The Economy Guy » US Dollar

Markets Recap

cuible — Mon, 24 Jan 2011 19:08:07 +0000

The Markets Today…..

It has been awhile since I talked about how the various markets are doing in the US, so now is a good time to look at these markets and explain a little of what is actually happening.

Gold – as this is my recommendation for all readers to consider for inclusion in their personal investments – has been falling from its 2010 year end high of $1420, and hit $1340 the end of last week. There are many reasons for this fall off in price, but here are the main ones that I believe are in play:

People are taking profits from the 29% increase of last year – and there are lots of profits to take.
The Euro was used last year as play against gold – sell the Euro and buy gold with the money. This is being unwound right now as the Euro is gaining while gold is falling – normally they go in the same direction.
China is raising interest rates to cool off their massive growth in GDP – it is growing too fast for comfort of the Chinese leaders, and could lead to a fast growth in Chinese inflation – something that could cause unrest in the country, and something the Chinese leadership would avoid at all costs.

However, having said all that, I believe that the selling in gold is approaching its finish, and will resume its uptrend to new highs in the near future. The fundamentals for gold have not changed one iota. It has been a long time that I have given a “buy signal” for gold, but if the price goes below $1330/ounce where there happens to be some good support, then a purchase of gold would be called for. (On the Silver front, I have stayed away from Silver for the main reason that I don’t follow it too closely. However, Silver is also much more volatile than gold – down 10% versus 5% for gold’s decline – so that’s another reason I don’t recommend it. However, if you believe it is a great investment, I would say go for it if you have done all your due dilligence homework.)

Stocks – have been going up when measured by the DJ30 or the S&P indices. This is being caused by the Quantitative Easing 2 money being poured into our economy by the FED finding a home in stocks (plus other places too). However, there is an underlying trend that you should not miss. The small cap stocks are underperforming the rest of the stock market. In other words, money is coming out of small cap stocks and going into large cap stocks (like the DJ30) stocks) – go and check out what is happening to those small caps, and you will be happy if you are not invested in them.

Bonds – are falling in value as interest rates trend upward. This is the unexplained phenomenon as the FED is trying to reduce interest rates, but the market is defeating that goal, by raising interest rates. Also, I have been reporting on the beginning of the end of the Muni Bond market which will also have a negative affect on bond values sometime later this year.

Dollar – started the year going upwards, but has fallen off sharply during the past week. The Euro is now standing at 1.36 Dollars/Euro. We will have to wait a little longer to see if the Dollar confirms its downward trend against all currencies.

Oil – started the year going upward, and went as high as about $92/barrel. It is now standing around $88/barrel, as the OPEC have “hinted” they may increase the supply of oil. You can ignore just about anything the OPEC nations ever say, and history shows they don’t follow up with their promises too well. Oil wil probably hit $100/barrel by the first half of 2011.

Other News……

The Irish Government fell last week, and they called a general election on March 11th. The ruling party will be wiped out in the next election as just about everyone in the country sees how incompetent they truly are. They have earned their fate. However, the much more interesting thing to follow is whether of not the next government to come into office will “repudiate” the deals made with the EU and IMF. If they repudiate them, it will cause a shock waive heard around the world, and Greece will probably line up to do the same thing.

Spain is planning a restructuring of its banking system. Effectively, I believe there will be a Spanish bailout of its banks as part of the restructure plan. This sounds way too similar to what the Irish Government did before it found out how bad the banks really were. There is a natural tendence for any bank to hide its real problems – assuming it has some bad problems. Spain is no different. People in Spain are demonstrating with “Donde Esta Mi Donera?” signs. Spain is just further behind the power curve than Ireland. Watch out for Portugal and Italy too.

Dubai built those beautiful islands off its shore so massive resorts and hotels and residences could be built on them. I find it amusing that those islands are being reclaimed by the sea (sinking in effect), as the waves and tides due their endless work. I wouldn’t have wanted to be one of the millionaires who bought one of those lots and built a mansion on it.

FDIC Guarantees

cuible — Fri, 11 Sep 2009 11:48:19 +0000

Stocks soared forward today setting near term highs, and bonds increased in value (lower interest rates) as the FED bought bonds on the open market.

The Dollar lost more money, and is WEAK, WEAK, WEAKER.

Gold, oil and gasoline all went sideways.

In the news today…..

FDIC Bank Guarantees – of $320B that were made when banks failed and other banks have taken over the bad debts, are being proposed to be phased out in 6 months by Sheila Bair, the head of the FDIC. Don’t be confused. This is not a phasing out of the $250,000 per account of FDIC guarantees, but guarantees to banks. Let’s give Sheila a big thumbs up as this would eliminate a risk to taxpayer money and would provide an early indication of how banks will fare without these guarantees.

Foreclosures – in August came in at the second highest level in our current housing meltdown. In other words, foreclosures are on a rampage. The highest foreclosure rates came in Nevada, Florida and California.

Jobless Claims – fell last week, and stood at 550,000. Everyone cheered because this number was less than the estimates. What are people cheering about? This is just a big number, plain and simple.

Trade Deficit – hit $32B last month, and was growing from previous months as imports surged in the US. How would you interpret this statistic? My opinion is that a growing trade deficit means we owe MORE money to other nations, and our Dollar will continue to fall as long as this imbalance doesn’t appear to be being fixed – ever.

Here are the last numbers for today (about 40 min before closing):
Dow Jones 30 Industrial – 9626 (up 80 points)
10 Year Treasury Bond – 3.34% (down 0.18%)
Euro – $1.4606
Gold – $997 (up $2)
Oil – $71.94 (up $0.63)
Gasoline – $1.80 (down $0.02)

Taxes, Clunkers and Benefits

admin — Tue, 04 Aug 2009 00:24:58 +0000

Stocks soared on the news of manufacturing data. (It was down, but stocks went up). Bond interest rates soared too.

The Dollar lost 2 cents – a massive move, and portends inflation.

Oil and gasoline rose significantly – you can now bet that gasoline will be rising at the pump. Go fill up now.

Gold rose slightly.

In the news today…..

New Taxes for Middle Class??? – Treasury Secretary Geithner and Larry Summers cannot rule out a tax increase for the middle class – a discussion they had this last Sunday. What are the ramifications of this announcement?

Politically – President Obama is stuck with trying to not look like a liar from his declarations about no new taxes. I think this will become a political hot potato in the near future.
Economically – the statement makes complete sense. The deficit spending must be paid for somehow – and the choices are first increased taxes, and second inflation.
Internationally – the Chinese have put the heat on the Administration to keep the Dollar strong, and interest rates low – and Geithner’s statement certainly makes the Chinese happy.

Cash for Clunkers – used up its $1B budget sometime last week, or over the weekend. The program is a wild success as people scramble to turn in their clunkers to get the “free money.” How much money was committed to these buyers?? Who knows??? No one, apparently, as the government just can’t add up the numbers – what complete incompetency. The House voted to add $2B more to the program. Before more money can be added to the program, the Senate must approve the funds, and then the bill would go to the President. There is no doubt the President would sign this bill – and take complete credit for the giant success the program has in providing “stimulus” to the car companies. However, the Senate has not passed the bill, as some Senators have reservations about spending more money while we are creating world shattering deficits. And, the Senate problem can’t be blamed on the Republicans, as the Democrats control the Senate. This is a giant fiasco in the making. If the government can’t run this program, do you want that same government to run your health care, or “cap and trade” for energy? If the Senate passes the bill, the President’s ratings will soar. If the senate doesn’t pass the bill, the President’s ratings will tumble further. Fun, fun, fun.

Unemployment Benefits – as many as 1.5 milliion people receiving unemployment benefits will be coming to the end of those benefits. If this happens, these people will add to those who won’t be able to pay for them homes, and pay their other bills. The government is looking at providing some additional support to these people. Whether more benefits are provided or not, the fallout is negative for the economy. More benefits = more deficits. No more benefits = housing and credit impact on economy.

Manufacturing – did fall as fast as prior months. So, this is why stocks shot up today. Get this straight – manufacturing is still declining, just not as fast. The organization who takes these measure predicts that manufacturing will grow next month. It is very possible that manufacturing will increase next month – but the real question is “Will there be new jobs coming out of this increase?” No one can answer that question, and my prediction is ‘no’.

Here are the last numbers for today:
Dow Jones 30 Industrial – 9287 (up 115 points)
10 Year Treasury Bond – 3.64% (up 0.14%)
Euro – $1.4416
Gold – $959 (up $3)
Oil – $71.58 (up $2.15)
Gasoline $2.07 (up $0.06)

Credit Cards And The Dollar

admin — Tue, 07 Apr 2009 21:46:16 +0000

Stocks fell today on the anticipation of poor earnings reports – ending down 186 points. Bonds went sideways.

The Dollar gained today.

Oil and gasoline are in a trench moving up and down in a narrow band. They are still in that narrow band, and therefore are moving sideways.

Gold gained $11 today, but I await a test of the support level of $850 to $860.

In the news today….

Credit card use in February fell at an annual rate of 9.7%. This is another sign of reduced consumer spending and increased consumer savings.

Why has the Dollar been strong this year??? Here is the most logical explanation that I’ve seen. There are a lot of people/companies who must make payments in Dollars. And, there is no credit around for them to borrow Dollars. So, they are converting their local currency to Dollars to be able to make these payments. This explanation came from George Soros. Assuming this is true, the Dollar should go back falling in value when the credit markets start freeing up.

Here are the last numbers for today:
Dow Jones 30 Industrial – 7790 (down 186 points)
10 Year Treasury Bond – 2.91% (down 0.03%)
Euro – $1.3268
Gold – $883 (up $11)
Oil – $49.15 (down $1.90)
Gasoline – $1.46 (down $0.02)

Hurrah!

admin — Tue, 04 Nov 2008 21:30:24 +0000

Hurrah!!!!!! The election is here at last, and it will be all over today. Markets love certainty, and the election provided an unwanted level of uncertainty in the financial markets. My interpretation of the numbers today, is that the markets all turned today, and will be looking different in the future. But, how will the look?? We’ll see, and I’ll talk about it. Let’s look at what happened today.

Stocks were up as much as 300 points during the day, and ended up 179 points. This is a steady increase in stock values over the past week. Does this mean that the markets love to have Obama win? – the apparent winner according to the news. Let’s look at the historic truth of stock markets. Stocks markets have done better under Democratic Presidents, than under Republican Presidents, over the past 30 years. Is that statistically significant? I don’t think so, but stock betters don’t really care – they just place their bets, and wait to cash in their chips. The counter to stock being at a turning point is the recession that we are falling into. How could stock prices reflect one year’s worth of lost revenues, and still go up? We’ll see.

Bonds rallied too!!!! I find that amazing – and it is counter-intuitive. I will be watching this phenomenon over the next few days to try to understand it. I don’t understand it today. LIBOR was the lowest that it has been since last June. In other words – it’s back to normal. This is great news, and could be one of the elements in understanding the bond phenomenon.

The Dollar fell significantly against all currencies (except the Yen), and this could be a major turning point for the Dollar – has it reached its peak?

Oil rose 11% today – imagine that 11% in just one day. Hard to believe, but it’s true. This could also be the turning point for oil prices. Has Oil reached its low price? We’ll see. Gasoline is still low at less than $1.50/gallon at the refinery. You pump price should be $1.90 today, but it isn’t of course.

Gold rose $31 today, and could also be a measure of the turning point for gold from its near term lows. We’ll see.

Food for Thought Tonight……

Here is an interesting article that reflects on our economic system. Please read it, and try to comprehend its purposeful meaning. The article is written by Kevin Depew of Minyanville.

“You can build a hamburger with one ingredient, ground beef, or you can use 100, but in the end it is still just a hamburger. Our credit system has 100s of ingredients these days, but it’s still just a hamburger… one that has been doctored up with all of these fancy ingredients…The word credit comes from the Latin “credere”, which means, literally, “to believe, or to trust.”…When the “credere” is gone, the whole thing unravels, and it works both ways, from lender to borrower, and from borrower to lender. This is why monetary and fiscal policies are not working…Credit is nothing but a belief. That belief, “credere”, stretched to its limits by the policies of endless credit expansion, was weakened to such an extent that it has developed what may be likened to an autoimmune disorder, a condition where the immune system mistakenly attacks itself, destroying even healthy body tissue in the process…Under normal circumstances, without excessive credit expansion policies, the system’s immunity defenses would attack and destroy the toxic substances – such as subprime mortgages – and leave the healthy tissue alone. However, the system now has turned on itself and is attacking healthy body tissues and toxins because it can no longer distinguish between the two…Unfortunately, autoimmune disorder often results in the destruction of the body itself (the financial system), or abnormal growth of an organ (government and regulation) and/or changes in an organ’s function (the banking system). At this point, we have no idea what the outcome will be, but I think our doctors (policymakers) are dramatically underestimating the disease.”

Here are Yesterday’s numbers:
Dow Jones 30 Industrial – 9499 (up 179 points)
10 Year Treasury Bond – 3.75% (down 0.16%)
Euro – $1.2948
Gold – $757 (up $31)
Oil – $71.50 (up $7.59)
Gasoline – $1.49 (up $0.13)

Where Should You Put Your Money?

admin — Thu, 09 Oct 2008 12:07:31 +0000

Stocks dropped again today at the end of the seession – down another 189 points. We haven’t seen this much of a sustained multi-day drop in stock prices in a very long time. Do you remember when the DOW broke on the upside each of those 7000, 8000, 9000, and then 10,000?? That happened very fast – it looks like it will be faster on the way down.

Bonds got clobbered today as the FED was screwing around with the Bond Market by reducing interest rates, and having some unexpected auctions. Sort of screwy, but this caused great nervousness in the bond market – hence the increase in interest rates.

The Dollar fell a little; oil and gasoline fell a little too – with oil hitting a near term low.

Gold continued its ramp up in price, and is now over $900 – so this is a cautious buy at this price.

In the news today….

The FED surprised all the markets today by dropping the FED Funds Rate by 0.50% in concert with all the major Central Banks. You can see that all the rest of the world is scared to death with what’s happening in the financial markets – because they went along with the FEDs leadership. Normally they don’t. I consider this action VERY telling. This brought the Prime Rate down to 4.50%.

The FED gave another $37.8B in addition to the original $85B it loaned to AIG when it took it over. This is another case that the FED didn’t know how bad AIG was when it took its original action, and is now being surprised by REALITY.

September retail sales (surprisingly to me) were up 1% – much less than the 1.9% expected by the economists. I expected this number to start turning negative.

Tonight’s Dinner Conversation….

So where are people putting their money around the world today?? This is a very important topic to ALL economyguy readers – so listen up.

Cash in the form of US Dollars appears to be important.
US Treasuries are being hoarded by all banks around the world, and being held onto like death. This demand for Treasuries encouraged the FED to offer up some new Treasuries today – and they were snapped up – especially by foreigners.
Gold is the world’s “safe haven” – whereas it is normally US Treasuries. Someone in the Middle East bought up the world’s supply of Krugerands – so don’t try to buy any. The US Mint has stopped minting 1/2 and 1/4 ounce Golden Eagles BECAUSE the DEMAND IS TOO GREAT!!!!!!!!!

What does this mean for you personally??

Here are Today’s numbers:
Dow Jones 30 Industrial – 9258 (down 189 points)
10 Year Treasury Bond – 3.72% (up 0.21%) – bonds got clobbered
Euro – $1.3658
Gold – $907 (up $25)
Oil – $89.95 (down $1.11)
Gasoline – $2.03 (down $0.03)

Is The Stimulus Package Fair?

admin — Thu, 24 Jan 2008 22:00:24 +0000

The market got a boost today from the “Stimulus Package” talks, and ended up 108 points.

The 10 Year Treasury took it in the shorts as the rate increased 0.21% (IN ONE DAY), ending up at 3.64%. Bond prices were just doing their normal thing as people took money out of bonds to put in the stock market. Stocks were deemed to be less “less risky” today than they were yesterday. Stocks are just irrational, but they do have their impact on other markets. This hit to the bond market means you’re going to have to wait a little longer to do that REFI on your real estate.

The Dollar got kicked around today, and the rest of the world’s currencies (except Japan) increased in value. Oil prices increased as the “Stimulus Package” is expected to increase oil demand. Gold took off and increased $24 to $907, as the gold market felt its oats.

In today’s news…..

The Stimulus Package is the news item of the day. Let’s dissect it like a frog. First of all, it’s not a done deal – but close to a done deal. The House approved their version of the package and is sending it on to the Senate for approval. The Senate will make changes – just because. They say they’ll get it to the president for signature sometime in February. I thought this was URGENT. Speaking of urgent, the IRS says they probably won’t get to sending out those checks until June – because they’re just too busy. Second, the package

is targeted (about 2/3’s of the $150B package) at the lower income earner because that person will spent his tax rebate check immediately – or so it’s assumed.

Here is a way to look at the Stimulus Package that you won’t find in any news article today. Is it fair? According to Congress, it’s fair – that’s the whole point of “compromise”. Remember that Congress is that body who has an 11% approval rating, and is dying to do something to get re-elected next November. So, my antenna goes straight up when I know it’s Congress who’s doing all this good.

We don’t know the details very well – only the headline. And, the Senate will change it anyway. But, here’s what we know. This is positioned to give the “poorer” folks in the nation a tax rebate of at least $300, and probably a lot more. One catch – that poor person or family must be earning money. (Let’s assume that means they get a W-2). What about the retired folks out there??? Well, they’re screwed. No earnings means no tax rebate. So, how about a 90 year old retired WWII veteran who is living on his Social Security and pension totalling $17,000 a year? He gets NOTHING. Is that fair? I would think that person would spend his tax rebate just about as fast as any “poor” family if he got one. Why is he eliminated? Politics – that’s why. What about the illegal immigrant who is earning enough to get a tax rebate. He’ll get it. Is that fair? Of course, that can’t happen in Arizona where an employer can’t hire an illegal immigrant, but it sure can happen in other states. Is this a way to sneak in aid to the illegal immigrant community in the US? Congress fairly unanimously thought illegal immigrants should have amnesty immediately last year, and so did the President. The same people are rowing this boat. I’ve included this thought to provoke you.

French Bank loses $7.5B this week

Society Generale lost $7.5B due to a rogue trader in France. He got caught yesterday. I know you say, “It’s France, who cares?” How safe is your bank? This $7.5B is on top of the billions lost on the sub-prime loan fiasco. The interesting point is that the Federal Reserve didn’t have a clue what was going on earlier this week, BUT THEY SHOULD HAVE. There was enough smoke early in the week to know a foreign institution was doing something BIG.

Existing Single Family Houses Sales going Down

For all 2007, existing single family median house prices declined 1.8% Not much in my opinion. The quantity of houses sold declined 13% over 2006. While the real estate market is really LOCAL, the overall national price decline just hasn’t started to be a big problem — yet.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,379 (Up 108 points)
10 Year Treasury Bond – 3.64% (Up 0.21%)
Euro – $1.4768
Gold – $907 (up $24)
Oil – $89.41 (up $2.42)
Gasoline – $2.28 (up $0.03) – could have been worse, because gasoline inventories came in much higher than expected.

Dinner Conversation

admin — Wed, 19 Dec 2007 21:00:05 +0000

Issue: 12/19/07 Wednesday

The market was up and down and up and down today. I’m feeling seasick. We are definitely in the light volume season of trading from today all the way to the end of the year. Moves can and will be exaggerated. Bonds increased in value slightly as bond players are still trying to figure out what’s really going on with all the money flashing around the world. The dollar is meeting resistance in its attempt to climb against the Euro. If the Euro turns around, it is ready to continue its march in strength. If the dollar finds more strength, it has a couple of cents left in its climb.

Here are details of how the Fed will protect homebuyers.

Key provisions of a Federal Reserve plan to protect home buyers from shady lending practices:

Restrictions on penalties for paying off a mortgage early.
Requirements to set aside money to pay for property taxes and homeowners’ insurance.
Showing proof of income when seeking a home loan.

For both risky and not-so-risky borrowers, the Fed proposed:
- Prohibiting certain types of misleading or deceptive advertising for home mortgages. For instance, it would bar using the term “fixed” to describe a rate that is not truly fixed over the life of the entire loan. It also would require that all applicable rates or payments be disclosed in ads with equal prominence as advertised introductory “teaser” rates.
- Requiring lenders to provide financial disclosures to borrowers early enough for them to use while shopping for a mortgage.

The “protection” for buyers include restrictions on who can qualify for a loan. Sounds like a little double-talk. In reality, these restrictions aren’t a big change in lending practices, and don’t really stop those poor loans from being made in the future. A great example of your government in action. Unfortunately, it’s the Fed this time.

Here are the results of the first Fed $20B auction.

The Fed announced that the interest rate on the short-term loans will be 4.65 percent, which is slightly less than the 4.75 percent the Fed charges banks on emergency loans through its “discount” window. Banks have been reluctant to use the Fed’s discount window because of the fear that investors will believe they are having trouble getting funds in a normal manner. The Fed received bids from banks for $61.6 billion worth of loans, an indication the Fed had been successful in achieving its goal of encouraging banks to use the new auction facility. In its announcement of the auction results, there were 93 bids for the emergency loans. Each bank could submit up to two bids.

The good news is that the auction was oversubscribed by 3 to 1. The bad news was that somewhere between 47 and 93 banks bid. This is a small number consider the 1000’s of banks in the country. The Fed isn’t going to publish which banks got how much money – a sign a fear to be transparent.

Dinner Time Conversation Teasers (some of you told me you like having this type of diversion)

U.S. military commanders in Iraq didn’t know Turkey was sending warplanes to bomb in northern Iraq until the planes had already crossed the border, said defense and diplomatic officials, who were angered about being left in the dark. Americans have been providing Turkey with intelligence to go after Kurdish rebels in northern Iraq. And a “coordination center” has been set up in Ankara so Turks, Iraqis and Americans can share information, two officials said Tuesday. But defense and diplomatic officials in Washington and Baghdad told The Associated Press that U.S. commanders in Iraq knew nothing about Sunday’s attack until it was already under way.

Do you remember that crazy Armenian Resolution that Congress tried to pass, but failed?? Well, here is a follow-on story on how the US military works with its allies. Here is what you can read into this story – the Turks don’t trust the Iraqi Central Government, so they didn’t give any advance notice of the air raid; the US has set up an intelligence center in Turkey to share knowledge about the PKK (Kurdish rebels) whereabouts and movements; the US still has excellent military relations with the Turks.

Here’s another dinner time story.

Credit rating agency Standard & Poor’s slashed its credit rating for bond insurer ACA Financial Guaranty Corp. to a non-investment grade “CCC” from investment grade “A.” The downgrade of ACA led S&P to cut ratings on nearly 3,000 municipal bonds, which could may spark a municipal borrowing crisis, according to Peter Schiff, chief executive of Euro Pacific Capital. ”Many municipalities get high credit ratings because their bonds are insured,” said Schiff. “Higher borrowing costs for cities will force them charge higher property taxes, which will increase the strain on consumers. And some cities may be shut out of the credit markets.”

So you thought there weren’t going to be knock-on effects of the sub-prime meltdown??? Here is one that could catch you in the pocket book – a gift from your county property taxing authority. Cities and counties are run by small time politicians who usually aren’t much different in their inability to get anything done – just like Congress. Cities and counties were hoping home prices would just keep going up, so they could spend all that extra cash and NOT have to increase your “tax rate.” Your taxes would go up, but your tax rate wouldn’t – a bittersweet reality for homeowners. Now cities and counties are going to have to make some hard choices. I encourage you to hold their feet to the fire, and not allow them to even think about deficit spending.

Here are Wednesday’s closing details:
DJ30 – 13,207 (Down 26 points)
10 year US Treasury Bond – 4.07% (Down 0.05%)
Euro $1.4376
Gold closed at $805 per ounce. (Down $2)
Oil Closed at $91.24 (Up $1.16)
Gasoline is $2.33 (Up $.03)

The Dollar Gains….Florida Loses

admin — Fri, 30 Nov 2007 02:00:03 +0000

Issue: 11/29/07 Thursday

The stock market went sideways today; resting a bit after the last hectic trading days. The Fed chief, Ben Bernanke, hinted that there will be a reduction in the Fed Funds rate in the future. Interesting that yesterday the same hint (from Federal Reserve Members) caused a stampede in buying stocks, but when the Fed chief spoke, the market hardly moved.

The bond market was the more vocal market. It is down again well below the 4% level, and looks like its going to stay there for the foreseeable future. The 10 year bond has discounted the 1/4% Fed Funds reduction that will probably be announced at the 11 December Fed meeting. It has ALSO discounted an additional 1/4%!!!! That last discount is the most interesting one to ponder.

The dollar gained ground today against most currencies. This is a natural phenomenon of “taking profits.” The dollar has lost so much against other currencies, and currency traders have racked up so much profit, that it’s natural for them to want to take some of their profit off the table. However, the fundamentals have not changed, and I would expect the dollar to continue its fall in the next couple of weeks.

Markets never go in a straight line – up or down. They move with great jerks up and down, but not the same direction each day. This is true of all markets. The more liquid the market, the less the period of its transitions. Housing markets are illiquid, and have periods measured in years. I making this point so no one is ever surprised when a market (stock, bond, currency, commodity) changes direction.

Here’s a fun news article that you probably won’t see.

Trustees of the State of Florida‘s investment fund for schools & local governments should be thoroughly despised by now as their investment in mortgage debt continues to cause massive withdrawals forcing the administrators to take drastic measures today. After a total of $10B in outflows (about 1/3 of total assets within the fund) the gang packed it in, halting access to what some may fear is vital short-term payroll cash. WSJ’s Gaffen yesterday “The state has been the epicenter of more than one debacle in the last handful of years. Of late, the housing crisis has hit the state hard, and now the credit crisis has made a home in the sweltering heat of the Sunshine State“.

If you thought the credit crisis was limited to banks and finance companies you were woefully wrong. The State of Florida was playing with those puppies too.

Mortgage Rates : Freddie Mac reports the average 30 year mortgage rates were down at 2 year lows of 6.10% in the latest week while the 15-yr dropped to 5.73% & average 1-yr adjustable rates were up at 5.43%. Those rates are starting to look friendly again.

The White House has announced that next year’s GDP is projected to increase 2.7%, rather than the 3.1% it previously predicted. It is interesting that they cannot ignore the fact that the economy is slowing. My personal history watch of White House announcements is that you SHOULD IGNORE THEM!!! This is not a politically motivated statement. It is a financial statement based on my personal observation. The White House has political objectives that it projects onto its predictions. There are much better predictors of GDP growth than a political body’s announcement.

Here are Thursday’s closing details:
DJ30 – 13,312 (Up 22 points)
10 year US Treasury Bond – 3.94% (Down 0.09%) – the bond market rules!!!
Euro $1.4757 – profit taking going on in the currency market
Gold closed at $802 per ounce. (Down $5)
Oil Closed at $91.01 (Up $0.39) – a fire broke out on an oil pipeline on the US/Canadian border
Gasoline is $2.26 (Down $0.01)

Recession and the Falling Dollar

admin — Thu, 22 Nov 2007 00:29:47 +0000

Issue: 11/21/07 Wednesday

Someone up there was listening today. I said that the Dow 12,800 level must be tested, and indeed it was, falling 211 points to 12,799 today. This was caused by the same old fears. If you remember a previous article, the Dow 30 and Dow Transportations now signal a “recession” in the US market.

Don’t get too excited. There is a big but…. This is Thanksgiving week, and this week is known to have much lighter volumes than regular weeks. During light trading weeks, the volatility can be exaggerated so, I’m not convinced about this breakdown in the Dow until it stays below 12,800 next week.

The 10 Year US Bond market continues to improve, and it has my attention. It is trying to tell us something. For sure, it’s saying the Fed will reduce its Fed Funds rate in December, but it’s going further than just confirming that action. What does it mean? It could be just a technical run up to see how far it can go. If so, it will correct and give back 0.25%. But, it could be telling us the a recession is much greater than 50%, and is betting on it. This is too much like reading tea leaves.

Gold seems to be coming back into vogue. Oil is hanging around just less than $100, and there is no doubt in my mind that it will break through $100 sometime in the near future. This will be caused by speculators, and will come back down in price afterwards. Why is it so high?? Because it can be!!!

Currencies continue to show the weakness in the dollar. I saw a program today that said “What’s so bad with a weak dollar?” Great question. It helps exporters! The Chinese continue to ship cheap goods! Boeing is beating Airbus in the world markets! Americans make and spend dollars – so who cares about another currency?

Well, the downside is in how fast the dollar is going down. It is scaring markets so much that OPEC had it on its agenda to discuss. The dollar has moved from $1.00 to $1.48 to the Euro. When an Arab Sheik buys a stallion in Europe with his dollars it costs him a LOT more money. That’s why. Gold purchasers are happy because it’s moving the Gold market. American gold jewelry buyers aren’t happy because the price is going up! In an extreme, (and how far off is that extreme??) the dollar could get so weak that foreigners stop buying their local made products, and only buy American goods, causing price inflation in the US – and causing a depression worldwide – and we wouldn’t be able to duck it. So, it is in our own interest to be vigilant in how low and how fast the dollar falls.

Somebody famous once said “We live in interesting times.” And how!!!!

Here are Wednesday’s closing details:

DJ30 – 12,799 (Down 211 points)

10 year US Treasury Bond – 4.02% (Down 0.03%) – it fell again. This is very low.
Euro $1.4859 – a new high for the Euro