Gary’s Note:
As the dollar goes, so goes the nation. And things aren’t looking all that
good for the dollar. Bill Jenkins has a good idea where it’s all headed…as
well as what you should be doing to prepare.
|
The United States: Land of the Setting
Sun |
By Bill Jenkins
October 22, 2009
Pylesville, Maryland, U.S.A.
The dollar’s
days are numbered…but there’s going to be a lot of movement both up and down
before its ultimate demise.
Pound up...
Euro down…
Aussie pulling
back…
Canadian giving
way…
Yen losing
ground…
October is
coming to an end, and we haven’t really seen hide nor hair of any terrifying
market moves or monstrous returns to the old days of dollar safety, when
anything that even had a scent of risk was spurned as foolhardy investing.
But as of now,
the dollar has been tanking and anything that is paying a higher interest
rate has been soaring, thanks in part to the hawkish comments and actions by
the Reserve Bank of Australia, but mostly due to the boneheaded actions of
the United States.
Any way you put
it, when a man shows up and says, “Hello! I’m from the government and I’m
here to help” — RUN. As fast as you can. RUN.
We are following
in the footsteps of Japan. Should this continue, we will have to replace our
Stars and Strips with a new flag, “The Land of the Setting Sun.”
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No
Happy Ending for the Dollar
We’re now at a
9.8% unemployment rate, and we lost a jaw-dropping 263,000 jobs in
September. Now it’s true this isn’t the 700,000 we were losing not so long
ago. But it still is not awe-inspiring evidence of a recovery.
The euro’s
meteoric rise was on the G-7’s agenda this week. But before we start jumping
up and down for joy as the powers that be begin pushing the euro back down
(and the dollar up), I must confess that I smell a rat.
The folks at the
European Central Bank have not been too worried about the strengthening euro
up to this point. That could always change. But for now, they seem to be
enjoying this appreciation. For them it acts as a nominal rate increase,
which will keep inflation in check should it appear. But don’t get me wrong.
Central bankers are men just like us (only often with a lot less common
sense). They can get blinders on and only see things a certain way. After
all, don’t all humans usually see things the way we want to see them? And
this can handicap them when it comes to reading the data — the same way it
can handicap us. Should they allow the euro to rise too much and too early,
it will crush their budding recovery… much to their surprise and chagrin.
That being said,
the dollar is in a bad way. Aside from the sheer size of its GDP, and the
fact that historically it has managed to pull its fat out of the fire, I’m
not sure what we can look at currently to construct any happy outcome for
the dollar. That’s it, plain and simple.
The
Dollar Will Be Let Down Gently
But nothing, not
even the dollar, falls all at once. Hence all this jawboning about the euro
(and yen, while were at it) being too expensive. None of these foreign
economies can afford to let the dollar fall too much, too quickly. Thus, if
they continue to badmouth the strength of their own currencies, it buoys the
dollar and gives them opportunities to get out at a better price. But they
can’t dump too much on the market all at once. If investors get wind of
that, the big boys will have a harder time getting their target price.
So it seems to
me that we should be looking for another return to dollar strength. That
would play right into the hands of foreign economies that are looking to
quietly unload the dollar. It is also the reason I don’t think we should
look for the dollar to go into freefall — it is simply too costly for our
trading partners. I believe they will do all they can to allow themselves an
exit at a decent price.
No matter what
may happen to the dollar’s reserve status in the decades to come, it will
retain this status for a long, long time. Thus in this great tug of war
between the currencies, there will always come periods when the dollar will
be viewed as too cheap, and those who need it for continued trading purposes
will not be able to resist the drive to buy it.
No
Dollar Strength from this “Recovery”
For our last
note, let me reassure you, dollar strengthening will not come as a result of
the recovery we are supposedly in.
The stimulus has
not performed as promised. A quick look at the figures from last November to
the present will reveal it was no panacea:
Unemployment
November ‘08: 6.6%
October ‘09: 9.8% (up 50%)
GDP
November ‘08: $14.3 trillion
2nd quarter ‘09: $14.1 trillion (down .25%)
Housing starts
November ‘08: 655,000
October ‘09: 590,000 (down 10%)
Food stamps
participants
November ‘08: 31.1 million
July ‘09: 35.9 million (up 15%)
Home mortgages
underwater
November ‘08: 15 million
October ‘09: 25 million (up 66%)
Deficit
November ‘08: $450 billion
October ‘09: $1.5 trillion (up 300%)
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Looking for a Dollar Bounce
Let’s sum up. I
am looking for a bounce in the dollar (and I have been since mid-September).
I thought that perhaps the fall season might be enough to bring it on. That
hasn’t happened. That’s not the same as saying it isn’t in the cards. We are
now in the midst of the new equities earnings season. J.P. Morgan produced
stellar figures that pumped risk appetite into the market strong and hard.
Other corporations may not be able to do as well.
It seems to me
that this rally is already on thin ice. At any rate, the dollar will bounce.
It will likely end up being a bigger move than most anticipate and it will
be fueled by fear and short covering. Then, when the big boys have had
enough, the course will be reversed, fundamentals will resume their place,
and the dollar will begin its drift toward the nether regions once again.
It is a
treacherous pathway before us, but it should yield us some really nice
profits if we position ourselves accordingly.
Due to the
increased interest in currencies, the NASDAQ now offers an easy way for
anyone to play up to ten currencies against each other.
Click here to for
the full fact sheet on the NASDAQ currency options. So you can do your
positioning to take advantage of the coming strength in the dollar…and in
the dollar’s ultimate decline.
Regards,
Bill Jenkins
P.S.:
I’ve been making sure subscribers to my newsletter Master FX Options
Trader have been positioning themselves accordingly. You can profit
from the dollar’s gyrations, too. In fact, I’m currently working on a
special offers for any new readers who would like to come onboard. Keep an
eye out for more info next week.
 |
Just minutes
after yesterday’s issue was sent my inbox started to fill up…
Peak Oil:
Really? Let’s begin…
Depletion now
exceeds discoveries, even from Brazil and Baaken. Peak oil was 2007 at 85
million barrels per day. That will never be exceeded.
Prices
subsequently fell because of demand destruction. Now that prices are
increasing again, demand will be suppressed again.
This is a very
unstable price plateau. The question is what amount of oil is adequate to
maintain civilization until a replacement for oil is found.
Coal is
plentiful enough to support the base load throughout the world. But how
will transportation be supported?
Demand for
transportation is elastic; it is a function of the value of goods
transported.
As oil prices fluctuate, transportation will follow.
This is the new
area of study, how will this new economics work? Will the believers in
global warming destroy us with cap & trade as we slide into a new ice age?
*****
There are more
than the two extreme possibilities of oil production that are mentioned —
one being that oil is produced by decayed plants and animals (when it’s
gone it’s gone) and the other being oil is produced by the earth
constantly (it’s gushing out from the center of the earth and we’ll never
run out). I think that oil is being produced constantly by natural
processes in the earth, but not at a rate necessary to sustain present oil
consumption. So peak oil does exist because consumption is at a much
higher rate than creation. However, in thousands of years — after man is
either no longer here or has no use for energy generation via oil — oil
will be plentiful again. Thus as a practical matter, we will run out of
“producible” oil, but as a scientific fact we will find that oil is being
produced by the earth.
*****
I’ve been
reading where some scientists believe that oil doesn’t come from Dinosaurs
(or actually algae or some biological source) but rather from heat and
preasure that converts carbon and Hydrogen into oil. While that sounds
nice, it doesnt pass the smell test of chemistry.
Peak oil is a fact, maybe delayed by new finds and/or new tech, but still
a fact. We are using it faster than it is being replaced even if there is
a magic oil pump in the innards of the earth. The decline of available
oil and the continuing rise in price is a result. Substitution of
alternate forms of energy will also string this out as will the tactics of
those selling oil to delay destroying demand. The analogy with oil
suppliers as drug pushers seems appropriate.
People desperate to sustain themselves by playing the market or the
casinos? That seems like desperation to me. Desperation that leads to
getting cleaned out. Maybe they heard the story about Fred Smith (of Fed
Ex fame) who went to Vegas because he didn’t have payroll money and
figured he would use what he had to make it or break it. Story goes he
bet it all and won enough to stay afloat and Fed Ex took off. Even if
that were true, it won’t work for 9+ million unemployed.
BS 0049
Yeah, about that
lucky streak…
While this
sentiment has been the downfall of multitudes of the “wannabe fortunate”,
I believe that, at least anecdotally, some folks DO have a statistically
improbable ability to consistently win at random games. My uncle in New
Jersey had an incredible streak of NJ lottery wins over many years,
several times winning multi-thousand dollar prizes twice in one day! He
also routinely found valuable objects like Nikon cameras on the shoulder
of the road; he said he looked there more closely than most. Being steeped
in the lore of the inscrutable Far East, I asked him if the Indian goddess
Lakshmi —bringer of good fortune—had smiled on him. He said the only
Indians he knew ran the gas station in his neighborhood.
News you can use
from Barstool #25
Some guys simply
have all the luck.
(That reminds
me… This morning we sent you a note about to chance to get in on another
lucky streak. No losers in 2007, 2008 or 2009 for a total gain of 4647%. But
the offer ends tonight.
Click here to read more.)
Some guys have
all the pain.
Your editor is
one of the latter. Another poor night’s sleep but I did manage an early
start in the Whiskey Room this morning. And I mean really early.
The coffee’s about to wear off, Shooters…
Oh well. Agora
Financial has made arrangements to heal my hurts with food and drink and
fellowship this afternoon. Whiskey co-conspirator Samantha Buker
and I will use the opportunity to discuss all sorts of seditious
notions…which we’ll be sure to share with the rest of you true believers
later.
Regards,
Gary Gibson
Managing Editor,
Whiskey & Gunpowder
