Dave Wrixon

Tighten or Ease Rates?

The problem is that you are treating the Market as your Servant rather than your Master. When the Master finds out what is going on he is going to get really pissed.

The idea that you can use Employment as a target to manage the rest of the economy is nonsense. There are scores of failed Socialist experiments which show this to be a complete fallacy. Trust me I know, I have lived through the consequences of the failures of Old Labour's dreaming in the UK.

Changes in the Dollar's Value Reflect Changes in Money Velocity

The only increase in the velocity of Money is the speed at which it is fleeing the US.

Challenging Week Coming for U.S. Treasury Market

How else do you think the Banks balance sheets are being repaired? It is being done by stealth with tax payers money. Banks only make money if they lend. The higher rates are the more money they make, if they can sustain the lending volume. With low rates and low volume there is no way on this Earth they can be profitable in a market where even then borrowers are defaulting in huge numbers.

But lets make it clear, much of the investment in Treasuries is effectively a charitable donation, not that most of you have any discretion as to whether you subscribe. However, some blind fools think seem to think they can make a killing standing shoulder to shoulder with those doing the bailing out. To those I say, "Go get yourselves an education!"


On Nov 09 05:40 PM untrusting investor wrote:

> If the Fed gave you money at 0-0.25% (like GS, WFC, etc. can get
> it for) and you could turn around and invest it in US debt at 3 -
> 4.5%, effectively getting 3-4% free interest, would you do it? Why
> do you think the big banks are not lending to anyone? They get ultra
> cheap Fed borrowing and guaranteed higher returns with no risk, and
> that is exactly what they are doing. Why should they lend to you
> for the extra risk involved, when they can make risk free money?
>
>
> How you would you like say a $20 billion loan at almost nothing and
> get to earn say 4% on that? 4% x $20 billion is a big chuck of change,
> especially when it's so easy for them.

Understanding Oil's Deadly Role in Recession Before It's Too Late

"That was one of the major causes of the worldwide “Great Recession” that we have still not recovered from."

Bollocks, at most this was a severe symptom of the underlying problem.

The Dollar as a Funding Currency

It is not even in the ECB remit to track the dollar. All they care about are monetary conditions within the EU itself. Of course the dollar may impact upon that indirectly but it will never be a primary focus. Newton may have discovered gravity, but nobody as yet has worked out how to control it.


On Nov 10 12:29 AM Peter Cooper wrote:

> The ECB is clearly in the process of taking action to reverse the
> dollar fall as this article indicates, and of course they have a
> secret plan, see: arabianmoney.net/2009/.../

The Dollar as a Funding Currency

At one level you have sort of got it better than Roubini, yet at another level you are clueless. The next crisis is not the collapse of the carry trade, capital flight from America has not even begun. That will cause a collapse in the American assets and higher interest rates and a fresh and deeper plunge into recession. The higher interest rates of course will make the US debt situation intractable, and Multinationals owe no allegiance to the US more than they do anyone else. As soon as the tax burden in the US start to rise significantly they will be off on their toes, especially if they are no longer primarily dependent on Wall Street for funding. There may of course be a dollar bounce if interest rates go high enough but the consequences will be catastrophic. However, this is not an area of discretionary policy making. It will simply the be consequence of events and failures that have been unfolding for a decade. You can wave the star spangled banner all you, it won't make a blind bit of difference.


On Nov 09 11:27 PM Shonkypom wrote:

> The USD dollar will rebound because the US is the biggest and most
> diversified corporation in history (even Berkshire looks like a flea
> in comparison). The US can afford to pay off debt faster than anyone
> else, because it owns the house. For extra cashflow, the US will
> use the foreign currency earnings of the many powerful US corporations
> that own foreign subsidiaries. By depressing the dollar the US gives
> itself a big pay rise, plus relatively devalues its debt. As soon
> as those debts reduce to manageable levels, interest rates will return
> to normal levels and the dollar will rebound in spectacular fashion.
> . what a deal for the country that created the crash.
> Leverage up and go long usdchf, usdjpy, usdcad, usdaud, usdnzd as
> soon as the USD uptrend starts to assert itself. When will it happen
> - who knows, try fishing with small bait trades but get a harpoon
> ready for when it breaches.

The Dollar as a Funding Currency

Fed will tighten but not soon enough or enough to make to dollar rise. In these things, it is all relative to the performance of others and the Fed will always be a day late and a dollar short.


On Nov 09 03:11 PM athena wrote:

> Yes, that is why th edollar will continue to drop as the Fed indicated
> a looser short term future. The Fed will tighten and the dollar will
> rise. The question is when. My guess is that they will wait until
> they see the
> corrupted CPI start to rise.

The Dollar as a Funding Currency

No, but the Americans are no longer in a position to screw everyone else.


On Nov 09 03:00 PM Bailmeout2 wrote:

> The carry trade is great for everyone except those holding on to
> U.S. dollars. I think Americans are getting screwed!!!

How the U.S. Government Is Swallowing the Economy

America has decided that she is too big to fail. She thinks the World is going to pick up the tab for her failures. She probably ought to rework that calculation.

How the U.S. Government Is Swallowing the Economy

If China starts buying Gold at that kind of level, the biggest beneficiary would be the FED. I think China will buy but only within a certain target range, which is almost certainly not set in dollars but some other criteria. It may be against the Euro or even against a basket of commodities.


On Nov 09 07:24 PM Mad Hedge Fund Trader wrote:

> chp Paul Tudor Jones nicely summed up the fundamental argument in
> favor of gold in his recent letter to investors. The yellow metal
> is accumulated, and not consumed, and is the ultimate store of value.
> Gold does particularly well during times of excessive monetization,
> inflation, and instability of the banking system, as we are seeing
> now. Central banks, which have been consistent sellers for the last
> 20 years, are about to flip to net buyers. If non G7 central banks,
> like China, want to increase their gold holdings from the current
> 20% of reserves to the 35% weighting now owned by the G7, it will
> require 1.3 billion ounces of new purchases, or 20% of the total
> world supply. Certainly they are getting fed up with their ever depreciating
> dollar holdings. Witness last week’s Bank of India purchase of 200
> metric tonnes. ETF’s now own $50 billion worth of the barbaric relic,
> about 3% of the world total, making them the sixth largest holder
> in the world, and retail demand for these gold proxies is expected
> to explode in coming years. Private investors, mutual funds, and
> pension funds are all underweight gold. This is all happening in
> the face of declining production from traditional gold suppliers
> like South Africa. It all adds up to a whole lot of new gold buyers
> and a shrinking body of sellers. Paul didn’t give any specific price
> targets other than “up.” Long time readers of this letter know I
> have been banging the table about gold all year. Time to salt away
> more American eagles for those college funds and grandkids . For
> those who prefer holding the barbaric relic of the physical kind,
> visit the tightest spreads in town on American Eagles and bullion
> at www.millenniummetals.net/ . And while you’re there, sign
> up for their free research product on precious metals.

Czech Reports This Week Could Spur Euro Rally

Do hope so, I have a mortgage to pay in Czech Crowns which has been getting expensive of late. Also friends jobs are under pressure and a weaker Crown would help.

U.S. and U.K. Property Bubbles: Bounce, Then Bust Again

I don't think the supply demand scenarios in the US and the UK are even vaguely similar.

Is the U.S. Still a 'Permagrowth' Economy?

No, you will get permagrowth, but only if read US Government statistics.

Does Disaster Loom from Dollar Funded Carry Trades?

I wouldn't worry about it unwinding. When you get to that point, you will see light at the end of the tunnel, even if you are getting the occasional roof fall. The Carry Trade itself will be more like asphyxiation from toxic gases as far as US Manufacturing is concerned.


On Nov 09 01:37 PM Nathaniel C wrote:

> Karl I agree with your comments. When this dollar carry unwinds it
> will be huge event that will not be orderly. It will start one day
> without any news and be quite sharp as everyone in the carry trade
> is leveraged 5-20 times. It will be a domino effect with all the
> leveraged longs forced to sell.

Does Disaster Loom from Dollar Funded Carry Trades?

So, NOT!


On Nov 09 01:36 PM Jasper M wrote:

> "If indeed the dollar is still 'overvauled' and going to 40 . . .
> "
>
> Yeah, it's so not, Karl, not anytime soon. Bearishness is always
> greatest at a bottom, and the current slew of predictions re the
> 'death' of the dollar are a product of its turn, and thus do Not
> reflect actual trend.
> Here, at the end of the credit deflation, we can reasonably expect
> to see the price of almost everything drop vs. the dollar.