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Thursday September 08, 2011

Swiss unlimited forex intervention plan opens new round in currency wars

Switzerland opened a new round in the global currency war on 6 Sep 2011 as the Swiss National Bank's decision to cap the Swiss franc for the first time since 1978 marked a bid to protect trade hurt by record currency strength against the euro and dollar. The Swiss central bank said it is "prepared to buy foreign currency in unlimited quantities" to keep the euro above 1.20 francs. The franc plunged a record 8.1% against the euro on the SNB's unilateral move, putting it head-to-head with the $4 trillion-a-day forex market that drove the franc up more than 16% against 9 major peers in the past year.

The move may help stabilize markets by forcing investors to return to riskier assets, said Jim O'Neill, chairman of Goldman Sachs in London. The initiative may leave Norway and Sweden vulnerable to gains in their currencies as countries such as Brazil and Japan fight to limit appreciation amid a flight from the euro debt crisis and near-zero US interest rates. Led by China, all of Asia's 10 biggest economies last year sought to influence their own exchange rates to aid exporters as the dollar fell. HSBC recommended Norway's currency as an alternative after the SNB's action. The krone has strengthened 4.5% against its 9 major peers over the past year.

- This was one big announcement by the Swiss. At one stroke, EUR/CHF jumped from approximately $1.10 to $1.20 and stayed there. That's a gap up of around 10 cents, or in forex trading terms, 1000 pips. In the world of leveraged foreign currency trading, in large enough amounts, profits can be made trading in as little as 1-2 pips, while very good money can be made (or lost) in 10-20 pips. Hence 1000 pips is analogous to a Richter-scale 10.0 earthquake.

So the Swiss have gone nuclear on their own currency. While the exact timing of the announcement might have been a surprise, there had been hints along the way in recent weeks as the Swiss authorities had been openly discussing possible pegs to the euro and such. Investors may wish to take note that when the Japanese kicked off the current phase of the currency wars back in Sep 2010, gold prices had gone up nearly 60% from the $1200 region to over $1900 in the past year. This next round in the currency wars could eventually take prices of gold, commodities and other related assets into literally unchartered territory. Do not expect immediate jumps across asset classes though - we shall see how this plays out over time.

(2011-09-08 00:44:32 SGT) [Biz] Permalink

Tuesday July 12, 2011

Cisco said to be cutting as many as 10000 jobs in upcoming mass layoff

zerohedge.com -> bloomberg.com :

Cisco Systems, the largest networking-equipment company, may cut as many as 10,000 jobs, or about 14% of its workforce, according to two people familiar with the plans. The cuts include as many as 7,000 jobs that would be eliminated by the end of Aug 2011, said the people, who asked not to be identified because the plans aren't final. Cisco CEO John Chambers is slashing jobs and exiting less-profitable businesses as competitors such as Juniper Networks and HP take market share in Cisco's main businesses with lower-priced, simpler products.

Cisco said in May 2011 that it shuttered the Flip video-camera unit and cut 550 jobs. The company may eliminate more positions in the consumer-product unit, which makes Linksys home-networking equipment. Sales of Cisco's switches and routers, which made up more than half of revenue last year, will continue to slip, said Brian Marshall, an analyst at Gleacher & Co. Cisco stock had dropped 24% so far in 2011, while the S&P500 index had risen 4.9%.

- It would be quite a waste to see anything happen to the Linksys division, which used to be a standalone company in its own right until Cisco acquired them. So far all the home routers I have used have been Linksys products, from the wired BEF-SR41 to the Linux-based WRT54GL and now the Cisco Linksys E3000 wireless router, and they have all been reliable and served well over the years.

On the enterprise front, however, what I have heard from colleagues back at the office have not been as favorable in recent times, with some of them talking about the high cost and complexity especially of the newer Cisco switches and routers. In addition, as Cisco tried to integrate security features such as firewalls and intrusion detection systems into their products, I have actually been advised to specify other models from say Juniper instead, as their combo appliances are supposed to be actually cheaper and better. With the increasing level of maturity in this technology sector, the next frontier is inevitably pricing and this is where we might be looking directly at the impact of that.

(2011-07-12 21:31:23 SGT) [Biz] Permalink

Lloyds Banking to cut 15000 jobs, to focus on UK

bloomberg.com :

Lloyds Banking Group, Britain's biggest mortgage lender, will cut 15,000 jobs and reduce costs by an additional 1.5 billion pounds ($2.4 billion) as it withdraws from overseas units and increases its UK focus. Most of the job losses will come in the UK as a result of cuts to management functions and centralizing some roles. The bank also plans to withdraw from more than 15 of its 30 overseas units. British banks, including Lloyds, HSBC and Barclays are reviewing their operations and trimming profitability targets as regulators enforce higher capital requirements to prevent a repeat of the 2008 financial crisis. Lloyds had already pledged 2 billion pounds of savings annually following its purchase of HBOS 3 years ago, which has so far resulted in about 27,000 job losses. Lloyds has a total of 104,000 employees with about 4,000 outside the UK. HSBC, Europe's biggest bank, had said it would cut 700 posts.

- It looks like what could be another wave of mass layoffs starting up again just as the world thought that the 2008 financial meltdown was over. With the economy supposedly in a recovery and the stock market seeming to have picked up right where it left off since 2009, the next thing is to look at the jobs front, and there things seemed to be easing for a short while before reversing course again.

But if you were to look at let's say the S&P500, you would note that the stock market has been in a consolidation pattern since the 1344 level back in Feb 2011. The SPX has been unable to make a convincing run for the 1400 level since then. Although it has not been an outright crash so far, we could suppose that the 6-month lag time also applies, which is why we might be looking at some consolidation on the jobs front in recent weeks.

(2011-07-12 20:21:21 SGT) [Biz] Permalink

Friday May 13, 2011

Singapore : SGX to try to boost volume by attracting high frequency trading

In a move to stay competitive, the Singapore Exchange (SGX) has unveiled several strategies to attract more traders and raise trading volumes. This follows its recent failed bid to merge with the Australian Stock Exchange [ASX]. One of these will be to woo high frequency traders. High frequency trading (HFT) is a type of computer-programmed trading which involves no human interaction. It currently accounts for 30% of the derivatives trading volume on the Singapore Exchange. And SGX said it hopes to raise that level higher but declined to provide any targets. HFT potentially could support growing liquidity, making it more accessible for new capital and for investors to participate in the market." Other initiatives to improve the bourse's competitiveness include reducing tick sizes, and increasing its product range to include metal futures. Come mid-August, SGX will launch Reach, which cost S$250 million and is the world's fastest trading engine.

- Barely just over one year after the 6 May 2010 Flash Crash where the Dow Jones index fell by 900 points due to high frequency trading, Singapore wants to have a go at the same kind of trading techniques that have been determined to be the main factors behind the falling-off-the-cliff behaviour of the US stock markets that day.

And that was even with large volume and highly liquid stock markets like the NYSE. So, is HFT even advisable for much smaller markets like the Singapore stock market? I don't think so. But I'd suppose they are going ahead anyway, now that they do not seem to have many new ideas or further initiatives since the failed ASX bid.

(2011-05-13 14:04:43 SGT) [Biz] Permalink

Sunday September 26, 2010

COMEX gold prices hit new record high over $1300 per ounce on USD weakness

onefinancialmarkets.com, bbc.co.uk :

Gold prices have broken the $1,300 an ounce ceiling for the first time (24 Sep 2010), although only briefly. Trading platform investors saw London prices for Gold reach $1,300.07 before falling back below that threshold. The latest rise has been spurred by caution over the global economy, as well as weakness in the US dollar, which fell 1% against the euro. The gold price has increased five-fold in the last 10 years, up from a low of $258 in 2000.

One man who lost his bet on gold is former Prime Minister Gordon Brown, who sold 400 tonnes of the UK's gold reserve as chancellor between 1999 and 2002, just before prices began a ten-year price rise. The World Gold Council's last report on the gold market predicted that continuing strong demand from jewellery buyers in the two fast-developing markets of India and China would help to keep the price high. Particularly bullish analysts predict that continued uncertainty over the state of the economy will prompt gold to rise as high as $2,000 an ounce by the end of the year.

- Back in Apr 2010 I remarked that the gold chart had been looking like some kind of damped spring, apparently building up energy over a period of 5 months as the COMEX gold futures prices went back and forth as the trading markets tried to sort out the ongoing debate over inflation vs deflation. And then for a while it looked like deflation was poised to make a comeback when it seemed that we might get a repeat of 2008, with economic indicators looking like they were rolling over, a shrinking M3 money supply, and Death Crosses Everywhere.

But with recent talk of QE2 aka Quantitive Easing Round 2 making the rounds, and the Fed lately jabbering about not having "enough inflation", it is now becoming a bit clearer which way things might go. And of course there is Japan, lighting the fuse to spark off the Currency Wars, now apparently in full swing. Contrarian commenters have long written about a currency crisis being the next stage in the roadmap and we could be rounding that lap right about now. Hence gold's decisive take-off, blasting right through old records in the $1200's and now bumping up against $1300.

What's next is anyone's guess, with various people talking about $1400 or $1500 targets by the end of the year. $2000 seems a bit far out - but you never know. Gold prices have had quite a run the past 2 months. For those of you looking to get in, a good piece of advice would be *NOT* to chase prices. You'll have your chance, but you'll have to be patient. Give it a few months. If you *have* to DO something, at least do a bit of dollar cost averaging. So here's hoping to see you on the other side of, say, $1500 gold. Have fun in the meantime.

(2010-09-26 21:40:01 SGT) [Biz] Permalink

Monday September 20, 2010

Lockheed Martin lays off 600 senior executives

channelnewsasia.com :

Lockheed Martin announced that more than 600 company executives have taken up early retirement offers as the defence contractor undergoes a massive cost-cutting restructuring. The layoffs, representing one quarter of Lockheed Martin's senior management, are part of the company's plan to cut back about 10,000 employees across the United States since the start of the year. The buyout offers are the latest in a series of initiatives aimed at "enhancing performance and lowering costs to keep pace with evolving customer realities and global security challenges." Lockheed Martin employs about 136,000 people worldwide and is engaged in development and manufacturing advanced weapon systems.

- Though this might sound more like a rounding error in the rarefied atmosphere that Lockheed Martin resides, where top-line revenue figures are well over the $40 billion range, this cost-cutting measure would probably be pretty significant in terms of the impact that it would have on the rest of the organization, and in terms of how it would be perceived by the rest of the world going forward. A quarter of senior management effectively being told, "thank you very much, here's the door" speaks volumes as to the kind of changes that are occurring in the US military-industrial complex.

Okay, now that some people have asked (again), besides the obvious macro-economic factors (or obvious to those who've been keeping track), here's some further information on how and why I decided to get out early, long before all this happened, which was all of two years back :

1. The company newsletter started to sound just a little bit too self-congratulatory (20,000th Hellfire missile delivered!). Not to take it too personally, but to me it sounded like they were celebrating it like it was a high-volume product, instead of saying they had a revolutionary new way of tracking and hunting down, say, tanks. Where exactly may I ask, is the edge in producing missiles in volume?

2. The halo around the Stealth Fighter mythos shining just a little bit less brightly, with the retirement of the original F-117 Nighthawk, and the F-22 Raptor ending up mired in problems, and ultimately being cancelled. That, and the end of the SR-71 Blackbird era with nothing viable in sight other than tin-foil hat brigade rumours of an Aurora super project that was supposed to be a black triangular UFO that could go Mach 5, stop, and turn on a dime. That would run on exotic fuel that doesn't exist. Yes, and that would take some photos as it went about being too invisible, too fast, and too maneuverable to catch. Nope, naturally I didn't quite buy that story.

3. The Democrats starting to win just a bit more in elections than they've been doing in the Republican years under the Bush family. It was mostly this last one, actually. The first was just a hunch, the second pointed at problems in the big aerospace division but did not detract at all from the information systems division I was in. But this last one, welllll ... that was political. That was different. That was it.

(2010-09-20 22:27:45 SGT) [Biz] Permalink

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