Archive for November, 2011

Secret Fed Loans Gave Banks Undisclosed $13B – Bloomberg.

I know some hedge fund manager asked “the bank didn’t clean up their book”, where the money go? I guess that explain it. Here you go, Fed pick up the tab. Well, the big banks were able to make money with 0.01% interest rate.

Freaking Moral hazard. I really don’t know what to think of it. Honestly, if the fed didn’t do this, I am pretty sure my saving is gone by now. I, however, feel kind of rip off since I know how much the bankers are making. And I know the Fed is helping them to do that.

You know the indication of these information? If the Fed print more money (QE3), people is going to be crazy mad, and the wall street occupy is going to be wild.

Secret Fed Loans Gave Banks Undisclosed $13B - Bloomberg

PMorgan Chase and Goldman Sachs Group, among the world’s biggest traders of CDS, disclosed to shareholders that they have sold protection on more than $5 trillion of debt globally.

According to the information provided by the above two CDS issuers, JP and Goldman have written USD 3 and 2 Trillions against to the PIIGS sovereign credit respectively.

I cant imagine JP and Goldman are able to pay 5 Trillions if the Euro crises spread out.
In short, the US Financial institutes will be greatly affected by Euro crises. be Prepared.

Please protect yourself/Wealth ASAP.

I would urge everyone to learn finance, to learn currency or investment. If you think you can ignore it, just wait and then the situation will be getting better. Then you are definitely under a very high risk. From 2012 Jan to 2012 April, there will be around 0.84T bond mature within the euro zone. (not include the british) At that time, even the German may have problems to raising debt. In fact, as per the Bank of International Settlement statistics data in 2010, the German debt is $ 2,446b which is 83% her own GDP. And the France debt is $ 1,762 which is only 82% of her own GDP. Actually, the German is in deeper debt compared with the France.

The fire may spread to German finally and once the clock steps into to 2012. We are going to have many count down parties for Euro-zone members’ debts maturity and there will be some entities default for sure. It doesn’t make sense to ask ECB to save those countries as the ECB is backup by those trouble countries’ credit. In fact, France is burning now as i just discovered that her 10 years bond yield rose 7.56% yesterday, a single trading day only. (

Ask yourself, did you see someone in your history who borrowed a huge amount of money and enjoyed life for 10 years. Suddenly worked very hard, cut all the expense and repaid the debt? And finally he/she became a very wealthy person? I think it never happen and most of the cases are that guys couldn’t borrow anymore and went default. Remember, this crises are not created by asset bubble/overbuy/oversell. There will be no “clock overshoot/mean reverse” effect.

Do you feel very strange that why there are no bailout planning come out lately? Last year, for Ireland/Greece crises, IMF/ECB were proactively to setup bailout plan and organised meetings. To be honest, you know the answer too. There is no possible bailout plan for saving France/Italy/Spanish.

Please keep gold, rmb, hkd, short euro currency, short euro stock market. Don’t step into any stock market and keep learning the financial knowledge. I would say, the worst action at the moment is “NO ACTION”.

One ECB is not enough. We need a powerful factory immediately and the factory needs to turn on turbo to produce more and more ECBs.

For your information, France, Spanish and Hungary are infected now. I curious if Hungary will go to default soon.

European Central Bank vs Market

ECB is running out of the bullet as she still didn’t have the permission from German to print money. All the 0.3T reserve is going to use up. Now, we know that 30b/week purchasing speed is far from enough. Italy bond yield rises back to the inresibile yield 7% now.

Friends, be prepared. It seems to be out of control now.

Another financial nuclear bomb -> “Automatic Trigger”.

Deadlines for the Congressionally appointed special joint “Super Committee” – which includes 12 members of Congress, “six from the democratic and six from the republican” – to provide a comprehensive debt reduction plan are fast approaching.

November 23rd, the day before Thanksgiving, is deadline for the committee to vote on a draft plan that provides at least $1.5 trillion in cuts to the national debt.

Otherwise, the “Automatic Trigger” will be fired and there will be $1.2 trillion of automatic spending cuts to defense program budgets.

Moody/S&P announced if the politicians can’t come out a deal before 23 Nov, there will be a very high chance to downgrade the nation from AA to A credit ranking as it implied the government is not functioning well for handling financial/debt crises …

Friends, I believe the democratic will reject the deal suggested from republican and vice versa.
It happened in the Aug raise debt ceiling crises, remember?

If US may be downgraded again, there must be panic, there will be a Gold rally.

What is “Open market purchase”?

I think Japan central bank should has the most authoritativeness to explain this term.

Since 1989, Japan suffered a asset price bubble burst. The credit crunch attacked the whole economy system which caused a disaster to the banks/SME/Individual. After the stock market recession, no bank was willing lend and no one was willing borrow. (Everyone was saving money to prepare other default/writeoff.) All economy activities were totally collapsed in the second largest economy entity at that time.

The Japan central bank took the responsibility to act as only/final risk taker, by quadruple her balance sheet scale (both asset and liability side) . She repeated the following actions for nearly 20 Years:

1. Requested the Japan Treasury department issue bonds through auction and attract the banks in Jap to bid.

2. Increased her own balance sheet scale by:
a. At the liability side, create Yen (Currency) .
b. At the asset side, purchase the Government bond from the secondary market with premium/higher cost (from the domestic banks.)

The action equals to distribute the new Money to the M2 (increase the money supply to the economy system). Since the supply of money was getting huge, the interest rate was getting low. Her aims was to simulate the borrowing and economic activities.

The action 2. is called “Open market purchase”, which is the same as QE or printing money. The side effect of “Open market purchase” are

1. Introduce inflation as the money supply increase. (both M1/M2)
2. Increase the debt ratio for the central bank.

In fact, Bank of Japan is the forefather of QE and federal reserve/ECB are copying now.

Why Germany is so reluctant to stump up for the euro?

1. A currency is backup by the country’s credit and it is a liability of the of central bank. If the ECB (European Central Bank) prints the Euro and purchase the Italy’s bond, it equals to the German uses her own credit to borrow money and give it to the Italian to spend. Of course German will be very reluctant to do so. (Why ECB prints money equals to German prints money? It is because German is the only country which has credit in the Euro Zone.)

2. German suffered a hyper inflation in 1931 and they don’t want to suffer it again. Hence, they have been refusing print money since the establishment of the Euro zone.

What is EFSF?

The European Financial Stability Facility (EFSF) was created by the euro area Member States following the decisions taken on 9 May 2010.

The EFSF’s mandate is to safeguard financial stability in Europe by providing financial assistance to euro area Member States.

In short, it is the fireman of the Euro Debt Crises. But now the question, EFSF doesnt have enough “water” to put off the “fire” (PIIGS debt).

Gold would certainly go to 2000

I own gold. I have not sold any gold. I bought some more a week or two ago when it was down. When gold goes down, I try to act and buy more. If it goes down a lot, I would hope I would buy a lot more. Gold would certainly go to 2000. I do not know when it is going to go to 2000, but I know it certainly would very soon.