Posts by "macrosam"

Have not read all the posts but agree with catnip from what I've perused. Turning point of PBOC likely will occur within timeframe of 2012 transition of power.

Re: Catnip "Think twice: ECB monetizing of PIGS bonds could be compared to FED monetizing California bonds. The FED doesn't buy Ca bonds. Why not? "

Sorry for the delayed response, but the answer is that the Fed does not have to. There is more than enough investor appetite, both domestic and foreign. The ECB has to buy garbage that few others would touch.
http://www.bloomberg.com/news/2010-09-17/international-buyers-increase-u-s-muni-bond-holdings-15-to-83-billion.html

The reason once again goes back to what I have been stating repeatedly, though in different hues. Foreigners have to redeploy their long USD back into the US in order to sterilize the appreciative effects on their own currencies. If they do not do this, then they must be prepared to redeploy those USD into other currencies or assets (USD denominated assets). But then that recipient nation must be willing to either absorb the US's deficit with that capital exporting nation or in turn reallocate that capital back into the USD via US Treasury or asset purchases in order to sterilize the impact on their own currencies. No one currently (or normally) wants to absorb another nation's deficit. With Europe being unable to sustain its deficit, the US is being leaned into even more heavily, hence the continued bid in UST and other US assets. We've already seen Japan's unwillingness to absorb the US's deficit with China after China decreased UST holdings and increased JPY and JGB purchases. No one wants to absorb that deficit. This is also why USD bears do not see the big picture. The world reserve currency, by its nature, must be provided in excessive supply to meet the world's demands. This necessary excessive supply along will bring many to question its soundness. If there is not ample supply of that world reserve currency, you will have deflation and depression resulting from what essentially is a destruction of money supply, a la what drove the downfall of gold as a currency or as a currency peg (limitations of physical supply in regards to its application towards both tangible and intangible value).

I have all but been assured that China (SAFE) does not employ leveraged strategies. That was my first suspicion as well. It makes sense not to as well.

I don't antipate EUR/USD to get back above 1.30 for anything longer than a cup of coffee, but I am waiting and watching as the uncertainty during these times is hard and technicals are making me lean towards further downside in EUR as it appears we are at a near term top (from off the 1.26 recent lows). I will be patient and let things play out as my timing has been a bit off recently.

Keep in mind that the largest investors in the world are pension funds and insurance companies. Both sell liability product and consequently must own a spread above their liabilities not only to meet obligations but to generate profits. Pension funds are severely underfunded to they must continue to put a bid into higher yielding assets otherwise they must contribute more of their funds to these asset pools.

The losses of $430bn attributed to Zhou are likely hyperbole, especially considering that China's total holdings of UST are in the neighborhood of $900bn and China does not implement the use of leverage (no derivatives) or curve trades (i.e. no steepeners, flatteners, butterflies, etc). More likely than not this may have something to do with corruption, especially in response to the grey market income report released a few weeks ago by Credit Suisse that China has come out through state controlled media to vehemently question.