Arbinet Insider Buying, Income and Equity Down

Arbinet, (ARBX), is a leading provider of innovative voice and IP solutions for buying and selling telecommunications capacity. They route for its Members approximately 2% of the world's international voice traffic to 1,300+ destinations worldwide. Arbinet's membership base includes approximately 75% of the world's 40 largest international carriers and 8 of the world's prepaid service providers. Members own 70+ mobile networks and 75+ broadband networks (arbinet.com).

They provide a variety of services to its members. Below is a visual view of their MarketAxcess and Assured Axcess products.

CRB, CCI Commodities Index Gathering Momentum

The Reuters/Jeffries CRB Index and the Continuous Commodity Index (CCI) are both gathering momentum. The R/J CRB Index is the 10th revision of the CCI Index. In 2005the energy weighting increased to 39% from 21.4% while other commodities got cut down (pie chart). Zeal LLC has a bunch of essays explaining the differences. He has charts that show the CRB and CCI decoupling in 2006 due to plummeting oil prices. He believes the old index better depicts the overall commodities market. All here 1, 2, 3, 4). I see this index as a re-flation barometer. If commodity prices catch a sustained bid here it could be planting seeds for a rebound in growth and/or a global commodity inventory/demand balance. Also, global currency dilution could be putting upside pressure on commodities. Monetary inflation benefits those who get the newly printed money first so why not buy commodities on the cheap?

So I decided to chart out both of them and provided the CCI futures curve. It's 5% higher from Cash to August. The charts below are at the close on April 1, 2009. On April 3 the call/put premium ratios were also interesting via barchart.com. For the options expiring 4/9/09 the Call/Put Premium Ratio was 0.07, for 6/12/09 the Call/Put Premium Ratio was 2.11 , and for 8/14/09 the Call/Put Premium Ratio was 2.23. So it looks like sentiment is skewing toward the bullish side but total premium values on Jun and Aug are much lower than April. Très Intéressant!!

From the Charts, the new CRB Index is testing support after breaking the long term downtrend. It's been in a channel since December, 2008. It's also above the 50 day moving average which is positive. Bottom support and the 50 day could provide some bids but if it fails the $200 level looks supportive. RSI looks decent and must stay above 50. As for the CCI, it's also in a channel and is sitting above the 50 day. RSI looks good. This could test resistance levels (382ish) and needs a push to break above that level to set it free. On a technical basis at least.

Yuan Swaps, $UUP $24-25 Puts Open Until June and SDRs.

This continues from my previous post about $UUP April $25 put action after the Fed's decision to buy Treasuries, agency-MBS and agency debt. Now Russia and China are trying replace the US Dollar with a "Super Reserve Currency" (Special Drawing Rights consisting of currencies, gold, baseball cards etc.) to diversify sovereign credit risk. The idea was put off at the G20 meeting because #1 priority was saving the global economy (Reuters). But leaders were definitely tweeting about it probably.

Zhou Xiaochuan, Chairman of the Peoples Bank of China, thought 'Special Drawing Rights' should play a bigger role as a reserve asset. Here are quotes from his speech via pbc.gov.cn on March 23, 2009.

Reform the International Monetary System

Zhou Xiaochuan

I. The outbreak of the crisis and its spillover to the entire world reflect the inherent vulnerabilities and systemic risks in the existing international monetary system.

Issuing countries of reserve currencies are constantly confronted with the dilemma between achieving their domestic monetary policy goals and meeting other countries' demand for reserve currencies. On the one hand,the monetary authorities cannot simply focus on domestic goals without carrying out their international responsibilities on the other hand,they cannot pursue different domestic and international objectives at the same time. They may either fail to adequately meet the demand of a growing global economy for liquidity as they try to ease inflation pressures at home, or create excess liquidity in the global markets by overly stimulating domestic demand. The Triffin Dilemma, i.e., the issuing countries of reserve currencies cannot maintain the value of the reserve currencies while providing liquidity to the world, still exists.

When a national currency is used in pricing primary commodities, trade settlements and is adopted as a reserve currency globally, efforts of the monetary authority issuing such a currency to address its economic imbalances by adjusting exchange rate would be made in vain, as its currency serves as a benchmark for many other currencies. While benefiting from a widely accepted reserve currency, the globalization also suffers from the flaws of such a system. The frequency and increasing intensity of financial crises following the collapse of the Bretton Woods system suggests the costs of such a system to the world may have exceeded its benefits. The price is becoming increasingly higher, not only for the users, but also for the issuers of the reserve currencies. Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws.

II. The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.

1. Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s, Keynes had already proposed to introduce an international currency unit named "Bancor", based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted. The IMF also created the SDR in 1969, when the defects of the Bretton Woods system initially emerged, to mitigate the inherent risks sovereign reserve currencies caused. Yet, the role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.

2. A super-sovereign reserve currency not only eliminates the inherent risks of credit-based sovereign currency, but also makes it possible to manage global liquidity. A super-sovereign reserve currency managed by a global institution could be used to both create and control the global liquidity. And when a country's currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.


Here's Geithner's response to his proposal at the Council on Foreign Relations. The White House did come out on 3/31/09 saying the USD would remain the worlds reserve currency (Reuters).

Mark-to-Market Rule Changed, Market Up Big.

This accounting change could boost bank profits in the first quarter. The liquidity problem is the reason why FASB is doing this. Does this ruin transparency and the market healing process? Here's a line from Rick Santelli from the CNBC video below.
Rick Santelli on CNBC: "Changing the rules in the middle of the game makes a lot of metrics that have contributed to healing change very quickly and dynamically and the PPIP fund will be one of the casualties."
Also, world leaders at the G20 agreed to pledge $1 trillion of emergency aid. Market is up 3.8%.

Credit Default Swap Spreads Still Elevated

It looks like credit default swap spreads are still elevated and after reading these articles, G20 leaders facing world trade 'emergency', Double-digit unemployment hits 7 states, Roubini Says Stocks Will Drop as Banks Go ‘Belly Up’, Obama Said to Find Bankruptcy Likely for GM, Chrysler, you can understand why.

Credit Derivatives Research provides charts of their CDS indices on their website updated daily. Here's a snapshot of their CDR Liquid 50 Indices and CDR Counterparty Risk Index as of 3/31/09. I added trend lines. Most spreads are near their previous highs. The Counterparty Risk Index is retesting highs not seen since the Lehman bankruptcy in 9/2008. As for the Liquid 50 Indices: The CDR Liquid 50 NAIG (investment grade) chart is in a strong uptrend, the CDR Liquid 50 NAHY (high yield) chart is in a channel near previous highs and the CDR Liquid 40 EUXO (Euro high yield) chart is in a wedge and waiting for clearance to either break through previous highs or fail. Go to creditresearch.com for all of this data and more. Eventually risk will be overpriced and institutions will make mad dough selling this protection. When that day comes.


CDR Liquid 50 NAIG Index (creditresearch.com)

CDR Liquid 50 NAHY Index (creditresearch.com)

CDR Liquid 40 EUXO Index (creditresearch.com)

CDR Counterparty Risk Index (creditresearch.com)

Gold and US Dollar ETFs, Talks of New Intl Reserve Currency.

The Gold and US Dollar ETFs are sitting right around the 50 day ma ahead of the G-20 meeting. $GLD closed just below the 50 day moving average and 90ish support level while $UUP closed just below 50 day resistance. A catalyst could bring some technical breaks which could dictate some trends. It will be interesting to see if Gold/USD trade in tandem or decouple from here (safe haven v. reflation). The pair briefly divorced when Bernanke announced he was going to create $ to buy Treasuries (chart at bottom). Right now, early Tuesday morning, Gold is down 0.11% and the USD is down 0.47%.

Also China and Russia both want to replace the US Dollar as the worlds reserve currency with a basket of currencies and gold as Special Drawing Rights. This talk could have an affect on USD/Gold.

Also look at the 1 year chart of GLD, it is unchanged!

GLD 6 Week Chart

GLD 6 Month Chart

GLD 2 Year Chart


A Car That Flies at Terrafugia (Videos)

Wright Brothers + Henry Ford x Carl Dietrich ^ Elon Musk = Electric Car Plane Spaceship.




Actually I'm just talking about a car plane that runs on unleaded gasoline. Carl Dietrich is the CEO/CTO of Terrafugia, a MIT spin off company based in Mass that is bringing The Transition® or "first practical street legal airplane to the world". The Transition® is "a small aircraft that can fold up it's wings, drive on the road, gas up at a normal gas station and park in a single car garage." It even has better gas milage than most cars (27m/g in the air and 30m/g on the ground). Phase 1 was just taking off and landing on a runway which is shown below. This will be a new era of personal aviation. It's $194,000 which is a lot of dough but they have refundable $10,000 deposits. The roadable aircraft will be delivered in 2011. You need a sport pilots license which takes 20 hours of training in the air. Real life Jetsons is coming people.

USD Index Went From 92 to 151 In Early 1980s. A Look At USD, CPI and Fed Funds During 80s Recession.

I thought I'd check out the relationship between the Trade Weighted U.S Dollar Index, Consumer Price Index and Fed Funds Rate during the early eighties recession. Here's a brief summary via Wikipedia (last updated on March 24, 2009). I suggest you read the whole thing which explains the S&L crisis and the Continental Illinois National Bank bail out. There was a banking crisis with inflation, fed funds and unemployment all hitting double digits from 1980-83 (inflation-> fed funds-> unemployment).

The early 1980s recession was a severe recession in the United States which began in July 1981 and ended in November 1982.[1][2] The primary cause of the recession was a contractionary monetary policy established by the Federal Reserve System to control high inflation.[3]

The recession was the most serious recession since the Great Depression[4] until the current recession.

In the wake of the 1973 oil crisis and the 1979 energy crisis, stagflation began to afflict the economy of the United States. Unemployment had risen from 5.1% in January 1974 to a high of 9.0% in May 1975. Although it had gradually declined to 5.6% by May 1979, unemployment began rising again thereafter. It jumped sharply to 6.9% in April 1980 and to 7.5% in May 1980. A mild recession from January to July 1980 kept unemployment high, but despite economic recovery unemployment remained at historically high levels (about 7.5%) through the end of 1981.[5] Inflation, which had averaged 3.2% annually in the post-war period, had more than doubled after the 1973 oil shock to a 7.7% annual rate. Inflation reached 9.1% in 1975, the highest rate since 1947. Inflation declined to 5.8% the following year, but then edged higher. By 1979, inflation reached a startling 11.3% and in 1980 soared to 13.5%.[6][1]

A brief recession occurred in 1980. Several key industries—including housing, steel manufacturing and automobile production—experienced a downturn from which they did not recover through the end of the next recession. Many of the economic sectors that supplied these basic industries were also hard-hit.[7]

Determined to wring inflation out of the economy, Federal Reserve chairman Paul Volcker slowed the rate of growth of the money supply and raised interest rates. The federal funds rate, which was about 11% in 1979, rose to 20% by June 1981. The prime interest rate, at the time a highly important economic measure, eventually reached 21.5% in June 1982.[2][8]


The trade weighted US Dollar Index made a double bottom at $88.30 on 10/30/1978 and $92.24 on 7/10/1980 and hit a high of $148.12 on 2/25/1985 (St. Louis Fed Database). The inflation rate hit a high of 13% and Fed Chairman Paul Volcker tightened up liquidity and sent the effective fed funds rate to 19% which killed the inflation. As you can see the U.S Dollar Index followed the CPI and Fed Funds rate with a 60% gain. That's interesting.

The question I have is what will happen to the U.S Dollar Index once inflation hits and Bernanke burns the liquidity he created. Here's his exit strategy. It will be interesting to see if the U.S economy recovers before other nations and how Bernanke times the inflation risk. If the U.S recovers first and parked U.S Dollars start to multiply, inflation could hit which could dilute USDs. What if Bernanke is ahead of the curve and liquidates lending programs and hikes rates forcefully like Paul Volcker? What if there's a global yield gap that brings profitable carry trades to the U.S??? But if Bernanke waits too long would people exit the USD and debt based on tighter foreign spreads and a negative real return? It's all about timing it seems.

Of course Central Bank Interventions and a global U.S Dollar threat (1,2) could ruin this market force. Also the U.S has some fiscal issues with the national debt sitting at $11.046 trillion on 3/26/09. But from 1982 to 1985 Reagan increased the national debt by record amounts, however Debt/GDP was much lower back then. Either way this is one big mind f*.

Also I found an 80s video about the coordinated Plaza Accord that broke down the U.S Dollar in 1985. It features Prof. Paul Krugman.

Great Jim Rogers Interview via CNN's Talk Asia

This is a great Jim Rogers interview via CNN's Talk Asia.

Question: Why Wall Street?

Jim Rogers: "My passion has always been the world and what's going on in the world and suddenly I found a place that would pay me, pay me a lot of money, if I could just tell and figure out what was going to happen in the world, and what was going to happen in the future. I couldn't believe it. They wouldn't have had to pay me I would've done it for free!

Question: What specifically? What was the interest? Was it the politics, how the economy is inter..?

Jim Rogers: How it all interacted together. If there's a revolution in Chile it's not just a revolution in Chile it affects the price of copper, it affects a lot of things. When the price of copper skyrockets, there's a lot of knock on affects. It's all fascinating to me, it's a 3 dimensional puzzle and the pieces are always changing. It's such an unbelievable challenge and every day they come in and they change the pieces in the 3 dimensional puzzle and you gotta figure out oh my gosh what about Chile it might turn into a revolution or what about Malaysia you know something could happen in Malaysia. You got to put this puzzle.., this was so fascinating to me I couldn't believe it."

He also talks about the Quantum Fund with Soros and his world travels.




Via A Jim Rogers Blog.