Sunday, October 26, 2008

New info from FX dealer friend (small biz)

Overflow order from big dealers, 14x avg USD market order at open - biz is in HK, Sing, India.
The numbers to watch are 0.5x, 1x (normal), 10x, 100x. Once it passes third base it always score fourth. Never failed. Don't short USD here. Do it at 100x - will update in two-three weeks or so. Watch Citadel blow up. I suspect (east) european Convertible in the books. This will be historical moment when Fed backstops the entire European and hedgefunds universe, in addition to de-facto eventual back of FHLB this week/next. Legendary deleveraging here.

Edit #1: Still on currency, based on this article I think I have nailed pretty solid where FXA bottom is going to be, which I believe about $12 - 15.

http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/australia/3246178/Australia-bans-word-drought-as-too-upsetting-for-farmers.html

Australia bans word 'drought' as too upsetting for farmers
The word "drought" makes farmers feel depressed and should be replaced with "dryness", a panel of Australian government experts has said.


By Bonnie Malkin in Sydney
Last Updated: 11:47AM BST 23 Oct 2008

The group also warned farmers to get used to the lack of rain because dry conditions are expected to continue.

43 comments:

Penn said...

Damn, I have a GBP long in place via ETF.

I guess I am going to get raped on it tonight. Any way to mitigate the risks using futures?

MTGSPY said...

Err? Why long GBP vs. any currency? that is the country that is the worst prepared/capitalized in the next 10 years. That's why Bear C was joking with me that in the London olympics Her Majesty may have to skimp on the show - maybe put a bunch of medievalist tents with here in one of them for peep shows.

I do understand the motivation in some people to avoid loss of "purchasing power" in USD but GBP is not supposed to be one of them.

MTGSPY said...

I didn't mean to avoid answering the question, but it's one thing to know the disease and quite another to know the cure.

Somebody sent me a link to
http://www.professorfekete.com/math.asp

Which I believe strongly that this guy knows what ails you but cannot cure you (he's suggesting people buy gold).

Penn said...

My reason for going long GBP was a pure gamble, not too much thought behind it.

I always considered 1.6 dollar to a GBP as a line in the sand. Dollar used to trade in this range for the longest of time.

With the parabolic rise of the dollar in the last few weeks I just could not resist shorting it. Oh well, the position is small so will not cause too much damage.

gtt said...

Short dollar != long quid.

Try going long Swissys next time.

MTGSPY said...

This is just a gamble of mine GTT and not to bust your chop, but I think FXF long mindset is very similar to Freddie/Fannie and AXP longs in the sense that you have the "right" to infinite leverage because of your sterling asset quality and trusts. :D

Greenie said...

UK is one country that is not going to exist after this depression. Another one is India.

I would rather go long swissy than GBP, if I am so inclined.

MTGSPY said...

Where would India be? It's been scheduled for armageddon in the past 3000 years and never materialized? :D Just kidding. Marginnayan's optimism leaks out to me I guess.

So, I was right about my weekend hunch on foreign currency "stresses"? This won't be mere words being exchanged in the end, mind you.

PCap said...

India has religion issues, internal social unrest.

D said...

Regarding London

http://www.elitetrader.com/vb/showthread.php?threadid=135330

MTGSPY said...

I saw Jayarammv posts in TF with interests especially now that a lot of rejection letters are falling upon elite cadres of IIT graduates. I found it very hard to believe that they would take 7 lakhs (14K USD) because I think prices are about the same for everything across the world now - talk about some kind of imbalance.

gtt said...

So, we gonna crash tomorrow? That was a nasty close.

MTGSPY said...

Gtt,

Always. Or we can just pull 2-500 points a day off the bulls wallet if you prefer.

People got emotional when it comes to mathematics, but the truth is that housing money, a leverage, propels another leveraged system, US corporations, to earn the way they did in 2000-2006. We have just started to turn down on earnings and where do you figure the long term potential, unlevered earnings are going to be for the SPX? I put my money on the $20, with a good chance they dip to negative for a while until the bulls eyes popped out of their sockets in disbelief by 2H 09.

mliu_01 said...

I think India is pretty fucked. They are starting to build infurstructure now. But it is kind of late. And the outsource for IT is not going well.

mliu_01 said...
This comment has been removed by the author.
gtt said...

Any chance the rush to dollars reverses soon?

jpick said...

mliu, my man, haven't seen you around tf much...hope you're doing well

mtg,

you expect currency routs again tonight??

MTGSPY said...

Hang on, I think US is gonna be forced to "bail" everyone by extending unlimited swap TAF-style to EVERYONE.

When that happens, I will update in ONE sentence what you need to do. Believe me you won't be surprised why I said that :D

MTGSPY said...

It's here already!!!!!!!

Get ready:

Oct. 28 (Bloomberg) -- Korea Development Bank was approved by the Federal Reserve to sell as much as $830 million of commercial paper to the U.S. central bank.

State-run KDB can raise $400 million in the U.S. by selling short-term notes, Sung Joo Yung, a spokesman for the Seoul-based bank, said today by telephone. The bank will roll over an existing $430 million of debt, he said.

Kookmin Bank, South Korea's largest, was also deemed eligible to sell commercial paper to the Fed, spokesman You Jung Youn said by telephone from Seoul. The amount of debt Seoul-based Kookmin will sell hasn't been determined, he said.

The Maeil Business Newspaper today reported Kookmin would be able to borrow as much as $50 million.

South Korea's government pledged last week to guarantee as much as $100 billion of the overseas debt of local banks to ease a liquidity squeeze. The state guarantee will cover about 140 percent of each bank's foreign-currency debt due by mid-2009.
http://www.bloomberg.com/apps/news?pid=2....

gtt said...

What will this do - treasury dislocation -> long rates rocket?

Greenie said...

"We have just started to turn down on earnings and where do you figure the long term potential, unlevered earnings are going to be for the SPX? I put my money on the $20"

Mr. Spy, Do you know what earning means? You are hanging around with financial companies for too long.

MTGSPY said...

Suppose I don't and the burden of proof lies upon you to convince me to come back in after being robbed so badly. And suppose in Q2 09 all I see is negative earnings for SPX aggregate.

Now, you have your work cut out for you. That's not easy at all to explain when comes the time. I live in reality, Greenie.

Greenie said...

I like the london thread.

"The most popular name in the UK is Mohammed" :)

However, I must admit that I am a Mr. Beans fan and am ready to give Brits few points for their humor.

So Mr. Spy, when is that crash scheduled? Do you have a new ETA?

MTGSPY said...

Relax Greenie. I will do it Attila style posting it REAL TIME! :D

Greenie said...

Atilla predicted everything from 1300 to 650 within the short span of two weeks, all real time :) :).

BTW, I am hearing that a large UK based global bank is in trouble. Is that Barclays?

D said...

Greenie-

They're all in trouble brother!

:)

D said...

Atilla's followers are going to be slaughtered, it's only a matter of time. It's not good broadcasting positions for multiple reasons...

MTGSPY said...

Both HSBC and Barclays have bought subprime units in the US and now have an unknown billions of bad loans being hidden somewhere in the balance sheet. For IT rally the key is the FX. Find me a convincing double bottom on JPY or double tops in rupee/AUD/IDR/KRW and hopefully the news of US bailout for "global liquidity" and there's your 300 pt ES rally. Surprised? :D The best goodies always come the last, Greenie.

Greenie said...

Really? Rupee will be in trouble? Who cooda thunk, when my parents were converting their rupees into gold three months back? Some genius said that they would be bankrupt for buying gold.

Greenie said...

"They're all in trouble brother!"

I have no doubt, but Mr. Spy said Barclays for his safe account and so I am wondering about Barclays. What is recommendation about DBS bank, Mr. Spy? I have to open an account somewhere to protect myself from falling sky.

Greenie said...

In response to your TF comment:

"By keeping it I don't mean being afraid of losing 20-30% in a selloff buying assets (stock, RE, etc), but also due to other reasons (gov't robbery is pretty high up on my list right now). Don't be angry, I am a veteran of three "seizures" so far, so I know how it plays. But I don't know how to play it when everyone is choked by toxic asset, and there is NO way to force it in the open cuz the guys in control is the one hiding the toxic assets. Honestly if there is a seizure I will not be able to avoid it properly this time - no elegant solution."

Buy gold. That is the solution :)

MTGSPY said...

I was hinting of last night action in FX. I think the selling in rupee is overdone greenie. If that swap comes online this week it's game on for long rupee again.

D said...

The word is Citadel is honoring the peak high watermark level for new capital from FoF.

MTGSPY said...

Well, D, when you have to work for food you can expect the quality of that work? No?

Greenie said...

I see an interesting development in Atilla's blog - nobody believes his call any more.

D said...

MTG -

The way Citadel is structured, nothing will change for the traders. Employee/trader compensation is billed to the investors and the performance fee goes to KG.

They consistently run 5%+ expense PLUS the 20% gravy to KG.

gtt said...

"nobody believes his call any more."

well when you are wrong three times in a row....

D said...

KG isn't the best trader, Cohen is. KG is the best manager and is hawkish on details. They will make it through this, he is vicious and so untrusting that I have faith he will be around long enough for me to go toe-toe with him.

This is a market bottom brother. I don't want to talk you out of your position (that's not cool) and staying short is fine, just place some stops up above somewhere in the event you are wrong.

:)

D said...

If Atilla is trading the size he speaks of, he shouldn't be talking about his trades. That is not the mark of a good fiduciary in this game. It is an old bad habit that the market is telling him to stop. It's his form of advertising the forthcoming fund that next to none of those guys are going to be able to invest in. HFs are all about family office and FoF money...I don't think he has accepted that reality yet.

MTGSPY said...

Well bonuses are paid OVER the watermarks, so how come you expect anything for these guys in the next, uh, 20 years? They can't possibly be paid on how many swaps they entered.

D said...

Mtg, they are compensated on individual performance...that is how Citadel has such large swings in operating expense 8%+ before. That 8% includes the individual traders' performance incentive, not the firm 20% which is not the traders'.

MTGSPY said...

Well those guys times are up. It's started by a random guy who just gets random people lending him money and that snowballs down the hill. Now that game is over.

D said...

KG has had a good run, they are too big in the derivative space to survive this though. He is by no means an average person though.