Melancholy Korean

Critique of Dollar Policy

I'll be honest. I never read your posts that carefully. But this one was fantastic. Like the outrage, especially. Great work.

The Budget Deficit and Declining Dollar

"I also think I am now one step closer to understanding Democrats, but I digress."

Look, I'm a Republican too, but that's a cheap shot. Half our budget goes toward the military. Where was our party, or at least the fiscal conservatives, as opposed to the "neoconservatives" (neo-Trotskyites) on the Iraq war? Talk about a truly idiotic use of our funds. And the Laffer curve? That was pushed hard by Ronald "Reagan" (or did you meant Don Regan)? In any case, both of 'em.

Not that the Dems have any answers. The housing bailout bill is only going to prolong the adjustment in prices that needs to take place. Whether it happens in four quarters or four years or forty years, eventually, prices will have to fall back to reasonable levels.

My Take on the ECB: Head Fake?

Dan's right. Tricky's gonna raise rates once ("it's not a series of rate hikes, etc etc). Then what? The US and Europe are both on the cusp of a major recession. Does the ECB eventually start cutting? Or are they going to attack inflation and cause widespread economic misery, in the name of discipline and austerity? How much pain can the people take?

I'd like to buy far out of the money options, like 5 delta, on the euro going away in five years.

Is the Fed Being Hawkish Enough?

Still amazing to me Tricky's gonna raise rates in this environment. Germany (apparently Spain, Italy, Ireland don't count in the ECB's thinking) is now starting to show signs of a downturn, and they will go down as hard as the US. But while the American system has a lot of flaws, and is prone to booms and busts, our labor markets are flexible enough for us to adjust quickly.

1.3 trillion in mortgage losses? Whatever. As Michael Milken said at the Global Conference, we've had trillion dollar losses before; hell, we've had at least three of 'em in the past twenty years (Texas real estate, SNL crisis, dot com). The history of American capitalism is made up of booms and busts. As long as we let the system take the losses, as long as the we let the players adjust without trying to cushion the pain through regulation and artificial props (can you say Dodd housing bill?), the faster we will get out of the coming recession.

"However in the longer term, the US dollar has bottomed out alongside US interest rates and it will only a matter of time before it begins to trend higher once again." Absolutely agree. Of course, it's all in the timing!

OPEC's Move to Devalue the Euro

gonna be a bumpy ride, especially with Tricky playing his stupid power games, but I think you're right. Dollar's still got room to strengthen, oil is overvalued, but shorting euro - dollar is a safer way to play than shorting oil. oil is now in stupid bubble territory. explosive upside moves, even to ridiculous levels like 200 or 250--that Russian oil minister think he's Henry Blodget?--are no longer off the table. but eventually, oil (tulips, corn, wheat, silver, gold, tech, housing, energy stocks, Nifty Fifty, South Sea Trading, railroads) will come crashing down.

Will the Dollar Recovery Launch a Bank Rally?

Good stuff. I like the connection of stronger dollar (which I def agree with) and the banks stocks. You're right about possibly being a little early on the financials, but hmm... interesting ideas, especially re sector rotation.

Dollar/Krone Relationship A Sign Of Peak Oil?

You're right about the ECB. They are playing a stupid power game. Let the differential tighten, let oil retrace, solve the inflation problem. Doesn't matter, though, 'cause the Fed will defend the dollar here. Dollar's bottomed. Oil is a bubble, so it will burst, but of course timing the thing well, i.e., avoiding getting gored by a vicious short-covering move, is what separates the traders from the commentators.

The Push for a Stronger Dollar

Come on, USD. You can do it. I think I can, I think I can.

Thanks, Bernanke and company. You're gonna save us from that smelly French man, after all!

Bernanke Hoping Increased Dollar Will Ease Inflation

"guns blazing" is right on. get outta the way of this train.

ECB Avalanche May Bury Inflation Concerns in a Recession

Finally, finally. Thank you. Ultimately, the moral indignation that Europeans feel at the thought that the US might be pissed by Tricky's comments this past week miss the point. It's not some great pissing contest (which, of course, the Europeans would lose, since we have a bigger army and the willingness to use it.) It's about a sensible policy for the Europeans themselves.

"But oil and energy prices are one of the main drivers of European and worldwide inflation. The price of crude had fallen to below $122.00. On Friday it closed at $138.54. The dollar lost 2.6% against the euro on Thursday and Friday; the price of oil rose more than 8.4% on Friday alone. The Thursday and Friday rise in oil on the New York Mercantile Exchange was a record for the exchange.

"The ECB has damaged its own case against inflation. What will generate higher inflationary expectations more than a sharp hike in gasoline prices? Would not a sustained 15% or 20 % drop in the price of oil do more to counter inflation in Europe than threatening to push a rate increase on a slipping European economy? Will not higher energy prices further undermine European GDP and fracture consumer spending?"

Nationalizing Oil: Well-Intentioned, But Wrong

It's easy to refute her so-called argument, and you did a good job. Your point about an "increasing" number of Americans wanting a "socialist" solution is valid, especially if we replace "socialist" with what that might actually happen in the current political environment (assuming we don't have a revolution)--taxing the rich (corporation) to pay off the less fortunate.

Of course, and I don't mean to get off on a tangent here, but who should we blame for awakening the untamed beast of populism? I think the Idiot Son and the war in Iraq is probably a good place to start, but maybe also Slick shares some blame, especially his move to eliminate welfare.

The consequences of a real "worker's revolution" in America would be dramatic and severe (the probability is small, I grant) so I just want to ask all the traders out there, don't you think a decent, or even minimal, social safety net a great hedge against this kind of political risk?

Why sell that downside put? Is the extra premium from saving money on the safety net worth the (small) chance that hoards of angry, hungry, desperate people will march in the streets? That people who have just lost their homes and jobs, who have lost their retirement savings because of the deflating of the tech or housing bubble, who have nowhere to go and no one to turn to, aren't you worried they might vote for dramatic change? Or worse?

Bernanke's Backfire: Now What?

I think it's called a telephone. You can use it to talk to people, like, oh, I don't know, central bankers in Europe and Asia.

Great article. Painted into corner is right on. Raising US rates now would be suicidal, not raising rates devastating, letting the ECB lead the way depressing (literally).

Two questions:
(a) did the probability of Euro going away tick up ever so slightly this past week?
(b) why is monetary policy always cast in moral terms? Strong medicine, "toughness," etc etc.

Inflation Triangle Dilemma: Dollar / Oil / Euro

I'm sensing a new contrary indicator--moronic commentators. Oil must be nearing its high and the dollar close to bottoming, if this is your new demographic.

Anyway, nice article. Triangle is exactly right. Why Tricky can't hold steady and let the differential tighten, or at least stay constant, is beyond me. I'm sure Bernanke would love to raise rates to catch up and is looking for any sign of strength to do so, but the frog wants to play tough guy, I guess.

ECB Move: An Opportunity To Trim International Exposure

Hmm. We all get the commenters we deserve, but wow. Agree with you Keith. It has been most "interesting to watch." Can't say I understand what the ECB is doing. Shooting oneself in the face to spite the big toe. Or something like that. As for M. Tricky, he's French, and well... there's a reason one can't translate "fair play" into French.

Good luck to our European allies with the higher rates (weaker dollar, higher oil prices). Strong medicine sure tastes good. It's almost as addicting as moral indignation.

Trichet, ECB Missing the Point with Crude

ECB