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The definitive U.S. Dollar Rally Thread

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  • Thu, May 13, 2010 - 05:04pm

    #41
    Peak Prosperity Admin

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    Re: The definitive U.S. Dollar Rally Thread

Bonds are dollars. There are NO differences. Rollovers are now insane, we are talking weekly now, not monthly and all is moving to the short side of the curve.

Zerohedge has been front running this, their site is down right now but if you google rollovers +treasury debt +zerhedge +short side of the curve I think you’ll see what I’m driving at. It is, without any doubt, unsustainable.

1.6 quadrillion has NOTHING to do with the bond market or sensational MSM cash flows. You might want to read up on the off balance sludge that is on the worlds banks balance sheets for it is beginning to unwind.

Link

 The unregulated derivative market is now 55 times the size of all the world’s GDPs 600 trillion in total (audio link).

According to Table 3 OCC.pdf (from our Treasury) 200 trillion of this toxic mess reside here in US banks. Tyler, over at ZeroHedge, ran a piece pegging it at 1,600 trillion (1.6 quadrillion). The subprime mess was 1.5 trillion. It blew up the economy. We now have wave two of the Alt-A and Option Arms rolling to shore. Another 1.5 trillion. A lot of this consists of NINJA loans. Those are no income, no jobs, no documentation. I suppose putting down you make 100k when you don’t have a job doesn’t defy corruption?

  • Thu, May 13, 2010 - 05:56pm

    #42
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    Re: The definitive U.S. Dollar Rally Thread

Instead of going back and forth, let me ask it this way, tossing this obnoxious monkey on your back: Can you show me one country that had a currency crisis that DIDN’T have a bond market implosion?

Lessons From The 80’s: Nothing New Under The Sun (Davos)

Does anyone here remember the Latin American debt crisis in 1982? It was a lot like Greece…. 

In the FDIC’s own words: “The crisis began on August 12, 1982, when Mexico’s minister of finance informed the Federal Reserve chairman, the secretary of the treasury, and the International Monetary Fund (IMF) managing director that Mexico would be unable to meet its August 16 obligation to service an $80 billion debt (mainly dollar denominated). The situation continued to worsen, and by October 1983, 27 countries owing $239 billion had rescheduled their debts to banks or were in the process of doing so… 

Sixteen of the nations were from Latin America, and the four largest, Mexico, Brazil, Venezuela, and Argentina, owed various commercial banks $176 billion, or approximately 74 percent of the total LDC debt outstanding. Of that amount, roughly $37 billion was owed to the eight largest U.S. banks and constituted approximately 147 percent of their capital and reserves at the time. As a consequence, several of the world’s largest banks faced the prospect of major loan defaults and failure.

  • Thu, May 13, 2010 - 07:03pm

    #43
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    Re: The definitive U.S. Dollar Rally Thread

Davos, why do you even debate US Bond or dollars future – as you seem to think the 1.6 quadrilion in derivatives will trump everything.  Why do you even discuss the US Bond or currencies, if deriatives will bring down the house regardless of how we handle future deficits/budgets? 

Regarding the net number of outstanding derivatives – that number is lame.  Give me the net exposure – the net potential risk and then do the math to tell us what the odds are of the different loss amounts.  Remember that the vast majority of derivatives have perfectly offset risk – and so the vast amount of this 1.6 quadrillion (your number…not mine) has no risk whatsoever.  Further, of the remaining amount, even in end time scenarios only a tiny fraction would fail. The 1.6 quad number is like me betting you $100 team XYZ will win, with you betting they lose and saying the economy has $200 in exposure to the game.  Um, no…its zero exposure.  One loses, one wins, and the net is zero.  Please dont start a debate on counter party risk unless you have concrete numbers to back it rather than guesses or quotes from Tyler Durden.

Now, more realistic is to say there is substantial derivative risk…fine.  And, is that an issue?  Definately…but the only reason to throw around a number with a Q in front of it is to attract attention and seem dramatic – – – but know it does nothing for our knowledge and only promotes panic in those uneducated in the subject matter.  Tyler Durden should be congratulated for the 2 or 3 great articles he has done in the past 2 years…but the rest of it belongs on the Alex Jones website.  Here is a good piece re Tyler and Zerohedge:  http://wallstreetpit.com/9714-outing-zero-hedge

The misinformation and slanted journalism of MSM must stop.  I should also note that its infiltrated the posters on this site and has spun out of control.  Anyone reading any financial work from anyone posting things on this site should have their BS filters set on high.  Anyone trusting Tyler Durden at zerohedge should check his facts in several different locations as his writting is designed to get people returning by pushing peoples hot buttons (Glen Beck or Alex Jones anyone???).

Last, I would love some response to my specific points about the bond not = dollar other than a simple repeat that the bond is the same as a dollar.  Without them, your argument fails.

 

 

 

 

 

 

  • Thu, May 13, 2010 - 07:14pm

    #44
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    Re: The definitive U.S. Dollar Rally Thread

re your post “lessons from the 80’s”…..

Again, make specific counter points to my comments on the asset side of the equation backing the US bond.  I dont want more big numbers re debt, rolling debt times, or historical examples of currency crisis – – I want specific responses to the fact that the US has massive amounts of wealth and net present value of cash flows to prevent a crisis for a long time relative to the net present value of future liabilities.  Its about net cash flows, not just outflows.

Balanced…full picture accounting.  The banks hide and disregard their liabilities these days, Davos disregards the US’s assets.  haha…

  • Thu, May 13, 2010 - 07:32pm

    #46
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    Re: The definitive U.S. Dollar Rally Thread

[quote=rickets]

I want specific responses to the fact that the US has massive amounts of wealth and net present value of cash flows to prevent a crisis for a long time relative to the net present value of future liabilities. 

[/quote]

Is that a freudian slip? I hope you weren’t being serious. What the US does have is massive amounts of DEBT. We are the most indebted nation in the world.

  • Thu, May 13, 2010 - 07:40pm

    #47
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    Re: The definitive U.S. Dollar Rally Thread

Wow, who’da thunk that I’d be the bear on summer metals? 

I’m cautious as hell right now guys. If there’s one thing that I have learned the past three years, it’s that the unexpected should be expected. There’s gold fever right now, and all gloom and doom over the impending death of the euro. 

I’m not buying it. True, I think the Euro is dead, but not yet… not yet. 

I’m waiting to see what happens once the smoke (and panic, and fear) clear from the ECB bailout. Remember, all of this is happening a mere month and a half before the rather predictable summer doldrums. If this recent elation for gold and silver winds up cooling off just before the summer season, then.. is it possible that we could be looking at a local high for the metals? or a rather sharp retracement to come? 

In 2008 we all thought that we’d be eating beans out of a can by now. But none of us saw the unexpected. Never underestimate the establishment’s ability to kick the can. Something doesn’t seem right about this. We’re assuming that this won’t stabilize. 

  • Thu, May 13, 2010 - 07:49pm

    #45
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    Re: The definitive U.S. Dollar Rally Thread

[quote=rickets]

re your post “lessons from the 80’s”…..

Again, make specific counter points to my comments on the asset side of the equation backing the US bond.  I dont want more big numbers re debt, rolling debt times, or historical examples of currency crisis – – I want specific responses to the fact that the US has massive amounts of wealth and net present value of cash flows to prevent a crisis for a long time relative to the net present value of future liabilities.  Its about net cash flows, not just outflows.

Balanced…full picture accounting.  The banks hide and disregard their liabilities these days, Davos disregards the US’s assets.  haha…

[/quote]I had this argument before in 2006 with the VP of a community bank over the housing market. He used the identical argument: The blogoshphere is full of misinformation, my numbers were wrong, derivatives won’t matter and I wasn’t taking into consideration the vast wealth or the assets. 

Like I told him: Think what you want.

PS: You can count derivatives as assets or wealth, I’m not. The banks count them too, and repo the bad ones that would kill their ability to keep their doors open.

  • Thu, May 13, 2010 - 07:49pm

    #48
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    Go Rickets, Go!

Rickets, I’m with you for the most part on this. In particular,

[quote=rickets]

Please dont start a debate on counter party risk unless you have concrete numbers to back it rather than guesses or quotes from Tyler Durden.

Tyler Durden should be congratulated for the 2 or 3 great articles he has done in the past 2 years…but the rest of it belongs on the Alex Jones website.[/quote]

Amen to that. And don’t forget (for the uninitiated who may be reading) that “Tyler Durden” is a pseudonym used by a former hedge fund analyst who was banned from the industry for insider trading.

It’s frustrating as hell because ZeroHedge has ALL THE RIGHT SUBJECT MATTER – I mean better than any site on the net in terms of covering the right topics as opposed to the surface-level perspective of the MSM. But you need a gargantuan BS filter to sort through his writings and separate the fact from the conspiracy theory.

However, I have to stick up for my friend Davos with regard to a substantive issue I think you’re trivializing:

[quote=Rickets]Regarding the net number of outstanding derivatives – that number is lame.  Give me the net exposure – the net potential risk and then do the math to tell us what the odds are of the different loss amounts.  Remember that the vast majority of derivatives have perfectly offset risk – and so the vast amount of this 1.6 quadrillion (your number…not mine) has no risk whatsoever.  Further, of the remaining amount, even in end time scenarios only a tiny fraction would fail. The 1.6 quad number is like me betting you $100 team XYZ will win, with you betting they lose and saying the economy has $200 in exposure to the game.  Um, no…its zero exposure.  [/quote]

Whoa there, Rickets. Now you sound like Tyler Durden rearranging the facts for your own convenience!

The whole point is that the system is dependent on the fact that those derivatives are risk-balanced, and fails to account for the fact that the risk balance is spread across different entitites that are not required to post margin. When one of the major players goes belly-up, the whole system is unbalanced and the risk goes exponential instantly. That was the whole rationale for saving AIG – the domino effect of unbalancing derivative risk could cause a cascading series of defaults across the entire financial system.

Davos my good friend, I’m covering your back here and sticking up for you on the derivative risk thing, but I’m afraid Rickets is right on the other issues. Cash does not equal bonds, and to be honest your recent posts have been slipping to a Durdenesque credibility level. Don’t go Jones on us!

All the best,

Erik

 

  • Thu, May 13, 2010 - 07:53pm

    #49
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    Re: The definitive U.S. Dollar Rally Thread

Thanks Erik:

I’m not going Jones on you. My point is the bond is the egg which precedes the chicken. The eggs getting laid are rotten, rotten dollars will hatch. Take care.

  • Thu, May 13, 2010 - 07:54pm

    #50
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    Re: The definitive U.S. Dollar Rally Thread

ZH is disappointing the hell out of me lately Erik.  You’re spot on. All the right facts. But Tyler is becoming the National Enquirer of the financial blogosphere with his daily “sky is falling” sensationalism and what I interpret to be seeing way too much into the data at hand. 

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