Europe is boiling over again with Greece, Italy, and Spain all having fits of one sort or another. Options expire Friday and I'll have yet another opportunity to either go long gold stocks or wait around for even cheaper share prices. This is the stuff dreams are made of, as the old movie line goes. Dreams are also made of sarcastic comments on business news.
The EU has another mendicant demanding attention. Cyprus needs a bailout or the whole house of cards comes down right now across the Continent. No bailouts for any of these troubled countries means they fail to meet the deficit spending limits of EU membership. Any investor who goes long the euro now gets what they deserve. On an unrelated note, I once knew a really hot girl from Cyprus. She never needed a bailout.
U.S.-domiciled multinational corporations have long known how to keep profits away from the IRS. They don't repatriate their profits from operations outside the U.S. This reduces their corporate Treasury options but that is irrelevant for those companies that find high NPV projects in other markets. The cost of doing business in the U.S. is becoming an increasingly high barrier to new investment, thanks to the Affordable Care Act. Assigning IP to foreign subsidiaries isn't the only trick to ensuring profits stay overseas. There's always internal transfer pricing for companies with complex supply chains.
The BIS thinks big banks have an advantage in trading currency because the size of order flow has some kind of predictive power. I'm calling BS on the BIS and their stinking report. Order flow size is just another source of noise in valuing currency. Hedge funds dumb enough to use this as a signal will be hurt when the signal strength degrades. I can easily illustrate how this indicator could collapse. A run on the dollar will be the largest order flow increase in the history of the currency markets, indicating something that every market participant will already know (the death of the dollar as a reserve) when it happens. Only economic fundamentals determine a currency's real value. It would be just as dumb to say that daily NYSE volume indicates the stock market's future value but some hedge fund idiots will believe that too.
That run on the dollar gets postponed every time the eurozone does something stupid. Mme. Lagarde's endorsement of more ECB rate cuts is just the thing to reduce the euro's attractiveness as a store of value. Europe wants to play beggar-thy-neighbor with Japan and the dollar will rise in the short term as long as they keep this up. The Fed beat all of the developed economies to the bottom by being first with ZIRP.
The Chinese economy is clearly headed for stagflation. I'm so glad I sold out of my China equity ETF in 2012. Curious readers can find more support for my opinion on China's coming malaise in this summary article describing last week's WorldAffairs 2013 conference in San Francisco.
I do act on my own sarcastic thinking, at times of my choosing. No one else on the planet can benefit from what I say but smart people may find my transparency entertaining. I'll bet even "Mickey" reads my genius language, but he's too dumb to understand it and doesn't have any money at all.
