USD Weekly Outlook: Sovereign Debt Threat, Thin Liquidity, Stalling Stocks Boost the Buck [View article]
Please understand that "safe haven" is strictly a FX label for currencies that tend to get bought in times of fear, NOT necessarily because they are safer (ok, definitely not safer) but because they were sold to fund purchases of FX that do better in times of optimism. AUD, CAD are far less likely to see debt downgraded than certain other English speaking countries.
On Dec 20 07:02 AM Dave Wrixon wrote:
> Yes, the Safe Haven Myth is still alive and well. > > But all that will do is deepen the inevitable panic and meltdown.
The Dollar Situation Is Getting Clearer [View article]
As I've noted repeatedly in posts here on SA and on fxmarketanalysis.wordp.../ as long as at least one of these three forces are active:
1. rising risk aversion from some fear inducing event likemore bad news about the Dubai World debt (will Abu-Dhabi really backstop the whole thing?) 2. improving US jobs and spending data - the key metrics the Fed is watching for permission to exit stimulus and raise rates 3. some kind of euro-specific trouble (like the current sovereign debt threat from Greece, Spain, with Portugal, Italy, Lativa and others far from stable) that hurts the EUR and thus pushes up the USD (the EUR/USD alone comprises a third of all FX trade, almost forcing a move up in one to pressure the other down)
then the USD rally has legs, in this contest of the least ugly.
The Comm. dollars may have better long term prospects as long as China keeps demand up and their banking systems remain far healthier and less extended
Nothing wrong with taking a ride with the USD while you can, especially to get into FX with better long term fundamentals. Do that, because currency diversification is now everyone's responsibility
FYI, while we're enjoying a USD bull for perhaps the next number of months (more if the sovereign debt threat keeps hitting the Euro-zone and the EUR) may be a good time to try to pick up Non-US stocks with reliable, high yields for some non-USD income.
How Should We Improve Seeking Alpha's Comment Rating System? [View instapost]
Hi Dave,
Reminder: consider a feature to allow email notification of new comments to a given article. At least authors should get this so that we can choose to respond without constantly checking for new comments (I don't), ideally anyone should be able to be notified about new comments, at least periodically. Some of the best content is found in the follow up comments, a massive resource that is not being used.
Some of these are better than the articles themselves (mine included!)
THAT deserved mention in market currents!? Half were restatements of the obvious "The US dollar is likely to meaningfully appreciate once market-driven short-term rates begin to rise." Gee, really? You mean currencies tend to rise with there short term interest rates? This is analgous to predicting that traffic will stop if the traffic light turns red.
"Employment in the US will probably continue to improve. " As if it was getting worse than 2009? Yes, we all saw the last NFP report.
Gold Price Appreciation Likely on Eurozone Debt Concerns [View article]
Good post
Gold tends to rise when one of the following occur:
-fear of financial collapse -fear of inflation from a combination of growth and excess money supply -decline in the USD in which gold is priced
Unless EZ debt concerns prompt fear of global collapse, not likely though possible, the most likely immediate consequence of worsening of EZ debt crisis would be a slide in the EUR and thus a further rise in the USD,( because these two push each other in opposite directions) and thus quite possibly a DECLINE in gold, at least in the near term.
Whether that is just a relative calm before the debt contagion spreads to the US depends on how heavily US banks are exposed to EZ bank and sovereign default. We suspect they have considerable exposure, though we haven't done a thorough check.
Bank Collapse in Austria Brings Eastern European Debt Center Stage [View article]
Fine article. The problem for us all is that we don't know who is exposed to who, by how much, and how much default in country X can occur before they topple Y and Z.
It's analagous to a dominos setup. The more players leveraged to each other the closer the dominos are to each other. The more leverage a given party has, the higher (less stable) that domino, and the less of a default needed to send it toppling onto the others.
Could be good for the USD short term, because the anything bad for the EUR pushes the USD higher (because the EUR/USD pair alone comprises about a third of the total $3-4 trillion per day of FX trade). Of course if the US turns out to be player Z.....
Because no one knows who is really exposed, we risk another confidence crisis that caused credit markets to seize up about a year ago.
To keep from getting too blindsided, visit fxmarketanalysis.wordp.../ for daily monitoring and analysis of global Forex, commodities, and stock indexes.
What's the Gold / Oil Ratio Telling Us? [View article]
Per my understanding of Ashraf Laidi's excellent coverage of this very topic, the average has varied considerably, typically betwee 12:1 - 15:1 (bbls oil/oz.gold), yet when the dollar is really suffering, the average can get lower, well below 10:1. Not surprising, since when the dollar is plunging both assets are becoming more expensive in USD terms.
The value of the ratio is just to give us a non-USD way to value these assets, which is useful when the USD is devaluing.
Why a Stronger Dollar Is Not a Problem [View article]
As long as USD rates remain low enough to make a funding (i.e. selling ) currency for carry trades, it will continue to be sold when there is optimism about global growth because investors can get better returns in other FX like the AUD or NZD. Conversely, these trades unwind in times of fear and spark a "short squeeze" type demand in the USD, as we've seen in the wake of Dubai and Euro zone sovereign debt "events".
The BIG exception to this rule is when there is positive news about growth that is not only good for corporate earnings (and thus equities) but also for improved prospects for the FED raising USD short term interest rates. That kind of news must improve employment and/or consumer spending, which are the key weaknesses preventing the Fed from raising rates. Any news that addresses those, as we've seen over the past 2 weeks, will cause both stocks AND the USD to rise in tandem.
FYI because the EUR/USD alone comprises about a third of all FX trade, any EUR travails automatically boost the USD, and vice versa. Thus credit market troubles from Greece, Spain, and now Austria all give the USD a boost. FOR DETAILS ABOUT WHAT REALLY MOVES THE USD AND RAMIFICATIONS SEE: fxmarketanalysis.wordp.../ for the articles: 12/14 – 12/18 Global Market Outlook: Must-Know Dominant Forces & Implications – Short Version and USD GROWING SERIOUS PAIR OF…WINGS:Why the Bullish Reversal Is Real & Implications For World Markets
true, the EZ banks don't have much Dubai debt exposure - the damage from Dubai for the EZ was that it reminded everyone that sovereign credit risk was real, Moody's, Fitch et al realized it was time to cover their assets and make sure they didn't get caught flatfooted yet again, hence the belated downgrades post Dubai.
FYI UK banks have about 30% of Dubai debt, so Monday could get very interesting for GBP traders - positive if Dubai comes through somehow or the 80 or so creditor banks ALL agree to something. Negative if not, in which case Dubai goes into default. Great time to be short the GBPUSD if that happens
On Dec 13 09:45 AM Clive Corcoran wrote:
> pdtror > > Actually the Eurozone does have a central bank - it's called the > ECB and it sets interest rates for all of the EU members who have > adopted the euro as their currency (which does not include UK which > is a member of the EU but not the EZ) > > Biggest problem facing the ECB is whether to accept government paper > from all of the EZ states as if it was as good as the AAA borrowers > (i.e. France and Germany) or as poor as the BBB+ paper of Greece > and also some other "problematic" credits from Ireland, Spain, Italy > etc. > Any sign of dis-memberment of the EZ bloc - e.g. if Greece had to > leave - would be a much greater negative for $EURUSD than a Dubai > World default.
> bcu I would be woefully remiss in not mentioning the impressive five > cent rally Uncle Buck has pulled off against the euro since last > week, from $1.51 to $1.46. Call it yearend profit taking, attempts > to beat higher taxes in 2010, or a bump up against a key technical > level, if you like. The reality is that when too many traders sit > at the same table for a free lunch, the table has a nasty tendency > to upend, and the food goes flying in everyone’s face. This is the > sort of unpleasant thing I had in mind when posting six global risk > alerts since October. It is absolutely no coincidence that dollar > surrogates like gold and oil, have also been rolling over like the > Bismarck. The long term fundamentals for the dollar still look as > ghastly ever. But they looked just as bad during the height of the > financial crisis, when the greenback shot up from $1.60 to $1.20, > in a heartbeat. I don’t think this snap back rally will be anywhere > near as forceful as the last one. Hot money trades are like a wild > beast that has to breathe. Just make sure you stand clear when it > exhales, and hold your nose.
are you only looking at US stocks? Does that movement usually hold. Intraday movements are often meaningless. Also, a widely held perception becomes self fulfilling in the short term.
On Dec 13 09:49 AM logicalthought wrote:
> >>stock movements in fact tend more often to drive the USD, not vice-versa. > << > > Then why (as anyone staring at a screen all day lately can tell you) > have stocks regularly been retreating a few minutes AFTER the dollar > ticks up, and vice-versa?
The Google Phone, Unlocked (Confirmed and More Details) [View article]
Hail unlocked phones! Hope for those of us overseas where oligopolies make any decent mobile 4x the price in the US. Unlocked means anyone who can bring one overseas can use it with any GSM carrier. Hahahahaha to you Partner
USD Weekly Outlook: Sovereign Debt Threat, Thin Liquidity, Stalling Stocks Boost the Buck [View article]
On Dec 20 07:02 AM Dave Wrixon wrote:
> Yes, the Safe Haven Myth is still alive and well.
>
> But all that will do is deepen the inevitable panic and meltdown.
The Dollar Situation Is Getting Clearer [View article]
1. rising risk aversion from some fear inducing event likemore bad news about the Dubai World debt (will Abu-Dhabi really backstop the whole thing?)
2. improving US jobs and spending data - the key metrics the Fed is watching for permission to exit stimulus and raise rates
3. some kind of euro-specific trouble (like the current sovereign debt threat from Greece, Spain, with Portugal, Italy, Lativa and others far from stable) that hurts the EUR and thus pushes up the USD (the EUR/USD alone comprises a third of all FX trade, almost forcing a move up in one to pressure the other down)
then the USD rally has legs, in this contest of the least ugly.
The Comm. dollars may have better long term prospects as long as China keeps demand up and their banking systems remain far healthier and less extended
Nothing wrong with taking a ride with the USD while you can, especially to get into FX with better long term fundamentals. Do that, because currency diversification is now everyone's responsibility
It's All About Deleveraging [View article]
It's All About Deleveraging [View article]
How Should We Improve Seeking Alpha's Comment Rating System? [View instapost]
Reminder: consider a feature to allow email notification of new comments to a given article. At least authors should get this so that we can choose to respond without constantly checking for new comments (I don't), ideally anyone should be able to be notified about new comments, at least periodically. Some of the best content is found in the follow up comments, a massive resource that is not being used.
Some of these are better than the articles themselves (mine included!)
Three lunchtime reads:
1) Mankiw: Nine observations about investment
2) Mortgages: Strategic default and duty to shareholders
3) Richard Bernstein's 10 predictions for 2010 [View news story]
"The US dollar is likely to meaningfully appreciate once market-driven short-term rates begin to rise." Gee, really? You mean currencies tend to rise with there short term interest rates? This is analgous to predicting that traffic will stop if the traffic light turns red.
"Employment in the US will probably continue to improve. " As if it was getting worse than 2009? Yes, we all saw the last NFP report.
please.
Gold Price Appreciation Likely on Eurozone Debt Concerns [View article]
Gold tends to rise when one of the following occur:
-fear of financial collapse
-fear of inflation from a combination of growth and excess money supply
-decline in the USD in which gold is priced
Unless EZ debt concerns prompt fear of global collapse, not likely though possible, the most likely immediate consequence of worsening of EZ debt crisis would be a slide in the EUR and thus a further rise in the USD,( because these two push each other in opposite directions) and thus quite possibly a DECLINE in gold, at least in the near term.
Whether that is just a relative calm before the debt contagion spreads to the US depends on how heavily US banks are exposed to EZ bank and sovereign default. We suspect they have considerable exposure, though we haven't done a thorough check.
Bank Collapse in Austria Brings Eastern European Debt Center Stage [View article]
It's analagous to a dominos setup. The more players leveraged to each other the closer the dominos are to each other. The more leverage a given party has, the higher (less stable) that domino, and the less of a default needed to send it toppling onto the others.
Could be good for the USD short term, because the anything bad for the EUR pushes the USD higher (because the EUR/USD pair alone comprises about a third of the total $3-4 trillion per day of FX trade). Of course if the US turns out to be player Z.....
Because no one knows who is really exposed, we risk another confidence crisis that caused credit markets to seize up about a year ago.
To keep from getting too blindsided, visit fxmarketanalysis.wordp.../ for daily monitoring and analysis of global Forex, commodities, and stock indexes.
What's the Gold / Oil Ratio Telling Us? [View article]
The value of the ratio is just to give us a non-USD way to value these assets, which is useful when the USD is devaluing.
Why a Stronger Dollar Is Not a Problem [View article]
The BIG exception to this rule is when there is positive news about growth that is not only good for corporate earnings (and thus equities) but also for improved prospects for the FED raising USD short term interest rates. That kind of news must improve employment and/or consumer spending, which are the key weaknesses preventing the Fed from raising rates. Any news that addresses those, as we've seen over the past 2 weeks, will cause both stocks AND the USD to rise in tandem.
FYI because the EUR/USD alone comprises about a third of all FX trade, any EUR travails automatically boost the USD, and vice versa. Thus credit market troubles from Greece, Spain, and now Austria all give the USD a boost. FOR DETAILS ABOUT WHAT REALLY MOVES THE USD AND RAMIFICATIONS SEE: fxmarketanalysis.wordp.../ for the articles: 12/14 – 12/18 Global Market Outlook: Must-Know Dominant Forces & Implications – Short Version and USD GROWING SERIOUS PAIR OF…WINGS:Why the Bullish Reversal Is Real & Implications For World Markets
USD Movements Dominating Markets [View article]
FYI UK banks have about 30% of Dubai debt, so Monday could get very interesting for GBP traders - positive if Dubai comes through somehow or the 80 or so creditor banks ALL agree to something. Negative if not, in which case Dubai goes into default. Great time to be short the GBPUSD if that happens
On Dec 13 09:45 AM Clive Corcoran wrote:
> pdtror
>
> Actually the Eurozone does have a central bank - it's called the
> ECB and it sets interest rates for all of the EU members who have
> adopted the euro as their currency (which does not include UK which
> is a member of the EU but not the EZ)
>
> Biggest problem facing the ECB is whether to accept government paper
> from all of the EZ states as if it was as good as the AAA borrowers
> (i.e. France and Germany) or as poor as the BBB+ paper of Greece
> and also some other "problematic" credits from Ireland, Spain, Italy
> etc.
> Any sign of dis-memberment of the EZ bloc - e.g. if Greece had to
> leave - would be a much greater negative for $EURUSD than a Dubai
> World default.
USD Movements Dominating Markets [View article]
On Dec 13 11:10 AM Mad Hedge Fund Trader wrote:
> bcu I would be woefully remiss in not mentioning the impressive five
> cent rally Uncle Buck has pulled off against the euro since last
> week, from $1.51 to $1.46. Call it yearend profit taking, attempts
> to beat higher taxes in 2010, or a bump up against a key technical
> level, if you like. The reality is that when too many traders sit
> at the same table for a free lunch, the table has a nasty tendency
> to upend, and the food goes flying in everyone’s face. This is the
> sort of unpleasant thing I had in mind when posting six global risk
> alerts since October. It is absolutely no coincidence that dollar
> surrogates like gold and oil, have also been rolling over like the
> Bismarck. The long term fundamentals for the dollar still look as
> ghastly ever. But they looked just as bad during the height of the
> financial crisis, when the greenback shot up from $1.60 to $1.20,
> in a heartbeat. I don’t think this snap back rally will be anywhere
> near as forceful as the last one. Hot money trades are like a wild
> beast that has to breathe. Just make sure you stand clear when it
> exhales, and hold your nose.
USD Movements Dominating Markets [View article]
On Dec 13 09:49 AM logicalthought wrote:
> >>stock movements in fact tend more often to drive the USD, not vice-versa.
> <<
>
> Then why (as anyone staring at a screen all day lately can tell you)
> have stocks regularly been retreating a few minutes AFTER the dollar
> ticks up, and vice-versa?
USD Movements Dominating Markets [View article]
The Google Phone, Unlocked (Confirmed and More Details) [View article]