TheLFB [http://rs6.net/tn.jsp?e=001aaqp5YeNnqXOEYlGVk_YOAYe4Aw89_IgR-BPmOzp3kQrMtRvo2DvvJcU33OPNdwlnDBUm6XI3UVmhDqcxZqsFzsrXoGBP8i5eOiysLjaGmw=]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
04/10/08 Newsletter Issue
532
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Hello traders, welcome to TheLFB's weekly newsletter. We are very happy that you
have chosen to make us a part of your trading schedule and would encourage you
to also make use of the website and its resources. We are developing a new site
that we are very excited about, and look forward to bringing that to you over the
next month. The Trade Team is producing a Chart of the Day, housed in the Trade
desk Thoughts area of the site and have developed the Forex Rumor Mill. You know
the kind of thing; water cooler chat that you know may be vital if you miss it.
It is our spin on what is really happening on the Trade Desks around the world.
The Trade Alerts are doing very well. Since January we have issued 130 Alerts, they
have generated 2820 net pips. The 91 trades that have followed through have averaged
30 pips each. We issue targets 1 through 3, but have stated that in the current
market conditions that we need to take what the market is offering, and at this
point in time that is an average of 30 pips per alert. There are some trades that
have run for 120 pips. In April there have been 10 winning alerts that have totaled
515 (Five Hundred and fifteen) pips, or 51 pips average per trade. We have a 3:1
win ratio this year. Why not try it out, and see what all this fuss is about, here's
what traders are saying; http://www.thelfb.com/services/testimonials/.
Don't miss out. Join the LFB today. Full Membership Subscription details. [http://rs6.net/tn.jsp?e=001aaqp5YeNnqUYyCmCQuWMRzR8kSuc23mws-3qIxnECNVtSspct7LKmFcLHy8je4q2ixCbKuXQqja30LJvYz8L-c2e4A7EMGnZD3Ymav5ikrjC22V-DAN1V54pG83quPZC]
Newsletter Archive [http://rs6.net/tn.jsp?e=001aaqp5YeNnqVDqIXxDbTffzzuIdUBLTR5fjpYa9HTRYynTXtDAIU09eCprwkEBs9Qm9qvslS5Y1KeRVR9pEQBMSybuDIDnWjrYNwh3rdAFQSQFqo_2iMPMjGhPYNw8SyM1Cxcn_dUWOcKvVwOjNgiDdljMAUs0xyc4_jgItrk3A9ppILTj27j01fFy_r90CXB7sqNCERNst0=]
If you have missed the previous newsletters, feel free to catch up by checking out
TheLFB archive. [http://rs6.net/tn.jsp?e=001aaqp5YeNnqVDqIXxDbTffzzuIdUBLTR5fjpYa9HTRYynTXtDAIU09eCprwkEBs9Qm9qvslS5Y1KeRVR9pEQBMSybuDIDnWjrYNwh3rdAFQSQFqo_2iMPMjGhPYNw8SyM1Cxcn_dUWOcKvVwOjNgiDdljMAUs0xyc4_jgItrk3A9ppILTj27j01fFy_r90CXB7sqNCERNst0=]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
All this News. When will I see it in my charts?
Newspaper [http://rs6.net/tn.jsp?e=001aaqp5YeNnqUMTiiBH2w0un2zGW-AUOWiNwSfXU-tBa8xwzHX7-4xfywBun2f-3yWNTQq6aG_mEJ-wKDBdYZoLMdrY4CYwVLdNbDJiS7NCSwh8B9OwYsqYnwB2nycCcnF]With
all of the data recently regarding Central Banks, interest rates, treasury auctions,
mortgage write-downs, credit crisis, etc, etc, it is easy to understand that the
markets need time to absorb this data. So, how long does it take for Fundamental
news to get onto the Technical charts.
Technical information on a Chart is easy to read, open to very little opinion, and
normally very reactive. Fundamentals, and news, tend to be susceptible more to opinion,
they are not like Technical reactions, they take time to build and get absorbed.
Two ways of looking at Fundamentals and Economic Releases, and how quickly they
will impact a currency are;
1) From the Institution/Bank's standpoint
2) From the Trader/Speculators standpoint
The Bank is looking at where the economy needs to be in 12-18 months from now and
will think long and hard regarding any change in policy, especially interest rate
increases. The ramifications of raising rates are incredible; it affects all aspects
of an economy.
The Traders/Speculators are the ones who drive the currency values, whipping them
into a frenzy in anticipation of a rate increase/decrease. Once the reality of a
rate hike hits, so long as it is not completely unexpected, it usually leads to
the Speculative money moving to a new home fairly quickly. They then look at where
the next run-up could come from, as per the Sell The Pound and Buy The Euro moves
in anticipation of the rate decisions this week.
The Pair is driven on speculation ahead of time, the decision comes, reality sinks
in, and the speculators are off to the next one. If there are no more currencies
to drive up or down they may go to Bonds, or Gold, or Oil, or Equities; anywhere
that their speculative, excess overnight funds, can be parked for maximum returns.
Rather like butterfly's that cannot stay still, however pretty the current flower
is, they are always looking at where to go next, just in case something is missed.
So the effects of a Rate Increase, or other important releases, are normally felt
before the decision 80%, at the decision 5% and after the decision 15%. How quickly
the currency appreciates/depreciates is totally dependent on the current Business
Cycles, US$ Index strength/weakness, Central Bank policy, and Market sentiment for
risk. Right now Risk Tolerance is low, and as such the follow through is muted.
Earning Swap Interest, or overnight interest for holding one currency Long against
a lower yielding cross pair, is important to the Institutions, but until Risk is
accepted in the market the Carry trade will be unimportant.
It is the Speculators who create the volatility day-to-day, and the Speculators
who are looking for quick, reactive moves to news that most retail traders pick
the pieces up of. So it really depends on what side of the Market that you stand
on as to what length of time the Fundamentals need, to be felt. Risk Tolerance
= Quick Price Changes on the News. That however is not what we have right now.
Look to trade the Momentum and not the Moment.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Blame Game
There's a game being played right now in the financial world called "Let's blame
Allen Greenspan for causing the housing/credit bubble." If you've been following
the press at all recently, you've probably read all about how Mr. Greenspan kept
interest rates too low for too long and that it was this mis-guided interest rate
policy which made credit all too available and drove up housing prices, creating
a bubble which has now burst so messily upon us all.Blame [http://rs6.net/tn.jsp?e=001aaqp5YeNnqVWaEnMa_gTgZD7g9dLcAq3g-CN5XXY-kivMczp2pSceAfVsfTCH9NXl20P3Sw3h4INGRIplEKn5_94gAdaA3MsYB-KxYM5IH0_eTX1gaZJuULppjMOQolHzcu7b9tQM80=]
Well, here's a news flash for you: The world's leading banks on Wednesday publicly
accepted much of the blame for the credit crisis.
The Institute of International Finance represents more than 375 of the world's largest
financial companies. On Wednesday, they decided to place the blame for the worst
financial disaster since the Great Depression exactly where it belongs; on the
banks themselves. The IIF said that "major points of weaknesses in business practices",
including bankers' pay and the management of risk, led to the current crisis in
global financial markets.
After issuing this stupendous "my bad" in its interim report on the causes and consequences
of the credit crisis, the IIF promised a code of conduct for better self-regulation
of the industry while saying at the same time that it would be "completely wrong"
for the authorities to impose much greater regulation on the industry. My teenager
made the same basic argument last week when I found him playing a video game in
lieu of an overdue homework assignment.
"We think it would be completely wrong to jump to some premature regulatory measures,"
Josef Ackermann, chief executive of Deutsche Bank and chairman of the IIF board,
said. "We want to demonstrate we can do a better job within the industry." (Please
give us another chance-we promise to do better next time).
The IIF report detailed a litany of failings on the part of the banks, including
improper risk management, conflicts of interest over bankers' pay, the over-reliance
on models (rather than on plain old common sense) along with an inbred tendency
to feed like "pigs at a trough" when provided with inordinate amounts of liquidity
(OK, I added that last bit on, they didn't really say that, but I'm sure that is
what they meant).
It said that while the issue of compensation should be left to individual banks,
there should be greater deferral of bonuses and setting pay "on a risk-adjusted
basis", which means that bankers who have simply taken big risks and struck lucky
should not be overly rewarded after their "luck" helps to bring their firms to the
brink of financial ruin.
I happen to agree with Mr. Ackermann's take on regulation though. Central planning
as a concept has failed numerous times and there's no reason to try it again. However,
there does need to be far more "looking over the shoulders" in the future and in
the end, this is likely to be the outcome.
So hopefully, the "blame Allen Greenspan" game can now be ended. Game, set and match
to Mr. Greenspan. It also made result in the equity market's ability to hold in
the green as it seems as though there could be an end to the Credit-Crisis cloud
of doubt.
If that is the case, and the markets hold higher the Yen Cross Pairs will move higher,
Risk Tolerance will allow the Aussie to push northwards, and the Dollar Index may
find less day-to-day volatility.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Usd. The Chf and the Fed
Due to the tight credit conditions in the inter-bank market the Fed had announced
new forms of lending for financial institutions.
Federal Reserve [http://rs6.net/tn.jsp?e=001aaqp5YeNnqXgwQjgU2JeLSdgvWHr0L4BGZDqqfiWn_pa8lstB9Z4OXE2JV-hxv6eCP8tjQJgJS7nXTIK3HVOvc9c0mUgiBJUbf6_UxKE7sHmldeHKizDb6d4KqupNOoW]Currently,
there are 8 ways of getting money from the Fed, 5 of which were masterminded only
after the credit squeeze had begun. We could take this as a sign, showing how strong
the financial markets really were affected.
Here are the current main ways for borrowing:
1. Open Market Operations
2. Discount Window
3. Securities Lending
4. (New) August 17, 2007 Term Discount Window Program
5. (New) December 12, 2007 Term Auction Facility
6. (New) March 7, 2008 Single-Tranche OMO Program
7. (New) March 11, 2008 Term Securities Lending Facility
8. (New) March 16, 2008 Primary Dealer Credit Facility
It is well known that Mortgage Backed Securities, or MBS, are the cause of the credit
crises, pushing losses in the form of write-downs higher, actually, way up. To counter
these the Fed had opened its doors to accept MBS through 7 of its Lending Facilities,
as long as they are rated AAA. The only one making an exception is the Securities
Lending which accepts only US Treasuries.
One step further, the Term Securities Lending Facility accepts MBS rated as AAA
and Residential Mortgage-Backed Security, while the others do not. With this decision
the Fed is going one step further in an effort to free up the bank's balance sheets,
especially when they are accepting AAA MBS paper with a "hair cut" of only 98%.
This is the same "hair cut" T-bills get and we have to think that the MBS market
at this point is completely frozen. This is the best deal you can find out there.
At this point in time us forex traders should start to see an interesting position.
The bank switches MBS papers, that they can't sell anyway, for Treasury Bills, which
are highly liquid papers. Banks don't just take T-Bills to keep them on the balance
sheet, they have their MBS for that; Banks takes T-Bills to sell them, and increase
their liquidity. Win/Win for the bank, Lose/Lose for the taxpayer who's money the
Fed is playing around with in an effort to stimulate the economy.
By selling T-Bill they are actually sending Bond prices down and Bond yields up
(from the bonds price/yield inverted relationship). Sending up the short term interest
rate, through selling T-Bills, generally increases the yield on longer term bonds,
like the 5 and 10 years bonds. This is how the Fed, as any other central bank does,
controls interest rates, by controlling short-term yields.
Obviously, the most effected currency pair by the raise in Bond's yields, especially
10 years Bonds, is the Swissy, Usd/Chf. If this all holds true it would mean we
should see some stronger Dollar bounces versus the Swiss Franc.
It is interesting that since the Lending Facility was announced, we have seen a
certain increase in T-Bills yields. Unfortunately, the TSLF is still new, with only
2 operations until now. We still need some more time to determine if this theory
will work over time, but it's attractive to watch the operations being done, and
to monitor its effect on currencies.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Save 50%
First time subscribers can take advantage of a one time only offer. Sign up for
a Silver subscription and get 1 month of the Gold level benefits at the Silver price.
There is no extended contract required. Act now and take advantage of the Trade
Desk Alerts and participate in the live Daily Broadcasts with our Trading team.
Contact TheLFB with promotion code; Newsletter 532 [http://rs6.net/tn.jsp?e=001aaqp5YeNnqVhkWQEHpyjpT68kX1oCwoP2ZbuHoX8ZDPKdIBjGW4Xciv742jYtu_WHf8lUhwqtRbBzP5a3MTh5WYBGqOA3eJ4sMhvYdhQ8PF6nHaArZ_NHn8QgxtYz2iuye6-DMUmQcg=]
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Forward email
http://ui.constantcontact.com/sa/fwtf.jsp?m=1101845959555&ea=olliz79.forexnews@blogger.com&a=1102054637944
This email was sent to olliz79.forexnews@blogger.com,
by alerts@thelfb.com
Update Profile/Email Address
http://visitor.constantcontact.com/d.jsp?v=001jYqn93s1IRBW8EYrmQqBX_u5o0BpFWQTHeFdtvDKAU9koozIe_5s4mZTUuPjd2Ja3AHTELKtDp4%3D&p=oo
Instant removal with SafeUnsubscribe(TM)
http://visitor.constantcontact.com/d.jsp?v=001jYqn93s1IRBW8EYrmQqBX_u5o0BpFWQTHeFdtvDKAU9koozIe_5s4mZTUuPjd2Ja3AHTELKtDp4%3D&p=un
Privacy Policy:
http://ui.constantcontact.com/roving/CCPrivacyPolicy.jsp
Email Marketing by
Constant Contact(R)
www.constantcontact.com
The LFB | 3370 N. Hayden Rd. | Ste. 123 | Scottsdale | AZ | 85251
0 comments:
Post a Comment