Enzio's Clock - US & thus Global: Four events and a funeral - Comments

Dear Sir,Your last sentence

Enzio — Sun, 11 May 2008 19:05:45 +0800

Dear Sir,

Your last sentence is your answer. Hitherto, markets have focused on the problems facing banks. In my opinion, the Fed is plugging the holes of commercial banks. These need cash injections just in order to stay afloat, e.g. by maintaining liquidity ratios decreed by the regulators.

Now, imagine you are in a boat. It has a hole. You have plugged that hole. Surely the first thing that you do is to get ashore asap in order to stay safe. So, back to the dry world of economics, banks won't lend.

Now they are faced with a worsening Economic Time in America, so up go the corporate (i.e. non-bank) defaults. Your boat is safe and ashore. If you go back out to sea - i.e. if you start lending to corporates that are about to sink - would that make sense?

Greetings from Phuket, Enzio

Is my understanding of the

DrDog — Tue, 06 May 2008 04:14:50 +0800

Is my understanding of the Actions of the Central Banks and the Commercial banks correct?

1. The Fed is trying to help the commercial banks and Investment banks by offering cheap dollars for them to borrow in order that they do not fail and secondly the Fed is hoping the commercial banks will start lending to everyone?

The commercial banks and investment banks are borrowing the cheap dollars offered by the Fed, but only to strengthen their Financial Statements with no intentions of lending to others?

Isn't it logical for the Banks to borrow the cheap money, strengthen their financial statement and then start lending as quickly as possible, after all, their business model is to collect interest on loans? So, why won't the banks lend. Do they believe the economy is so bad that every one is a credit risk?

Fair enough. Thank

vanzell — Mon, 05 May 2008 22:02:59 +0800

Fair enough. Thank you.

van

Van, that's too specific for

Enzio — Mon, 05 May 2008 19:23:17 +0800

Van, that's too specific for my way of doing things. Sorry.

I am more concerned with

vanzell — Mon, 05 May 2008 01:27:07 +0800

I am more concerned with re-shorting the Dollar. I am having difficulty finding a good way to determine the best entry ranges against the EUR/JPY. Do you have any method I could use in determining that or alternatively, do you have any speculative range of the EUR/JPY decline against the Dollar?

Thank you,

van

well spotted, Van. Yes,

Enzio — Sun, 04 May 2008 13:48:27 +0800

well spotted, Van. Yes, along with everyone else I'd go long dollars in the short term.

As you know, my service is of strategic nature so I don't make such "calls". But this does not negate your keen observation!

Enzio,If central banks and

vanzell — Sun, 04 May 2008 01:33:56 +0800

Enzio,

If central banks and commercial banks are at odds in term of their lending practices (e.g. central banks push liquidity that commercial banks are reluctant to offer as loans) wouldn't that indicate a relative liquidity tightening? If that's the case - wouldn't that be bullish for the Dollar (short term)?

US & thus Global: Four events and a funeral

Enzio — Sat, 03 May 2008 18:28:38 +0800

Teaser:

This week's newspapers have been festooned with four bits of monetary news:

Japan has decided to stop raising (?) rates;
America's Fed (probably) has decided to stop slashing rates;
America's Treasury Secretary Paulson thinks that the credit crisis is over half done with, and
Just yesterday, the Fed expanded its cash-loan auctions and tweaked other liquidity measures.

So how do you make money off this policy sea-change? This piece has been written particularly for our subscribers who are naturally long of dollars or dollar-pegged currencies...like we are here in Hong Kong.

Health warning: this piece is heavy going, but, I hope, rather rich in content...Also, per our Advice Tracker, you know that we are not right in everything that we say or in all of our investment suggestions, but then, we are mere mortals...

Topics Covered:

Super power - or "super paltry" currency?
Government monetary interventions and The Economic Time™
What this implies for inflation and thus interest rates according to The Economic Clock™
How to make money off these ideas