Tuesday, September 2, 2008

The U.S. $

The U.S. $ is rallying.  I have been a U.S.$ bear for YEARS, but I don't fight what my eyes see.  The economies of the other currencies are in much worse shape than we thought, and the $ is rallying relative to these currencies as a result.  Why this should be so hard on the precious metals is unclear to me, but it has been and that is that.  As a store of value, my money remains on the metals rather than the currencies.

Things change, markets change, data changes, and you must accept it or lose money.  Fighting counter trends is a sure way to a short, very unproductive and unhappy career in the markets.

The funny thing is, Bernake is getting credit for this.  There are, and always will be, unintended consequences and outcomes as a result of many variables.  Often, we have no idea "WHY" until months or quarters, and sometimes years, later.  

This is still ALL about oil. That does not mean oil will always outperform every other commodity, but it is ALL about oil.  Keep your eyes on the data.


Mentatt (at) yahoo (d0t) c0m


12 comments:

Don said...

Delation. Less money out there.

Comparing dollars to Euros is a mute point--both are disappearing at similar rates.

We may be entering a depression.

Anonymous said...

"May"?

Dude, this is the beginning of the Greater Depression!

Anonymous said...

Yes, a Greater Depression -- with the food stores stocked with hamburger buns and juice on sale, the Speedway having no gasoline shortages (even the U.S. crude oil reserves are having a hell of a time getting below 300,000,000 barrels), electricity in every household and prices sinking for natural gas and heating oil (a cheap winter!). We should have "Greater Depressions" like this every day of the year if we can get them!!!!

Anonymous said...

Kindly remember that all of the above was also the case during the last Great Depression. There exists no correlation.

Anonymous said...

Its hilarious, the MSM says the US economy is strong and NOT in a recession, AND the reason oil prices are coming down is because the whole world is in a recession!

Anonymous said...

NEW YORK (CNNMoney.com) -- Home heating bills are expected to rise dramatically this winter ...

While heating oil and natural gas prices have fallen from recent highs, they remain well above last year's level and still pose a significant threat to poor and fixed-income Americans.

Heating oil prices are expected to reach $4.34 a gallon nationwide this winter, according to estimates from the Energy Information Administration.

Anonymous said...

On the Nymex, natural gas was $7.943 on 10/1/07. Today, it was $7.26. Hmmm, cheaper. Also, heating oil was $2.50 on 10/1/07. It was $3.08 today. A 23% increase. Not inconsequential, but for the rest of Northern America, a cheap winter has been set up for us. I think I'm gonna like this Depression. But first, a $100 dinner on Clark Street .... :)

Don said...

Platts

Wednesday, 1 p.m.: Refining legend Thomas O'Malley, now the CEO of European independent refiner Petroplus, told a conference today that the "market [was] completely underrating the impact" of Hurricane Gustav on US oil supplies. He estimated that 20 million-30 million barrels of inventory would be lost because of the storm. He compared Gustav to Hurricane Lili of 2002, which he said wiped out about 25 million barrels of inventory from the market. "You're going to see some exceptional cracks" in September, he said.
Betting against Tom O'Malley generally isn't a winning approach.

Don said...

PS. With deflation prices go down. Because no one has money to buy anything.

Notice how much less fuel we're consuming. Unparalleled numbers of people are getting that electricity you speak of cut off; record numbers of houses are in default; credit cards are soon to follow.

Anonymous said...

The 'inflation' vs 'deflation' conundrum is difficult because there are good arguments for both.

However, the behaviour of the FED is clearly in favor of inflation. The last thing Helicopter Ben will ever do is let his buddies on Wall Street suffer the consequences of their actions. The FED has been handing out money to Goldman Lehman Citi et. al. in the 100s of Billions for well over a year now. When the FED is pumping out $17 billion each week, it offsets a lot of deflationary events linked to the 'credit crunch'.

While there is no theoretical limit to the FED's money supply, I think there is a practical limit to the amount the FED can give away. The economy is supposedly driven by consumers (~70%) and, as you point out, credit cards and mortgage refinancing are drying up. Consequently CEOs everywhere are 'cutting expenses' i.e. laying off workers. This will have the unintended but predictable consequence of slowing the economy down even more, rather than lifting the particular CEO's company ahead of his competitors. When the official unemployment rate hits 7%, the REAL unemployment rate will be over 20% and the FED won't be able to give away enough money to Wall Street to keep Ben's Buddies afloat.

So, the way I see it, short-term we will have inflating prices for gas, food, rent, etc. AND long-term no one will have money to buy anything!

What a SYSTEM we have!

Anonymous said...

Clearly inflation.
Priced a postage stamp, ice cream, hair cut, or trip to the cinema lately? All are identical in form and function to their 1960 equivalents, yet each cost 1000%-3000% more. Same for virtually every good or service.
The only thing deflating is hallucinated 'wealth'....paper 'assets', cookie cutter houses built of glue and sawdust, and the like, and, for a time, anything that could be outsourced to cheaper labor markets (before rising cost of transportation negated the savings).

Anonymous said...

We are in a deflation. The $850,000 that was paid for the overpriced house was still paid for with someone's money, and everything of size is dropping in price .. cars, boats, energy. A haircut is $10. That's peanuts compared to the big stuff. We don't get deflations very often (every 75-80 years) so people aren't used to them.