A U.K. vote to leave the European Union on June 23 would cause major currency fluctuations and dent growth in the country, according to Ramin Nakisa, global macro strategist at UBS. He estimated it would have an approximately "2 percent impact on GDP (gross domestic product) in the U.K. over the long term." However, the "biggest effect would be on FX (foreign exchange), so we're saying euro/sterling would go to parity if there was an exit," he told CNBC Friday.
- The Currency Shares British Pound Sterling Trust ETF (NYSEARCA:FXB)
- The iPath GBP/USD Exchange Rate fund (NYSEARCA:GBB)
The boards of many of Britain's largest listed companies have made no contingency plans for a possible Brexit amid polls showing rising public support for leaving the European Union. The Financial Times contacted every FTSE 100 company, and only four- Easyjet, Persimmon, GKN andStandard Life - said they were engaged in detailed planning for a Brexit. Asked what measures it was taking to prepare, Vodafone, on the other hand, said "none of note required".
- *SAUDI ARABIA SAID TO SEEK DETAILS ON BANKS' FORWARD CONTRACTS
- *SAUDI ARABIA SAID TO PROBE BANK CURRENCY TRADES AS PEG STRAINS
- *SAUDI ARABIAN MONETARY AGENCY SAID TO WARN BANKS ON PRODUCTS
There has been renewed speculation that the world’s biggest oil exporter won’t be able to maintain the riyal’s peg to the dollar as revenue plunges and the kingdom weighs paying government contractors with IOUs. Riyal forwards for the next 12 months rose to 590 points, the highest since Feb. 19, according to data compiled by Bloomberg, signifying increased speculation of a devaluation.SAMA is asking banks to explain the rationale and relevance of the structured products for the economy and explain why they’ve entered into the products without informing the central bank, according to the people. It also wants transaction details of the derivatives since Jan. 18.It’s also seeking to understand the impact of the products on Saudi banks’ U.S. dollar buy positions from the central bank as well as the risks to customers and banks, they said. The central bank warned any future structured derivative product should be submitted to SAMA for review and approval before they’re launched.
Three-month interbank offered rates in Riyadh have suddenly begun to spiral upwards, reaching the highest since the Lehman crisis in 2008.Reports that the Saudi government is to pay contractors with tradable IOUs show how acute the situation is becoming. The debt-crippled bin Laden group is laying off 50,000 construction workers as austerity bites in earnest.Societe Generale’s currency team has advised clients to short the Saudi riyal, betting that the country will be forced to ditch its long-standing dollar peg, a move that could set off a cut-throat battle for global share in the oil markets.Francisco Blanch, from Bank of America, said a rupture of the peg is this year’s number one “black swan event” and would cause oil prices to collapse to $25 a barrel. Saudi Arabia’s foreign reserves are still falling by $10bn (£6.9bn) a month, despite a switch to bond sales and syndicated loans to help plug the huge budget deficit.The country’s remaining reserves of $582bn are in theory ample – if they are really liquid – but that is not the immediate issue. The problem for the Saudi central bank (SAMA) is that reserve depletion automatically tightens monetary policy.Bank deposits are contracting. So is the M2 money supply. Domestic bond sales do not help because they crowd out Saudi Arabia’s wafer-thin capital markets and squeeze liquidity. Riyadh now plans a global bond issue....Eventually the next cyclical oil spike will come to the rescue. The question is whether the Saudis can batten down the hatches and make it through the financial storm in a very leaky ship.
http://www.zerohedge.com/news/2016-05-26/saudi-officials-crackdown-fx-market-currency-peg-starts-strainFor oil, however, the most crucial point is what happens to Middle East currencies and in particular to the Saudi Riyal. In fact, Saudi Arabia’s FX reserves are still high and point to an ample buffer for now, but they have been falling at a relatively fast rate (Chart 21). However, should China allow for significantly faster FX depreciation than is currently priced in by markets, we believe oil prices could fall further. Naturally, the FX reserve drain on Saudi could accelerate to $18bn per month if Brent crude oil prices average $30/bbl (Chart 22), sharply reducing the Kingdom’s ability to retain its currency peg.However, if Saudi cannot resist the gravitational forces created by a persistently strong USD and depegs the SAR to follow Russia or Brazil, oil prices could collapse to $25/bbl. Weaker commodity prices would in turn add more downward pressure on EMs (Chart 26). Thus, even if micro supply and demand dynamics are improving, the path for oil prices in 2016 will heavily depend on how the USD moves against the CNY and the SAR. Or on a Saudi supply cut.
- Reduction of quality
- Less quantity, but for the same price (less chips in the bag, every year)
- Intentional, engineered 'appearance' of more (there are less chips, and bag is bigger too)
- Accompanying marketing 'feel good' slogans
5/24/2016 COLUMBIA SC - Elite E Services today has released "Splitting Pennies - Understanding Forex" in a new softcover US Trade edition. This is the best edition yet! It's 6x9 and includes recent articles such as the Big Red Forex Button....
Among the many revelations in the Senate Intelligence Committee’s investigation into the use of torture by the CIA is this crucial detail: The CIA delegated much of its “enhanced interrogation” to others.The report discloses that in 2008, 85 percent of the workforce in the CIA’s Rendition, Detention and Interrogation Group was made up of contractors. Former FBI special agent Ali Soufan, who was at the center of the Sept. 11 investigations, told FRONTLINE that he believes that the CIA’s most troubling interrogation practices can be traced to the agency’s decision to hand over key responsibilities to these outsiders.“They hired people from outside,” said Soufan, who testified to Congress in 2009 about what he saw as the many flaws in the CIA’s procedures. “We hire the best and the brightest to work for the government, and then we outsourced to people who we have no clue who they are.”
The other part of the world that could produce a rival to the United States is Eurasia. Eurasia is a region of extremely varied geography, and it is the most likely birthplace of an American competitor that would be continental in scope. Geography, however, makes it extremely difficult for such a power (or a coalition of such powers) to arise. In fact, the southern sub-regions of Eurasia cannot contribute to such formation. The Ganges River Basin is the most agriculturally productive in the world, but the Ganges is not navigable. The combination of fertile lands and non-navigable waterways makes the region crushingly overpopulated and poor.
The government approaches work in an entirely different way than in private enterprise. Healthcare.gov - the world's first billion dollar website, is another great example. Now imagine the task the Department of Defense is given; protect America from external threats. Their first step, to identify threats. In the military, this is done by agencies such as the CIA and the NRO. Actually if the CIA operated according to its public mission, it would be an analyst agency not much different than those seen on Wall St. - providing information to their DOD bosses who act on it. Since 911, the potential for financial terrorism has been considered a national security issue. It's in the laws, it's in the regulations, it's serious. What if the Saudis flood the market with US Dollars? What if the Chinese dump treasuries crashing the US Dollar? What if hackers take control of the NYSE and flood the market with sell orders, causing a crash? These are all extremely improbably events, so rare there is a higher chance of a giant meteor striking Manhatten this year. The probability is so low it's difficult to calculate. But just like the false threat of Russian's launching nukes, billions of dollars have been spent building a Big Red Button to press in case it happens. It's because government workers have one thing in mind; protect themselves. Avoid a potential disaster. The last thing any government worker wants is to be in charge of security on a day like 911, even if the threat is financial. Although the debate rages about TARP and government actions during the weekend of the Bear Stearns collapse - the financial system was saved. They pressed the button. But this wasn't the Forex button.
More details are being released about the anonymous expose of Washington D.C. corruption and largesse that confirms why Americans hate their national government and have rallied to anti-establishment presidential candidates like Donald Trump. As NYPost reports, the 65-page manifesto called 'The Confessions of Congressman X' is based on years of transcribed private discussions, which the congressman last November gave editor Robert Atkinson, says more time is spent fundraising than reading bills and calls Washington a "sinkhole of leeches," where money 'corrupts' and House members are "puppets" to lobbyists who bankroll their campaigns.
- USA can revoke the powers of the Fed, and create their own government run central bank
- USA can make null and void, use of the US Dollar as "Legal Tender" - to be replaced by a new currency, something electronically, centrally controlled
- USA can freeze all incoming and outgoing Foreign Currency transactions (which are processed by the Fed)
Too many problems still: The biggest problem is that DBK has too much leverage. On our measures, we believe DBK is still over 40x levered. DBK can either reduce assets or increase capital to rectify this. On the first path, the markets do not exist in the size nor pricing to enable it to follow this route. Going down the second path also seems impossible at the moment, as the profitability of the core business is under pressure. Seeking outside capital is also likely to be difficult as management would likely find it hard to offer any type of return on new capital invested.
The difficulty in analysing investment banks from the outside is that it is hard to establish core profitability. In an industry in structural decline, investment bank management teams are also likely to face similar challenges. Each weak quarter is seemingly greeted with an excuse that it could have been better if not for the wrong type of volatility, client uncertainty or central bank intervention. Q1 2016 saw the absence of one-off profitable events that have protected revenues in the past. We have perhaps had the first glimpse of what core profitability in the investment banking industry really is (ROEs in the midsingle digits at best) and it could be even worse if the traditional seasonality occurs.
Price target cut to EUR9.00: We look at DBK’s valuation in two ways. One is a sum-of-the-parts analysis on the basis of normal conditions returning. This would imply a price target of EUR15.00. The second is a leverage adjusted P/E using the sector average multiple of 10x. This implies a price target of EUR9.00, using tangible book value. Considering “normal” conditions are unlikely to return and risk is re-pricing, we use the latter.
The critical issue now is that the U.S. dollar is appreciating again. The
Bloomberg Dollar index is up 2.8% in the last two weeks and another 2%
wouldn’t be an unreasonable consolidation in the context of it dropping
more than 7% in the previous three months.That previous dollar slide distracted from the fact that yuan depreciation never abated. Against the basket, it’s been weakening at an average rate of almost 1.2% per month for the last five months.The market’s single-minded focus on USD/CNY is crucial and it’s also why disaster can still be averted. It will require the PBOC to temporarily suspend their yuan-weakening policy for as long as the dollar is climbing.Otherwise, prepare to batten down the hatches for the coming storm.
“Like most of my colleagues, I promise my constituents a lot of stuff I can never deliver,” he admits.“But what the hell? It makes them happy hearing it . . . My main job is to keep my job.”
The title of one chapter sums up his view of congressional leaders: “Harry Reid’s a Pompous Ass,” he says of the Senate Democratic leader.“We spend money we don’t have and blithely mortgage the future with a wink and a nod. Screw the next generation. It’s about getting credit now, lookin’ good for the upcoming election,” he says.
“I contradict myself all the time, but few people notice,” X says. “One minute I rail against excessive spending and ballooning debt. The next minute I’m demanding more spending on education, health care, unemployment benefits, conservation projects, yadda, yadda, yadda.”
“Voters are incredibly ignorant. It’s far easier than you think to manipulate a nation of naive, self-absorbed sheep who crave instant gratification . . .,” vents Congressman X.He says money “corrupts” and House members are “puppets” to lobbyists who bankroll their campaigns.“Business organizations and unions fork over more than $3 billion a year to those who lobby the federal government. Does that tell you something? We’re operating a f–king casino,” he says.He describes himself as a “closet moderate” who supports charter schools and tax vouchers to allow poor kids to go to private schools.
“Our education’s in the toilet, and all we do is snipe at each other,” he says.Congress is too polarized and partisan to get anything done, by the congressman’s account.“There seems to be a complete disintegration of confidence in government. A fear that government is its own special interest,” he says.
“America’s on an irreversible decline and no one in Washington seems to care . . . God help us.”
My “CHAIN OF COMMAND” METHOD
- Never use a STOPLOSS when finding a new set file.
- And any type of stoploss in an EA is ALWAYS THE VERY L-A-S-T thing to finish your set file as it has NOTHING to do with how your EA runs but is there as a LAST safety device. EA’s on the net that attempt to use a SL as a active part of their set files are giving away tons of profits and their profit graphs in back-tests are choppy because they are way under developed and should be avoided. The more a EA is developed (logically, -Chain of Command) the “smoother” it will trade as its program is more advanced/developed so it deals with market conditions better.
- Use 1 notebook for each pair. You will find that the better you keep your notes the more use you’ll get out of them later as you read and go over your notes perhaps looking where there might be a “fork-in-the-road” that you can return to, to perhaps find a better setting. I do this all the time as there are “forks” at each major “step” within the set file. I’ll define these as we go on.
- DD%'s (Max & Rel)
- Win/Loss ratio
- Total trades
by Wayne Madsen, via Strategic Culture
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