Comments on: Is the dollar now a credit market play, not an equity play? http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/ Thu, 08 Jan 2009 00:14:14 +0000 http://wordpress.org/?v=2.6.1 By: Stuart http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98201 Stuart Mon, 30 Jul 2007 10:21:27 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98201 "still not seeing why that should lead to a conclusion that the Euro - or Europe - is an equity market play. " I wondered about that too. Euro markets are outperforming vs. Euro interest rate spread will continue to widen vs the dollar “still not seeing why that should lead to a conclusion that the Euro - or Europe - is an equity market play. ”

I wondered about that too.

Euro markets are outperforming

vs.

Euro interest rate spread will continue to widen vs the dollar

]]> By: Guest http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98200 Guest Mon, 30 Jul 2007 10:18:19 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98200 "In... Managed Futures: Changing Course: Becalmed No More... Barron's notes that Red Sox principal owner John Henry's commodity fund is suffering a three year, 40% decline... But... In 2007's second quarter, the portfolio surged 25%. Ironically, Merrill Lynch... ended a long-term relationship with Henry in April and pulled its mostly retail investors' assets out of his fund - almost exactly at the portfolio's lowest point..." http://www.bloggingstocks.com/2007/07/28/red-sox-owners-futures-fund-is-tanking/ “In… Managed Futures: Changing Course: Becalmed No More… Barron’s notes that Red Sox principal owner John Henry’s commodity fund is suffering a three year, 40% decline… But… In 2007’s second quarter, the portfolio surged 25%. Ironically, Merrill Lynch… ended a long-term relationship with Henry in April and pulled its mostly retail investors’ assets out of his fund - almost exactly at the portfolio’s lowest point…” http://www.bloggingstocks.com/2007/07/28/red-sox-owners-futures-fund-is-tanking/

]]> By: Guest http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98199 Guest Mon, 30 Jul 2007 09:29:24 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98199 - or that the USD/United States is necessarily a credit market play. - or that the USD/United States is necessarily a credit market play.

]]> By: Guest http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98198 Guest Mon, 30 Jul 2007 09:26:55 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98198 <a href="http://www.ft.com/cms/s/bb8f50b8-3dcc-11dc-8f6a-0000779fd2ac.html">Funds that shake capitalist logic</a> State investors have other motives besides making companies maximise shareholder value, says Lawrence Summers <a href="http://www.ft.com/cms/s/1fb37926-3dea-11dc-8f6a-0000779fd2ac.html">Big spenders stir protectionism</a> Sovereign wealth funds from Asia and elsewhere are buying into firms in the west but are often less than transparent Funds that shake capitalist logic
State investors have other motives besides making companies maximise shareholder value, says Lawrence Summers

Big spenders stir protectionism
Sovereign wealth funds from Asia and elsewhere are buying into firms in the west but are often less than transparent

]]> By: Guest http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98197 Guest Mon, 30 Jul 2007 09:11:06 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98197 "the dollar is absolutely a credit market play" still not seeing why that should lead to a conclusion that the Euro - or Europe - is an equity market play. “the dollar is absolutely a credit market play”

still not seeing why that should lead to a conclusion that the Euro - or Europe - is an equity market play.

]]> By: Guest http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98196 Guest Mon, 30 Jul 2007 09:06:56 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98196 Interesting to think about the impact of this kind of price correction, across the spectrum, if it happens: "..."The current prices are being driven by speculation rather than physical issues,"... Should that be the case, then oil prices could fall almost as quickly as they have climbed. James Cordier of Liberty Trading Group said he expected oil to be back near $60 a barrel in the autumn..." http://news.bbc.co.uk/2/hi/business/6920159.stm Interesting to think about the impact of this kind of price correction, across the spectrum, if it happens: “…”The current prices are being driven by speculation rather than physical issues,”… Should that be the case, then oil prices could fall almost as quickly as they have climbed. James Cordier of Liberty Trading Group said he expected oil to be back near $60 a barrel in the autumn…” http://news.bbc.co.uk/2/hi/business/6920159.stm

]]> By: Stuart http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98195 Stuart Mon, 30 Jul 2007 09:06:02 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98195 IMO the dollar reaction was a short covering rally. The USD is heavily heavily shorted and was technically very oversold. A short term technical bounce was expected. Long term the dollar is absolutely a credit story, but credit of the US Federal Government. Often neglected in discussions, as the unfunded liabilities "become funded", the fiscal deficit will very much call into question the viability of long term bond holders. It is worthwhile to reflect back to an earlier testimony by Ben Bernanke in addressing a presented question as to why foreigners continue to buy 30 year treasuries. To that question he answered, he doesn't know. That answer is food for thought for everyone reading this forum for if the top banker cannot rationalize the purpose of foreign creditors purchasing long term treasuries, then the dollar is absolutely a credit market play. IMO the dollar reaction was a short covering rally. The USD is heavily heavily shorted and was technically very oversold. A short term technical bounce was expected. Long term the dollar is absolutely a credit story, but credit of the US Federal Government. Often neglected in discussions, as the unfunded liabilities “become funded”, the fiscal deficit will very much call into question the viability of long term bond holders. It is worthwhile to reflect back to an earlier testimony by Ben Bernanke in addressing a presented question as to why foreigners continue to buy 30 year treasuries. To that question he answered, he doesn’t know. That answer is food for thought for everyone reading this forum for if the top banker cannot rationalize the purpose of foreign creditors purchasing long term treasuries, then the dollar is absolutely a credit market play.

]]> By: Guest http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98194 Guest Mon, 30 Jul 2007 08:25:16 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98194 "Trading has surged in put option contracts on European and US stock indices..." http://www.financialnews-us.com/?contentid=2348417008&page=ushome “Trading has surged in put option contracts on European and US stock indices…” http://www.financialnews-us.com/?contentid=2348417008&page=ushome

]]> By: Anonymous* http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98193 Anonymous* Mon, 30 Jul 2007 07:11:24 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98193 Also - the contraction of credit and M has no effect on the monetary base unless the Fed decides to make it so. Also - the contraction of credit and M has no effect on the monetary base unless the Fed decides to make it so.

]]> By: Anonymous* http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98192 Anonymous* Mon, 30 Jul 2007 06:57:19 +0000 http://blogs.cfr.org/setser/2007/07/29/is-the-dollar-now-a-credit-market-play-not-an/#comment-98192 Anonymous ibid: Very good point. Although Fed action to increase liquidity at the margin is normally consistent with reducing the funds rate. The Fed increases liquidity via expanding the monetary base, which will tend to correlate with easier short rates. Whereas maintaining the funds rate at this stage is consistent with allowing some marginal deflationary effect associated with credit contraction, up to a point. Beyond that point, the fed 'put' gets executed, with a lowering of the funds rate. The question is, how far will they allow marginal credit contraction before they feel the need to do this? Anonymous ibid:

Very good point. Although Fed action to increase liquidity at the margin is normally consistent with reducing the funds rate. The Fed increases liquidity via expanding the monetary base, which will tend to correlate with easier short rates.

Whereas maintaining the funds rate at this stage is consistent with allowing some marginal deflationary effect associated with credit contraction, up to a point. Beyond that point, the fed ‘put’ gets executed, with a lowering of the funds rate. The question is, how far will they allow marginal credit contraction before they feel the need to do this?

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