With this week’s ECB’s decision all but official, a more important question looms: what’s next? The ECB is a bank whose primary focus — witnessed in both its charter and its past actions — is price stability. Despite poor economic performance in recent months, the ECB essentially has to raise rates this week, as the [...]
Archive | June, 2008
Have we overshot?
Whether you focus on fundamental or technical analysis when trading currency, you should have a healthy grasp of both.Fundamentally the current account of the US is unsustainable and depreciation was expected.After experiencing such a large depreciation over six years all traders should ask themselves, have we overshot?When I say overshot I reference the Dornbusch model, [...]
Random Country Report: Part 2 – Egypt
The markets are closed, Wall-E is opening in theatres, and by now most people have at least a foot out the door for the weekend. After writing all week about the USD, the Fed, and about how I am a better forecaster of market movements than my colleague John, I have decided to do the [...]
Irrational Exuberance
Irrational exuberance was a term Greenspan used to demonstrate the speculative bubbles that occurred throughout the economy.Robert Schiller used this phrase as the title to his very influential book Irrational Exuberance.The term was invented by Greenspan while he addressed the AEI in Washington DC. “But how do we know when irrational exuberance has unduly [...]
Why Big Banks are Hurting
Ever since the Medici started banking, the industry has been very simple, long term loans from short term liabilities.This system is sound, it’s boring but it works and smart people make a lot of money doing it.However big banks in 2004 began to feel a squeeze in Net Interest Margins, the cost of consumers borrowing [...]
Indecision
The FOMC had its meeting today and they fulfilled expectations. This is evidenced in the 100 pip move shortly following the decision. The market then stabilized and has been flat ever since. What does this reflect? Indecision, it reflects the fact that traders feel the Fed is still ambiguous as to whether they will [...]
A Day in the Life
10:16 AM PST — I am writing right now about an hour before the US Federal Reserve announces what it will do regarding interest rates, along with a hopefully detailed forecast of what is to come. Some of my colleagues (cough… John… cough), have come to the conclusion that the Fed will shock the markets [...]
Game Time!
As I have explained before, there are some days when there is little of note in the FOREX world, so I get the chance to research a random economy somewhere in the world. Today (and I’m sure tomorrow) is not such a day. Everyone’s favorite superpower, the United States of America, came out with important [...]
Enigma Solved, Not Yet
Prior to Wednesday’s meeting the Fed has little room to wiggle.The inflation readings of CPI and PPI are extremely high, while other economic indicators are signaling recession.Let us overview the news that evidences a recession bound economy.The Richmond manufacturing index is down a lot, home price index is down, and consumer confidence is down.There [...]
Random Country Report: India Revisited
My assignment for the day: write 200 times “Next time I will not get too excited when I write about India’s short term economic situation.” For those who have been following India in the past few days, the developments seem anything but the rosy picture I painted last time around. Sure, in the long run, [...]
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