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[cobran20 94]

It could well be that but the breakdown measurement of the possible symmetrical triangle is not that different to the head and shoulders breakdown target.

We'll see if the RBA prints enough cash to drive the break upwards.

Volume on the Dow has picked up considerably during the last two up days. Perhaps a Xmas rally ahead? Whilst the lower trendline is not broken, the party continues.

[Bernard L. Madoff 14]

Watch the DX for a 74 breakdown.

[Mod - edit - removed the embedded image as it was popping up a username and password dialogue]

[Bernard L. Madoff 14]

If your 401k (USA) was all in equities in 1999. Guess what? You haven't made a dime....

http://jessescrossroadscafe.blogspot.com/2009/12/americas-lost-decade-in-equities.html

[cobran20 94]

Is it going to happen this year?

Santa Claus Rally: 40% of the Dow’s Yearly Gain in a 17-Day Stretch

A few weeks ago, I ran the numbers of how well the stock market does for each day of the year. I looked at all of the Dow closings going back to the beginning of the index in 1896.

The best time of the year is a 17-day stretch from December 21 to January 7. Over the last 111 years, the Dow has gained an average of 3.39% during that 17-day period.

To put that in some perspective, the Dow’s annual gain is 8.32%. This means that more than 40% of the Dow’s yearly gain has come during this brief stretch which is less than 1/20 of the entire year

[cobran20 94]

Volume on the Dow has picked up considerably during the last two up days. Perhaps a Xmas rally ahead? Whilst the lower trendline is not broken, the party continues.

The Dow continues to struggle to get above the 50% retracement of the big drop it had after the 2007 top. If it doesn't break above relatively soon, the party could turn sour.

[cobran20 94]

The yields are rising again. Perhaps a Feb 2010 rate rise?

[wulfgar 12]

IMO, 0% chance of a rate rise tomorrow.

Was that a bad batch of chicken entrails?

We'll see if the RBA prints enough cash to drive the break upwards.

Doesn't look like they are printing much cash at all.

Banknotes in circulation 12 months ago.............$50,373 million

.........................today.....................$49,560 million

Looks like deflation dude, if anything they have unprinted!

Watch those dollar shorts go to hell! No equity fairy this Xmas!

[Brimble 0]

Was that a bad batch of chicken entrails?

Doesn't look like they are printing much cash at all.

Banknotes in circulation 12 months ago.............$50,373 million

.........................today.....................$49,560 million

Looks like deflation dude, if anything they have unprinted!

Watch those dollar shorts go to hell! No equity fairy this Xmas!

Should be seeing some repo property on the market any time now ?

Tom

[wulfgar 12]

Should be seeing some repo property on the market any time now ?

Tom

I've been suspecting this for quite a while. I believe the world's mainstream central banks operate under an agreement about how much currency they are allowed to create. And this agreement goes back to Basel 1988. Something that was formulated in hindsight of the riotous currency printing of the 1970's.

The world collectively splurged last year and now the central banks have to make up for it by cutting back this year.

I'd say the banks raising rates at breakneck pace is proof they're experiencing a shortage of cash.

Always remember though raising rates is just one method of rationing money, they could simply curtail lending if they chose.

[merovingian 0]

Banknotes in circulation 12 months ago.............$50,373 million

.........................today.....................$49,560 million

Looks like deflation dude, if anything they have unprinted!

How do they reduce the notes in circulation? Old notes being removed, but not replaced by newly printed notes? That, plus other means?

[Bernard L. Madoff 14]

How do they reduce the notes in circulation? Old notes being removed, but not replaced by newly printed notes? That, plus other means?

basically...yes.

http://www.rba.gov.au/CurrencyNotes/role.html

[wulfgar 12]

How do they reduce the notes in circulation? Old notes being removed, but not replaced by newly printed notes? That, plus other means?

One typical patten is the banks borrow more cash from the RBA in the run up to Xmas. The banks pay interest on this at around the official cash rate. The demand for cash is greater around around Xmas, many withdrawing funds they had saved during the year for Holiday spending. In the new year the demand subsides and the banks return the cash they no need. But generally each year less cash is returned than was borrowed, so cash increases YOY. But the banks will a few billion before Xmas and return a few billion after Xmas.

The low point is usually around the middle of the year.

Banknotes...........................late June 2008 ....................$42,115 million

Banknotes...........................early Dec 2008.....................$50,373 million.................stimulus

Banknotes...........................late June 2009......................$48,059 million.................stimulus

Banknotes...........................early Dec 2009.....................$49,560 million.................definitely not stimulus!

By late December 2009 banknotes in circulation reached close to 52 billion. Over the course of the following months about 4 billion was returned to the RBA. However this year the RBA is not letting out much cash and the last few months less than 2 billion extra has been brought into circulation.

[cobran20 94]

Are You Ready for Another Lost Decade?

[cobran20 94]

Rating agencies doing the job of bond markets

Traditionally, the bond market is where governments are kept accountable. In the 1980s, after the inflation nightmare of the 1970s, we have the bond ‘vigilantes’ who watched money supply growth like hawks. Any governments that print money will be punished by the bond vigilantes selling government bonds, thus raising their yields.

Today, the bond vigilantes are neutered. Central banks (obviously we don’t have to name names here) are buying up their governments’ bonds to prop up their prices. This means government bond prices cannot fall. That in turn makes government bonds an attractive destination for those who wants to preserve their capital. The bond vigilantes cannot do their job of punishing irresponsible governments.

Long-term interests was supposed to be determined by the free market via long-term government bond prices. That is supposed to reflect the market’s belief about long-term price inflation rate and the governments’ ability to honour its debts. Today, with governments (via their central banks) sticking their dirty paws on the bond market, bond prices are useless indicators of the credit-worthiness of governments.

Now, we have to rely on credit rating agencies to do that job. This week, the Greek government was infamously downgraded by Fitch. Greek government debt is on par with junk bonds. S&P revised the Spanish government’s credit outlook to negative. Downgrades on bigger fish governments are coming. In fact, Moody is putting the US and UK governments on notice.

Lending at 3.4% for 10 years to the US government is the most mind-boggling stupid investment. Is the market that stupid? Or is it the work of the Federal Reserve?

[cobran20 94]

The Precious needs to hold around $US 1040. Oil also looks like it is in for a good fall and our rupee needs to hold 89c otherwise it could fall sharply.

... and a couple of interesting articles:

Sovereign Debt and the Revenge of the Bond Nerds

There's Something Happening With Oil

The Carry Trade Is Now In Trouble

[wulfgar 12]

The Precious needs to hold around $US 1040

Got it the wrong way around around Conbran. To go below 1000USD, gold will have to be pushed.

If investment demand completely dried up, the commodity market would still offer 700 USD an ounce.

But then you got the Chinese who'd like another 9000 tons please and will buy hand over fist at a good price. If the Chinese have decided that an ounce of gold is the better choice over a 1000 greenbacks, that floor is going to stay. And that floor rises 4% per annum at the very least and even more if Chinese discontentment with greenbacks is a growing disease.

[cobran20 94]

It's risen almost 0.25% since the last rate rise a couple of weeks ago.

[sydney3000 17]

our rupee needs to hold 89c otherwise it could fall sharply.

I am with you. This is a tremendously important point in time.

[cobran20 94]

Have a look at the chart of the chine RE market in the link below. Classical bubble & pop example:

Timing Investments in Chinese Real Estate

[sydney3000 17]

The AUD as feared dipped below $0.89. I reckon 2010 will put 2007/2008/2009 to shame.

[firehawk 1]

The AUD as feared dipped below $0.89. I reckon 2010 will put 2007/2008/2009 to shame.

A good, old-fashioned currency crisis then, perhaps?

[cobran20 94]

Watch that correlation between the US' M2 & the S&P500. At times, the M2 has acted as a leading indicator:

link

[wulfgar 12]

Watch that correlation between the US' M2 & the S&P500. At times, the M2 has acted as a leading indicator:

link

I'd have to know how they construct the velocity for the US M2. The US M2 is 8.3 trillion, so with a velocity of slighty under V2 it appears they using total assets of the Federal Reserve system as the M0. This is in the region of 4.5 trillion, mainly US treasuries. However the formal FED

balance went from 1.1 trillion prior to the crisis to 2.2 trillion today. Basically the Fed kept most of it's reserves off balance sheet and activated over trillion of it's treasury reserves during the October crisis. A Project aimed at placing the entire assets of the Fed on balance sheet has been mooted.

Only about 3 trillion or so worth of US treasuries sit in foreign Central Banks. The the Fed activating their enormous off balance holdings runs the risk of damaging the world market valuation of US treasuries.

US monetary factors is some bizarre cobweb filled universe that defies quantum physics. The RBA is a lot more straight forward.

On Credit Crunch Strindberg noticed the correlation between the Aussie Median House and the M3 divided on a per capita basis.

1959 80 cpc 670 m3

1969 91 cpc 1 175 m3

1979 286 cpc 37 714 m3

1989 718 cpc 11 570 m3

1999 1 216 cpc 21 384 m3

2009 2 400 cpc 53 641 m3

The first figure is currency per capita and the second figure M3 per capita. I use the currency/M3 for the velocity factor in Aus.

In 1959 the population was 10 million....the currency was 800 million and the M3 6.7 billion. So with a V8.4 even 20 years after the Depression the velocity was still below the historical average of 10.

With the onset Milton Friedman economics in the 70's, Banks denuded themselves of real reserves. And the Velocity of money headed for 30. Although the 80's and 90's saw an average figure of V15. This was the main factor behind the credit boom. The problem now is the banks have no real reserves to cope with a bank run and are technically insolvent.

No greenshoots, we are only at the beginning of the great deleveraging!

[cobran20 94]

The Precious needs to hold around $US 1040. Oil also looks like it is in for a good fall and our rupee needs to hold 89c otherwise it could fall sharply.

89c has been breached to the downside and the $A seems to have topped against the yuan and probably the euro as well (to be confirmed). First target should be around US$0.81.

The link below has an interesting comment from an 'Anonymous' poster that provides food for thought:

No Christmas For Carry Traders After A Year Of Debauchery

..., Fundamentally AUD is not a bad play for the comodity and Asian exposure as there is no doubt Asia will have overall greater growth than the rest of the world over the next 20 years if free trade is allowed to exist in its current condition. However, China is massively overvalued right now, and so are a lot of markets, like Australian real estate which is in a bubbly state as well. If some liquidity is pulled out of the system AUD could get seriously hurt. .... There is a great chart out there I can't get my hands on that shows the credit spreads markets' behavior in relation to mortgage resets and they move ni perfect harmony. If that hols in 2010 and 2011 we are due for a second wave of credit mayhem with mortgage resets spiking over these couple years.

[merovingian 0]

One typical patten is the banks borrow more cash from the RBA in the run up to Xmas. The banks pay interest on this at around the official cash rate. The demand for cash is greater around around Xmas, many withdrawing funds they had saved during the year for Holiday spending. In the new year the demand subsides and the banks return the cash they no need. But generally each year less cash is returned than was borrowed, so cash increases YOY. But the banks will a few billion before Xmas and return a few billion after Xmas.

The low point is usually around the middle of the year.

Banknotes...........................late June 2008 ....................$42,115 million

Banknotes...........................early Dec 2008.....................$50,373 million.................stimulus

Banknotes...........................late June 2009......................$48,059 million.................stimulus

Banknotes...........................early Dec 2009.....................$49,560 million.................definitely not stimulus!

By late December 2009 banknotes in circulation reached close to 52 billion. Over the course of the following months about 4 billion was returned to the RBA. However this year the RBA is not letting out much cash and the last few months less than 2 billion extra has been brought into circulation.

Sorry for the slow response, but I've been a deep hole in Kambalda. A gold mine actually. With an alleged cost per ounce of $AUD938.

Anyway, your response made me realise (I think) something I should have understood before - we are talking notes in circulation, not notes in existence, right? So when you say that the RBA isn't "printing" much lately, you don't mean that in a physical sense, but rather in terms of cash released into circulation?