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Thoughts on the Greek Referendum

October 31, 2011
While I have consistently been highlighting the political risks in Greece that could throw a new monkey wrench into European plans and global capital markets, today's turn took me by surprise. The euro had been trading heavily all day and Italian bond yields were holding above 6%, despite talk of ECB purchases, and the French-bund spread was w…
Thoughts on the Greek Referendum Thoughts on the Greek Referendum Reviewed by Marc Chandler on October 31, 2011 Rating: 5
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German 55.5 bln euro Error to be Explored

October 31, 2011
It appears that an accounting error at FMS Wertmanagement, the bad bank for Hypo Real Estate, may have overstated the debt by 55.5 bln euros (~$77.7 bln). FMS. FMS has reportedly corrected its figures, to lower the debt by 24.5 bln in 2010 and by 31 bln euros for this year. The accounting adjustment will reduce Germany's debt/GDP by a couple o…
German 55.5 bln euro Error to be Explored German 55.5 bln euro Error to be Explored Reviewed by Marc Chandler on October 31, 2011 Rating: 5
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BOJ Shows Hand and Other Developments

October 31, 2011
The Bank of Japan intervened unilaterally in the foreign exchange market for the first time in three months and sent the dollar from JPY75.35, record lows, to JPY79.50 in two hours. Estimates put the size of the intervention at a new single day record near JPY6 trillion. The IMM Commitment of Traders showed the next speculative position had more t…
BOJ Shows Hand and Other Developments BOJ Shows Hand and Other Developments Reviewed by Marc Chandler on October 31, 2011 Rating: 5
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Six Events and a Few Things to Watch in the Week Ahead

October 30, 2011
Risk appetites returned in a big way in October, as equities, emerging markets, commodities and currencies all generally advanced and smartly so, recouping much of the ground lost in September. The events in the week ahead will likely set the tone for the month of November. They include three central bank meetings (RBA, Fed and ECB), two data poin…
Six Events and a Few Things to Watch in the Week Ahead Six Events and a Few Things to Watch in the Week Ahead Reviewed by Marc Chandler on October 30, 2011 Rating: 5
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To Forgive is Divine

October 27, 2011
Markets rallied strongly in response to the European developments. Yet it is an exaggeration to think that this rekindled risk appetites as the whole month of October has seen equities, emerging markets, commodities and foreign currencies trend higher, recovering from their neck-breaking, wealth-destroying plunge in September. Still the advance on…
To Forgive is Divine To Forgive is Divine Reviewed by Marc Chandler on October 27, 2011 Rating: 5
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Look to Fade Relief Rally

October 27, 2011
Big sigh of relief that European officials delivered the bare minimum amount of details of the new plan, which are largely as had been anticipated here and elsewhere. The broad outlines consist of a 50% haircut on private sector holdings of Greek bonds, leveraging the EFSF 4-5x for firepower of around 1 trillion euros, 9% Tier 1 capital by mid-201…
Look to Fade Relief Rally Look to Fade Relief Rally Reviewed by Marc Chandler on October 27, 2011 Rating: 5
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A Follow Up to the Absence of a Muni Crisis in the US

October 26, 2011
On October 4th I wrote "One Crisis that Did not Materialize", which discussed the fact that the fears of hundreds of billions of dollar losses from defualts in the municipal bond market proved wide of the mark. Many were skeptical. Here is the latest data.
The Rockefeller Institute's analysis of Census Bureau data found that prelimin…
A Follow Up to the Absence of a Muni Crisis in the US A Follow Up to the Absence of a Muni Crisis in the US Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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Australia: Rate Cut Likely Next Week

October 26, 2011
Minutes from the recent RBA meeting kept the door ajar to a rate cut next week, and today's CPI figures, especially the fact that the preferred trimmed mean measure rose 0.3%, half as much as the consensus expected and bringing the year-over-year rate to 2.3% from 2.6%. Pushes the door wide open. Barring some major shock in the coming days, th…
Australia: Rate Cut Likely Next Week Australia: Rate Cut Likely Next Week Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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Berlusconi Cuts Deal: Et Tu Brute

October 26, 2011
Controversial Italian Prime Minister Berlusconi appears to have finally capitulated to international and domestic pressure. Press reports indicate that he has agreed to step down by January. This in turn will bring forward elections, probably to March 2012, a year earlier than Berlusconi had previously insisted.
Italy would join a number of other c…
Berlusconi Cuts Deal: Et Tu Brute Berlusconi Cuts Deal: Et Tu Brute Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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D-Day for Europe? And What's Up with the Yen?

October 26, 2011
The euro has remained firm even as the US S&P tumbled yesterday, Asia stocks slip and expectations for the outcome for today's summit continue to ratchet lower. It does continue to stall out in the $1.3950-60 area. The $1.3840-50 area still marks the first level of support, though the $1.3890 area held in both Asia and Europe.
At most, an …
D-Day for Europe? And What's Up with the Yen? D-Day for Europe? And What's Up with the Yen? Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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CNBC: Waiting on a European Debt Solution CNBC: Waiting on a European Debt Solution Reviewed by magonomics on October 25, 2011 Rating: 5
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Three Political Events that Should be on Your Radar

October 25, 2011
Tomorrow's EU Summit is the markets main focus. The key issue is whether European officials can finally provide closure to the two year old debt crisis and deliver the "comprehensive" and "decisive" package they have repeatedly promised. We are skeptical as governance structures and diverse interests of the stakeholders len…
Three Political Events that Should be on Your Radar Three Political Events that Should be on Your Radar Reviewed by Marc Chandler on October 25, 2011 Rating: 5
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Choppy Consolidation: Flavor of the Day

October 25, 2011
The major currencies are in relatively narrow ranges in choppy trading ahead of tomorrow's EU summits and German parliament vote. The major foreign currencies remain firm as the North American session is about to begin.
Most attention is on the EU and euro zone summit tomorrow, but the German Bundestag vote is very important as well. The vote …
Choppy Consolidation: Flavor of the Day Choppy Consolidation: Flavor of the Day Reviewed by Marc Chandler on October 25, 2011 Rating: 5
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Much Noise but Pattern Holding

October 24, 2011
The pattern in the foreign exchange market remains intake by which the major currencies often move in the direction of the recent trend and some follow through on Monday before some consolidation kicks in. The euro and sterling made new 7 week highs today in early Europe and the Australian dollar made new six week highs. However, as the European s…
Much Noise but Pattern Holding Much Noise but Pattern Holding Reviewed by Marc Chandler on October 24, 2011 Rating: 5
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European Summit: More Talk Needed, but Something Emerging

October 23, 2011
The European debt crisis turns two years old. On average there is a crisis management summit a little more frequently than every other month on average. The most concrete and certain thing to emerge from the weekend's summit is that there needs to be at least one more before the November 3 G20 summit, which is a deadline of sorts for a resolut…
European Summit: More Talk Needed, but Something Emerging European Summit: More Talk Needed, but Something Emerging Reviewed by Marc Chandler on October 23, 2011 Rating: 5
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Europe: Your Rope

October 20, 2011
European officials simply cannot get out of their own way. They are their own worst enemy presently.
First assurances that a durable comprehensive solution would be forthcoming. Then lower expectations, with even reports suggesting that at this late date Germany could cancel the summit. More likely that they agree to some frame work now and the de…
Europe: Your Rope Europe: Your Rope Reviewed by Marc Chandler on October 20, 2011 Rating: 5
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Pessimism Grows, FX Consolidation Continues

October 20, 2011
The focus remains squarely on Europe. Concern that France and Germany are moving in two different directions undermines the already fragile sentiment and weakens expectations ahead of the weekend summit. This has kept the euro confined to the ranges carved out Monday-Tuesday--$1.3653-$1.3914. The lower end of the range seems more fragile today, bu…
Pessimism Grows, FX Consolidation Continues Pessimism Grows, FX Consolidation Continues Reviewed by Marc Chandler on October 20, 2011 Rating: 5
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Thoughts on Recent Price Action and Drivers

October 18, 2011
The position adjustment and renewed risk appetite seen after a dismal September has been halted in its tracks by a combination of the more somber warnings from German officials that the sense of closure that many investors seek to the 2-year old European crisis will remain elusive despite the Berlin-Paris pledge for a comprehensive and durable sol…
Thoughts on Recent Price Action and Drivers Thoughts on Recent Price Action and Drivers Reviewed by Marc Chandler on October 18, 2011 Rating: 5
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Preview of the Week Ahead

October 16, 2011
Corrective forces are likely to weigh on the US dollar through most of the week. The critical event will the the European summit. There is much anticipation for what has been called "durable" and comprehensive" action to address the European debt crisis.
More broadly speaking, over the last couple of the weeks the capital markets ha…
Preview of the Week Ahead Preview of the Week Ahead Reviewed by Marc Chandler on October 16, 2011 Rating: 5
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Outlook for European TARP

October 16, 2011
What Winston Churchill said about America—that it can be counted on to do the right thing after it exhausts the other alternatives—seems equally applicable to Europe. It is slowly but inexorably moving toward its own version of TARP—the U.S. “toxic asset relief program”. Rather than sub-prime mortgages and related derivatives, the toxic assets in …
Outlook for European TARP Outlook for European TARP Reviewed by Marc Chandler on October 16, 2011 Rating: 5
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Fed's Custody Data

October 13, 2011
The Federal Reserve has long competed with the private sector in offering foreign central banks custodial services (yes Brown Brothers Harriman, my employer is offers custodial services to a wide range of asset manager). The Fed reports its holdings every Thursday. Today it reported that custody holdings fell by $21 bln in the week through Wed.
Th…
Fed's Custody Data Fed's Custody Data Reviewed by Marc Chandler on October 13, 2011 Rating: 5
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Consolidation Emerges

October 13, 2011
Since October 4th low through yesterday's high the S&P 500 has rallied almost 14%. In the same time the euro US Treasuries have fallen for six consecutive sessions before today. Some popular technical retracement targets of the down late summer down move have been approached and it should not be surprising for the markets to consolidate a …
Consolidation Emerges Consolidation Emerges Reviewed by Marc Chandler on October 13, 2011 Rating: 5
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Watch Italy

October 12, 2011
The domestic machinations in Slovakia will soon be resolved and passage of the EFSF reforms remains the high probability scenario. The bigger political risk may lay with Italy today.
After losing a vote that seemed largely a formality yesterday (approving last year's government balance sheet), Prime Minister Berlusconi is under pressure to hol…
Watch Italy Watch Italy Reviewed by Marc Chandler on October 12, 2011 Rating: 5
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Currency Correction Continues, Greenback Drops

October 12, 2011
The extreme market positioning leaves many long dollar holders in weak hands. The longs tried making a stand, but it has been rebuffed and the dollar is falling victim to profit-taking and stop-loss chase. Both sterling and the euro have posted new legs higher today to extend the correction that began last week.
At $1.5785 it has retraced a 38.2% …
Currency Correction Continues, Greenback Drops Currency Correction Continues, Greenback Drops Reviewed by Marc Chandler on October 12, 2011 Rating: 5
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Gold, S&P, and the Euro: Correlations Revisited

October 11, 2011
(This follows up on this post.) The elevated volatility levels have made for difficult times for many investors. To simplify the complexity, there is much reference to risk-on and risk-off. We look at the correlations (60-day rolling correlation of the percentage change) between gold, S&P and the euro and find a more nuanced and varied relatio…
Gold, S&P, and the Euro: Correlations Revisited Gold, S&P, and the Euro: Correlations Revisited Reviewed by Marc Chandler on October 11, 2011 Rating: 5
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Wild Card for Tuesday--Slovakia ?

October 10, 2011
Slovakia could very well be the wild card for tomorrow. Thumbnail sketch--4-party governing coalition split on it. Slovakia would be on the hook for 7.7 bln euros 1 percent funding. Sounds like peanuts maybe...but Slovakia's GDP is only around 65 bln euros. The cabinet met for three hours today and failed to reach an agreement. The vote is sch…
Wild Card for Tuesday--Slovakia ? Wild Card for Tuesday--Slovakia ? Reviewed by Marc Chandler on October 10, 2011 Rating: 5
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Same Drivers, New Targets, Be Careful of Turn Around Tuesday

October 10, 2011
Thin market conditions and extended positioning is producing a most dramatic reaction in the foreign exchange market. The initial targets suggested here for the correction have been either achieved or neared much sooner than expected.
Here are the next objectives. A move above $1.3700 in the euro would target $1.3850 and then possibly $1.40. A move…
Same Drivers, New Targets, Be Careful of Turn Around Tuesday Same Drivers, New Targets, Be Careful of Turn Around Tuesday Reviewed by Marc Chandler on October 10, 2011 Rating: 5
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Corrective Pressures Unfold, Lift Equities and Commodities, Weigh on Dollar

October 10, 2011
The market misread the Fitch downgrade of Italy and Spain before the weekend. The rating agency was largely lagging the other rating agencies and the market. With Tokyo markets closed, it was fairly easy to extend the pre-weekend euro losses, but with talk of European bank recapitalization, Merkel and Sarkozy's pledge for new and bolder action…
Corrective Pressures Unfold, Lift Equities and Commodities, Weigh on Dollar Corrective Pressures Unfold, Lift Equities and Commodities, Weigh on Dollar Reviewed by Marc Chandler on October 10, 2011 Rating: 5
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Bloomberg: Zandi, Chandler on U.S. Economy, European Crisis Bloomberg: Zandi, Chandler on U.S. Economy, European Crisis Reviewed by magonomics on October 07, 2011 Rating: 5
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Quick Word on Jobs Data

October 07, 2011
I had thought I had gone a bit out of the limb warning of the risks of a stronger than expected report and that the stronger the report the worse the dollar would perform. Instant gratification, but with holidays in the US, Canada and Japan on Monday, the market may not significantly extend the dollar's decline ahead of the weekend. However, s…
Quick Word on Jobs Data Quick Word on Jobs Data Reviewed by Marc Chandler on October 07, 2011 Rating: 5
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Jobs Featured

October 07, 2011
The US jobs report is obviously the main event today. It is one of the most difficult high frequency data to forecast. While cognizant of the uncertainty and slack in the economy, I think the risk of an upside surprise is greater than it may appear. I say this primarily because the recent string of US economic data has surprised on the upside. Eco…
Jobs Featured Jobs Featured Reviewed by Marc Chandler on October 07, 2011 Rating: 5
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BOE and ECB: What it Means and What is Next

October 06, 2011
The Bank of England, which has a penchant for surprising the market, choose not to wait for the quarterly inflation report to provide cover, and announce GBP75 bln additional bond purchases over the next four months. Although many recognized it was possible, only 11 of 32 economists surveyed by Bloomberg expected the asset purchases to be announce…
BOE and ECB: What it Means and What is Next BOE and ECB: What it Means and What is Next Reviewed by Marc Chandler on October 06, 2011 Rating: 5
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China Bill: Huff, Puff and Bluff

October 05, 2011
US national elections are 13 months away and not coincidentally, the Congress is looking at a new measures to encourage China to re-value the yuan. While there is little doubt that the yuan in under-valued, though reasonable people may differ on the magnitude, politics more than economics appears to be the driving force.
The most important threats …
China Bill: Huff, Puff and Bluff China Bill: Huff, Puff and Bluff Reviewed by Marc Chandler on October 05, 2011 Rating: 5
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Position Squaring Featured Ahead of Key Events, Data Shrugged Off

October 05, 2011
The euro has been the biggest beneficiary of the bout of position squaring ahead of tomorrow's ECB meeting. The move began yesterday and has survived the three-notch downgrade of Italy's sovereign rating by Moody's and a new erosion in the service sector PMI (to 48.8 from the 49.1 flash reading and 51.5 in Aug)and poor Aug retials sale…
Position Squaring Featured Ahead of Key Events, Data Shrugged Off Position Squaring Featured Ahead of Key Events, Data Shrugged Off Reviewed by Marc Chandler on October 05, 2011 Rating: 5
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Greece Runs out of Money, but When?

October 04, 2011
Troika officials have postponed for the second time the decision on the next tranche of Greek aid under the 2010 agreement. While this seems to tempting the fates and fanning fears of a default, it does not appear that Greece needs the money until the mid-Nov, the new time frame for the Troika's decision. The postponement is probably best unde…
Greece Runs out of Money, but When? Greece Runs out of Money, but When? Reviewed by Marc Chandler on October 04, 2011 Rating: 5
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One Crisis that Did Not Materialize

October 04, 2011
A little more than a year ago, many investors were worried about the US state and local government finances. There were genuine concerns that what was happening in Greece could very well be the future of numerous US local governments. Yet the much forecast debt crisis of US city and state governments failed to materialize.
While Greece and other …
One Crisis that Did Not Materialize One Crisis that Did Not Materialize Reviewed by Marc Chandler on October 04, 2011 Rating: 5
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Turn Around Tuesday Falls Flat

October 04, 2011
The counter-trend moves often seen on Tuesday is falling flat today. The euro fell to the $1.3145 before finding a bid. A break here will target the $1.3045 area, the 61.8% retracement of the euro's rally that began in early June 2010, the last time the euro was below the $1.20 level. On the top side, the $1.3225-50 may be sufficient to cap.
S…
Turn Around Tuesday Falls Flat Turn Around Tuesday Falls Flat Reviewed by Marc Chandler on October 04, 2011 Rating: 5
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Chutes and Ladders: Preview of BOE and ECB Meetings

October 03, 2011
The Bank of England and the European Central Bank meet this week. There is much speculation that both can alter policy. We suspect there may be risk for disappointment, but that disappointment with the BOE, could trigger a bounce in sterling, while disappointment with the ECB could see the euro sell-off.
The outcome of the Bank of England meeting …
Chutes and Ladders: Preview of BOE and ECB Meetings Chutes and Ladders: Preview of BOE and ECB Meetings Reviewed by Marc Chandler on October 03, 2011 Rating: 5
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Hardly Calm, but Storm Comin'

October 03, 2011
The US dollar is beginning what could be a momentous week on generally firm footing. The European finance ministers meet today and RBA, BOE and ECB meet later this week and the US reports jobs data at the end of the week. The Japanese Tankan and European manufacturing PMIs do nothing to weaken growing pessimism about the world economic outlook, bu…
Hardly Calm, but Storm Comin' Hardly Calm, but Storm Comin' Reviewed by Marc Chandler on October 03, 2011 Rating: 5
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