Coelacanth

Market Predictions: 'Crazy' About the Dollar

Hey Paul,

You bring up some great points.

I could be mistaken but I thought the increase in minimum wage was going to get phased in over time. Plausibly this could mitigate wage pressures in the near term keeping us out of a wage-price spiral situation.

I agree with you about the auction rate securities mess. Pretty daunting. I think most companies are working hard to re-imburse investors though and it appears the Fed is going to keep lending to commercial banks for some time to come.

My sense about the negative effect a strengthening USD would have on American exports is would have to appreciate much, much further for that effect to be truly palpable. The flip side is a stronger dollar will help to tamp down domestic inflation and gives Americans more purchasing power. We'll see.

Market Predictions: 'Crazy' About the Dollar

MarkMedayski,

So the truth is revealed.....you're a Jew hater and your opinions read like some hack partisan blogger.

Market Predictions: 'Crazy' About the Dollar

MarkMedayski,

Interesting take. So you basically want euro to go 1.70 thereby choking off and killing euro-zone exports even more so than is happening now? Great idea.

Interest rates to 10%? Too funny. While the ECB will be lowering rates in 09' - 10'.....ours will be rasing them.....making America's assets more attractive than the euro-zones.

Euro-zone unions aren't doing you any favors either. Because you're so unionized compared to us "stupid Americans" many euro-zone employees have already won outsized wage increases. Betcha can't guess how euro-zone companies are going to compensate for higher unit labor costs. Can you say wage-price spiral?

EU Industrial production, manufacturing, consumer sentiment, consumer spending, business confidence....all falling off in dramatic fashion.

The EU is about to find out if the twelve gold stars on their flag are in deed representative of unity and perfection.

Market Predictions: 'Crazy' About the Dollar

Excellent piece Louis....and yes I agree the euro has much longer slide to go. Siesmic shifts don't occur like this all the time and investors would do well to take advantage of what's happening now.

It was interesting this week to see euro-zone, French, Italian & German GDP growth for the 2nd qtr. were all negative. Despite Trichet's hawkish stance I suspect euro-zone slowing will become more and more pronounced in the coming weeks and months The cacophony of calls to lower rates will only get louder and louder.

The BOE's quarterly inflation report this week was striking in how dovish it seemingly was....almost hinting rate cuts may come even before CPI, PPI and import/export input indicators show signs of slowing. The idea being that as long as it was evident that inflation had peaked or was cresting....rate cuts would happen sooner rather than later.

My suspicion is the same may happen in euro-land and that markets haven't priced in this possibility.

US Dollar: 5 Reasons It Will Not Hit a New Low

I could see the dollar possibly hitting a new low late 3rd qtr. or 4th qtr. but not before then.

The real question for me is how heavy an impact ultimately will the continuing, relentless erosion of household wealth be on consumer spending. IMO this is the key.

I gotta tell ya.....as sanguine as some in the market are about there not being any fresh dollar weakness, I'm just not as sanguine. I just don't think we've yet felt the full impact housing & credit will have on U.S. economic fundamentals (not to mention inflation and rising unemployment).

That said, given the the extraordinary measures our Fed has taken to stave off financial panic....its not a stretch at all that currency intervention would happen if the buck were to resume it's earlier death plunge.