Would you pay $1.25 for a euro?
Would you take $125,000 of your Dollars and convert them to 100,000 Euros and put them in your safe until Christmas? The Euro topped out (non-spike) at $1.45 in April (when the markets topped out) and then plunged to $1.31 (10%) before bouncing back to $1.41 (66% retrace) and then fell all the way back to $1.27 (10%) came back to $1.34 (66% retrace) and then down to $1.21 (10%) and is now back at $1.25 (33% retrace).
Fibonacci would be very proud to see his numbers still ruling the markets 800 years later but it certainly doesn't make us feel warm and fuzzy about the Euro's chances of getting back to $1.30, since $1.29 would be that 66% retrace before we'd expect a drop back to $1.06.
From the point of view of our 5% Rule, we've got a 25-point drop from $1.45 to $1.20 and our "weak bounce" is a 20% retrace to - $1.25 and $1.30 would be a "strong bounce" 40% retrace but a failure here would be a very bad sign and, as you can see from Dave Fry's chart, the 22 week moving average crashing down to $1.25.57 doesn't make it seem all that likely.
In fact, $1.256 was our shorting spot for the Euro yesterday and there is easy money to be made there several times already. We don't usually bother with currency trades but that one seemed pretty obvious. This morning obvious Futures trade I highlighted for our members in an earlier note was going long on gasoline (/RB) off the $2.90 line as we head into oil inventories tomorrow and the hurricane makes landfall and knocks out a couple of refineries (they don't have to be damaged, someone always at least "trips" on the plug and shuts them down for 2 or 3 days to jack up gas prices - especially ahead of holiday weekends).
Gasoline makes a nice, bullish offset to our generally bearish bets - including oil shorts, because we still have way too much of it - despite 4 consecutive weeks of heavy draws, which were caused by a drastic reduction in imports and a drastic increase in imports to fake the impression of US demand over the summer.
How much of a reduction? Thanks to the manipulation of our nation's strategic resources for profit by the Banksters, net imports of crude fell from 8.8Mbd this time last year to 7.6Mbd last week. Shorting America by 1.2Mbd is 8.4Mb per week and EVEN WITH THIS BLOCKADE OF IMPORTS, the net draw on US stocks was just 3Mb last week.
Before it was mysteriously redacted, World News had a great article titled "Forget LIBOR-GATE: Oil Market Manipulation Is Far Worse" which gave a nice overview of the manipulation that is perpetrated by Investment Banksters, who leverage their QE money to jack oil prices up as much as $35 a barrel (with $60 being a "fair price" - and Exxon Mobil's (XOM) CEO testified as much on Capitol Hill) by manipulating both the supply of and demand for crude and crude products. I wrote a similar article back November, 2009 titled "Goldman's Global Oil Scam Passes the 50 Madoff Mark" but it didn't change anything - in fact, oil prices now are $10 higher than they were then, costing global consumers yet another $328bn a year for the barrels alone and another $328Bn as the pass-through costs and mark-ups flow through the supply chain (gasoline was only $2.06 when oil was $85 a gallon in 2009, now oil is $95 and we're long on gas at $2.90 - at least we KNOW we're being screwed and can bet on it!).
What we need, according to Chris Christie, is to "fundamentally reduce the size of our government" - get them out of the way so Wall Street can control your life and steal your wages without being annoyed by the occasional, toothless Congressional inquiry. It was touching to hear that Gov. Christie's father put himself through college on the GI Bill - too bad that's one of the many programs on the chopping block under the Romney/Ryan budget.
In other proud GOP moments, Pennsylvania Senator Rick Santorum proclaimed it the party of life, hailing the platform's pledge to ban abortion with no exceptions, even for the health of the mother, incest or rape (what Paul Ryan calls the "method of conception"). Tea Party zealots celebrated the harsh immigration stance premised on hunting down 11 million undocumented workers until they "self-deport."
The conventioneers reacted well to the "hard truths" that Christie said Romney would be handing out, including $900Bn in ADDITIONAL tax breaks for the top 2% (people earning over $250,000 a year). If there was ever an incentive in this country to up your tax bracket - this is the best on yet - maybe Romney is on to something.
A 20% tax cut across the board above the extended Bush taxes, will hand millionaires an average $175,000 a year tax break. Corporations will get not only a cut in tax rates, but a "territorial corporate tax" system that exempts companies from U.S. taxes for anything reported as earned abroad, giving multinationals a million dollar incentive to transfer jobs and report profits abroad. They'll abolish the estate tax that applies only to multi-million dollar estates of the top 1%. And they vow to defend the favorite loophole of the wealthy: the 15% tax rate on capital gains and dividends and on "carried interest" (the obscene tax dodge that enables Bain partners and other private equity guys to treat their fees as capital gains rather than income).
Romney and Ryan also pledge to cut government spending dramatically, but won't say what they will cut. They do promise to lard even more on the Pentagon, already burning through more money than it did at the height of the Cold War in comparable dollars. And they put off cuts in Social Security and Medicare for a decade, because they don't want to disturb today's seniors who vote in large numbers. The cuts thus must come almost entirely from the 15% of the budget that pays for the domestic services of government -- everything from education to FEMA, the agency Republican Governors are calling on to assist in response to Hurricane Isaac. As Bob Borosage, of the Institute for America's Future, so aptly puts it:
Behind the multi-million dollar stage in Tampa, beneath the glittery "reintroduction" of Mitt Romney as a pragmatic business guy, lies this "hard truth." With the US suffering Gilded Age levels of inequality, Romney will fight for more tax cuts for the very wealthy and the corporations. And with record numbers in poverty, Mitt's promise is to savage vital programs for the vulnerable. Forget about the Tea Party's ersatz anti Wall Street populism or the Christian Coalition's war on women. This is the candidate and the party of privilege, intent on lavishing more benefits on the few while savaging the already inadequate support for the poor and the vulnerable. That's the "hard truth" Chris Christie didn't bother to mention.
Get rich quick - you don't want to be a poor person in America if these people take over!
Additional disclosure: Positions as indicated but subject to change (see Tuesday's post for upside hedges).