Tuesday, October 6, 2009

Equities up...Dollar down

Greetings good citizen,

Today we slid another step closer to pulling the plug on life as we have come to know it. Once again I feel compelled to warn you that this is not so much being done ‘for you’ as much as it is being done ‘to you’, contrary to what the ‘cheerleaders’ say.

Frustrating as it is for us ‘doom and gloom’ types, the world refuses to slide over the cliff in one neat, brisk movement. It continues to get hung up on the tiny obstacles it encounters on the way down, which the ‘Pollyanna’s’ amongst us seize upon to declare that the disaster is over, it’s time to ‘get happy’! (Again)

The failure of our corporate controlled government to rein in the free-wheeling finance sector has set into motion other forces our corporate overlords may or may not control…

Understand good citizen that the water is plenty murky as the stage is being set for, for lack of a better term, ‘the mother of all contrarian plays’. We are truly lurching toward the point where ‘no good deed will go unpunished’…

Without further adieu, we proceed to tonight’s offering

Stocks and Gold Gain as Investors Shun the Dollar

Published: October 6, 2009

Investors clamored to buy pretty much anything on Tuesday — as long as it was not the dollar

A seven-month slide in the value of the dollar gained force as investors migrated to other markets and fretted over a report that crude oil could one day be priced in other currencies, hobbling the dollar’s role as a vehicle for global trade. [How worried do you think the multi-nationals are over the fate of the dollar? They have proven time and again that the dollar doesn’t mean shit to them! Case in point, why do you think the dollar is in the crapper in the first place?]

On Wall Street, shares climbed higher on hopes of robust profit reports as earnings season kicks off later this week. And the dollar’s declines propelled gold prices briefly above $1,040 an ounce — a record high — and touched off a buying spree for copper, silver and platinum and crude oil — commodities that stand to hold their value if the dollar does not. [And who do you suppose ‘makes out’ when commodity prices skyrocket? It sure isn’t consumers so that leaves who? Gee, who gets to shove it up your backside (with higher prices) while they hunt for the ‘greater fool’? Who do you suppose gets to play that stupid game? You don’t suppose that would be ‘the investors’ would you? Maybe we should be asking a different question…like why isn’t all of this predatory bullshit illegal?]

The dollar slipped further against major currencies, continuing a decline that has sent it tumbling 15 percent since early March. The dollar fell to $1.47 against the euro, and the Japanese yen strengthened to 88.76 for every dollar. Concerns about record-breaking deficits and a lackluster economic outlook in the United States have steadily eaten away at the dollar’s value since early March. [Um, and what do you suppose has changed since early March? Equities have gone up (for no apparent reason) but other than that…nothing. So the dollar continues to collapse and we can only wonder why. Or would wondering why the dollar isn’t totally worthless already be a more worthwhile question?

Investors who sought the relative safety of the American currency during the financial crisis are now pursuing higher returns in stocks, commodities and foreign currencies, amid speculation that demand for American debt is waning, and that the dollar could lose its status as the world’s reserve currency. [Strangely, if we flip that rock over (The dollar loses reserve currency status) what difference does it make at this stage of the game? It sure don’t mean a shitload, good citizen…]

Underlying the dollar’s weakness is the growing perception that many policymakers around the world, and in Washington, quietly welcome a slow but sustained depreciation of the dollar, especially against the Chinese renminbi and other Asian currencies. [Um, geez Louise, why the hell would THAT make a difference now, AFTER we’ve already sent all of our factories there? Which is to say the ‘damage’ is already done…]

A weaker dollar would make imported goods more expensive in the United States and American exports* more competitive [* too bad there aren’t any!], but it could also make overseas investors wary of buying the Treasury bonds that the United States needs to sell to finance its budget deficit. [Tell me again why the multi-nationals are (or ever have been) worried about this?]

On Tuesday, investors’ concerns were piqued by Australia’s surprise decision to raise interest rates, making it the first big economy to lift rates after the global financial crisis. [How much do you want to bet that the only people ‘ignorant’ of this move were the sheep themselves. This is what’s going to cause the ‘green shoots’ that nobody has seen yet to ‘disappear’.]

Countries around the world — including the United States — trimmed interest rates to record lows as the credit crisis metastasized last year, in an emergency effort to stimulate the markets and keep lending from drying up. Although credit is flowing better now, the Federal Reserve has indicated that interest rates will hover near zero for some time. [How long will the Fed be able to keep rates low when the ‘rest of the world’ is paying higher returns?]

“The move was taken as a sign that the global economy is firmly on the road to recovery,” said Vassili Serebriakov, a currency strategist at Wells Fargo. “That’s lifted risk appetites and assets across the world. The dollar strengthened when global financial markets went into tailspin and has retraced back all that strength.”

Adding to the turmoil, a report on Tuesday in The Independent, a British newspaper, suggested that China, France, Japan and Russia were in secret talks with Persian Gulf countries to abandon the dollar for international trade in oil and replace it with a basket of currencies plus gold. [Couldn’t have been ‘real secret’ if the press knows about it, could it? We can only wonder whose idea it was to add the ‘golden clincher’…]

The article named no sources and was quickly denied by Muhammad al-Jasser, the governor of the Saudi central bank, and Dmitry Pankin, Russia’s deputy finance minister. French officials declined to comment. In China, the government is closed for a weeklong holiday, but well-connected bankers were skeptical.

“While informal discussions might have taken place, I doubt they represent a serious intent to undermine the existing global monetary order or the role of the U.S. dollar,” said Fred Hu, who is the chairman of greater China for Goldman Sachs and advises the Chinese government. [Who else among you is disturbed to see that particular name ‘pop up’ in this most unseemly of circumstances? If one encounters trouble these days, you can almost count on Goldman Sachs to be nearby…]

But the report caught the attention of financial markets because several economists have been predicting in recent months that at some point, the world’s oil exporters would start moving toward other currencies to limit exposure to the dollar.

“It won’t be easy to make such a shift, it’s a pretty unrealistic idea in the near term,” said Qu Hongbin, an HSBC economist in Hong Kong. But in the years to come, he added, China would be delighted if it could print its own currency to pay for oil, instead of having to earn dollars through exports.

As they pulled away from the dollar, investors streamed into commodities like crude oil and gold, whose values often move in opposite directions from the dollar. [While inflicting major whackage on the non-investor class by jacking up the cost of living!] Fears that the American currency could decline even further if investors seek higher returns in more lucrative investments pushed gold prices higher.

“Right now it doesn’t give any sign of pulling back significantly,” said James Steel, a commodities analyst at HSBC. “There’s still a worry about the dollar. There’s a latent worry about inflation.” [It won’t be ‘latent’ for long if the US has to play ‘follow the leader’ when global interest rates head for the stratosphere!]

Crude oil futures in New York rose 43 cents to $70.83 a barrel.

Analysts characterized the surge in gold and oil prices as a reaction to weakness in the dollar, rather than a sign of bullish hopes for a quick recovery. Although activity is picking up, oil consumption remains subdued as factories lope along at partial capacity, and consumers are still reluctant to spend thousands of dollars on gold jewelry when the recovery is so tenuous. [ The honest answer is they’re still too broke to be loading up their credit cards with such luxuries…at least those of us not depending on seven digit bonus checks next month…]

At 2:30 p.m., the Dow Jones industrial average was up 85 points, or 0.9 percent, and the broader Standard & Poor’s 500-stock index was 0.8 percent higher, adding to their sharp gains from a day earlier. The Nasdaq was 0.9 percent higher.

What these ‘coke sackers’ aren’t telling you is the Dow was up 150 points at 11:30 this morning and has been headed in the down direction ever since. Okay, I can see it rallied a little before the closing bell and it closed up 131.50 points…on dollar weakness; that lead to a rush into commodities...

Now you’re really screwed good citizen. For months we’ve been told there’s nothing ‘safer’ than the US dollar. Sure the dollar is ‘weak’ right now but there isn’t anything out there to take its place. If equities ‘slip’, not to worry, people will crowd into dollars!

How much do you want to bet that’s a bunch of horse pucky too?

Imagine how much trouble our economy will be in if ‘everybody’ starts avoiding the dollar?

Remember what I said about our ‘supply lines’ collapsing? This is the situation that will make that happen…and understand something else good citizen, we could become the next Zimbabwe, virtually overnight.

Not to get you all worked up but we aren’t talking ‘might’ here…this is happening and it’s happening here and now!

I’m sure you aren’t going to be comforted when I tell you there isn’t a dip, dang thing you can do about it either…the ‘speed’ of the collapse will be tied to how quickly interest rates rise.

The quicker they go up, the quicker the wheels fly off…that said, I’m willing to bet the Aussies will ‘back off’ if things get too overheated.

Once everybody is back in ‘lockstep’, the ‘danger’ will pass.

Now, I haven’t gone hunting for this information but it would be a good thing to know how much the Aussies have jacked up their rate, just to see where this game of ‘follow the leader’ is headed.

Sadly, that information isn’t there for the taking, I’ll have to go dig for it.

That said, you may want to keep your eyes open because things could change, not day by day but minute by minute…

Thanks for letting me inside your head,


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