Net shorts again a record in the euro
By Peter Boockvar - March 12th, 2010, 5:35PM
According to the CFTC data for the week ended Tuesday, net shorts again went to a record high in the euro after last week’s modest drop. Net shorts in the pound fell a touch from last week’s record high. In contrast, net longs in the Canadian $ rose by 60% to the most since Nov ’07 and net longs in the Australian $ rose 26% to a 7 week high. Net longs in gold rose for a 4th week, up slightly. Net longs in crude rose to a 7 week high.
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March 13th, 2010 at 6:46 am
Can anyone comment on what predictive value the above data has? As one not knowledgeable about futures markets, the above data are – to me- factoids without context. What do we do with this info?
Thanks
March 13th, 2010 at 10:22 am
8:55 am ET 03/13/2010 – UPI: European Union ministers are nearing completion of a bail-out package for Greece. . . The package . . . could contain as much as $34 billion in aid with primary backing from France and Germany . . . Options include loans to Greece and a bond issue guaranteed by eurozone countries . . . The deal must be constructed to circumvent EU rules that prohibit a bail-out for a country on the edge of insolvency. . . “
Think of what this really says: EU rules prevent Greece from creating money. So, unlike the United States, Greece legally cannot service its debts. The EU will break its own rules to lend Greece more money, while insisting that Greece destroy money by running surpluses. (Debt creates money; destroying debt destroys money.)
Thus has the debt-growth-restricted world of the debt hawks merged with the money-growth-restricted world of the gold bugs in one currency, the euro. Each day, the euro will encounter problems with reality, problems that will require patches and rule-bending, and will devolve to a jerry-built, recession-prone, Frankenstein currency, eventually to be abandoned in the midst of crisis.
Those who have read my blog, will not be surprised by Greece’s and the EU’s problems. The euro is the inevitable result of beliefs by debt-hawks and gold bugs — which are identical.
Debt hawks, gold bugs and the EU all are the same people, though they may not realize it. They all wish to restrict the growth of money, just through different mechanisms. Debt hawks would restrict money growth by outlawing its creation. Gold bugs would restrict money growth by tying it to a commodity with limited growth ability.
The EU nations are hobbled with both. They are tied to a “euro standard” (ala a gold standard) and the growth of the euro is legally restricted. Why does restricting the growth of money have such widespread appeal, when money growth so obviously is needed for a growing economy? Because even sophisticated economists do not seem to understand the three-word sentence the forms the very basis of all economics:
“Money is debt.”
Rodger Malcolm Mitchell
March 14th, 2010 at 12:08 pm
@DoctoRx – what this basically means is people are (for lack of better terminology) taking bets against the future direction of these currencies – simply put, in the marketplace, short means selling, long means buying – so those who are “short” the Euro are betting that the Euro is (broadly speaking) going to go down in value – while at the same time, those are “long” the Australian Dollar and the Canadian Dollar are “taking bets” that those currencies are (again, broadly speaking) going to go up in value. As far as I can tell, this is a bet on future economic activity based on the health of the various economies and what they have to offer in the world marketplace. Australia and Canada are heavy commodities producers, so market participants believe that there is going to be more demand for their currencies, which will be needed to purchase goods produced in their respective countries. As far as the Euro is concerned, they are having a lot of economic problems for a whole host of reasons which are too numerous to get into for the purpose of this post, but the sentiment is that they are going to experience sluggish economic activity and growth, and taking bets on the future is essentially betting on economic growth.
For oil, people are thinking that there is going to be an uptick in demand for oil, ergo, price for that commodity will go up. People are also betting against depreciation of the dollar, by being long oil, because as the value of the dollar goes down, the more prices, which are largely denominated in dollars, will go up to compensate for the loss of purchasing power of the dollar. Gold is in general a bet against paper currencies, and the fact that they depreciate over time because the supply can be expanded at will, as opposed to gold, which is a much more comparatively fixed and finite supply, thus market dynamics are expected to render it more valuable over time as the value of the paper currencies used to purchase it is eroded.
Many of these bets for the growth in demand for commodities and and economic growth in general are predicated on Asia being the current and future engine of economic growth – as “poor” populaces become wealthier as a society, they consume more and more – which means more economic activity as people produce, sell, buy, and consume more goods and services. The commodities play specifically is based on the idea that these are the basic building blocks of an economically expanding society – as they build roads and power plants and dams and electrical and water infrastructure and cities – all the things that are needed to run a modern economic society, they need raw materials (oil, copper, coal, steel, grains, meat) to fuel that. They also start to eat more meat, which takes exponentially more grain to cultivate than just eating the grains themselves. Thus a self-reinforcing loop where demand for one thing often increases demand for another.
Anybody have any other thoughts, please let me know – that’s just how I interpret the data….
March 14th, 2010 at 9:27 pm
…Buy EUROS…!!!!