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Rank: Member Joined: 3/10/2008 Posts: 301 Location: Abu Dhabi
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karanjakinuthia wrote:A peek at the Currency Crisis of 1931 reveals that unlike today, Germany was on its knees financially due to war repatriations after World War I. It had to issue bonds in the United States to pay for its war debt; in essense utilizing debt to settle debt. The French, on the other hand, were in a strong position as a result of its substancial gold holdings and heavy commodity base.
France's opposition to the German-Austrian agreement led it to redeem German bills, severely crippling the latter's funding situation. That move by the French and its banks pushed Credit-Ansait Bank of Austria over the edge sparking bank failures across Europe.
Interestingly, Germany is engaging in the economic brinkmanship of the French several decades ago.
Interesting. German is really proving to be the millionaire who was once a beggar and sleeping on the streets, but now cant understand how someone cant afford a meal.... extreme arrogance. They're really trying to take advantage of Greece, asking for huge premiums for any bail outs. On a different angle, some office mates the other day were discussing the way Greeks really live beyond their means, and this has even become a culture in the govt. I dont know how true this is, but quite similar to Dubai and Abu Dhabi case.
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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The ratings agency S&P's downgrade of Greek and Portuguese debt rang out like a fire alarm in a supermarket, sending market participants scurring for the exits. The mood was that of sell first and ask questions later. Safe havens were the U.S. Dollar, U.S. Treasuries and gold. Portugal is now being looked upon as the next shoe to drop, all the while the Greek Tragedy grows in amplitude with talk of a further 10 billion Euro top-up by the IMF. At the start of April, Greece's 2 Year Bonds were trading at 5% and are now sporting a 16.81% rate. Confidence is the thread that intertwines all markets. The fear of contagion and a repeat of the 1931 Currency Crisis due to World War I debts is straining that very bond. We all recall that war broke out 8 years later in Europe. 2018 threatens to bring about the same result and coincides with the 26 year War Cycle. "Stock markets around the world plunged today after Standard & Poor's cut Greece's credit rating to junk status and downgraded its view of Portugal in the clearest evidence yet that the European sovereign debt crisis is spreading. Italy and Spain are also viewed as vulnerable. In London, the FTSE 100 index closed down more than 150 at 5603, a fall of 2.6%, and there were big falls in share prices in Athens, New York, Paris and Frankfurt. Analysts blamed politicians in Germany for dragging their feet over a Greek rescue package worth €45bn. German chancellor Angela Merkel has demanded that Greece come up with a tougher and longer austerity package before the EU ploughs in €30bn and the International Monetary Fund comes up with €15bn. But investors fear the government will be unable to deliver amid opposition from trade unions who have already taken to the streets...." Read more: http://www.guardian.co.u...redit-rating-downgraded
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Several reasons stack up against a sovereign bond issue by the Kenyan government at this time: 1. The Western world is mired in a Debt Crisis which will cause capital flight from state and municipal bonds of heavily indebted nations in Europe and the U.S. 2. Capital flight will reduce the prices of bonds and inversely result in an upward trajectory of interest rates. 3. Emerging market debt (Kenya would fall under this category) is based upon interest rates of the long end of the U.S. Treasury debt market (10 year and 30 year Treasuries) plus about 200 basis points. 4. Bond investors, fearing default are already shifting their funds into short term U.S. Treasuries causing a rise in long term rates. 5. In the event of default by a sovereign, volatility will spike swaying currencies and bond prices/interest rates. Greece's flirtation with default has caused a spike in its 10 Year interest rate from 3% to 9.6%. 6. In the event of civil unrest, finger pointing and possibly war, volatility will spike swaying currencies and bond prices/interest rates "The government has been urged to take advantage of the prevailing global liquidity and low interest rates to issue the Euro Bond. The National Science and Economic Council (NSEC) has recommended to the government the need to issue the bond at a time when the international debt market is awash with funds and the prevailing low interest rates....." Read more: http://www.businessdaily.../-/ele61fz/-/index.html
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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@kk Quote:3. Emerging market debt (Kenya would fall under this category) is based upon interest rates of the long end of the U.S. Treasury debt market (10 year and 30 year Treasuries) plus about 200 basis points.
4. Bond investors, fearing default are already shifting their funds into short term U.S. Treasuries causing a rise in long term rates.
5. In the event of default by a sovereign, volatility will spike swaying currencies and bond prices/interest rates. Greece's flirtation with default has caused a spike in its 10 Year interest rate from 3% to 9.6%. Can you explain this more. I don't understand. Like we didn't see this coming. Greece bans short selling. It's like Lehman and Bear Stearns all over again. But will the outcome be different this time? Read more: http://www.marketwatch.c...28?reflink=MW_news_stmp
http://www.businessweek....om-today-to-june-28.html“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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@ Scubidu. When the prices of bonds fall due to waning investor demand, the interest rates of the bonds rise. Therefore, in a Sovereign Debt Crisis, investors offload bonds of nations in turmoil causing a comensurate rise in interest rates. Unlike the 1930's when the U.S. was a creditor nation, had a surplus budget and second only to France in gold holdings, it now ranks as the largest debtor nation in the world with deficit spending as far as eye can see. Therefore, its currency and debt markets cannot act as a port of safety during this crisis period. Emerging market debt interest rates are several basis points above what are considered robust markets. The U.S. and Germany fall under this category. Notice that Greek interest rates are quoted as X percentage points above German Bunds. As an emerging market, we will be subject to U.S. long term interest rates. If and when the Debt Crisis crosses the Atlantic, U.S. rates will head upwards due to investors offloading U.S. debt fearing default. Those of our sovereign debt are set to follow. Astute investors are piling into short term U.S. Treasuries whose short maturity durations allow for re-assessment depending on prevailing conditions. Long term debt holders are in for a rude shock. We are witnessing Point 5 unfolding. The Euro and major stock markets are swaying violently. Greek and Portuguese Bonds are plunging. The VIX Volatility Index was up by 30% yesterday, the highest increase since October 2008. All this and we haven't had a default yet. How then does one price a long term bond in this environment when the markets are "a loose cannon on the deck of the world in a tempest-tossed era"? How then does the government guarantee sufficient uptake from investors who are fleeing from debt markets?
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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@Scubidu Time magazine reported in its September 28, 1931 edition on the shock of the British default. Their comments were as follows: "Last Monday, all businessmen were shocked to read in their morning papers that the British pound sterling was no longer based on gold. The Tokyo Stock Exchange had announced that it would not open. Tokyo was followed by Bombay, Calcutta, Johannesburg, London, Berlin, Amsterdam, Copenhagen, Vienna, Oslo, Stockholm, Brussels and Athens. The Paris Bourse opened, but limited all trades to 5% of all holdings and no dealing in foreign exchange. Montreal’s Exchange opened similarly restricted. The New York Stock Exchange remained open, but as in dark November 1929, short selling was forbidden. In the artificial market thus created, stocks gyrated unsteadily, closed higher; bonds closed at lows for the year." In another article, Time reported: "In few nations nowadays is there a ‘free and open market.’ The Berlin Bourse closed from July 13 to September 3, opened with shortselling banned, then closed again. In Great Britain all trades were put on a cash basis which practically eliminated shortselling as did restrictions imposed on the French and Athenian Bourses. On the Paris Bourse a seller must deposit 40% margin, also 25% on the amount of the stock sold which makes bear activities a rich man’s privilege. One of the most dramatic events of the present crisis occurred in Amsterdam on September 21 when after a terrific slump in prices, all transactions were cancelled, the Exchange closed in status quo. Montreal and Toronto met the British crisis by banning shortsales and establishing ’minimum prices’ for securities, but both last week were open with no restrictions. The Tokyo Exchange has been closing and opening repeatedly during recent weeks. Tokyo stocks broke badly when the shares owned by interests who operate the Exchange collapsed.* These efforts were a waste of time, the stock markets continued to fall until mid 1932. Similar efforts during the financial crisis of 2008-2009 did not stop the market from declining. Regulators seem to disregard the fact that the short seller is the only participant who is obligated to buy in a falling market inorder to cover his short position. Markets can decline by the mere virtue of sell orders overwhelming buy orders. *Source: The Greatest Bull Market in History
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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KK. Ever thought of running a teaching seminar? Young chaps like myself would pay top dollar to listen to you. Think about it. You're lending me the book dude "The Greatest Bull Market in History". “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: New-farer Joined: 4/9/2010 Posts: 7 Location: Nairobi
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Thanks to all the contributors....a good read. Welcome to The Obablo Media Online Shop! www.obablo.com
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Thank you Scubidu and Obalbo.
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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The commodity bull markets of the past century were (and will be): 1907 to 1919 1968 to 1980 1999 to 2016 Of note is the fact that the greatest intensity of price increases is felt during the last 4 years to the top of the bull market. At that point in time, the markets are in parabolic or blowoff mode. Consumers and industrials are well advised to prepare for the years 2012 to 2016. "A sharp rally in commodity prices with the ongoing global economic recovery could increase the exposure of frontier economies such as Kenya to imported inflation and exchange rate instability, the International Monetary Fund (IMF) has warned. The IMF says such instability could slow down growth in the near term, leaving many countries behind their medium term targets with serious consequences on the economic environment..." Read more: http://www.businessdaily...0/-/vgr6l4/-/index.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Another stake in the heart of Europe. May 19th is a Red Letter Day for Greece. It needs to repay 9 billion Euros to foreign and domestic investors by raising money from the debt markets. Unfortunately, it cannot do so due to its skyrocketing rates: 2 Year Bonds are trading at 23%. Meanwhile, German engages in brinkmanship. The weakness in the Euro is a boon to its manufacturing sector. "BERLIN—A cut to Spain's credit rating on Wednesday, just one day after downgrades to Portugal and Greece, fueled fears that the euro zone's debt crisis is widening and sent new tremors through financial markets. Chiefs of the International Monetary Fund and the European Central Bank went to Berlin to exhort reluctant German lawmakers to support the IMF-European Union rescue package for Greece. According to German officials, IMF head Dominique Strauss-Kahn said the aid could total up to €120 billion ($158 billion) over three years—nearly three times the amount recently pledged...." Read more: http://online.wsj.com/ar...html?mod=wsj_india_main
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Rank: Veteran Joined: 7/24/2008 Posts: 781
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@kinuthia, Thanks,I find your posts very informative. Another dude that has really educated me is Adam Hamilton of Zeallc. http://www.zealllc.com/essays.htmThe utimate goal of investing is to buy low sell high;if we re-write this core equation in psychology terms it becomes buy fear sell greed.
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Thank you Sheep. I was once a follower of Adam Hamilton. His articles on commodity cycles are quite informative.
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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Ive just read one of his articles now on inflation. Dude has some interesting views. So much to read, so little time. Thank you sheep. http://www.zealllc.com/2008/moninf.htm
http://www.zealllc.com/2009/biginf.htm
http://www.zealllc.com/2009/biginf2.htm“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Those whom the gods wish to destroy they first make mad. "Amidst growing pessimism about the financial condition of U.S. cities and states, investors are increasingly buying financial instruments that essentially allow them to short sell - or bet against - cities and states, says a Wall Street Journal report. Offered by banks like JP Morgan, Bank of America, and Citigroup, the so-called municipal credit default swaps can be used by investors to bet that insurance contracts protecting holders of municipal bonds will default...." Read more: http://www.huffingtonpos...t-us-citi_n_553891.html
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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In the wake of the 1929 stock market crash and the ensuing depression, gold was hoarded as a protection of wealth. The government had fixed an ounce of gold to $20.67 so gold stocks were essentialy utilities. It was in 1934 that Franklin D. Roosevelt devalued the dollar versus gold by fixing it at $35. The premier gold stock at the time was Homestake Mining. The 1931 calendar brought with it a ticker price of $79 per Homestake share, closing the year at $129 due to the unfolding Debt Crisis in Europe. 1932 saw the stock trading at a range of $110 to $163 whilst in 1933 the range was between $145 and $373. Roosevelt's devaluation was a boon to gold miners. Homestake reached $544 by 1936. It is that time again. "Dear Friends, Linked below are some charts of gold priced in currencies other than the US Dollar. As you can see from the charts, gold is either making new highs or is close to previous highs. What this reveals in picture form is a loss of confidence in paper currencies. This is gold reverting to its historic, age-old role as a safe haven for wealth preservation. Trader Dan...." Read more: http://jsmineset.com/201...-in-various-currencies/
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Rank: New-farer Joined: 1/18/2010 Posts: 13 Location: Nairobi
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Where can i get supply vs demand stats on stocks?
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Rank: Elder Joined: 6/20/2007 Posts: 2,048 Location: Lagos, Nigeria
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@Mzee karanjakinuthia , Spot Gold price in USD at the moment is circa 1,170 can you predict the peak price this year, or can any one answer the question ? The wazua spirit as members is to educate and inform and learn from others within the limit of what we know in any chosen area irrespective of our differences in tribes, nationalities, etc. .
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Rank: Member Joined: 11/13/2006 Posts: 551 Location: Nairobi
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@ Young. Please review the chart below: http://www.facebook.com/kinuthiakaranja?v=info#!/photo.php?pid=3334669&op=2&o=global&view=global&subj=44489575924&id=649361247 My forecast is a technical price objective based on chart analysis. It does not factor six sigma events or fat tails such as a sovereign debt default. In that regard, the key to gold's glitter here and now is the intensity of the Debt Crisis. Gold is the canary in the coalmine, warning of deadly gas.
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