Archive for January, 2012

A Bit-O-Money Honey

Monday, January 30th, 2012

The International Monetary Fund’s Christine Lagarde explains just how to use the tape measure on your neighbor whose fireman’s suit may be lacking the room it needs for a “tailor-made” firewall.  However, before the wall is built, a Bit-O-Money is the order for the day. 

“It is critical that the euro zone members actually develop a clear, simple, firewall that can operate both to limit the contagion and to provide this sort of act of trust in the euro zone so that the financing needs of that zone can actually be met, if the finances of the world are not interested in that zone,” Lagarde continues. “It’s for that reason that I am here, with my little bag, to actually collect a bit of money.”

 

Here’s a link to the video of her offical panel comments: http://202.108.9.138/news.jsp?fileId=129783

Here’s a video of a follow-up interview where she explains how to tailor “some corners” of the fire suit with a bit-o-compulsory tailoring. Dave calls this the square peg in the round hole custom tailoring method where you simply drive home your “simple” firewall with a custom-made hammer.

Dave can only think of one question to ask Ms. Lagarde and it’s a variation on the Jerry Maguire theme of helping me, help you… “Show me the firewall.”

….Aaaand……. It’s Gone

Monday, January 30th, 2012

According to the in-depth reporting of the Wall Street Journal, the money that you had on account with MF Global didn’t disappear, it just changed forms.  It went from a solid to a liquid and then from a liquid to a vapor.  It’s still there, it was just, well…. uh…. it was vaporized.  Dave will allow them to explain.  He’s just a blogger.  They are real journalists. 

http://online.wsj.com/article/SB10001424052970203920204577191014034430488.html?mod=WSJ_hp_MIDDLETopStories

If you don’t understand how this could happen to your account, obviously you have never sat in this seat.  The video animation explains, the vaporization technique.

 If you’re having difficulty accepting the “Not anymore you don’t… Poof!” explanation for accounting integrity at the CFTC, please allow Bart Chilton to explain the circuitous relationship between circles and smoke.  Remember, you’re paying his salary.

http://tradewithdave.com/?p=9122

 

Soros Offers Skidpad Solution

Sunday, January 29th, 2012

Soros Explains To Eurozone Leaders The Distinctions Between Marco Polo, Auto Polo & Driving While Blindfolded

The self-appointed driver of the so-called “open society” movement, invokes his best Danica Patrick as he explains just how exactly reckless drivers recover from an impending car crash.  There is no mention of applying the brakes.  Simply steer into the skid if you want to avoid crashing.  A crash would ultimately result in losing your sovereign driver’s license, having your hands removed from the wheel and your car being taken over by another driver. 

Here is George’s “delicate two-phase maneuver.” 

Step 1… impose reforms

Step 2… stimulate through issuance of Eurobond debt.

Here’s the full article: 

http://www.nybooks.com/articles/archives/2012/feb/23/how-save-euro/

By the way, George would like to know why all you twenty-somethings out there in Europe are not rioting.  For more on how to Save Our Ship Soros Style readers may enjoy this: http://tradewithdave.com/?p=9070 and this  http://tradewithdave.com/?p=6164

The Likelihood Of Upswings

Sunday, January 29th, 2012

File:MaoStatueinLijang.jpg

The Chairman… perfecting the upswing  (photo: Wikipedia)

The fine folks over at Allianz Global Investors ask the question; “Why is China’s upswing likely to continue?”  Dave gives his answers.

Allianz says…  China’s currency reserves amount to U.S. Dollars of $3,000 billion.

Dave says…  That makes China’s reserves equal to 30 Facebooks (based on their pending IPO valuation of $100 billion).  Wow! 

Allianz says… China’s currency reserves would be sufficient to buy the entire global gold reserves. 

Dave says… Exactly.  Please try to buy them and when you do gold will be $50,000 per oz. and your reserves will be worthless relative to gold.

Allianz says… Domestic developments, such as the pick-up in inflation and weak domestic demand, suggest China will permit a gradual renminbi appreciation. 

Dave says… Huh?  How exactly is it that “weak domestic demand” and “renminbi appreciation” (i.e. Americans can’t buy Chinese TV sets at Best Buy anymore) equate to a China’s upswing being likely to continue.  Did I miss something? 

Allianz says… China can boast a security net for its currency. 

Dave says… That’s right.  China’s currency is CNY.  You’re selling CNH.  China’s currency reserves are in CNY, not CNH. 

Allianz says… China will probably continue to drive global growth. 

Dave says… Don’t bet on “probably.”  Do bet on definitely. 

Allianz says… Due to capital and exchange-rate controls demand has a smaller effect on the exchange rate of the onshore renminbi (CNY)

Dave says… Who controls the capital and exchange-rate controls?  Oh yeah… the Chinese government.  You can trust them.

Allianz says…. Increasing exchange-rate spreads between the CNH and the CNY cause Chinese companies to conduct their FX transactions (renminbi into other currencies) in Hong Kong. As a result, the supply of renminbi in Hong Kong increases.

Dave says… I thought you just said that capital controls are what allow the supply of CNH Renminbi to increase in Hong Kong.  Now you’re saying that it is the spread.  Which is it?  Is it price discovery or manipulation?  Oh yeah… it’s manipulation. 

Allianz says… Arbitrage opportunities for Chinese companies help to optimise the exchange rates of the offshore and the onshore renminbi (if the exchange rate is the same, there will be no arbitrage)

Dave says… I thought you said “only local and selected foreign investors” may invest in chinese currency.  Now you are saying Chinese companies engage in price discovery narrowing the spread and eliminating the arbitrage.  So is this a free-market engagement or simply a few hand-picked banks that are doing the dirty work for the People’s Bank of China by trying to trick folks into believing that Renminbi in CNY is the same as Renminbi in CNH? 

Do you really expect Dave, or anyone else for that matter, to believe that “Chinese companies” would engage in this arbitrage if they were centrally directed to no longer engage in the arbitrage?  You’re counting on them to create the equilibrium between the two disparate currencies?  Dave don’t play that game.  It’s called Communism. 

Here’s the new brochure… read it for yourself:  http://www.allianzglobalinvestors.ch/Documents/PRS_RenminbiCurrency_b2b_en_EU_0112.pdf

 

 

Pete Peterson’s Dollar Store

Saturday, January 28th, 2012

File:2008-10-07 Dollar General in Durham.jpg

photo: Wikipedia

Pete’s piece on how the Chinese got into the same boat as as a one-price retailer bears repeating.

Not to repeat myself, Dave let’s Pete do the talking…

“The law of one price tells us that in an efficient market all identical goods must have the same price. It follows that onshore renminbi (CNY) and offshore renminbi (CNH) should therefore trade at more or less the same exchange rate versus the dollar.”

Then Pete concludes his article by saying…

“In summary, one of the side effects of China’s incremental internationalization process is that you can have two different prices for the same renminbi.”

As Dave said, that’s how you know Pete’s Law of One Price is in effect… when you have two prices.  Here are the charts that explain it.  Just don’t ask Pete to explain the non-fungible nature of the ISDA & NAFMII Master Agreements on derivatives. 

http://www.piie.com/blogs/china/?p=689

Here are the links to the repeat of the Pete posts:  http://tradewithdave.com/?p=8965

http://tradewithdave.com/?p=8986 

http://tradewithdave.com/?p=9141

DaveOS (rhymes with “save oats”)

Friday, January 27th, 2012

File:Luftbild Davos.jpg

photo: Wikipedia

What is DaveOS exactly, you ask?  It’s Dave’s OS… you know, his operating system.  It’s Dave’s MS-DOS or Dave’s I-OS if Dave was a Mac instead of a PC.  DaveOS is not to be confused with Davos (rhymes with ”have oats”).  Davos is a ski resort in Switzerland.  Dave has started a new tradition of spending an entire week with other like-minded Daves celebrating DaveOS while everyone who is not invited to DaveOS goes to Davos to avoid feeling left out.

It’s kind of like one of those clubs for baldheaded men (which Dave is not… Dave is whiteheaded and proudly got his first gray hair at 14 years old), or a club for guys with handlebar moustaches (which Dave also does not sport).  If you’re not following Dave fully, think of it as a Star-Trek convention for Trekkies, but instead it includes Daveys… like Davey Crocket who was king of the wild frontier and no doubt was one of the first people to ski down a hill on hickory bark and probably invented the sport (which Dave loves more than a box of Swiss chocolates from Gump’s of San Francisco). 

This year’s Davos attendees who were just not DaveOS’ cup of tea, will still receive the consolation prize of the Gump’s “Let Them Drink Cake” coffee mug as their parting gift.  http://www.gumps.com/p/my-cup-of-cake?CatalogCategoryID=o7bAqAsLNF8AAAEx_64z9_OY .  DaveOS itself is a Swag-Free-Zone similar to Geneva’s free trade zone for overpriced wristwatches and underhanded tax evasion. 

When you join DaveOS online each year to discuss the So So DEF (Dave’s Economic Forum) not the So So WEF (World Economic Forum) you won’t even have to buy airfaire to a foreign country where corned beef sandwiches cost $25 plus you still get to sleep in your own bed.  So sign up now for DaveOS 2013 by following @TradeWithDave on Twitter.com and you’ll get your exclusive invitation. 

Just how exclusive will it be?  Well, none of these people in the high-resolution photos at the link below will be invited… that’s just how exclusive Dave is and you don’t even need to be named Dave, you just can’t be a member of Soros Open Society because unlike Davos, DaveOS is closed to anyone without an internet connection… Davos is as Davos does (nametags not included). 

http://publicintelligence.net/world-economic-forum-davos-2012-photos/

This post was not brought to you buy GUMPS of San Francisco who like George Soros are also celebrating The Year Of The Dragon: http://www.gumps.com/gifts#~gift-galleries|year-of-the-dragon

Trade With Ted

Friday, January 27th, 2012

File:JunglebookCover.jpg

Ted Butler on silver, courtesy of Harvey Organ:

If JPMorgan is not selling but is, in fact, buying, then a very different scenario could develop, similar to how I have speculated in the past. If JPMorgan is buying and not the technical funds, then a very different and bullish scenario emerges. If JPMorgan decides not to put its head back into the lion’s mouth and withdraws from manipulating silver, then a new silver chapter may have begun. Let me be clear – there is no way of determining for sure who is buying and selling today and this past Friday; only future COTs will reveal that. If it turns out that JPMorgan is buying back more of its short position on these rallies that would suggest much higher prices to come and maybe real soon. This goes to the heart of the silver manipulation. Take away the big silver short and you should take away the manipulation itself. I’m not saying that is the case, just that it might be. I would play it, as I always do, like it may be the end of the manipulation, simply because if it is, there will be little likelihood of second chances to get on board easily.”

Dave’s take on Ted is Rudyard Kiplingesque… “If ” would indeed be the operative word.  It does feel like a jungle out there.  A quiet jungle in the middle of the night.  Who is the lion now, JP Morgan or a few million guys sitting in their boxer shorts with a tin box filled with silver eagles buried in their backyard?

http://harveyorgan.blogspot.com/

SK Options on how an overnight gold trade works:  http://www.skoptionstrading.com/updates/2012/1/14/revisiting-our-proposal-for-an-overnight-gold-fund.html

Dave on why you can trade Blythe Master’s alarm clock from March 5, 2011:  http://tradewithdave.com/?p=5583

I believe the Pan-Asian Gold Exchange will begin trading in June of 2012.  Once they start trading, I believe but cannot verify that this overnight phenomenon will dissipate:  http://tradewithdave.com/?p=9012

More on PAGE:  http://tradewithdave.com/?p=8934

Janet Tavakoli January 19th for HuffingtonPost on manipulation:  http://www.huffingtonpost.com/janet-tavakoli/cftc-price-manipulation_b_1215565.html

Tavakoli again on January 25th:  http://www.huffingtonpost.com/janet-tavakoli/gold-and-silver-price-man_b_1231011.html

Previous silver and JPManipulation posts:  http://tradewithdave.com/?p=9003

http://tradewithdave.com/?p=8293

Shooting Yourself In The Foot… literally

Thursday, January 26th, 2012

Do you have any of those friends who email you the joke of the day, or the latest goofy video of some cat falling into an aquarium or something? Dave generally tries to avoid this, but sometimes I too succumb to the power of humor, especially on the receiving end of a Glock 9 mm. Now, Hopalong Cassidy…

Trade With Dave or Change With Page

Thursday, January 26th, 2012

File:Codex Gigas devil.jpg

Before Google, we had the Codex Gigas (i.e. Giant Book)

If you haven’t read it about it, this is the official change from “Don’t be evil” to “Be evil.”  It’s your “choice.”  No one is making you use google.  How else are they going to get the upper hand over Twitter?

Notice of change

March 1, 2012 is when the new Privacy Policy and Google Terms of Service will come into effect. If you choose to keep using Google once the change occurs, you will be doing so under the new Privacy Policy and Terms of Service.

Larry Page on being conditioned about technology from a very young age…

I think that’s true of kids today as well. If you have access to these things at a really young age, you just become used to it all, and it is natural to you. Kids certainly don’t have fear of using computers now. It’s the same kind of thing. If you grow up in environments where you have ICs (integrated circuits) lying around, you don’t have fear of that either.

After reading about this policy change at Google, all Dave could think about is just how Larry Page is going to explain this to his wife and two children.  Then I started thinking?  I wonder how much information Google offers up on Larry Page’s children, so I simply asked Google… “Does Larry Page have any children?”  Google answered.  Larry has two children, but it didn’t offer their names or the gender of the younger child.  Looks like we could all learn a thing or two from Larry on how to use Google to maintain our privacy.  My guess is that his kids won’t be using Google. 

Wondering what exactly Google thinks about you.  Here’s a link that you can click on and see for yourself:  http://www.businessinsider.com/stop-what-youre-doing-and-go-see-what-google-thinks-it-knows-about-you-2012-1

 Read it for yourself a the link below:

http://www.google.com/policies/

Now Viewed By Many

Wednesday, January 25th, 2012

Charles Feng, regional head of fx, rates and credit trading for North East Asia at Standard Chartered in Hong Kong, said RMB (China’s Renminbi currency) is now viewed by many investors as a fully convertible and fungible currency. 

“The centre of the action is still obviously in Asia, but we see more European corporates who used to do their USD/CNY hedging in non-deliverable forwards or onshore USD/CNY.  They’re now using USD/CNH to hedge their exposures.  The European base and customer are expanding quite rapidly as well.” 

Institutional Investor Derivatives Week, December 26, 2011

http://www.iinews.com/site/rss/DW122611.pdf

An ISDA master agreement and a NAFMII master agreement will not be fungible, for instance, meaning banks will have to set aside two different sets of capital for both instruments.  Clearing houses looking to settle both types of derivatives will also have to collect two different sets of margin, the official said.  “But, if NAFMII does get appproval, all it takes is one local Chinese bank to say that it’s going to use it, say the Bank of China, then you’ll have every local bank using it,” the official said

From the November 28th edition of the same publication. 

http://www.iinews.com/site/rss/DW112811.pdf

Why is Dave making such a big deal about all this?  It seems complicated, but it’s really quite simple.  To be a global reserve currency a country has to allow its currency to freely float.  The same thing would apply to having your currency included in the International Monetary Fund’s “basket” of currencies known as Special Drawing Rights. 

According to the mainstream financial media, China has a goal of becoming an alternative to the U. S. Dollar as the world’s reserve currency.  To do that, China would have to remove certain capital controls that it has in place.  To move one small step in this direction, China has dipped their toe in the water by divorcing its currency (Yuan/Renminbi) into a two-part currency known as onshore Yuan (i.e. CNY) and offshore Hong Kong Yuan (i.e. CNH). 

According to Mr. Feng of Standard Chartered, some of his customers are acting “as if” Beijing has lifted their capital controls and that the market is the single driving force behind the value of their currency swaps.  Why is this a big deal?  If banks have separate capital requirements for CNH and CNY, but customers are operating under the concept that CNH and CNY are fully convertible and fully fungible.  Regardless of how their trading range may be narrowing, wouldn’t that be a trap?