Tuesday, January 28, 2014

Currency value can't be based on air.

The market can trend values if it is believed there is going to be gigantic news of an undervalued currency, but, that isn't what is happening here. Gambling is what has occurred. Portfolios are going to lose their gains.

The big markets news (click here) at the end of last week was the plunge of Argentina’s peso. The sell-off came as many other emerging-market currencies were already sliding:

What’s driving these trends is the intersection of the US Federal Reserve’s decision to slow its bond-buying stimulus—the so-called “taper,” which has been fueling a sell-off in emerging markets since early last summer—with a variety of more local problems, ranging from troubled economic institutions to political unrest and bad economic data in China....

Rather than governments monitoring their currency as a real reflection of their value, their reaction is all "oops' I guess we better do something. That isn't a market, that is gambling. Currencies should not be a gamble.

January 28, 2014
...Basci said at a press conference today (click here) that he’d called the meeting to address excessive volatility in the currency and it was time to bring interest rates into the fold. At the same time, he distinguished between temporary and permanent rate increases and defended his flexible rates policy. Basci also raised the bank’s year-end inflation estimate to 6.6 percent from 5.3 percent and said the bank would issue a statement at midnight, allowing time for monetary policy committee member Abdullah Yavas to attend upon returning from the U.S....

When investments into a country's economy increases market share and consumer confidence then the outcome of the currency is real. But, if there is no economic growth and in fact have an economy unable to compete in the markets there is no sense to inject the idea a currency is going to gain value.

I wish there was a law that said, "Truth in advertising when it comes to Wall Street's playground." It would stabilize economies and prove where global investment has a place to focus to increase the global economy." 

There are many countries that would love to have investment to increase the quality of life for it's people, but, 'to believe will make it so' is not the way to invest. Many of these countries have chronic problems with poverty, violence, armed conflict and a revolving door to leadership. There is no way a market can even take hold because someone wishes it so.

Upheaval in Ukraine endangers economic prospects

Ukraine’s crisis (click here) is endangering the prospect of a desperately needed economic recovery from recession and raising fears of a currency collapse, analysts said.
The struggle between President Viktor Yanukovych and the opposition comes after more than a year of recession during which the economy has remained afloat mainly thanks to a Russian bailout and grain exports.
“There are indications that business activity, investment activity is getting slower because people are quite uncertain on what will come next,” said Dmytro Sologub, an economist at Raiffeisen Bank Aval.
Ukraine came close to bankruptcy in 2013 before Russia stepped in with a controversial $15-billion credit that the opposition says will limit the country’s national sovereignty....

Now to actually place a value on the Ukraine currency the Russian economy and it's cash injection would count, however, that is watered down by the fact the cash injection was necessary and the political volatility nearly negates any economic growth. When a country can't even decide that it's constitution is a solid representation of it's future, how can anyone state this currency is emerging? It can't be. Economic growth and a country's assets determines the long term outlook of a currency.

The other side of this is the South African Rand. For as impoverished as that country is and the very profound problems it still faces, the currency 'tends' to be predictable. Why? Because of the incredibly rich commodities it provides the global market. That has value. But, even the South African Rand has a limit to it's value when the government and the people are on opposites sides of what quality of life means. If quality of life means losing a foothold on consumer income when strikes result in citizen deaths, where does anyone think this is going? South Africa's companies have to resolve to bring quality of life to the people before the currency will be a stable and productive in growth.

I thought Wall Street was good at math and not guessing. If all one does is to work the numbers without even looking at the real world data, the future of a currency will still show up.

Peace is an economic commodity. Building a country to provide value to the global economy should always be a focus to the leadership of that country. The idea the USA has a military industrial complex that demands satiation by illegally and immorally invading other nations in order to increase military spending is DAMN FOOLISHNESS. It is not only immoral in the lives lost by a USA military strategy, it will be decades and up to two generations or more for that country to recover. This is insane. Conflict is NOT the future of any country's economy, especially with a climate that is crashing and populations growing. The two don't intersect in a way that predicts a good outcome for ANYONE.

And the investment companies that simply thrive on garage sales is NOT the way to a solid economic growth or solving a country's problem.

The morality in today's markets is horrible. It has no vision and there is no currency stability. The markets are a living entity and impact real people and their future. I would think by now Wall Street would realize how completely narcisstic it has been without even looking beyond their noses to realize their methodology can't continue forever.