China floating is more about the Euro than bowing down to US pressure

From the WSJ:

A Chinese central bank adviser gave an upbeat assessment on the euro's long-term outlook and said global financial markets may have overreacted to the European sovereign-debt crisis.

Li Daokui, an academic adviser to the People's Bank of China, also told a financial forum on Friday that a major appreciation of the yuan is "impossible" because China's international payments are relatively balanced.

He repeated the official stance that the yuan float will be in two directions.

His views may not necessarily reflect the central bank's thinking, though he is at a position that his view can be heard by decision makers.

The comments came after the yuan rose to a modern-era high against the U.S. dollar on the eve of the Toronto summit of the Group of 20 industrialized and developing nations. Many analysts said the yuan would return to gradual gains in the week ahead, as Beijing won't be willing to see sharp rises in the yuan hurting local exporters.

A week ago, China removed its peg to the U.S. dollar, in place for nearly two years, returning the currency to a managed-float system that references the yuan to a basket of currencies that includes the euro. China's officials have said the move will help ease the pressure on the yuan to appreciate against the euro amid the euro-zone debt crisis.

China does what it wants for their own sake and doesn't really care about international pressure. They see the potential for the Euro weakening against the US dollar to threaten their exports. If they remained pegged to the US dollar, they lack tools to combat the Euro decline!

China moved to a float why? in order to have the flexibility to manage their currency against the Euro, NOT because the US wants to brand them a currency manipulator. Perhaps the Euro might rise in this case. I believe currency traders have caught on this idea. Euro shorts better be careful!

China's peg was released on the weekend, Wednesday Euro rallies while stock markets fall.

This is shaping out to be a battle royale! China and US versus the EU. Is China taking on more than it can chew in managing its currency against both US and Europe?

Malaysia won't go bankrupt, manufacturing exports!

From The Business Times:

Malaysia will not go bankrupt like Iceland and Greece following the nation's success in maintaining its debt level under control and prudent measures taken to reduce debt rate, Prime Minister Datuk Seri Najib Tun Razak told the Dewan Rakyat today.

He said the federal government's financial position will be carefully planned, constantly monitored and strictly controlled with full responsibility.

"The deficit level is expected to dwindle while the debt level will be kept under control in the medium-and long-term.

"These measures will help ensure the debt level and the federal government's deficit will not increase to the extent of jeopardising the country's financial capacity to repay its debts," said Najib, who is also Finance Minister, in his written reply to Lim Kit Siang (DAP-Ipoh Timur).

Kit Siang had asked Najib on the actions taken to ensure Malaysia would not suffer a similar fate like Iceland and Greece and become a bankrupt nation, requiring a bailout from regional and international communities.

The prime Minister said Malaysia's debts dwindled to RM233.92 billion last year as compared with RM236.18 billion in 2008 although the percentage rose slightly.

I sincerely hope so! But asia in general is pretty lucky that their property prices aren't as bubble-like as Europe and the employment rate is pretty good. Wages are of course low, but looks like China's people are getting paid a lot higher. Operators in the factories here don't get paid that much. I'd say with the salary raises at a lot of factories, minimum wage here is starting to look up.

I would say that the electronics sector here in Malaysia is quite competitive and worthwhile now! come to Malaysia! You get a more electronics manufacturing capable work force than China! Not only that, more people speak English than your export-oriented manufacturing country!

Game Theory at work, US and Europe!

Game Theory, more specifically the Nash equilibrium, Prisoners Dilemma is alive and well in the world. Europe is doing what is best for itself and US is doing what is best for itself. They can both cooperate for better gains but they won't even though it may be in their best interest to do so. (i.e. printing money the way US wants it done)

Apparently US needs help outside of itself to get the economy going again. If Europe won't cooperate with money printing, kiss Geitner's and Bernanke's money printing based solutions goodbye. Of course, they could print even more money, but it is hard to justify buying more assets to debase the currency as there is no crisis. Let's see where Bernanke goes with this.

Anyways, like I said before the US swap lines are open, but the ECB isn't using them. The swaps mean the US gets ECB bonds, Europe gets US Treasuries. ECB in turn, buys crap assets such as sovereign bonds with US money. If the ECB is gone sometime in the future, guess who will own the crap sovereign debts!

Positive on MISC and even MMHE (long term)

When MISC lists MMHE, it will obviously be good for MISC shareholders, but overall I think both should do well over a long period. One of the most expensive parts of doing business in the natural gas business is the building of huge LNG ports to convert the natural gas to liquid form. This is no small feat and is very costly from a fixed cost point of view.

Recently, there has been a breakthrough converting the Natural Gas to LNG on a ship. The FLNG vessel will then offload the LNG to a tanker for transporting to places around the world. This platform goes from rig to rig converting Nat gas to LNG and offloading it to a tanker.

Some advantages include:

• Smaller fields can be developed, that were previously unfeasible,
• Less red tape
• More share of the Natural gas pie for shipbuilders and rig construction.
• Less fixed cost for ports on land.
  
• More natural gas for everyone.

This is good for both MISC and MMHE. Petronas, MISC, and Mustang has also started a joint venturel on constructing a FLNG vessel. It will be expected to be in operation by 2013.

disclosure: long MISC.

BJ Toto needs to grab the low hanging fruit

BJ Toto has quite a number of outlets around the country. They should leverage their assets by conducting other transactions outside of gaming (perhaps bill payment, etc), so they can increase revenue with little risk. Maybe perhaps they are not allowed to do that by the government, as I do not know their arrangement.

During certain non-peak periods of the day I'm sure they can accommodate other types of products using their wide distribution network.

disclosure: long BJ Toto.

Euro short Top kill successful

Maybe BP should take a page from the short Euro FX traders on how to do a successful top kill.

Buffet's oil spill

Warren Buffet is getting grilled on the Television. It's maybe coincidence of timing, but basically Moody is BP and the oil spill is the financial crisis. Now Americans can properly visualize how horrible Moodys has been! Short Moodys if the SEC has any gonads to go after them!


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Update: After watching the hearings, I've got to say that I'm less than enamored at Buffet's character. His oracle-ness aura has faded away. I remember one question concerning Goldman Sachs and "due-diligence." Basically the answer was we got to depend on the government I guess. I mean seriously, do you want someone like that managing ur money?

Someone who just chucks 5 billion on decent terms? who doesn't "check" the hood? But now, It's come back to haunt him in this hearing! Sorry, I'm not sure if the 5 billion was worth it if Berkshire drops 5% in market cap!

ECB slow pokes, get ur shorts on!

From The NY times:

The European Central Bank said Monday that it had spent 26.5 billion euros buying government or corporate bonds since it began the debt purchases May 10, an amount that some analysts still consider inadequate to stabilize the euro zone’s financial system, Jack Ewing reports in The New York Times.

“The central bank has massive firepower but is not deploying it yet,” Silvio Peruzzo, an analyst at Royal Bank of Scotland, said in an e-mail message.

The disclosure Monday, in a routine announcement on the central bank’s Web site, indicated that the bond purchases in the week ended Friday were a relatively minor 10 billion euros, or $12.4 billion, after purchases of 16.5 billion euros the previous week. The bank has not disclosed what kinds of bonds it has been buying.

Yields on paper issued by Greece, Portugal, Spain and other highly indebted euro-zone countries have plunged since the central bank began the purchases. But though the purchases have achieved their goal of halting a sell-off of sovereign debt, the amount is still small compared with the total volume of bonds in circulation.

In a report issued earlier Monday, analysts at Royal Bank of Scotland estimated that European banks, insurance companies and other institutions hold some 2 trillion euros in government and corporate debt from the so-called peripheral euro zone countries.

LOL....I think every trader is calling the ECB on 25 billion in purchases so far for the month, cuz they are slow-walking the buying process. Come on, short Euros are going to come at them with everything they have. Still got 970 billion Euros to go!

This is the Fed Reserve Balance sheet.

Fed Balance Sheet (source: zero hedge)

You can see how ridiculously responsive the Fed was at QE. Thus we had a big rally! Come on ECB! Do it for the love of Money!

Euro FX futures

Central bankers play follow the bernanke, request liberal use of swaps

From the NY times:

South Korea is proposing that central banks set up a permanent arrangement for foreign-currency swaps to help address the type of funding shortages that emerged during the global financial crisis.

“Broadening and institutionalization” of such measures could help establish “a global financial safety net,” the governor of the Bank of Korea, Kim Choong Soo, says in the text of a speech to be delivered Monday in Seoul at a conference of central bankers.

Mr. Kim’s proposal comes five days before finance chiefs from the Group of 20 nations are scheduled to gather to discuss strengthening efforts to prevent financial crises. The U.S. Federal Reserve chairman, Ben S. Bernanke, who is among the officials scheduled to speak at the meeting, has opposed currency swaps as a “permanent service,” seeking instead to pressure banks into better managing their funding needs across different currencies.

Mr. Kim said his proposal could reduce the need for emerging economies to hold large quantities of foreign-exchange reserves as insurance at a “substantial” economic cost.

Wow, we're talking about Korea suggesting to the US to use more swaps. Well, if they want to bail out Europe, other countries are going to ask for their share as well.

But Bernanke isn't in much of a position since he let the genie out of the bottle with use of swaps during his tenure. Not calling him rascist or anything, but what the hell, exports to Asia are just as much as exports to Europe. If Asia is in trouble, it is in US' company's best interest to bail them out. Asian countries won't need to hold as many reserves which is good for US exports.

US Exports to the world by region

That is the main reason why Europe is getting bailed out. I say Asia should hold one currency together so they don't need to carry as many reserves and dump US dollars so Asia currency and wages can go up.

Then people in Asia can take holidays in Europe and US for Cheap!