23.12.2014 08:16
Is it Worth to Place a Bet on Bets?
The choice dilemma is whether to buy dollars or to wait - it is resolved at the level of trader psychology now
The market moves to the pre-New year slumber, and only several provokers are active in small volumes - the time has come to think about "perspective" problems. Even wise Alan Greenspan tried to outsmart the market through manipulations with interest rates. The 1999 situation also had cheap raw materials, growing stock markets, overbought American assets as the original data, and, in order to decrease pressure on the lending sector, the Federal Reserve increased rates three times. The super-bullish market collapsed with this share of adrenaline, the capital rushed to the USA for a short period, but several months later, money went into stocks instead of the lending market. Now, dollar demonstrates excellent results in the placement of treasury bonds (the volume of applications is three times higher than the issue amount) during the year that ends with the real perspective of improvements in 2015. The publication of macroeconomic statistics this week, stable growth statistics, and excellent dynamics of labor market, the highest profitability of American papers over the last 10 years gives ground for active investments and further strengthening of dollar as early as at the beginning of the year. However, the present FRS still has risks to walk twice into the same water.
The development indicator in modern understanding is the growth of GDP and prosperity level; hence:
- The first negative - the increase of key rates slows down economy growth and money flows, durable goods glut reduces the need for loans (mortgage loan sector is the first to suffer) and causes consumer stagnation;
- The second minus: budget supplementing (quantitative easing) with the help of the Central Bank funds has stopped; it will have to provide for itself with the profit from domestic/foreign investments in treasury papers in the midst of tax revenue decrease. But the Treasury is not used to saving on social programs or military-industrial complex, and the moment of high rates implementation will depend not so much on the condition of the economy, but on the balance - taxes/volume of long-term loans.
Dollar has been growing for several months, the interest to purchases is gradually going down; over the last two weeks, base currencies decline with the further growth of third world currencies has already been seen. It is highly probable that the American national budget officials can show the declared monetary "patience" and move the dates, not looking at the growing values - the growth on stock markets after last Wednesday only confirms the danger of forming another stock market bubble.
Local crises in developing countries that are not yet ready for national rates increase produce a special set of arguments. Now, the dependence of Asian corporations on borrowed funds particularly on dollar is much more serious then in the time of 1998 financial crisis; moreover, in order to attract capital, offshore schemes are used practically on the state level. That implies a constant risk of national currency crash by way of exchange of debt securities and credit funds for real dollar. The examples of stock prices fall and devaluation in oil-importing countries (for instance, Turkey, India/Indonesia, South Africa) do not discard catastrophic flight of capital; it is the most often thing that collective funds that invested in those countries, in the first case of panic, drop the most liquid assets at any price. The growing dollar makes such situations more aggravated, but it causes the ideas of hedging capital flight from cheap stocks through injections into American stock market.
The choice dilemma is whether to buy dollars or to wait; it is resolved at the level of trader psychology now. If you, as an investor, want to make reserves for preliminary purchase of state bonds expecting possible profitability growth in the next three months, then you are risking to keep money as dead weight in case of rescheduling the dates of rate increase. However, if you count on regular speculations, then you should buy anything that moves (dollar has been very dynamic since the beginning of the year), and the main thing in this case not to be late with the purchase.
The development indicator in modern understanding is the growth of GDP and prosperity level; hence:
- The first negative - the increase of key rates slows down economy growth and money flows, durable goods glut reduces the need for loans (mortgage loan sector is the first to suffer) and causes consumer stagnation;
- The second minus: budget supplementing (quantitative easing) with the help of the Central Bank funds has stopped; it will have to provide for itself with the profit from domestic/foreign investments in treasury papers in the midst of tax revenue decrease. But the Treasury is not used to saving on social programs or military-industrial complex, and the moment of high rates implementation will depend not so much on the condition of the economy, but on the balance - taxes/volume of long-term loans.
Dollar has been growing for several months, the interest to purchases is gradually going down; over the last two weeks, base currencies decline with the further growth of third world currencies has already been seen. It is highly probable that the American national budget officials can show the declared monetary "patience" and move the dates, not looking at the growing values - the growth on stock markets after last Wednesday only confirms the danger of forming another stock market bubble.
Local crises in developing countries that are not yet ready for national rates increase produce a special set of arguments. Now, the dependence of Asian corporations on borrowed funds particularly on dollar is much more serious then in the time of 1998 financial crisis; moreover, in order to attract capital, offshore schemes are used practically on the state level. That implies a constant risk of national currency crash by way of exchange of debt securities and credit funds for real dollar. The examples of stock prices fall and devaluation in oil-importing countries (for instance, Turkey, India/Indonesia, South Africa) do not discard catastrophic flight of capital; it is the most often thing that collective funds that invested in those countries, in the first case of panic, drop the most liquid assets at any price. The growing dollar makes such situations more aggravated, but it causes the ideas of hedging capital flight from cheap stocks through injections into American stock market.
The choice dilemma is whether to buy dollars or to wait; it is resolved at the level of trader psychology now. If you, as an investor, want to make reserves for preliminary purchase of state bonds expecting possible profitability growth in the next three months, then you are risking to keep money as dead weight in case of rescheduling the dates of rate increase. However, if you count on regular speculations, then you should buy anything that moves (dollar has been very dynamic since the beginning of the year), and the main thing in this case not to be late with the purchase.
