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FX - EuroTrash

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What a great week to be trading!


Here's some almost off topic / not specific to the EUR but still part of the whole picture


when the condition of an economy becomes overleveraged, it needs to experience consistently expanding GDP with unabated asset price appreciation and a falling currency, or it will become insolvent.
Michael Pento circa 2 yrs. ago today




Call me contrarian. But please don't call me a "doomer". I do not view this as doom. I realize the difference between the monetary system and the real economy. I recognize the difference between real capital and illusory wealth. The current monetary system is like a virtual grid, an electronic parasite overlaid on the real world. It can completely vanish and leave the real world totally intact. I look forward to a new beginning for the entire system. A healthy start like we have not seen in generations.

This reset is not something I am pushing for. It is not something I even wanted a mere year and a half ago. Instead, it is what I see as inevitable. Yes, many will be hurt and I will mourn their losses as some of my own loved ones are not well prepared. But what can I do more than I am already doing? We cannot fight the inevitable. We can only prepare.

There is NO SOLUTION that will save everyone's dollars. There are simply too many of them. There is NO SOCIALIST PARADISE. There is only reality and, living in it as we do, we must each walk our own Trail into the future.

a blogger circa 7/15/2009

One foot over the border etc

The Greater Depression Is Upon Us | David Galland | Safehaven.com

(no advert intended, yada yada)

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This lags a bit but still goes with the OP of this thread.

We were wondering how long it would be before Germany, following in the footsteps of such luminaries as Hank Paulson and Tim Geithner, would formally announce to the world that with it now openly calling the shots in Europe, it would be its way or the mutual assured destruction way. We just got our answer courtesy of the just released August Outlook from the Bundesbank, in which the German national bank lays out the framework of the upcoming European anschluss play by play, as Germany prepares to roll out the Fourth Reich welcome mat without ever spilling a drop of blood. After all: why injure the soon to be millions of debt slaves?


To wit from the report: "Unless and until a fundamental change of regime occurs involving an extensive surrender of national fiscal sovereignty, it is imperative that the no bail-out rule that is still enshrined in the treaties and the associated disciplining function of the capital markets be strengthened, and not fatally weakened."

Translation: "we will gladly help everyone out... in exchange for a little of that vastly overrated fiscal sovereignty... Did we say a little? We meant all of it..."


Here are the salient points from the just released Bundesbank manifesto of Mutual Assured Anschluss or else:

Overall, there is a risk that the originally agreed institutional framework of the monetary union will increasingly become eroded.


As noted, there is but one proposed solution:

Unless and until a fundamental change of regime occurs involving an extensive surrender of national fiscal sovereignty, it is imperative that the no bail-out rule that is still enshrined in the treaties and the associated disciplining function of the capital markets be strengthened, and not fatally weakened.

You want your stupid brilliant monetary union? Fine.

You want us to pay for it? Sure.

The cost? Your "extensive" national independence.



Bundesbank: "Mein Entschluss: Anschluss-Plus" - Germany Reveals The European Annexation Blueprints | ZeroHedge



..and, btw, the coming ‘atrocities’ of the Fourth Reich don’t hold a candle to the coming inhumanity right here in the good ole USS of A

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I am a strong believer of a limit to deficit financing...

Yes...You can take a loan...provided you can repay it back...

If you look at US credit bureaus...they rank everyone by a number

every individual has a credit score based on

his credit worthiness...based on income and current loan and his past history...


So...I feel that Countries like PIIGS (Portugal, Italy, Ireland, Greece, Spain)

are way above the top...!!


Deficit financing ...in other simple words...take a loan to pay current dues/ current desires/

current re-building/ current whatever ...is good provided you have a limit on your ability to pay....


so...it is useless to give a loan to the PIIGS because they will never pay it back...

and what is the fun of giving a loan to a person and extracting interest when one fine day he defaults...


They say it so nicely "HAIRCUT"

this means "DEFAULT"

this means that you do not pay...you just write down your loan as deducting X amount of the face value...whatever percent both parties agree....


The politicians at the top do not care....they have a term ...2 years or 3 years or 4 years

to cling on to their chair and say "Not on my watch "

so during this time...they will do anything, anything which makes sense or does not make sense to continue


it is the bankers who have to look at credit worthiness and the ability to pay !!!


no matter how much you sugar coat it....PIIGS are in a mess...

because of their Socialism !!


Always Short the EURO....once it goes up...ride it on the way down !!!

So simple !!

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...a report out from Morgan Stanley on the status of Euro banks and the issuance of LONG-TERM debt. The bottom line is that as of August there is no long-term debt market for the EU financials...




money market funds draining cash from European banks. This was a July data report. Things have gotten much worse since then. The July data scared the crap out of (even) me.


It has been well know that the MMFs were leaving the weaker countries in the EU. What is scary to note however is that the money funds are leaving Germany too. The largest month over month decline came from German banks. Shocking!; is my reaction. Essentially the MMFs are saying, “NO EUROPE”.


...growing list of EU financials that are looking for money and finding that their traditional providers are no saying:






….a side story.


At one point long ago I found myself in the position of being long an FX cash position with a London based French bank. On the other side of this was a short futures position with a street broker by the name of Refco.


There are only two ways out of this situation. One has to either (1) unwind the futures and also the cash or (2) try to do a “give up” of the cash position to the broker. (netting).


This was a several billion dollar position. More often than not the unwind approach costs money (the futures market is very smart at spotting this type of stuff). So I asked the French bank if they would do the wash trade with Refco. (Note: this is very common stuff)


I recall the exact response that was given (with a heavy French accent).


“I’m sorry, that is a bad address.”


At first I didn’t get it. The wording was not the usual, “We don’t take that name”. But it did mean the same thing. The French bank simply would not do business with Refco. I undid the position(s), and it cost me. The "Bad Address" thing stuck with me.


… on 10/10/2005 Refco was busted for lying to the public. Refco claimed to have a $530mm IOU on the books. Actually, it was worthless. Refco went Chapter 11 a few days later. Phil Bennet, the Refco CEO went to the slammer for 16 years.


The … side note ... Europe is becoming a “Bad Address"


Bruce Krasting


My comment would be it already became a "bad address" some time back. My questions are how much worse will it get / is the worst of the 'consequences' over for Eur?

There are, after all, several 'worser' "Bad Addresses"


plus - for fun



Edited by zdo

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With the demise of the EUR as a functioning currency increasing in probability on a daily basis, what do you see emerging to take its place?

DM ‘coming back’ of course – it never left actually… see OP . But, with the coming currency wars, will it be in the same 'fiat' type form as now?

The CHF won’t / can’t stay pegged to ‘DM’ and will be a thick player ( at least as long as there is a war industry left on the planet). But what about the other players? France, in particular? FF succumbs to being a thinly traded mkt like pre EUR? etc.

Thoughts? Thanks.

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EURUSD ~10 in ~12 days

… got a major chunk of this latest example of the theme of the thread… but left too much on the table messing around with it instead of just staying short outright …


…’contrary’ note to self – EURJPY looking for a cycle bottom on the weekly… who knows if it will find it ;)


… odd note to self: question – did they peg the USD and JPY to each other Aug 1st? … and nobody told us? :)


… bizarre note to self: question – what if all the sovereigns just pegged to the yuan?


… reasonable note to self: question – how long before CHF peg fails?

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Overnight, what if they threw every country out of the EUR except for

Germany, France, Italy, Netherlands, and Belgium?


Or… what if, overnight, Germany pulled out of EUR and re - issued the DM… ???

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Does anyone take the Merkel-Sarkozy dog and pony show seriously any more?

Perception management is not a solution.


For the past 18 months, every time reality threatens to intrude in Europe, Merkel and Sarkozy rush onto the global stage for a repeat performance of their dog-and-pony show. The global media declares it an artistic triumph and the "solution" to Europe's insolvency.


The fact that we've seen the exact same performance repeated again and again appears to be lost on the financial media, which never tires of declaring "this is the solution that will end the European bank crisis."


A few days or weeks later, reality once again intrudes, the ugly truth of systemic insolvency rears its frightening head once again…

Guest Post: The Uncredible Dog And Pony Show: Merkel And Sarkozy | ZeroHedge



On an unrelated note, (see arrows on attached) I'm still confused by the 'unannounced' and so far even more effective pegging of the USD and JPY which occurred almost a full month before the 'announced' pegging of the CHF and the EUR. Insights, understanding anyone???? Thx.



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"How cool is it that we live in a world where complicated financial engineering in a radically overleveraged system forms the cornerstone of the solution to these debt problems...Why are we so skeptical? Well, when you go back to the opening months of 2010, it was all about Greece and the prime goal was to prevent contagion to Portugal and Ireland. We know how that went. Then that fall, the risk was Greece, Ireland and Portugal and this was when the term PIG was coined. At that time, the goal was to protect Spain and Italy. And we know how that went. Then just this past July, the crisis moved beyond just Greece, Ireland and Portugal to include Italy and Spain (and this is where PUGS was coined). At this point it was about preventing contagion to the banks, but nothing has worked. The contagion has merely spread, and this is not the first time a late-day press release or policy announcement was leaked to juice the market. So, we are still living in a world were leveraging up is somehow deemed to be a solution to a world of excessive credit and all this will do, again, is just kick the can down the road." As we made it all too clear, far less diplomatically yesterday, "Are we the only ones dazed, confused, and tired beyond comprehension with this endless, ridiculous, pathetic, grovelling Groundhog Day bullshit? Stop risking civil and international war just to satisfy your bureaucratic vanity. THERE IS NO MONEY! YOU KNOW IT, WE KNOW IT, THE PEOPLE KNOW IT. ENOUGH!!!" So much for enough: 6 hours later we had the latest European rumormongering fiasco courtesy of The Guardian which has now devolved to the status of England's latest "paid for publication" tabloid.


David Rosenberg On The Insanity Of Fixing Excess Leverage With More Leverage, And The Relentless Euro Rumormill | ZeroHedge

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its what happens when the dealers of the drug are in charge - government rather than being the 'regulators' of the market have always been one of the worst participants in allowing excessive leverage to occur - they now believe the hype and dont have the balls (except maybe that German chick :)) to stop the rot - why would you - they would not control it when times were good, so why not just try the hail mary pass - they might get lucky. :2c:

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its what happens when the dealers of the drug are in charge - government rather than being the 'regulators' of the market have always been one of the worst participants in allowing excessive leverage to occur - they now believe the hype and dont have the balls (except maybe that German chick :)) to stop the rot - why would you - they would not control it when times were good, so why not just try the hail mary pass - they might get lucky. :2c:


Quoted for absolute truth.


It's been said already (albeit in market terms), but my take on this situation is that the PIGS are done for. The social structure created by the entitlement state is so pervasive that any political process of reform is doomed by virtue of the sheer self-imposed socio-political machine through which any reform must pass before being translated into real economic results. In short, things are going to get much worse for them before they get better because of the built-in resistance factor to navigating the tumultuous seas of the free market that comes with entitlement. They'll get around it eventually, but the process will be slow and painful, and it is made moreso by these bailouts.


So what happens after they adjust to what they laughably consider to be "austerity" measures? My prefered example for this situation is that of East Germany. Even now, more than two decades after the fall of the wall, East Germans are viewed unfavourably by their counterparts in former West Germany and deliver consistently substandard results across all economic sectors. Expect to see everything we've come to expect from peoples and economies that have to be weaned off of crippling state dependence: Slow growth rates, volatile markets rife with illegal activity, and rampant loan defaults - at least for a couple of years at best.


Fortunately, trade and commerce are made of India-rubber, and have, in fact, migrated to India for more rubber, amongst other things/places. Emerging export markets stand to gain from the tumult that will inevitably result from Europe's loss, and with more exports comes more PPI and therefore more imports. Germany also stands to gain from dropping the dead-weight ( and they will be forced to, eventually). The short-term consequences of such a move will be significant and cause temporary downturns, but there is nothing produced in the PIGS nations (to include purchasing power) that doesn't have a hundred ready substitutes. The best thing the EU could do is to kick these nations out, with the possible exception of Ireland for reasons I shall not detail unless asked(due to post length) but principal among which is Ireland's come-lately level of economic freedom.


That said, I'm a new member here and an even newer member of the investing community. I'm still figuring out how to be a good investor, and frankly, there's a lot of jargon people toss around here that I have to look up on a regular basis, so I can't honestly say that I'm someone to listen to or even consider. However, I'm versed enough in basic economic principles that I feel I can offer a reasonably educated perspective on the macroeconomic situation in Europe and what it means for the investing community in the long-term. I'm aware that there's a certain level of presumption in presenting my view, but I feel strongly that I am correct on the points I have made here, and I have the numbers to back that feeling.


Of course, if you feel that I am wrong, in any way, please tell me. I'm here to learn right now, not to teach.


Thanks in advance for any support/criticism,


- James

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What i thought a good summary and assessment from a broker report that was sent to me....(I no affiliation with who it was, it was just someones assessment sent to me by a friend)


Springtime for the euro, then reality

The nice thing about 4AM press conferences is that no one expects or wants them to be long. The agreement eurozone leaders reached with each other and the banks contain the following points:


1) Nominal write-down of 50% (EUR 100bn) of Greek debt in private hands; Greek debt owned by official lenders not touched

2) Remaining Greek debt will be refinanced at preferential rates

3) Bond swap to be done by end-January

4) Closer supervision of Greek adherence to the program

5) EFSF to be levered 4-5 times

6) No ECB involvement in EFSF; but EU officials were hopeful that they would decide to remain supportive

7) President Sarkozy will speak with China on EFSF involvement

8) EFSF will have both a direct insurance and SPV element; looking for EM/IMF support for the SPV

9) Estimates of EFSF firepower ranged from EUR1.0-1.4tn

10) Italy to deliver specific budget and deficit reduction program

11) Banks must meet minimum capital requirements, seek private capital to cover shortfall

12) If private capital raising insufficient, national governments and then EFSF to meet banking sector needs


The full text of the EU Summit statement can be found here: http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/125644.pdf


Overall there was very little that had not been discussed earlier. The euro rallied but the rally did not seem based on much new information since there are very few details and the agreements are to be finalized in the next few months.


We would expect the next 24 hours to be driven by how the Sarkozy call to China President Hu Jintao goes, how investors analyze the sustainability of Greek debt under this program, and the reception that the EFSF proposal will get. We are a bit surprised by the enthusiasm given the lack of detail and lack of surprise. We are also wondering how seriously investors will take the EFSF guarantees (which only apply in the event of a default), given that the banks were strongly encouraged to declare the current restructuring voluntary. Investors may fear that the EFSF guaranteeing governments will similarly contrive to avoid paying out on their first-loss guarantees.


For FX, we see this as broadly positive for risk, since the package seems adequate to avoid any euro zone driven financial market catastrophe for the next year or possibly longer, but it is probably not enough to improve euro zone growth prospects a lot and there are a lot of loose ends that could unravel. We continue to prefer small G10 currencies with good fundamentals (CAD, AUD, NOK, SEK, NZD). We think they will be supported by macro policies in the US, UK, Japan and China (if needed). We also note with satisfaction that investors have forgiven CAD and AUD for dovish central banks and weak CPIs -- we think that they will continue to be bought more on risk than off rate differentials.


We doubt that this package can bring long-term support to the euro, even as we note that there are a lot of committed USD sellers out there. There is a risk of running stops to the upside, as positions still seem somewhat short EUR, but we don't think this package can sustain major gains unless outside money is more enthusiastic about backing euro zone debt than either the ECB or euro zone governments seem to be, and we are not sure why this should be the case...

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We doubt that this package can bring long-term support to the euro,...


Yep, the OP was about adding the EUR to a very short list.

It used to be just the USD but now I love to see both the EUR and USD rally so I can short them.

They take turns leading in the long race to the bottom.

Will keep going to the well until it’s dry or poison…

So climb!

Climb high little euro!

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…finally QE x.28… not announced as such, of course…


The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank have announced a coordinated plan to provide liquidity support to the global financial system. According to the plan, the Federal Reserve is going to substantially reduce the interest rate that it charges the European Central Bank to borrow dollars. In turn, that will enable the ECB to lend dollars to European banks at a much cheaper rate. The hope is that this will alleviate the credit crunch which has gripped the European financial system by the throat. So where is the Federal Reserve going to get all of these dollars that it will be loaning out at very low interest rates? You guessed it – the Fed is just going to create them out of thin air. Our currency is being debased so that Europe can be helped out. Unfortunately, the impact of this move will be mostly “psychological” because it really does nothing to address the fundamental problems that Europe is facing. It is up to Europe to solve those problems, and so far Europe has shown no signs of being able to do that.

Michael Snyder


Also see

22 Reasons Why We Could See An Economic Collapse In Europe In 2012


so Fly little euro Fly!

Don’t worry - just FLY high… will have stops underneath for when you come back down

(and will also start resisting your little uptrend from above within the next 12 hours...)

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If the EURUSD were following recent correlation levels with the US indexes, the EUR would be back to 138.40 +. Instead it is near 1.34, down, and a third of the way back to it's 11/25 lows

This is related to the OP but I'm not sure how directly... hm ??

...nothing's 'fixed' in EuroTrash ... and the newly created USD's will not trickle down very far below the first recipients...


fwiw, I will not be giving these new shorts much wiggle room late Sun or early Mon am.... might even get flat.

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This is related to the OP but I'm not yet sure how directly... hm ??

If the EURUSD were following recent correlation levels with the US indexes, the EUR would be back to 138.40 +. Instead it is near 1.34, down, and a third of the way back to it's 11/25 lows

...nothing's 'fixed' in EuroTrashLand ... and the value of the newly created USD's will not trickle down very far past the first recipients...


There's a current "Trading Pullbacks" thread... maybe one of the methods could be - if an instrument is trash then just short into any and all rebounds...


...but fwiw, while the basic premise of the thread still holds, will not be giving my new shorts much wiggle room late Sun or early Mon am.... might even get flat...


Ya'll have a great weekend.

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