Tom Daschle now has Tax Issues
First it was Timothy Geithner having trouble paying all of his taxes and now Tom Daschle has a similar issue. Am I the only person in the America paying all of my taxes! The White House concedes that Tom Daschle had some “Tax Issues”. It seems he didn’t pay taxes on a car and driver service provided to him three years after he left the government. He has now paid those taxes. My question is, how many others are doing something similar, knowingly or unknowingly and if it were an Investment Bank executive would the excuse of “I made a mistake” be enough. This is my problem, “Senator Daschle filed the amended returns voluntarily after Barack Obama announced his intention to nominate the senator to be the secretary of health and human services.” What is President Obama would not have nominated him, he would not have amended his return. I would think he should have known something is wrong here.
CLICK HERE to read the story from the New York Times.
Let me know what you think.
Good Luck and Good Forex Trading.
Don’t Spend that Bonus so Fast
New York attorney general Andrew Cuomo may be looking for a return of the $4 billion in bounes paid by Merrill Lynch.
CLICK HERE to read the story on Bloombery News.
Good Luck and Good Forex Trading
Fed to keep rates Low
The Fed held rates steady at .25% which was widely expected. Really no thing about the statement was surprising to me. Here are the highlights.
The Fed expects weak economic conditions are “likely to warrant exceptionally low levels of the Federal Funds rate for some time”. Economic activity continued to weaken as seen in the Industrial production,housing and employment numbers. The deepening recession is clearly an affect of slowing consumer spending. No Jobs + No Credit = No Spending (this in Banker economics 101). Inflation is expected to decline as prices for energy and other commodities are expected to fall. This due to “prospects for considerable economic slack”(i.e higher unemployment?). These very poor economic conditions will support the Fed’s initiative of buying MBS paper and look for them to increase size if and when needed. The Fed stands ready to do whatever it takes to get the Credit markets moving, i.e the buying of Treasuries, although no announcement of a program was announced. The Fed does expect a positive effect from the Term Asset-Backed Securities Loan Facility (TALF) on credit for small businesses and households. Finally they mentioned the over supply of liquidity in the market and said that at some point it will have to be taken back out. Mr Bernanke said it will be done in a “timely way”. There was one vote against, by Mr Lacker who preferred to expand the monetary base by purchasing U.S. Treasury securities rather then through targeted credit programs.
Market Reaction.
The Dollar rallied after the comments came out causing the Euro to touch 1.3100. I think it is best to be out of the Euro in the near term as my view that it will strengthen still stands but I think it will test lower first. I am now looking to go short Usd/Brl and Usd/Clp. These currency pairs have had no luck moving up and I think now they will test lower. I will go short dollar’s against these two currency’s tomorrow. In Brazil they announced that the Government would suspend the import licensing measure which was put in place four days ago. This was seen as a sign of protectionism and may have been a reason for a weak tone in the Real. With this out of the way it gives some momentum to sell dollars. As for rates they still are trading heavy. I prefer to try to stay square(ish) for now as I think a paying position can make money short term, but I will wait for a turn as it is against the trend. Longer term rates continue to go lower but with inverted yield curves you need to pick your spots.
Good Luck and Good Forex Trading
John Thain Fights Back
John Thain has begun to fight back. He appeared on CNBC being interviewed by Maria Bartiromo. During the interview Mr Thain tried to explain what was going on. First he said that Bank of America were involved in the acceleration of the bonus payments to Merrill employees. He also claimed that he kept Bank of America management fully aware of what was going on at Merrill. The loses were reported as they developed. He also claimed that it was BOA management placed finance people on the ground at Merrill to keep an eye on what was going on. Mr Thain also said that the renovations to his office were necessary but that he regrets having Merrill pay for them and announced that he would repay the Investment house $1.2 million that was spent. Today New York Attorney General Andrew Cuomo subpoenaed Mr Thain as he probes the bonus situation. Mr Cuomo is seeking testimony from Mr Thain, J. Steele Alphin, Bank of Americas chief administrative officer and Andrea Smith BOA’s human resource employee sent up to Merrill late last year. If it is discovered that Ken Lewis knew anything about these bonus payouts, expect him to be the next on line at the unemployment office.
Markets
Today was another choppy day but I get the feeling we are breaking out. Usd/Mexico closed firmly above 14.2000 and seems destined to test 14.5000 by possibly the end of the week. Dollarstrength is also prevalent against Brazil and Colombia. The lone exception has been Chilebut here I think it is only a matter of time. Yield curves steepened a lot in both the Mexico and Brazilcurves. I expect this to continue. Although the Mexican CB was clearly talking dovish today I think to many cuts are built in. I will be looking to pick up Mexican forwards if the come off. Argentina has quietly been the biggest mover of the week. Implied rates through the NDF’s have come off form 50% last week to 15-20% on the close today. When we get to the 10-15% range I will be looking to take back my shorts and build a small long position. This move has been so quiet due to the total lack of liquidity in the currency pair. As for the Euro, I squared up my longs before going home yesterday. I fix long tomorrow at 8.15am New York time and will reassess the position then.
Good Luck and Good Forex Trading
Lending Drops and Big Banks
Front page of the Wall Street Journal has a story on “Lending at Big U.S. Banks”. I am not sure why this should be such a surprise. There are less people looking for credit and no matter what the banks are saying they are clearly less likely to lend unless the credit is excellent. Everyone, banks and individuals are looking so save cash, not spend it. The U.S. economy is at best stuck in the mud. No matter what is done either monetarily or fiscally I see little chance of us catching real traction near term.
Markets
Argentine rates came off very hard today in spite of the fact that the currency weakened. Rates came off over 10% today as the move toward lower global rates has finally begun to affect Argentina. I look for this flattening trade to continue to occur.
Brazilian rates moved higher with a steepening curve while the currency continues to trade in a range 2.2500-2.4500. There is no need to get excited about the currency until we see a breakout above 2.5000 or below 2.1500. I do think if we close below 2.2950 then we have a chance to test the lower end of the range. A close above 2.40 and we could test the top side.
Chile. A real sleeper.
Euro. This currency traded higher overnight and continued trading bid throughout the session. I think we have a real chance to go up and test 1.3950-1.4000 in very short order. A considerable portion of the market is short Euro’s. As we trade higher it will squeeze these shorts out. I think have a good chance of testing this target.
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