GMAC, putting their money where there mouth is.

General Motors is in the process of putting their newly found money to use. Im a news conference yesterday they announced new financing to be offered by their dealers. GM said it would offer 0% financing on five 2008 models and 0.9% to 5.9% loans on dozens of other 2008 and 2009 models in a year-end sales push backed by GMAC. I think this is what the government want's to happen with the money being pumped into financial institutions. Get the funds to the people as soon as possible.



CLICK HERE

GMAC Receiving TARP Money

GMAC is going to be receiving about $6 billion to help stabilize the company. The Treasury has kept the funds flowing and it does not look to be stopping anytime soon. They announced that "The new program didn't have a specific dollar limit". The money indirectly benifits Cerberus, who is a 51% owner of GMAC. This brings to a total of almost $350 billion that the Treasury has dispursed from the original $700 billion which was approved a few months ago.

CLICK HERE to read the story in the Wall Street Journal.

Good Luck and Good Currency Trading

Wall Street in Review....

2008 will be remembered as the year that brought Investment banks to their knees. First Bear Stearns, then Lehman.....followed by Merrill, Morgan Stanley and Goldman. Each had to come to terms with the fact that Investment Banking as we know it is gone.

In today's WSJ is an excellent article on what went on over the Sept 20, 2008 weekend. It is a good and interesting read.

CLICK HERE to read the story.


Good Luck and Good Currency Trading.

Retail Sales Slump

Even after record discounting, retailers are beginning to see that sales are going to be considerably below expectations. Sales of luxury items are especially effected falling 35% from a year ago.

My fear is that this is only the beginning. Come January with the credit card bills coming in I can see even more severe cutting back on spending. In today's WSJ there is an article on the effects the economy is having on small businesses. They are the hardest hit as lines of credit are cut back (even cancelled all together) and many of the customers are delinquent on payments.

CLICK HERE to read the story.

Good Luck and Good Currency Trading.

Toyota projects a loss in 2009

U.S. car makers are not the only ones facing financial problems. Toyota announced today that they are looking at projected losses in 2009. This would make the first time a loss occurred since 1938. This again signals to me that the Automakers problems are not JUST poor quality and unwanted designs. The credit crisis is a huge factor and one that a loan will not help.


CLICK HERE to read the story from the WSJ.


Good Luck and Good Currency Trading.

Brazil Central Bank Lowers Inflation and Economic Forcasts

The Brazilian Central Bank lowered its inflation forecasts as well as its economic outlook in a preclude to lowering interest rates in the near future. Although there has been extensive talk that Brazil was immune to the fall out from the credit crisis, in reality no one is. Rates in Brazil have been coming off as the currency has been getting beat up. This trend looks set to continue into the new year. I am looking for similar stories in Chile, Colombia and Argentina. Remember the Fed came out last week and said that they were going to keep interest rates at current levels (.25%) for an extended period of time. With the new year just weeks away Trader will be looking for a way to make money. Although I think that financial institutions will want only limited risk, some risk will need to be put on the table. Yield Monkey's get ready! I expect a gradual move into higher yielding currencies as economic activity grinds to a halt, volatility decreases and traders look for a way to make money. In these times yield is the way to go.

Good Luck and Good Currency Trading.

Auto Makers Bailout Approved

President Bush announced a plan to pump $13.4 billion into the auto makers by mid January. This plan gives the car companies a few months to get their house in order but certainly does not correct all of their problems. The money is going to GM and Chrysler and it gives them until March 31 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers.
More money can be made available if Congress releases the other $350 billion of the treasury departments financial rescue plan.

This plan to bail out the automakers sets "target" rather then firm requirements about what needs to be done.

President Bush was afraid that letting the auto makers fail "could send our suffering economy into a deeper and longer recession." He also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office." Both of these gestures are accurate and seem sincere.

President Elect Obama praised Bush for this action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."

The other part of this puzzle I don't hear many talking about is the toll the economic crisis is having on the car companies. From things that I am reading people are going into the show rooms but a large percentage are unable to obtain financing to purchase a car. Couple this with an economy where a large percentage of people are out of work and a large group that potentially will be out of work in the near future and you can see why car companies are struggling. Time might help (I think it will). Combine this time, with making hard choices, as President Obama has said,

“I do want to emphasize to the Big Three automakers and their executives that the American people’s patience is running out, and that they should seize on this opportunity over the next several weeks and months to come up with a plan that is sustainable. And that means that they’re going to have to make some hard choices.”

These hard choices should lead to more efficient companies and hopefully coinside with an improved economy will allow these companies to prosper. Well lets hope so at least.

Good Luck and Good Currency Trading.

A Unique type of Bonus

With all the uproar about compensation on wall street here is a unique way to pay bonuses to senior executives. Credit Suisse one of the hardest hit in the credit crisis has decieded to pay bonuses to about 2000 senior employees in the form of "illiquid shares" which "are linked to the performance of a pool of illiquid assets that were originated in the investment banking division," Credit Suisse said. The division was responsible for most of the bad subprime and other assets taken on by the bank in the leadup to the global financial crisis. Hey they made the mess now let them deal with it, or at least get paid based on value of those assets.

There has been alot of talk about how senior executives do not deserve bonuses this year due to the terrible performances of the industry. I certainly agree that if you do not perform, you should not get paid. This is a good way of compensating the people who helped create the problem. Basically no thing now but something down the road if things turn around. Great Idea.

CLICK HERE to read the entire story from AOL

Chrysler to shut manufacturing plants

Lets hope that this is not a sign of things to come, but Chrysler announced yesterday that they would be shutting all of the North American manufacturing plants for 30 days as they await a Government bail out package. All three automakers have been taking steps to survive the current recession and it seems that Chrysler feels that by closing their plants they will lose less money then by opening them up. This is real sad news. Both Chrysler and GM are afraid that they will not have enough money to make it through the end of the year.

The closing of the plants is somewhat normal. Usually during the holiday season all plants are closed for two weeks but this year due to the economic situation they have extended it to four weeks. My question is will it help? From news reports the car companies are suffering from two problems the recession and credit. Many car dealers are reporting that they have people coming into the show rooms to buy but are unable to get credit approval. This could be a bigger problem. If banks do not lend, even after receiving all the government assistance, then the auto makers will be in bigger trouble.

In a statement from Auto Dealers,

"The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation," .

With this shut down, workers will receive normal holiday pay for the first two weeks they are out of work and then will get unemployment benefits and supplemental pay from the company for the remaining two weeks.

With the current economic situation, the Bernard Madoff fund investigation and totally uncertain times I don't expect people to be hitting the stores in a major way in the near future.

Good Luck and Good Currency Trading.

SEC to probe ties to Madoff

As if Christopher Cox doesn't have enough problems there is a story in todays Wall Street Journal about the agency investigating its ties to Mr Madoff. One of the agency's former attorneys names Eric Swanson married Mr Madoff's niece Shana Madoff in 2007. Mr. Cox himself is reported to be saying, "I am gravely concerned" by the agency's regulation of the firm.

CLICK HERE to read the entire story.

Good Luck and Good Currency Trading.

The Fed surprises with a 75bp cut

The Fed came out swinging today, cutting the Fed Funds rate 75bp to 0.25%. The FOMC established a target range for Fed Funds of 00 to .25%. This is not overly surprising as the Fed Effective on most days has been down in this range. The vote was unanimous and this rate is expected to be in place for quite some time. Effectively the Fed is saying, stop putting your money in treasuries and get out there and invest (Stocks, small business's) or better yet SPEND.

The Fed wanted to make it clear that they have other tools at their disposal and are not afraid to act if needed. The primary focus of the monetary policy moving forward will be the Quantitative Easing measures that the Fed is using. The measures will "sustain the size of the Federal Reserves balance sheet at a high level". They also repeated that they are going to purchase large quantities of agency debt and MBS to support the mortgage and housing markets and it stands ready to increase the amounts as warranted.

The Fed also said it would expand the use of its balance sheet to "facilitate the extension of credit to households and small business" while using the balance sheet in creative ways to "further support credit markets and economic activity". Basically the approach seems to be that the Fed will do anything and everything to get the Economy rolling again.

They also believe that decreased oil and other commodity prices in addition to increased slack in the economy will lead to lower inflation.

The reaction from the markets was positive. Treasuries and stocks rose but the dollar came under tremendous pressure. I think all of these trends will continue to the end of the year.

Good Luck and Good Currency Trading

Bernard Madoff and the SEC

The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

This is the first paragraph of the Mission Statement from the SEC website.

Is there anyway that Christopher Cox can keep his job after this. Lets remember that this is after the Financial crisis has crushed the average investor. I do not believe that you can blame one man for all of these failures but as the man in charge you need to take the hit.

It turn out that the SEC never inspected Bernard Madoff's investment advisory business even after he subjected it to just such an inspection over two years ago. This ability to avoid detection for years certainly raises my interest in whether the SEC is effective at all. You would think (and hope) that a fraud of this magnitude would be uncovered through an inspection, that is why regular visits to investment advisory funds is important. Madoff's brokerage firm was inspected in 2005 and a few violations were detected. The so-called best- execution rules, which require that customer trades be made at the most advantageous prices, were violated three times. I assume this is basically "front running", filling orders for the firm before filling them for a client. This inquiry itself was only opened after tipsters and media reports raised questions as to how Madoff's returns were so consistent when other funds were not.

Now the heat is (or at least should be) on Madoff's auditors Friehling and Horowitz.
Hedge Fund Advisor Aksia should be looking good after all this. They have been advising clients to stay away from Madoff's fund since there were "Red Flags", including that its books were audited by a three-person accounting firm.

According to a Bloomberg article

Friehling & Horowitz included one partner in his late 70s who lives in Florida, a secretary, and one active accountant, Aksia said.

This all goes to show, if it looks to good to be true, it probably is. Also you are better off doing the research yourself as the SEC doesn't seem to be watching out for us.

Good Luck and Good Currency Trading

Inside theCage

I just finished the book Inside the Cage: A Season at West 4th Street's Legendary Tournament. This book is written by Wight Martindale Jr. It is about the legendary hard court basketball tournament held at West 4th street in Manhattan every summer. I have seen many pickup games at that park, and have come across a tournament game or two also, but I never knew what went on behind the scenes to get the games played. For anyone who has ever played basketball in a school yard take that action and multiply it 10-20 times and you get an idea of what playing at West 4th street must be like. The action is non stop and the play extremely physical. Many professional players have played here. Anthony Mason, Mario Elie, Smush Parker, Fly Williams just to name a few. The dedication and self sacrafice to keep this tournament going all these years is amazing and it shows what you can accomplish if you are doing something you love. Now this tournament mant not be as well know as the Rucker Park Tournament but is it just as contested on a nightly basis. I really recommend this book for any basketball junkie, and , if you are in lower Manhattan on a Summer night stop by and watch a game (get there early as it get 5-6 deep at the fence) it is well worth your time.

Good Luck and Good Currency Trading.

Bernard L. Madoff

Well until a couple of hours ago I never heard of the man. But now, I, and many others are well aware of who he is. It seems Mr Madoff ran a Hedge Fund that has been returning 8% for the last 10-20 years. This year he is slightly up even when the rest of the market is down 35-40%. Well after years of pyramiding money to live an extravagant life style Mr Madoff came clean to his sons and admitting thePONZI SCHEME. According to a WSJ article he called his two sons to his Manhattan apartment and told them about it. It seems investors were trying to redeem up to 7 Billion dollars and there was just no money left and no new money coming in. Mr Madoff as a last gesture wanted to pay bonuses to his remain employees from the 200-300 mio dollars that he had left. His sons went to the police with this information.

Enjoy your remaining years in Prison Mr Madoff. I will never understand this type of behavior. It is just not worth it!

CLICK HERE to read the Wall Street Journal story.

Good Luck and Good Currency Trading.

Brazil, Peru holds rates steady

As expected the Central Bank of Brazil held rates steady at 13.75%. They did however signal that they are prepared to act, possible as soon as the next meeting, to cut interest rates if it is deemed necessary. The "majority" of policy makers "discussed the possibility" of lowering rates but the vote was unanimous to keep them steady. As I have written about before, President Lula, has stepped up verbal pressure for lower rates. Some might view this "Discussion" as trying to appease the President, but I see it more as a good sign that the CB see a problem and are preparing to deal with it. According to BLOOMBERG NEWS Brazil has the highest real interest rates after inflation among 54 countries that they track. This clearly signals that inflation was and is a large concern, but between now and the next meeting on Jan 21 2009 I would expect alot more negative economic numbers to come out and with it pressure to cut rates. The problem for Brazil is that Inflation is running slightly high while their currency has weakened almost 32% since September. This being the second worst preforming currency of the year (behind only Iceland). To cut rates right now would only hurt this two situations, something the CB is not prepared to do. I still expect for rates to open lower tomorrow morning and the currency to be slightly stronger.

Peru also held rates steady at 6.5% which are seven year highs. The Government is hoping that these high interest rates will slow down inflation in the country. Like Brazil, the Peruvian CB openly talked of lower rates at their next meeting. The bank did however cut reserve requirements which frees up liquidity, something credit markets globally really need. It would not surprise me if Brazil took this step also. The problem seen in Peru, slowing growth, high inflation and a weak currency is a similar story throughout Latin America. These countries need to balance out all concerns. I think however it is important to see what has happened here in the States and the velocity at which it has happened. To lean toward lower rates and risk higher inflation seems the more prudent way to go right now.

Good Luck and Good Currency Trading.

Brazil Rate Meeting Tonight.

The Central Bank of Brazil meets tonight for the final time of 2008. There has been considerable uncertainty over the direction the CB will take. President LuLa has been calling for the CB to cut rates. Slowing growth numbers (except for the other days GDP number) and lower Inflation numbers led many to expect just such a move. However the CB has not been as negative on growth as the market and they seem afraid that further cuts in rates can make the weak currency situation move out of control. The currency has moved from 1.5600 to 2.5000, this with the CB in aggressively everyday to attempt slow the move.

On the growth front a number of corporations have announced suspensions or resizing of expansion plans. Confidence surveys are running low and crude prices are in free fall. Car sales in Brazil (like everywhere else) have collapsed. This is a key sign to me that everyone is tightening their belts. Remember if car sales slow, then there is a spillover effect. Steelmakers already facing a slowdown in demand globally are now hit here once again. From an employment stand point things do not look quite so bad. Brazil posted their lowest unemployment rate in the new historical series by IBGE, this while the total wage bill grew by above 8% in the last 12 months. All this being said I do not think inflationary pressures are present in Brazil. Therefore the uncertain nature of the economy lends itself to a wait and see approach. I see no change in rates from the Central Bank.


Good Luck and Good Currency Trading

Stocks Rally Again, except for the Tribune Co.

Stocks move higher once again, not only in the States but Globally. I am certainly not complaining, but I am finding it hard to come up with reasons why. President Obama has pledged to boost the economy by starting a public works program like no other. His goal is to put together a spending package bigger then anyone since the 1950's. This I think is good. If people are working they are spending money and paying taxes. The other reason being given is the Auto sector "Bail-out" or "Loan" depending on who you are talking to. I am of two minds here, one says we need a bail-out as letting the car companies fail could send the economy off the deep end (if we have not already done that). The other is let them file chapter 11 and sort their problems out from the ground up. This too, could send a crushing blow throught the economy, but which is worse?

My fear is where does this all end? The Tribune company today filed for bankruptcy protection. This because the companies cashflow will not allow it to cover the $512 million debt payment due in June. This all because ad revenues have come off very very hard. There is also no hope that these revenues will come back...EVER. The Tribune Co is also saddled with tremendous debt because Samuel Zellled an all debt backed deal to take the Tribune private. This to the tune of $12 billion.

Mr Zell sent a memo to the employees of Tribune, I found it on IDIOT INC.

CLICK HERE to read it (well worth the time).

So although I think that the Auto Bail-out is warrented, where does this all stop? Who is next in line for a handout?

As for the currency markets, I have been laying low. Liquidity is poor and I perfer not to trade during "whippy" markets if I can help it.

Good Luck and Good Currency Trading

Stocks Surge

Global stock markets are on the rise this morning as plans continue to come out specifying how governments are going to stimulate the economy.

China is looking into steps to expand the $586 Billion stimulus package already announced and India announced new spending after the central bank cut rates by 100bp. Here in the States it looks like the automakers are going to get a "loan" and that seems to have the markets reacting positively (who is next?).

CLICK HERE for further information from AOL.COM

Currency's remain whippy but quiet overall. I expect increased illiquidity as the days progress. So keep your positions smaller as it will be hard to exit trades.




Good Luck and Good Currecny Trading

Gas Prices continue to Fall

Are lower Gas prices enough to take the heat off the car companies, of course not. But lower crude prices translate into dollar's in the consumers pocket right away. Gas prices have hit the lowest levels in 5 years according to a national survey out today. The nationwide average for regular gas was $1.75 while $2.02 for premium. This is in comparison to the high in July of $4.11. This definitely translates into money in your pocket, but will the average consumer spend it or save it, that is the big question. Time will tell.


Good Luck and Good Currency Trading

General Shinseki named to Cabinet Post

General Shinseki was named to President Obama's cabinet today as the next Veterans Affairs Secretary. General Shinseki was the first Four Star General of Japanese-American ancestry and a major "wet Blanket" on the theory of a quick victory in Iraq. Shinseki testified in front of Congress in 2003 that it might take several hundred thousand U.S. troops to control Iraq after the invasion. This was not taken well by the Bush administration and Defense Secretary Donald Rumsfeld and his deputy, Paul Wolfowitz belittled the estimate as "wildly off the mark". As we know now General Shinseki was correct and all these years later we have many more troops in Iraq trying to finish the job.

This choice seems to be viewed as quite good.

"General Shinseki has a record of courage and honesty, and is a bold choice to lead the VA into the future," said Paul Rieckhoff, executive director of the Iraq and Afghanistan Veterans of America. "He is a man that has always put patriotism ahead of politics, and is held in high regard by veterans of Iraq and Afghanistan."

Upon his retirement from the Military in June 2003,General Shinseki had some advise:

"You must love those you lead before you can be an effective leader," he said. "You can certainly command without that sense of commitment, but you cannot lead without it. And without leadership, command is a hollow experience, a vacuum often filled with mistrust and arrogance."

Shinseki also left with the warning: "Beware a 12-division strategy for a 10-division army."

Very observant considering the twists and turns this war has taken since then.

I got most of my information for this post from a story on AOL

Good Luck and Good Currency Trading.

Federal Bailout Application

Click to enlarge.



Good Luck and Good Currency Reading

Employment, much worse then expected.

The employment number came out at -533,000. Expectations were for -335,000. On top of that there were major negative revisions to the two previous months. Bad numbers were expected but I think these were definitly off the charts. More government intervention is in the cards. Is there anyway the Govenment can let the automakers go under? I do not think so.

Here is the story from BLOOMBERG NEWS

Good Luck and Good Currency Trading.

The Brazilian Real melts....

The Brazilian Real fell to eight week lows on the back of speculation that interest rate cuts are near. Yesterday we saw Industrial Production fall 1.7% after expecting flat. This caused yields to tumble 60-70bp alone the curve. Despite the best efforts of the Central Bank the currency could not get a foothold. The CB sold dollars at two auctions and lent another 1.96 billion dollars to exporters in a separate offer in an attempt to slow down the free fall. It did little good. After the 150bp cut in rates by New Zealand today the market is preparing for a move by the Brazilian CB as early as next week. Certainly the DI curve expects this to happen. Commodity prices, which account for 2/3 of Brazil's exports are also off over 50% from July 2008 highs which is not helping the currency at all.

This is a trend I dare not stand in front of. For now as I wrote about earlier this week I am staying on the sidelines until a little more liquidity enters the markets.

Good Luck and Good Currency Trading.

GM Bailout Plan...and the others too.

GM is out with their plan and critic's are already saying it will not work. In it GM vows to cut 31,000 jobs, close nine plants and rid themselves of 1,750 dealers.

GM hopes the plan will convince lawmakers to give it up to $18 billion from the government: $12 billion in loans, including $4 billion by the end of December, and a separate $6 billion line of credit in case market conditions worsen.

"Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry," GM officials said, contending its collapse would have "a ripple effect that will have severe, long-term consequences to the U.S. economy."

Here is the rest of the story.

CLICK HERE

Good Luck and Good Currency Trading.

Australia cuts Rates

Australia cut rates last night from 5.25% to 4.25%. Rates have now been cut 300bp since August and is in line with the continuing deteriorating situation in the markets. The size of this cut is slightly larger then expected but I think totally hustified. I think the Aud will continue to suffer as the market is looking for risk reduction at all costs (many people buy Aud as a high yielder..yes me too!). The statement from the CB left the door open for more cuts in the future but implied that in the future they would be less aggressive. They did state that "Global inflation will moderate significantly in 2009". The Bank did note however, that policy was now “at an expansionary setting” and that the cash rate is now at its “previous cyclical low point” which implies that further rate cuts will not be as aggressive.


Good Luck and Good Currency Trading.

Bernanke Speaks.....Stocks Crash

OK so I was a little to early with my Yield Monkey speech. I walked in to weaker EM currency's and sold dollars right away. I was lucky as Usd/Mxn went from 13.8200 (where I sold) down to 13.5800 (where I took it back), Brazil made a similar move and I also profited small on that. But this was just luck. I was lucky that I took Wednesday and Friday off last week or I would have probably been short from worse levels. But it is better to be lucky then good and this time the Good Guy wins (that is me!).

As for the markets, stocks were having a difficult day and when Big Ben Bernanke began speaking all hell broke loose. He spoke frankly and I think this disturbed the markets abit. He said that there was:

“obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy.

That the U.S. economy will probably “will probably remain weak for a time,” even if the credit crisis eases

“Although further reductions from the current federal funds rate target of 1 percent are certainly feasible, at this point the scope for using conventional interest-rate policies to support the economy is obviously limited,”

I think that everything he is saying makes perfect sense. Maybe the market has been drinking a little to much of the "koolaide" being served by the talking heads on TV. I think the worst of the Credit Crunch is behind us, but that doesn't mean things are going to get better all of a sudden. Clearly the Fed is not going to sit back and watch things get worse. They put out two new programs to try to free up credit last week. Those include a commitment to buy as much as $600 billion of debt issued or backed by government-chartered housing-finance companies and a $200 billion initiative to support consumer and small-business loans. Get used to the volatility, it is not going away in the near future.

I am going to hold off making currency picks today, I do not have anything of substance on so I will wait till I get a more conviction on a move.

Good Luck and Good Currency Trading.

Sales Better....and EM (and Yield Monkey's) should benifit

Just a few quick thoughts to start the week. Initial reports seem to be pointing toward Black Friday sales being slightly better then last year and much better then expected. Does it continue? I do not know. I do know that I and most of the people I know are cutting back in one way or another.

Now on to some trading views. I still look for global interest rates to move lower. U.S. have done so and even if the Fed does not officially lower anymore the market is taking it lower themselves. Fed effective are consistently below 1.00% on a nightly close. This has flattened the yield curve at extremely low levels. What is a fund manager to do? Go for yield wherever they can. If I am correct and the market quiets down look for currency's such as Mexico,Chile, Brazil....or Heck the entire Latin American region to do better. I will be entering into small short dollar positions in this region today. There is an article on BLOOMBERG NEWS which talks about Funds in search of yield looking to enter riskier waters.

In the best year for Treasuries since 2002, fund managers who only buy government bonds are seeking permission to invest in corporate debt they considered toxic just a month ago.

Americans have short memories and as such this does not surprise me. With a new year approaching, traders are getting their 2009 budgets. You need to take risk to achieve a budget and I look for higher yielding assets to perform better.

My "big picture view" going into 2009 is, Global yields lower and a weaker dollar. I still think the Euro heads toward 1.4500 by the first quarter of 2009.

Good Luck and Good Currency Trading.