income as well as interest rates, such as that on the 30 year US Treasury Bond, $TYX, and inflation move higher as investors are risk averse Treasuries being contaminated by Fannie Mae And Freddie Mac Rescue liquidity and capitalization. The nationalization of the US mortgage backed securities onto the backs of the US taxpayers, has been driving $TYX higher since the Rescue was announced.
The yen carry traders are definitely in a pickle; their traditional strategies are failing.
The neoliberal Milton Friedman floating currency regime and its policies has met its Waterloo suffering defeat at the hands of gold investors as is seen in the currency harvest, DBV, falling, and gold, GLD, rising.
The world currencies have tanked and are now sinking; gold has risen supreme over stocks, bonds and all currencies.
An investment sea change has occurred: currencies are no longer floating, they are sinking.
Speculators may be borrowing from the Bank of Japan to go long gold in the futures market, or invest in gold ETFs such as GLD and IAU.
Those with access to the 0.5% Bank of Japan lending window will now be going short the markets to garner wealth; which will only increase the Deflationary Hurricanes that Mike Mish Sheldon references.
The investment demand for gold remained resilient today as disinvestment from stocks is rapidly getting underway, as can be seen in the ratio of gold relative to stocks, GLD:VTI, rising; and the ratio of gold relative to oil, GLD:USO, rising as well.
The Great Unwinding Of Investments Commences
The springs of liquidity and spigots of liquidity for stock investing have run dry and have been turned off
Jesse in report Bank Credit and Money Supply Growth shows a downturn in the "growth" of Bank Credit, MZM, M2 and M3. This documents the twin spigots used to generate fiat wealth in stocks and bonds have been turned off; these being the easy credit of the US Central Bank in TAF, TSFL and PDCF facilities, as well as the Bank of Japan, 0.5% interest loans.
The turning off of liquidity is seen in the daily chart of the barometer of the yen carry trade, that is EUR/JPY, FXE:FXY, where this metric recently turned down to 1.670, then bounced back up to an all time high in short sell covering, then fell lower to 1.690, and now is back up to 1.70, but beneath its all time high.
This turning off of liquidity is seen particularly well in the fall in margin credit and yen carry trade favored stocks, particularly the BRICS, EEB, on May 19, 2008; and then again in June, as the May 2008, Bank of Japan minutes were released indicating that inflation is an increased investment risk factor, and now today, with a significant fall lower to 44.43.
Inflation is a major factor in demand destruction at work in turning down stock such as Dow Chemical, DOW.
The ability of corporations to continually being able to wring out profits is done and over; its like a towel being wrong out; their is a maximum to what can be achieved; and that maximum has been achieved.
David Rosenberg of Merrill Lynch relates that EPS To See 35% Correction, PDF report: "The decline in domestic economic activity, steadily climbing input costs and diminished support from currency translation is likely to result in a sharp downturn in EPS, in our view. We see EPS operating earnings at 68.0 in 2008 (down 17.7% from 2007) and 63.0 in 2009 (down 7.2%). That translates into a 35% decline in EPS from the peak in 2006.
"We have been saying all along that the slowdown in the economy is not about the business sector. Balance sheets, outside the financial sector and the perennially restructuring auto sector are relatively healthy. However, the toxic combination of declining revenues and soaring costs mean that few sectors will escape this downturn with profit margins intact."
Going back to the liquidity information: the dwindling of liquidity is stock and bond deflationary: just as increasing liquidity bubbled wealth up, decreasing liquidity will ratchet wealth down.
Multiple systemic risk events are at hand: one being the credit gridlock causing a commercial lending freeze-up causing a massive increase in bankruptcies; this puts those who are long in currencies at risk.
Misery increases And Societies Become More Pyramidal
Patrick McGee of CEP news reports that unemployment came in higher that the 380K expected: U.S. Jobless Claims Soar to 406K in Week Ending July 19, 2008.
Not only are peoples are being pushed down economically, authoritarian rule is on the rise as WSWS.org author Ajay PrakashSarkozy reports that the Sarkozy government implements repressive police measures.
We have passed from one age into another -- gold is the means of preserving wealth
The age of 'investment prosperity is over' and the age of 'financial disinvestment and instability', and the age of 'state corporate rule' are rising.
One might ask, "How is state corporate rule rising"?
The leaders have announced two 'framework agreements': the Security and Prosperity Partnership of North America, the SPP, and the Declaration of EU US 2008. These give them authority to address events that threaten economic stability, and which provide for economic competitiveness. The leaders have appointed councils, working groups and stakeholders, who work in global government principles and policies of security and prosperity.
Kondratieff Winter has come to the people of the world.
My investment recommendation remains unchanged: I recommend that one dollar cost average a buy in gold within the next ten days with a diversified investment in gold at BullionVault.com, GoldMoney, and in a gold ETF, in a trust account, in Switzerland.
End of Day Charts
The US Dollar, $USD, remained unchanged; and Gold, $GOLD, rose 0.84% to close at $930.03.
Corey Rosenbloom in article Gold Takes An Unexpected Swing provides the chart of gold, $GOLD, showing its outbreak from former consolidation; with $890 forming a strong base of support.
Related Reading
My recent article Peak Dollar
The yen carry trade unwound as Martin Crutsinger Associated Press related the National Association of Realtor Report that sales of existing homes fell more sharply than expected in June. Sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units which left sales 15.5 percent below where they were a year ago. The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.
The unwinding of the yen carry trade can be seen in the EUR/JPY, FXE:FXY, which is the barometer of the yen carry trade, falling to 1.690 yesterday.
The EUR/JPY recovered today as the euro, FXY, rose against the dollar after European Central Bank council member Klaus Liebscher said policy makers have room to raise interest rates a second time this year even as economic growth falters; this caused gold, GLD to rise to 91.47, and the EUR/JPY, FXE:FXY, the barometer of the Yen Carry Trade, to rise to 1.704; while oil, USO, fell to 100.02. Industrial metals, JJM, sank 2% to 46.74. The USD/JPY zoomed back higher to 107.28; as the yen, FXY, fell to 92.46; note: amounts and percentages are intraday and are likely to vary before closing.
Yesterday, the stock market failed at major resistance -- the bear market is fully underway again
Kevin's Market blog graphically shows that The Dow fails at major riesistance.
The investment demand for gold remains resilient despite a faltering Aussie and Loonie
The Australian Dollar, FXA, fell; it will not be achieving parity; and it is no longer a yen carry trade interest rate differentially favored investment destination as Ron Harui and Candice Zachariahs of Bloomberg report Aussie Dollar Set for Weekly Loss as Banking Losses Mount .
The chart of the Canadian Dollar, FXC, is in a bearish pattern and it fell like a rock today as Bloomberg's Jamie McGee reports that Canada's Dollar Poised for Weekly Decline on Oil, Sales Data.
The Euro, FXE, The Australian Dollar, FXA, and the Canadian Dollar, FXC, have been the gold and natural resource currencies, that have been used to take gold higher; now that risk aversion to natural resource investing is rising; and oil prices are falling, lending liquidity from the Bank of Japan at 0.5% interest did not flow into these last two currencies today; this may hurt the traditional logic for investing in gold. However an investment demand for gold remains strong as the stock markets tanks; this is seen in the ratio of gold relative to stocks, GLD:VTI, remaining firm.
We have passed through Peak Currency; all currencies are now in a death spiral lower with the US Dollar
We are seeing disinvestment from traditional long the Aussie and short the Yen based on risk aversion to debt; and we are seeing disinvestment from long the Loonie and short the Yen due to risk aversion to stagflation.
The Yen, FXY, although down today, will be rising for a period of time before it begins to fall lower as well; the source of the rise being falling stock markets globally and investors buying yen to repay their 0.5% carry trade loans.
There is a reversal now of interest rate differential currency investing. For ever and ever, investors saw natural resources stocks rising. And therefore went long the Aussie. But now as referenced above, the natural resource stocks like Kinross Gold Corporation, KGC, which suffered eleven percent loss and manifested three black crows, have sold off. This means there will be deflation, not inflation in currency pair investing.
Gold, GLD, is rising; for the common investor and all investors for that matter, gold is the now sole means of maintaining wealth; even if it, for a time falls lower now that the gold currencies are failing.
Gold is likely to jump higher from time to time, as investors leap out of stocks and into gold, in a "desperation jump" to preserve wealth.
My heart really goes out to the retired fixed income investors living off of Treasuries, TLT, zero coupon bond funds, BTTRX, and utility stocks and ETFs, such as VPU; these will see not only their capital rapidly depleted but their income as well as interest rates, such as that on the 30 year US Treasury Bond, $TYX, and inflation move higher as investors are risk averse Treasuries being contaminated by Fannie Mae And Freddie Mac Rescue liquidity and capitalization. The nationalization of the US mortgage backed securities onto the backs of the US taxpayers, has been driving $TYX higher since the Rescue was announced.
The yen carry traders are definitely in a pickle; their traditional strategies are failing.
The neoliberal Milton Friedman floating currency regime and its policies has met its Waterloo suffering defeat at the hands of gold investors as is seen in the currency harvest, DBV, falling, and gold, GLD, rising.
The world currencies have tanked and are now sinking; gold has risen supreme over stocks, bonds and all currencies.
An investment sea change has occurred: currencies are no longer floating, they are sinking.
Speculators may be borrowing from the Bank of Japan to go long gold in the futures market, or invest in gold ETFs such as GLD and IAU.
Those with access to the 0.5% Bank of Japan lending window will now be going short the markets to garner wealth; which will only increase the Deflationary Hurricanes that Mike Mish Sheldon references.
The investment demand for gold remained resilient today as disinvestment from stocks is rapidly getting underway, as can be seen in the ratio of gold relative to stocks, GLD:VTI, rising; and the ratio of gold relative to oil, GLD:USO, rising as well.
The Great Unwinding Of Investments Commences
The springs of liquidity and spigots of liquidity for stock investing have run dry and have been turned off
Jesse in report Bank Credit and Money Supply Growth shows a downturn in the "growth" of Bank Credit, MZM, M2 and M3. This documents the twin spigots used to generate fiat wealth in stocks and bonds have been turned off; these being the easy credit of the US Central Bank in TAF, TSFL and PDCF facilities, as well as the Bank of Japan, 0.5% interest loans.
The turning off of liquidity is seen in the daily chart of the barometer of the yen carry trade, that is EUR/JPY, FXE:FXY, where this metric recently turned down to 1.670, then bounced back up to an all time high in short sell covering, then fell lower to 1.690, and now is back up to 1.70, but beneath its all time high.
This turning off of liquidity is seen particularly well in the fall in margin credit and yen carry trade favored stocks, particularly the BRICS, EEB, on May 19, 2008; and then again in June, as the May 2008, Bank of Japan minutes were released indicating that inflation is an increased investment risk factor, and now today, with a significant fall lower to 44.43.
Inflation is a major factor in demand destruction at work in turning down stock such as Dow Chemical, DOW.
The ability of corporations to continually being able to wring out profits is done and over; its like a towel being wrong out; their is a maximum to what can be achieved; and that maximum has been achieved.
David Rosenberg of Merrill Lynch relates that EPS To See 35% Correction, PDF report: "The decline in domestic economic activity, steadily climbing input costs and diminished support from currency translation is likely to result in a sharp downturn in EPS, in our view. We see EPS operating earnings at 68.0 in 2008 (down 17.7% from 2007) and 63.0 in 2009 (down 7.2%). That translates into a 35% decline in EPS from the peak in 2006.
"We have been saying all along that the slowdown in the economy is not about the business sector. Balance sheets, outside the financial sector and the perennially restructuring auto sector are relatively healthy. However, the toxic combination of declining revenues and soaring costs mean that few sectors will escape this downturn with profit margins intact."
Going back to the liquidity information: the dwindling of liquidity is stock and bond deflationary: just as increasing liquidity bubbled wealth up, decreasing liquidity will ratchet wealth down.
Multiple systemic risk events are at hand: one being the credit gridlock causing a commercial lending freeze-up causing a massive increase in bankruptcies; this puts those who are long in currencies at risk.
Misery increases And Societies Become More Pyramidal
Patrick McGee of CEP news reports that unemployment came in higher that the 380K expected: U.S. Jobless Claims Soar to 406K in Week Ending July 19, 2008.
Not only are peoples are being pushed down economically, authoritarian rule is on the rise as WSWS.org author Ajay PrakashSarkozy reports that the Sarkozy government implements repressive police measures.
We have passed from one age into another -- gold is the means of preserving wealth
The age of 'investment prosperity is over' and the age of 'financial disinvestment and instability', and the age of 'state corporate rule' are rising.
One might ask, "How is state corporate rule rising"?
The leaders have announced two 'framework agreements': the Security and Prosperity Partnership of North America, the SPP, and the Declaration of EU US 2008. These give them authority to address events that threaten economic stability, and which provide for economic competitiveness. The leaders have appointed councils, working groups and stakeholders, who work in global government principles and policies of security and prosperity.
Kondratieff Winter has come to the people of the world.
My investment recommendation remains unchanged: I recommend that one dollar cost average a buy in gold within the next ten days with a diversified investment in gold at BullionVault.com, GoldMoney, and in a gold ETF, in a trust account, in Switzerland.
End of Day Charts
The US Dollar, $USD, remained unchanged; and Gold, $GOLD, rose 0.84% to close at $930.03.
Corey Rosenbloom in article Gold Takes An Unexpected Swing provides the chart of gold, $GOLD, showing its outbreak from former consolidation; with $890 forming a strong base of support.
Related Reading
My recent article Peak Dollar
