The U.S. Dollar is without a doubt the most hated currency on the planet. The problem is, everyone knows it. Investor sentiment is at an all time low and open interest for the dollar (symbol: UUP, US Dollar ETF) stands at an incredible 97% on the short side. The Obama Administration doesn’t even have a dollar policy in place while the Federal Reserve’s printing presses are set on overdrive. Their latest initiative, to purchase worthless mortgage backed securities off the banks balance sheets in an effort to keep a lid on mortgage interest rates is as deluded as their other failed attempts to re-inflate the economy.
Entries under the ‘The Economy’ Category
The Worlds Most Hated Currency
On October - 26 - 2009
Quantitative Easing… In Plain English
On October - 13 - 2009
Back in the dark days of 2008 the Federal Reserve lowered it’s Discount Rate” (the short term rate at which it lends to financial institutions) down to .25%. In effect, it had reduced the return on government bond yields down to 0%. Adjusting the Fed Funds rate is a tool given to the Federal Reserve to battle inflationary pressures and to defend the U.S Currency from devaluation. Protecting the purchasing power of the currency is the Fed’s primary purpose.
China Baulks at Dollar Debasement
On May - 27 - 2009
It comes as no surprise that China, along with a growing number of other nations is calling for the replacement of the U.S. Dollar as the World’s Reserve Currency. China, Russia and Brazil most recently has suggested instead, a basket of currencies. The U.S. became the world’s reserve currency following World War II with it’s effort to rebuild Europe and Japan. It was the only still solvent nation that remained.
Most notably, Standard and Poor’s downgraded the AAA credit rating of the United Kingdom which it has held since 1978 and Bill Gross of Pimco Investments has stated that the U.S. is also in danger of losing it’s own AAA credit rating (which it first received in 1917). This would have disastrous results on the bond market as the increase in risk premium could create a chain reaction of rising interest rates and lower standards of living.
The Next Comodity Boom Has Arrived
On May - 22 - 2009
I’ve heard a good deal of noise about low inflation and more deleveraging and how inflation won’t be a problem until the economy begins to recover, possible in 2010. I don’t begrudge these market analysts. They’re only trying to make a living for themselves and their families. It’s kind of noble when you think about it.
Here’s the problem. The insidious type of inflation we are creating is not the kind that feeds on a vibrant economy. It is a severe tax on working working class families and the fixed income elderly that drains the purchasing power out of every dollar they earn.
Take The Money and Run
On May - 20 - 2009
The last nine weeks have been witness to an incredible rise for the major market indexes. From the March 9th lows (S&P 666, sign of the beast) we have seen a nearly 36% moonshot advance. It’s been a great run and a lot of fun to participate in but as the average Joe investor starts feeling left out and his greed overtakes his fear, he begins to buy into the market euphoria. For the contrarian investor this is a clear sign that the rally is officially over and the small guy is about to get crushed (again).
As unfair as it might seem… it’s really not. In the financial markets, like the jungle, only the quick and the strong survive. The weak, infirmed (uninformed), elderly and undercapitalized are food for the markets voracious appetite.
