sedek's Comments

Switzerland Threatens to Start a Currency War

Wed, 18 Mar 2009 12:10:13 -0400

"Bottom line: Many countries would love to devalue. They are all itching to do it – and that includes the U.S. too. (You think American exporters, and the unions behind them, wouldn’t love a weaker greenback?)

The reason we haven’t seen a runaway stampede of competitive devaluations yet is because it’s just international bad etiquette. No one really wanted to be the first to say “Sorry guys, but we have to do this.”"

All the fiat currencies have been devaluing for years, especially the dollar. The pound and euro have been gutting themselves with rate cuts to try to keep up, which makes the dollar look "strong." The Swiss just joined the rest of the world.

Is the Fed Being Hawkish Enough?

Wed, 25 Jun 2008 21:28:06 -0400

special: "*If the FED raises interest rates, M3 would slowly decrease over time and inflation would decrease...over years, not days, not weeks, not months."

Given that there is about a $25 speculative premium in current oil, a 25 bp rate hike and expectation of more to come would have oil at $110 within a week. Quite the stimulus for the economy.

Even Priced in Gold, Oil Is High

Mon, 09 Jun 2008 22:33:12 -0400

"Well, it turns out that even priced in that “currency,” oil is expensive."

The way I see oil priced is on three factors: in relation to gold at 10-1; plus a supply/security premium that factors in Irani embargos or Katrina type damage; plus the speculative premium, standard bubble of new money jumping on an inflated bandwagon.

In today's terms the above yields a base price of $90, plus about $25 for the recent inventory drop and Nigerian threats, as well as the little posturing dances of Bush, A'jad, and Chavez, and the rest as speculation on where oil will go next week or month, basically momentum players trying to squeeze some gravy out of the commodity bisquit:)

The recent drop in oil, 10%, came from speculative positions unwinding because of jawboning by Fed officials. Oil dropped even though inventories dropped, speculative drop overcompensating for what would normally have been about a $5.00 supply spike.

Thursday and Friday's oil spikes resulted from Trichet hinting that the Euro would strengthen from rate hikes and the unemployment jump suggesting that Gentle Ben would give more rate cuts. No concrete actions in sight, just speculation.

Black Gold or Yellow Gold?

Mon, 09 Jun 2008 08:28:35 -0400

" Meanwhile, the value of the US dollar has dropped by 50% in that time period."

Interesting piece, and I do like your realization that politics and the economy, especially in an election year, are linked.

My quibble is with your above. The Dollar has dropped over 70% to gold from it's highs in the late '90's, those glorious days of $24 oil and $250 gold and $2.00 wheat. Deficits, debt, low interest rates, and hyperactive printing presses are the culprits and we are trapped by unfunded liabilities into keeping the Dollar low to repay debt with Monopoly money. We'll have a brief outbreak of stronger Dollar before the election to throw a lifeline to the incumbents, then the Dollar falls again with no predictable bottom.

Inflation Triangle Dilemma: Dollar / Oil / Euro

Mon, 09 Jun 2008 07:54:30 -0400

"Let’s start with Europe, thanks to rising oil and food costs, inflation is rising fast in the Eurozone. To combat this inflation, ECB president Trichet said they may raise interest rates next month."

Trichet and ECB have inflation because they also have been devaluing their currency, preferring liquidity injections. When money is printed faster than GDP growth each unit becomes worth less against commodities with intrinsic value, like oil, gold, or wheat.

As for Bernanke, eventually he might realize that inflation is what is weakening the economy, distorting the normal balance of consumer spending by energy and food taking more than their normal share, causing other sectors to have less available. A couple of quick 25 bp rate hikes, to partially undo the erroneous 75 bp cut after the Asian meltdown, would drop oil to $100 and provide a $160 billion annual stimulus to other sectors of the economy without raising deficit and debt and while lowering trade deficit.

For this week, things will be simple. News that increases the liklihood of FOMC cutting rates will sink the Dollar and sppike commodities; news that makes it less likely that the FOMC will cut rates will keep things flat; news that makes it likely FOMC will raise rates will strengthen the Dollar and lower commodity costs. With faithbased fiat currencies the high priest, Gentle Ben, is also the prophet.

Energy, Inflation and the U.S. Dollar

Wed, 04 Jun 2008 11:36:18 -0400

"On the other hand, there are people like Steve Forbes who contend all we need to do is shore up the dollar and oil prices will come down. As usual, Forbe's has things back-asswards. It is the rising cost of oil (due to worldwide supply/demand fundamentals) that is causing, in a vicious circle, the US dollar to decline."

If you think oil demand has risen 500% since Jan '01 or 250% since Oct '07, then you might be able to support this point, but would still have a hard time explaining why worldwide demand has had less an impact on the price of oil and gold and copper in Euros, Swiss Francs, or Canadian Dollars.

Forbes is a buffoon but is correct that the tanking Dollar has driven much of commodity hikes. We have been reminded of this again lately as the Dollar strengthened from jawboning by Fed officials, causing expectation of rate hikes to be priced in to futures, and oil and gold have to retreat.

Oil also has a supply and a speculation component to the price, but the weak Dollar accounts for over two thirds of the price increase .

How Does an Oil Crisis Impact the Dollar?

Fri, 23 May 2008 00:03:59 -0400

Interesting piece, but not sure that lessons from the Arab oil embargo and the Irani oil embargo are of much use to us now. Better information comes from watching the three-way dance among Bernanke, the Dollar, and oil, as that has predictive value. Fed funds look stable for a few months, then likely to rise this fall, which will strengthen the Dollar, which will drop oil to $100 and gas below $3.00 so incumbent politicians have a snowball's chance of being re-elected.

Add to this that Trichet will continue quietly devaluing the Euro through his printing presses and the Dollar doesn't look bad in the EUR/USD pair through November, at least. After that Bernanke may turn into Paul Volcker or he may finish destroying the economy.

Weekly Market Commentary: May 19th - May 23rd

Wed, 21 May 2008 12:26:52 -0400

Thanks for the information. Well done.

3 Reasons Why the Fed Can Afford to Pause in June

Tue, 20 May 2008 21:39:16 -0400

Good piece, but I would suggest that the political factor be watched on the Dollar and expect a 25-50bp hike from Gentle Ben before the elections in an effort to deflate oil and bring gas prices down to $3.00. This should take the Dollar to about $1.45/Euro, maybe $1.50, as probably $20 of oil is now speculative premium driven by the bubble mentality, which is why oil has detached some from the dollar and is driving higher on no real news.

Good luck and I appreciate the information.

Dollar Rallies on Retail Sales, Euro Words

Wed, 14 May 2008 02:32:20 -0400

"His positively reinforcing statement is a strong indication that Europe’s finance ministers are pleased with the USD’s recent rebound versus the Euro, and that traders should continue to buy up dollars."

Is the Dollar rebounding against the Euro or is the Euro falling toward the Dollar? Based on commodities, I would say the Euro is falling a little, which explains EU's inflation problems. I see the Dollar stabilizing for now, as Bernanke's rate cuts seem at an end, but the Dollar rise won't come until traders start pricing in an expectation of rate hikes to lower oil costs just in time for the election. I expect 75 bp hike by October, 25 bp at a time, and $3.00 gas when voters go to the polls.

Excellent work, Ms. Cheng. You are a great help. Thank you :)

The U.S. Dollar: A Contrarian View

Mon, 14 Apr 2008 12:36:02 -0400

"I KNOW I’m right and that the USD along with other fiat currencies will continue to go down in terms of buying power…"

Very good piece and I agree that buying power is the true standard for a currency. The Dollar was "strong" when gold was $250 and oil $24 and is now "weak" with $930 gold and $111 oil.

It's Time to Talk About Inflation

Mon, 14 Apr 2008 01:14:25 -0400

"Bob Shiller has estimated that the United States has never seen, in the past 150 years or so, a spike in rising housing prices as we have seen in the past eight years! And, the bubble has spilled over into commodities, especially gold and oil."

Rather than seeing a "bubble" in housing and commodities, I think it more accurate to see the values as a reflection of how far the Dollar has fallen. The once mighty Greenback is worth about a quarter of what it was in the days of $24 oil or $250 gold. All housing tried to do was keep up with the commodities, but was torpedoed by rapid rate hikes attempting to correct the Greenspan low interest rates. Things won't get better until fiscal responsibility is restored.

The Credit Crisis and the U.S. Dollar

Mon, 14 Apr 2008 01:05:23 -0400

Interesting piece, especially "government controlled media." I've noticed that it has only been in the last few months that anyone in msm has noticed the relationship between falling Dollar and skyrocketing commodity prices or has made the connection between liquidity injections/rate cuts and the tanking Greenback. I doubt msm is taking direct orders from the the administration, rather is afraid to accurately report.

As for your sequence, I see it as:
1: Subprime lossses threaten banks.
2: Bernanke devalues currency to socialize bank losses.
3: Commodities rise.
4: Discretionary income is constricted.
5: Congress passes more tax deferments and bailouts.
6: Dollar devalues.
7: Commodities rise.
8: Etc.

I like commodities long and see short term trading opportunities in currencies, but would be careful with the Euro, as ECB is also devaluing. Gold and the other metals are real money, fiat currencies are no more than raffle tickets.

Why US Interest Rates and the US Dollar Will Continue to Fall

Wed, 26 Mar 2008 20:21:01 -0400

"The US needs a weaker dollar to spur growth, just as much as the Eurozone needs a stronger Euro to curb inflation."

All the weaker Dollar has spurred is commodity inflation and profits for Euro and commodity longs. It's been a disaster for the economy and for wae slaves, whose paychecks will always fall short of inflation, which means their buying power is constricted by higgh energy and grocery prices. FOMC should start raising rates, now.

Rest of the article is good.

U.S. Dollar Paradigm Shift Underway

Mon, 24 Mar 2008 22:02:37 -0400

"Call me the optimist, even a contrarian, but selling the US short is a foolish thing to do after the proverbial toilet has already been flushed."

The flushing is ongoing, the recent Deficit Stimulus Act, liquidity injections, BSC guarantees, and last week's rate cuts still washing over us, with more rate cuts, more bailouts, and congress tripping over themselves to come up with more ways to buy our votes with the grandkids' money.

Gold is useful as a standard, a way to recognize that the Dollar has lost 3/4's of its value in under eight years whil the Euro has only lost a half. Without the commodities, we would have no reference for the incompetence of our leaders and bankers.

Weak Dollar is Bad For America - and ETFs

Mon, 24 Mar 2008 21:53:27 -0400

"Maintaining and strengthening the value of our nation’s currency is in the best interest of American consumers, businesses and investors."

Excellent piece, but will point out that Americans love their big government as long as they aren't paying full price for it and that no politician can get elected on a platform of fiscal responsibility, which is why the three remaining presidential candidates are all running on four more years of Free Lunch. Commodities look good as far ahead as I can see.

As a great man once said, "Strong currency is the foundation of empire, weak currency is the doormat to Hell."

How Bad Is the Dollar's Fall?

Sun, 23 Mar 2008 15:20:51 -0400

Maniac: "Plus, when the dollar goes up in value, they have an awesome accumulation of treasurys they bought on the cheap."

And this is why I don't see a major, long term strengthening of the Dollar, as it would effectively increase the cost of redemption of debt. Most likely is an ad hoc fixing of the Dollar around $1000/gold, so funny-money debt can be repaid with funny-money.

How Bad Is the Dollar's Fall?

Sun, 23 Mar 2008 13:08:10 -0400

"The US Dollar has been in decline against the currencies of its key trading partners since January 2002."

Low interest rates and increasing deficits will do that to a currency.

"It takes considerably more Dollars to buy the basket of key currencies than it did in January 2002, but only slightly fewer than it took in January 1995."

Perhaps because those key currencies have also been devaluing by printing money like paper is free? I believe the comparison currencies have also fell to gold, oil, and other commodities and metals, just not as fast as ours has.

As for the relationship between Fed rates and Dollar strength, Euro was at $1.26 when we had 5.25% to burst the housing bubble, then went to $1.59 in anticipation of a full 100 bp cut last Tuesday after the BSC bailout and the new offer of cheap money to nearly everyone with questionable paper as collateral. The Dollar then strengthened because FOMC "only" delivered 75 bp, with two dissensions, and mentioned the word "inflation" in the press release, which I saw as jawboning rather than course correction.

Dollar will remain weak as long as FOMC and the US government continue to do more of what has already weakened it, rate cuts and deficit stimulus, the recent Deficit Stimulus Act being but the first installment of congress bidding for votes with our grandchildrens' money.

Where Will the 'Commodity Currencies' Head Next?

Fri, 21 Mar 2008 15:24:37 -0400

"$750 even $850 in gold is a good enough dip for me. Remember, I'm a trader, not an investor."

Great, then you're doing well on the way down. I don't trade gold and silver, just buy bullion for my stash, but do trade the EUR/USD. Big reverse the other day, "irrational depression," so I lost a little before I decided it was trending down, so have been mainly short Euro. Good luck.

Where Will the 'Commodity Currencies' Head Next?

Fri, 21 Mar 2008 01:19:58 -0400

"Could the commodity currencies fall further? Yes."

Probably, as we have profit taking turning into a lemming rush. I see no change in the important fundamentals such as rampaging US deficits and the FOMC still cutting rates while pumping new Dollars into the system, so the Dollar will drop again, while the rest of the world is doing fine based on slightly more responsible fiscal policies, so India and China will happily buy all the excess gold being dumped on the market by central banks or freed up by a very slight slowdown in US.

Pretty charts, but I'll look at $750 gold, $15 silver, and the Euro +- $1.35 as buying opportunities, probably the week before the election. Good shorts on the way down. Week after the election Arabia stops over producing, spiking oil, and Bernanke may be forced to start raising rates again, so should be interesting.

Commodities Experiencing a Record Sell-Off

Thu, 20 Mar 2008 11:04:44 -0400

The correction looks like profit taking turning into a stampede. As the fundamentals haven't changed for the Dollar, I see this as an eventual buying opportunity, probably around $800 and <$90. The American Dollar still lacks fiscal discipline from either the FR or the US government and I see no signs of discipline being restored in an election year, so see the commodities drops as a reverse bubble, irrational depression, and a short opportunity till then.

Burst Bubble? Commodities' Long-Term Story Remains Intact

Thu, 20 Mar 2008 10:15:14 -0400

Good piece and I agree with your analysis of the fundamentals. What I'm seeing the last couple of days is profit taking turning into a lemming rush over the cliff. Just a guess without charting, but Dollar $1.45 and gold $800 should be solid bottoms, about 20% off the tops.

In an election year with congress and the candidates bidding for votes with borrowed money, this is temporary and I see it as an opportunity.

The Fed Underdelivers

Wed, 19 Mar 2008 20:28:16 -0400

tpoise " Lest you forget that after 9/11, Oil plunged to around $25/barrel and we have $0.99/gallon gas."

Oil was $24 on inauguration day and Arabia raised output to keep prices down after 9/11.

Table Set for U.S. Dollar Intervention by World Banks

Wed, 19 Mar 2008 20:24:26 -0400

I would suggest that banks have been intervening for some time now through rate cuts and devaluing their currencies by printing money like paper is free, which is why most majors have also fallen to gold and commodities.

If you suggest central banks do something more public, like peg currencies or buy massive more amounts of devaluing Dollars, I disagree. They already have enough of these deteriorating assets and the FOMC and US government give no reason to believe that fiscal responsibility will be restored any time soon.

The Fed Underdelivers

Tue, 18 Mar 2008 21:16:09 -0400

"the bottom line is that economic activity has and will probably weaken further due to tighter credit conditions and a deteriorating housing market."

Cheaper money will not restore counterparty trust or making loans for deteriorating assets more likely. Fisher and Plosser are right, as the continuing fall of housing values and rise of commodities will show. Bottom line is that higher commodity costs will continue to outrun stagnating wages and constrict discretionary cash of the consumer. The slowdown will continue and get worse because the FR and US government will continue doing more of what caused the weak Dollar and high grocery and gasoline costs in the first place.

Why I Don't Like Forex Brokers

Tue, 18 Mar 2008 13:36:43 -0400

Good points. My suggestion is to withdraw your profits as you go, banking them, rather than getting greedy with the lure of compounding.

Are the same risks of insolvency possible in commodity futures? Like you I have a nagging voice about my forex, interbank fx, and have wondered if I would be better off switching to Ira Epstein to play the Dollar in a secondary manner, through oil or gold.

Saving the U.S Dollar: Wall Street's Next Big Bailout?

Tue, 18 Mar 2008 13:29:00 -0400

Interesting points, but I don't see centrals intervening in any manner other than continuing to devalue their own currencies by printing more money. The idea of Japan, China, and the oil producers buying more Dollars as their massive holdings are falling is short term, will be no better than a temporary slowdown, and will cost them more in the long run.

The only intervention that can stop the Dollar from falling further now is for the FOMC to accept that increased liquidity does not create increased counterparty trust and to not cut rates further this meeting. As a 75 bp to 100 bp cut is already priced in to the Dollar and commodities, a cut refusal would cause an immediate and major rebound in the Dollar and should take oil to $100.

The Dollar Should Continue To Fall

Mon, 17 Mar 2008 18:47:51 -0400

Carry trades and such are well over my head, but the Fed printing money like paper is free while the government raises deficits like the world will end tomorrow tells me that the Dollar will continue to weaken, in spite of the Euro itself weakening due to hyperactive printing presses. Major currencies are continuing to play "catch the falling Dollar," whether through rate cuts or liquidity injections, but can't do it when we are in an election year with candidates tripping over each other trying to be the most generous with the wealth of people thirty years in the future.

Gold/Dollar Ratio Goes Parabolic

Sat, 15 Mar 2008 12:41:19 -0400

Not seeing useful information in the article, as the Euro, and other "majors," is also devaluing due to Trichet printing money like paper is free. The commodities have pretty much all quadrupled, so I read that as the Dollar losing 75% of its value due to FR manipulation and US government deficit and debt. Until Ben Bernanke finally runs out of bp's to cut and as long as the government spends more than it generates in revenue, the Dollar will continue to devalue.

Unfortunately, the three remaining presidential candidates all offer more tax deferments and more spending targeted to their constituencies, so gold or wheat or anything of intrinsic value will continue to rise in falling currencies. For those who dream of gold falling, lock Ben Bernanke in a closet so he can do nothing this week. The Dollar will raise and commodities fall because the markets have already priced in a 50 bp cut.

$200 Oil - Who's Going to Pay For It?

Wed, 12 Mar 2008 16:27:00 -0400

More of "Blame everyone but the American voter and his love for Free Lunch." Oil moves inversely to Dollar strength, which has dropped about 75% to gold since VooDoo Economics arose from the ashes in '01. It is not a coincidence that the Dollar sets low records at the same time oil sets high records and gold and silver and copper and wheat are near their tops.

For today's breaching of $110 oil, thank Ben Bernanke and $200 billion in freshly printed money yesterday or blame the $160 billion Deficit Stimulus Act signed a few weeks back, then anticipate, as traders do, that the FOMC will further slash rates and weaken the Dollar even more next week. We are doomed. $1.60/Euro is easily in sight.