The Royal Bank of New Zealand continues to communicate to markets its belief that the kiwi is too strong. As such, the RBNZ is maintaining a low interest rate posture that is fueling a housing bubble with New Zealand housing up almost 10% from May to May. The major world central banks have forced monetary easing on everyone else. Of course, there is no need to worry, Kiwis. I’m sure that your housing market will have a soft landing and not cause a banking crisis.
The best way to avoid getting soaked in this game is not to be a sucker. Being a short-term trader is an expensive, time-consuming job. If you do not wish to pay for primary access to information and spend the time observing markets to learn about the vagaries or supply and demand, then you are just gambling.
The professional speculators will always beat the amateur gamblers in the long-term. The system is and always will be unfair. If you do not like it, don’t make short-term market bets.
As the red line in the chart indicates, the Nikkei has completed a round trip from 12,500 at the onset of 2-2-2 to 16,000 during the height of exuberance in May back down to 12,500 as investors realize that Japan is still Japan. The country is a victim of both a demographic disaster and the Cantillon Effect. The country cannot be awoken from its torpor with money printing or any other intervention, because it is not sleeping. Japan is dying.
This guy was in charge of the ECB throughout the entire boom to bust cycle of the new euro, 2003-2011. He claims that the OMT program is legal. It is not, though it is certainly necessary. The only thing holding up those periphery bond prices is the ECB. One day, the emperor will be shown to have no clothes, but today is not that day.
We have been monitoring the emerging market situation for quite some time now. Nothing has changed since our May 2 inflection point. Capital is slowly jogging out of emerging markets and into… I really don’t know. The usual havens are not showing massive inflows.
The chart above shows the plight of the Philippine peso. Note that this is basically the same pattern experience by all emerging markets. Since May 2, their currencies, bonds and stocks have been weakening in lockstep.
If you ever invest money in Argentina, then you deserve whatever happens to you. Argentina has been a rogue financial state for over a century now. As recently as the early 1900’s, the country had living standards comparable to the U.S., but it has been a basket case since then. The consensus among economists is that Argentina will have another financial crisis soon foretold in the exchange rate chart above, but they all believe that it will not be as severe as the last crisis.
I glean two pieces of information from the consensus views of all those economists. First, either Argentina will have a crisis that puts the 2001-2 to shame, or it will not have one at all. If you agree with the latter statement, reread the first line of this post.
As Juvenal imparted to us over two millenia ago, the keys to ruling are bread and circuses. The Greek government was able to remain in power (and alive) despite cutting off bread to a great deal of the population, but it may not be able to survive the elimination of the circuses. The largest protests in months were spurred by the PM unilaterally shutting down Greek public stations. Let’s hope that our government never makes the same mistake. We can accept optional wars, scandals and Big Brother monitoring our communications, but don’t you dare take those Kardashians or the NFL away from me!
The mainstream media loves touting the Eurozone banking union and never takes a moment to critically analyze what the eurocrats are telling them. In this case, the elephant in the room is the paltry sum available to resolve failed banks, €60bn. This amount of money is simply not sufficient. The Spanish banks alone will probably require this much capital within a year, not to mention all of those dodgy Italian and French institutions. The bottom line is that if these countries want to preserve their euro, they better open their wallets.