pushing the currency to significant levels against its US

British Pound Finishes the Year Strong on Housing DataThe pound rallied hard for a second day Thursday, pushing the currency to significant levels against its US, European and Japanese counterparts. However, this last push before the market tunes out may struggle to find momentum when larger-term fundamental trends are back on track. Today’s event risk offered a small sign of hope for the struggling UK economy. The Nationwide House Prices indicator rose for an eighth month with a 0.4 percent increase for the month of December. Economists for the group ascribe the increase in prices to the lack of supply in the market; and this data further confirms last week’s BBA report that mortgage lending is near a two-year high. Yet, the United Kingdom’s problems run deeper than simply patching the housing sector. Consumer spending is still absent, the possibility of a political regime change threatens to snuff the progress that recent policy has afforded and lending is anemic.

Growth in certain Euro Zone

Where the dollar would finish the year strong, the euro would tumble through the end of the truncated week. One reason for this weakness is the euro’s status as the primary alternative to the US dollar – a trait that has clearly worked against the former currency over the past month. However, the currency’s weakness can just as readily by attributed to its own fundamental short-comings as exogenous factors. Growth in certain Euro Zone member economies has fed bullish expectations; but as a whole, the region is struggling in its economic and financial recovery. What’s more, the ECB has offered no sign that it will pace a global return of rate hikes in 2010. Looking ahead to next week and year, it will be difficult to shake the specter of a stalled economy and mired credit market; but fine-tuning interest rate expectations is certainly possible.

Bullish on the US dollar for some time

As traders, we are less concerned with where the market has been and more interested in determining where it will go; but in this move we can establish a few meaningful questions that can guide our forecasts. First of all, we have to establish that the primary fundamental drivers for the currency remain: underlying risk trends; its status as a funding currency; and relative interest rate expectations. I have been bullish on the US dollar for some time; but on reflection of these broader fundamental drivers, the greenback has made little fundamental progress on any of the three. Investor sentiment held strong through the end of the year (as seen in the Dow’s buoyancy); US funding is still the cheapest among its most liquid peers; and the potential for a timely Fed rate hike was actually tempered through the final quarter. So, if all of these bearish factors are still in place; why did the US currency rally? To maintain a push to new extremes for any financial instrument (whether it be 16-month for EURUSD or 14-years for USDJPY) requires fundamental moment. All of these aspects may still exist; but they are not being fed by the influx of sidelined capital that bolstered risk appetite with reckless abandon throughout 2009. Moreover, stalled confidence further encourages profit taking before the year’s end. Now, looking ahead to a new year; the dollar still looks to benefit should risk appetite collapse, US market rates rebound or the Fed signal it is ready to return to a hawkish regime. However, should all of these trends remain, the dollar’s December rally may prove a brief reprieve in a larger trend.

Color Red For Condo Sales

There is another condominium project starving for potential buyers.
It’s the Colors project by Battistella located on the corner of 1st Street SW and 13th Avenue SW (right beside Chocolate Condos in the Beltline district). Once again, the location is good considering the project is in the inner city. The project is probably months away from completion and appears to be desperate for buyers. The following is a promotion that Battistella is running to spur sales. Needless to say, the promotion is “meaty.” Are these promotions honest elements of a “balanced” marketplace?

With many more new condo developments hitting the market soon, there is severe trouble ahead. Inventory levels will be astronomical while sales continue to dwindle. Soon many condo developers will have to cannibalize their competition with heavier promotions and price reductions to attract buyers. The cannibalization will extend to the already heavily saturated inventory of resale condos. It will be a fierce race to the bottom.
If you’re a potential condo buyer out there in the Calgary market; the best thing to do is to wait.

US Federal Reserve chairman Ben Bernanke

There is a certain sense of deja vu watching US Federal Reserve chairman Ben Bernanke pump more liquidity into the US market to try and keep it afloat.In his damning book, Greenspan's Bubbles, William Fleckenstein accuses his predecessor of blowing two asset bubbles. He says that the subprime mortgage crisis is Greenspan's legacy."Greenspan bailed out the world's largest equity bubble with the world's largest real estate bubble. That combination easily equates to the biggest orgy of speculation and debt creation in the United States (and the world) has ever seen. Unfortunately, Greenspan's legacy will not just be those two bubbles, their attendant busts, and the trillions of dollars of debt left in their wake. Operation Enduring Bubble - what I call Greenspan's monetary and interest rate decisions that created the real estate bubble also exacted a heavy toll on the dollar.''Greenspan, according to Fleckenstein, routinely suppressed the forces of creative destruction that come with every market. By slashing interest rates and keeping them low for too long, and by pumping in money, he ensured there was a loss of fear which meant that the normal risk reduction response that most business people have to periodic pain never occurred. It left the US swimming in an ocean of debt that has been ratcheting higher.According to Fleckenstein, Greenspan couldn't see the tech bubble because he was mesmerized by the facade of a technology-driven productivity boom, resulting in a continual cheerleading that encouraged others to make wrong-headed economic and investment decisions.

liquidity into the U.S. economy

Williams reports M3 is currently growing at close to a 9.6 percent rate and trending higher, compared with an 8 percent rate early this year, when the Fed quit reporting the measure.
"The Fed is pumping liquidity into the U.S. economy," Williams told WND, "and the Fed evidently did not want the markets to follow too closely what the Fed was doing with the money supply."
China today now is holding a historically unprecedented $1 trillion in foreign exchange reserves. During the Thanksgiving holiday, an announcement by China that their central bank planned to diversify foreign-exchange holding away from the dollar caused the dollar to drop in value on international currency markets. Since then, the dollar has hit a 20-month low against the euro.
"This was almost an orchestrated announcement," Williams claimed. "Around Thanksgiving the markets were thinly traded. I'm not sure who was playing games there, but the signal was clearly heard."
"You're dealing with mass psychology here," Williams argued. "The central bankers around the world know they are going to take a hit on their dollar holdings. None of the central bankers want to start a dollar panic, but none of the central bankers want to be the last out of the dollar, either."

policymakers who want to reduce creditors' expectations

While safety net expansion has increased TBTF concerns, the essence of the problem and underlying cause of TBTF remain clear: Policymakers support large-bank creditors to contain or eliminate spillover effects, but the support creates an incentive for too much risk-taking in the future. Our approach is straightforward. If spillovers lead to government support, then policymakers who want to reduce creditors' expectations of such support should enact reforms that make spillovers less threatening. Reforms that fail to address this fundamental issue will not change policymaker behavior and will not convince creditors that they face real risk of loss.
So what should policymakers do to address concerns over spillovers? The Federal Reserve Bank of Minneapolis recommends an approach labeled systemic focused supervision (SFS), which focuses supervision and regulation efforts on spillover reduction, and which consists of three pillars: