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Can China Do Without the Dollar?

July 2nd, 2009
By
David Goldman

China’s announcement overnight that it will allow companies to settle international trade claims in yuan shows how serious the Chinese authorities are about building a local currency market. Bloomberg reports,
 
July 2 (Bloomberg) — China will allow companies to use the yuan to settle cross-border trade and let them keep their entitlement to export tax rebates, seeking [...]

The Rise in the Savings Rate Has Only Begun

June 26th, 2009
By
David Goldman

In a recent post entitled, “The Stealth Deterioration in Asset Quality,” I argued that the rise in the US savings rate had only begun. That implies falling consumption, a weak housing market, and an L-shaped recession as far as the eye can see. That is just what we observe in the household spending and consumption [...]

Will China Buy Gold?

June 25th, 2009
By
David Goldman

When I put my orders in for gold and base metal mining shares yesterday, I hadn’t seen this Reuters report that a senior Chinese researcher had recommended buying gold instead of dollars for China’s reserves:

China should buy more gold because the U.S. dollar is poised for a fall and the metal is needed to support [...]

How to Hedge, and Against What

June 24th, 2009
By
David Goldman

In a market bounded by deflationary tendencies (rising savings rate, aging population, risk aversion), inflationary impulses (budget deficit in excess of 10% of GDP, huge expansion of Fed balance sheet), low private consumption (with 10% unemployment by a generous count), and rising government consumption, there is little maneuvering room on any side. Credit remains the [...]

Beware the Little Man With His Back to the Wall

June 23rd, 2009
By
David Goldman

[Note: this post appears simultaneously on my blog at First Things].
The Iranian exile journalist Amir Taheri, the dean of regime critics writing in the English language press, says that civil war is unlikely in Iran.  In the most convincing analysis I have seen to date, Taheri points out that Ahmadinejad has his back to the [...]

I’m So Tired (of This Market)

June 19th, 2009
By
David Goldman

As in this scene from Blazing Saddle Points, I’m tired of this market. There’s nothing to say that I haven’t set multiple times before, but here’s a note to make clear that I haven’t stopped thinking about things.
I announced at the beginning of the year that the stock market would chop sideways forever and that [...]

$134 billion in smuggled bonds almost surely a scam

June 17th, 2009
By
David Goldman

My inbox is bulging with gossip about the $134 billion in supposed smuggled bonds seized by Italian customs agents on June 5 from two Japanese men. The news is old, but William Pesek’s comment in Bloomberg this morning gave the second-day story some legs.
The idea that $134 billion in U.S. Treasury securities held by some [...]

The Stealth Deterioration in Asset Quality

June 16th, 2009
By
David Goldman

While the world’s attention was focussed on the dollar, inflation, and the possibility of resurgent inflation, signs of deflation crept back into asset markets. Some vintages of subprime AAA’s, a barometer of sorts of household health, are trading at all time lows of less than a quarter on the dollar.

This is not surplrising given that [...]

The end of Obama’s maneuvering room?

June 10th, 2009
By
David Goldman

Is Obama’s Economic Maneuvering Room Already Exhausted?
Wednesday, June 10, 2009, 3:55 PM
David P. Goldman

 
Between the election of Barack Obama and the afternoon of June 10, the yield doubled to 4% from 2% for 10-year Treasury notes, the benchmark for long-term yields in the U.S. economy. Part of the sharp rise in yield was a snapback [...]

It’s quiet out there — too quiet

June 9th, 2009
By
David Goldman

 
The markets will chop sideways forever, I wrote early in January.
 

Above: Bank of America Option Implied Volatility (from ivolatility.com)
 
Volatility has collapsed back to pre-Lehman levels. Starting on April 27 I began warning of a volatility implosion, which now has run its course.

Too many things can go wrong at this point.
1) The real estate rally is aborting, [...]