Author: shyam

Europe!

German Logo of the ECB.

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It appears that the EU is fast approaching the end-game. The Germans will not allow the ECB to print money and buy bonds. And neither will they allow PIIGS to default and quit. The only thing left on the table is tighter integration where austerity coupled with a transfer union will stabilize the Euro. The Germans seem to be hell bent on a treaty change and a move towards a fiscal union with tighter budget controls, even if that means removing democratically elected governments and replacing them with ‘technocrats’ favorable to Germany.

With Italy in dire straits, it appears that IMF has chalked up a $800 billion loan in case its debt crisis worsens. The funny thing is the largest contributor to the IMF is the US (18%). Wonder how that would go down with the Congress. But rumors of the IMF loan to Italy has sent stocks soaring, for now.

Since the US is going to be on the hook anyways, why not allow Uncle Ben to buy up all Euro debt? Maybe the only response to the current existential threat to Europe would be for the Fed to print dollars and buy up, say, €2 trillion of bonds? If it is presented as a choice between printing and fascism, Bernanke might just get away with it.

The fact remains that the world desperately needs the West to reflate.

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Fiat India–Nice cars ruined by Tata Motors

Fiat 1100-103, 1954

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Note to self: no matter what, do not outsource customer service.

Fiat has a decent lineup of cars in India. However, they have been extremely unlucky in choosing an Indian partner. Fiat cars were one of two models that were available during the dark days of the license-permit raj. Their earlier models (more than 30 years old) are still used as taxis in Mumbai. Why is it that given a choice, most people would not buy a Fiat now? I guess the answer is fairly simple: poor customer service.

Back in the 90’s Fiat partnered with Premier motors to introduce the Uno. I remember my dad “booking” a vehicle and waiting for over six months to actually take delivery. It was a complete disaster in terms of service levels. Parts were unavailable, mechanics did not know how to service the vehicle and there just weren’t many service centers accessible. Fast forward to 2011 and they are still where they were 20 years ago, except that they now have Tata Motors screwing things up for them.

How do you expect a partner to do a good job servicing your product when the same partner has equivalent models competing under his own brand name? No wonder Fiat gets a step-brotherly treatment. Ask me, its two weeks and counting to get parts for my Linea. Pathetic.

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Technical Analysis of the Financial Markets: Ch 5

This is a review of the fifth chapter of John J. Murphy’s Technical Analysis of the Financial Markets.

Triple Tops and Bottoms

imageTriple Tops, as the name indicates, are identified as three peaks at the same level. Volume decreases with each successive peak at the top and should increase at the breakdown point.

Return moves to the lower lines are not uncommon.

Double Tops and Bottomsimage

This pattern has two peaks (A&C) at about the same levels. The pattern is complete once the middle trough (B) is broken on a closing basis. Volume is lighter on the 2nd peak (C) and increases on the breakdown (D).

 

Saucers and Spikes

The saucer pattern shows a gradual turn from down to sideways to up and take a long time to form. Spikes are the most difficult to predict and usually occur when the markets are so overextended on one side that a piece of news or event triggers a sudden movement to the other side.

imageimage

Next: Chapter 6 – Continuation Patterns

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Technical Analysis of the Financial Markets: Ch 5

This is a review of the fifth chapter of John J. Murphy’s Technical Analysis of the Financial Markets.

The Head & Shoulders Reversal Pattern

image

The basic ingredients are:

  1. A prior uptrend
  2. A left shoulder (A) followed by a corrective dip (B)
  3. A rally into a high on light volume (C)
  4. A decline (D) that moves below (A)
  5. A third rally (E) that fails to reach (C)
  6. A close below the neckline (F)
  7. A return move back to the neckline (G) followed by new lows.

Once prices move through a neckline and completed the h&s pattern, they should not re-cross the neckline again. A decisive penetration of the neckline might indicate a false alarm.

The inverse head & shoulders is pretty much the inverse of the image above.

Next up: Triple Tops & Bottoms

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Everybody (and their mother) is getting out of the Euro

Maps shows a group of countries known as the P...

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Not to kick a man when he is down, but the news about institutions, depositors and finally money market funds getting rid of Euros have been piling up. US funds have been cutting exposure to both European banks as well as PIIGS debt. Even a German holiday company (TUI) started preparing for a Euro pull-out. Warren Buffet thinks the EU cannot be saved in its current form and Soros has been a hater all along.

The latest meme in this train-wreck is that PIIGS under pressure in the bond-market should offer gold as their collateral! If it worked for India in the 90’s, it should work for Europe in the 10’s, yeah? Even though I was ten at that time, I still remember the popular outrage when India shipped 47 tons of gold to England. What a reversal of fortunes it would be if Europe were forced to ship their gold to China. Italy holds about 2,400 tons of gold in its vaults, I hope the Chinese have built a big enough room to hold all that metal.

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