Colin Twiggs, Author at the patient investor

October 10, 2012

Fed Governor Daniel Tarullo Calls for Cap on Bank Size – WSJ.com

By VICTORIA MCGRANE And ALAN ZIBEL:

“In a Philadelphia speech, Fed governor Daniel Tarullo recommended curbing banks’ growth by putting a limit on their nondeposit liabilities, which are sources of funding for operations that go beyond consumer deposits. The idea takes direct aim at the biggest U.S. banks, including J.P. Morgan Chase & Co., Bank of America Corp., Goldman Sachs and Citigroup Inc., all of which rely heavily on such funding. Firms outside of this tier make much greater use of regular deposits…..”

Comment:~ Rather than placing a fixed size limit on too-big-to-fail banks, it may be more effective to raise capital adequacy ratios and/or leverage ratios for banks above a certain size — to discourage further growth. There may well be advantages, such as economies of scale, that enable large banks to deliver better pricing to their customers — and justify their size — but we need to guard against systemic risks. Rather than setting a size limit, higher ratios would ensure that large banks are well capitalized to withstand systemic shocks.

via Fed Governor Daniel Tarullo Calls for Cap on Bank Size – WSJ.com.

October 10, 2012

Failing History – By Amy Zegart | Foreign Policy

By AMY ZEGART

The more important and overlooked lesson…. is that the structure of the U.S. intelligence system made a tough job nearly impossible. Although the CIA was created in 1947 to prevent another Pearl Harbor, the agency has never really been central. Intelligence agencies in the State, War, Navy, and Justice departments hobbled the CIA from its earliest days to protect their own turf. As a result, in 1962 intelligence reporting and analysis about Cuba was handled by half a dozen agencies with different missions, specialties, incentives, security clearance levels, access to information, and no common boss with the power to knock bureaucratic heads together short of the president. In this bureaucratic jungle, signals of Khrushchev’s true intentions — and there were several — got dispersed and isolated instead of consolidated and amplified to sound the alarm.

Sound familiar? Before 9/11, this same fragmentation kept U.S. intelligence agencies from seizing 23 different opportunities to disrupt the terrorist plot…….

via Failing History – By Amy Zegart | Foreign Policy.

October 9, 2012

Iran Lawmakers Press Ahmadinejad on Economy – WSJ.com

By BENOÎT FAUCON

The rial has shed about 25% of its value against the dollar this month amid mounting sanctions aimed at halting Iran’s nuclear program. The sudden decline in the rial last week, the latest leg in a yearlong decline, prompted Tehran’s first major riots in two years and a crackdown on informal money changers. The situation appeared to have stabilized Saturday as Tehran’s bazaar—a key indicator of Iran’s business climate—reopened after closing for the second half of last week. But in an indication the turmoil may not be over, many money changers refused to trade Sunday, either out of fear of arrest or because of a refusal to comply with a government order imposing a fixed dollar rate……

via Iran Lawmakers Press Ahmadinejad on Economy – WSJ.com.

October 9, 2012

Australia: ASX 200 breakout

The ASX 200 broke through long-term resistance at 4450, signaling a primary up-trend with an initial target of 4900*. Rising troughs on 13-week Twiggs Money Flow indicate buying pressure. Retracement to test the new support level remains likely, however, in the next few weeks.

ASX 200 Index

* Target calculation: 4450 + ( 4450 – 4000 ) = 4900

The hourly chart reflects buying pressure, with initial retracement to 4475 after the breakout, instead of the expected 4450. Follow-through above 4500 confirms a strong breakout. At some point in the medium term we are still likely to see a test of the 4450 support level. Respect would confirm a healthy primary up-trend.

ASX 200 Index

October 8, 2012

Asia: China, India and Japan

The Shanghai Composite Index is consolidating between 2000 and 2150. Descending 13-week Twiggs Money Flow warns of long-term selling pressure. Respect of resistance at 2150 is likely and breakout below 2000 would signal a decline to 1800*.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

Shenzhen Composite Index is testing primary support at 800. Again, descending 13-week Twiggs Money Flow indicates long-term selling pressure. Resistance at 900 is likely to be respected, while breakout below primary support would offer a target of 600*.

Shenzhen Composite Index

* Target calculation: 800 – (1000 – 800 ) = 600

Japan’s Nikkei 225 is testing support at 8650/8700. Respect would indicate a rally to 9200, while failure would complete a double top reversal, signaling a test of primary support at 8200. Rising 13-week Twiggs Money Flow suggests medium-term buying pressure but the long-term picture remains negative. Breach of 8200 would signal a primary down-trend with an initial target of 7200*.

Nikkei 225 Index

* Target calculation: 8200 – ( 9200 – 8200 ) = 7200

South Korea’s Seoul Composite Index is consolidating between 1950 and 2000. Rising 13-week Twiggs Money Flow indicates buying pressure. Breakout above 2000 is likely, followed by a test of the year’s high at 2050.

Seoul Composite Index

* Target calculation: 2050 + ( 2050 – 1900 ) = 2200

India’s Sensex is retracing to test the new support level at 18500. Respect would signal a strong up-trend, but even retracement to 18000 would not be cause for concern. Rising troughs above zero on 13-week Twiggs Money Flow indicate buying pressure. Follow-through above 19000 would signal an advance to 21000*.

Sensex Index

* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0

Singapore’s Straits Times Index retreated from resistance at 3100. Expect another test of support at 3000; confirmed if short-term support at 3050 is breached. Recovery above 3100 would confirm an advance to 3300 — as would a 63-day Twiggs Momentum trough above zero.

Singapore Straits Times Index

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

October 8, 2012

The unemployment surprise

Headline unemployment may be falling but this extract from John Mauldin summarises the US predicament:

We are employing almost 5% fewer people as a percentage of our population than we were at the beginning of 2008. That means our real unemployment-to-population level is well over 12%. So we’re not even close to where we were in 1999, during the last year of the Clinton administration. And that doesn’t take into account the 50% of college graduates who are underemployed. A significant part of the problem is simply the fact that we are trying to recover from a deleveraging recession. The data suggests that such recoveries may take 10 years. For Japan it is more than 20 years, and counting.

The unemployment surprise (pdf).

October 8, 2012

IMF: Coping with high debt and sluggish growth [video]

The World Economic Outlook (WEO) presents the IMF staff’s analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries.

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[time: 38 minutes]

October 8, 2012

IMF downgrades world outlook [video]

Chief economist Oliver Blanchard on the IMF’s latest forecast.

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IMF revises forecast down, global growth projected at 3.3 percent this year
World trade slumps, hurting emerging markets, developing countries
Prospects could improve if clouds over euro area, U.S. “fiscal cliff” are lifted

Download the full report.

October 8, 2012

Europe: Testing resistance

Dow Jones Europe Index rallied off support at 250 and is testing primary resistance at 265. Breakout would signal a primary advance to the 2011 high at 310. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 250 is unlikely but would warn of another correction.

Dow Jones Europe Index

Germany’s DAX is similarly testing resistance at 7600 after finding support at 7200. Rising troughs above zero on 13-week Twiggs Money Flow indicate strong buying pressure. Breakout would signal a long-term advance to 8400*. Reversal below 7200 is unlikely but would warn of a correction to the (primary) rising trendline.

DAX Index

* Target calculation: 7200 + ( 7200 – 6000 ) = 8400

The FTSE 100 similarly found support at 5740 and is headed for an attempt at 6000/6100. Rising 13-week Twiggs Money Flow (above zero) indicates buying pressure. Expect strong resistance at 6000/6100 but breakout would offer a long-term target of 6750*.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

October 8, 2012

Canada: TSX60 finds support

The TSX 60 found support at 700, with 13-week Twiggs Money Flow — oscillating above zero — reflecting continued long-term buying pressure. Expect a test of the 2012 high at 725; breakout would signal a primary up-trend. Reversal below 700 is unlikely but would warn of another test of primary support at 640.

TSX 60 Index

* Target calculation: 725 + ( 725 – 640 ) = 810