Where's The Us$ Heading To ?

ray23 · November 12, 2007

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Increase in reserves.

What makes me nervous about any stocks, is that every time somehtign happens in the US stock markets. Asian stocks seem to follow that trend. Or at least seem to have thus far.

So at what point will the Asian markets go up independently or will they?

Not being the sharpest track in the box what I see could be very wrong. But it appears to me that the global economy is very real, what effects one country bleeds over into the others. All this make me believe that the sub prime mess is not confined to the U.S. But is effecting economies everywhere.

This being the case will the dollar continue to slide?

I get the impression that many think the dollar is down and out forever. I simply can not believe that, not the first time through this and it has rebounded in the past. History usually repeats itself. Not the first time the US has had a huge defecit. Want that a big issue in the Clinton administration and didn't they make some progress towards reducing it?

I don't see anything much happening to the positive during this admimistration, but one way or another this administration is finished in a year. Will the U.S. approach change when Bush leaves office, sure did when Papa Bush left office.

Am I missing something here? Is this going to a long term problem or a five year problem?

bingobongo · November 12, 2007

strap in kiddies......its coming.....

Currency Controls Return as Central Banks Fight Dollar Freefall

Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Edited November 12, 2007 by bingobongo

jumnien · November 12, 2007

Sure, the US and MR. Bush are manipulating the world and laughing all the way with their devalued dollar. I predict that Europe and Asia will at some time in the next few years get their act together and refuse to let the US get away with it any longer. They will take measures to lower the value of their own currencies to protect their own economies. Right now the US has the world by the balls with this devalued dollar business; don't expect it to continue indefinitely; enough is enough!

cclub75 · November 12, 2007

Sure, the US and MR. Bush are manipulating the world and laughing all the way with their devalued dollar. I predict that Europe and Asia will at some time in the next few years get their act together and refuse to let the US get away with it any longer. They will take measures to lower the value of their own currencies to protect their own economies. Right now the US has the world by the balls with this devalued dollar business; don't expect it to continue indefinitely; enough is enough!

I do not really agree.

The US are doing (by force)... what the other do (by choice). And by that i mean, the asian countries !

Let's talk about the cheaters : Japan with its insane 0 interest rate policy. Sure they had and still have a cruel deflation. But why is that ? It's curious that no one is asking this question.

Because like good asian they never accepted to clean up the mess of their previous excesses (cleaning the bad loans, reforming the state and the businesses, leaving the "godfathers economy" etc.)

China. Another big cheater. By controling the RMB, factored by their cheap labor, they are destroying all industrial basis in western countries and pilling up huge reserves.

So again, USD has to go down, because of the imbalances of US economy. Okay. But meanwhile asian currencies have to go up. That's the trick. And right now asian countries are still refusing this fact.

Edited November 12, 2007 by cclub75

jumnien · November 12, 2007

That's exactly the trap Mr. Bush has created for the rest of the world. If the dollar weakens, it really doesn't affect Americans in any negative way generally (a few expats living abroad on a tight budget aside). If the Asian currencies or Euro currencies strengthen, it devastates their economies.

longway · November 12, 2007

That's exactly the trap Mr. Bush has created for the rest of the world. If the dollar weakens, it really doesn't affect Americans in any negative way generally (a few expats living abroad on a tight budget aside). If the Asian currencies or Euro currencies strengthen, it devastates their economies.

is it deliberate? isn't it a result of having to fund spending? i understand that currently us goods are cheaper, making them more competive to other countries, but in the LT wont a declining currency have -ve consequences. For example declining foreign investment into the us and a lack of willingness to buy us debt instruments? or a risk of inflation? in either scenario the us will need to raise interest rates eventually. at the end of the day is not the us economy becoming more and more unstable with this scenario?

and as u pointed out other countries are struggling with the decline, if they get into trouble then the us also loses out as there export markets dry up.

have i got this right?

i only hope things keep going for another year or so, at that time my investments will mature and i can pull out with some money tucked away. from my position thats what i want to know, how long have we got? or are things not as bad as they seem?

sorry, alot of questions i hope someone can aswer a few at least.

sonicdragon · November 12, 2007

That's exactly the trap Mr. Bush has created for the rest of the world. If the dollar weakens, it really doesn't affect Americans in any negative way generally (a few expats living abroad on a tight budget aside). If the Asian currencies or Euro currencies strengthen, it devastates their economies.

Well it's not a very clever trap and extremely misguided, and if you think it has no conseqences for most americans then you have not thought it through. A devaluation strategy risks competitive devaluations, trade sanctions, and much higher long term interest rates. These things certainly do affect the average american.

mackayae · November 12, 2007

South.

lannarebirth · November 12, 2007

strap in kiddies......its coming.....
Currency Controls Return as Central Banks Fight Dollar Freefall

Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Yeah, that goes along with this note I received the other day:

On Nov. 7, Bill Cara wrote the following:

... When I wrote, "NOBODY knows when central bankers are going to put down the hammer", I was referring to (i) currency swaps between G-7 central banks that would serve to temporarily squeeze the USD shorts, (ii) an agreement with the largest G-7 banks (ECB and BoJ) to raise margin requirements for broker-dealers, commodity houses and near-banks on their trading and lending related to securities and commodities, and (iii) actions to clear off excess reserves of HB&B by selling these banks Treasuries so that they don't have the cash reserves available to keep up the lending to hedge funds and private equity firms.

I worded the statement that way (ie, "central bankers") because, by itself, the Fed has its hands tied at this point. It has lowered both the Fed rate and the Discount window rate because of concerns that its largest clients have serious credit market related issues that need time to fix. So it is not likely to turn around and raise rates now. Also, its usual policies can fail to have any impact on the large US capital pools because those institutions would simply take their business elsewhere, ie, to Europe/UK or Japan.

So, if you see the various trading exchanges raising their margin requirements, I think you could expect to see a rapid sell-off in commodity prices.

Posted by: Bill Cara [TypeKey Profile Page] at November 7, 2007 10:18 AM

============

from yesterday -

NYMEX to raise gold and silver futures margins

Thu Nov 8, 2007 8:49am EST

NEW YORK, Nov 8 (Reuters) - New York Mercantile Exchange Inc (NMX.N: Quote, Profile, Research) said it will raise margin requirements for its gold and silver futures contracts, effective at Thursday's close.

http://www.reuters. com/article/ marke...0071108? rpc=44

Still, it has a feeling of desperation about it and could bring about the exact opposite effect.

lannarebirth · November 12, 2007

That's exactly the trap Mr. Bush has created for the rest of the world. If the dollar weakens, it really doesn't affect Americans in any negative way generally (a few expats living abroad on a tight budget aside). If the Asian currencies or Euro currencies strengthen, it devastates their economies.

is it deliberate? isn't it a result of having to fund spending? i understand that currently us goods are cheaper, making them more competive to other countries, but in the LT wont a declining currency have -ve consequences. For example declining foreign investment into the us and a lack of willingness to buy us debt instruments? or a risk of inflation? in either scenario the us will need to raise interest rates eventually. at the end of the day is not the us economy becoming more and more unstable with this scenario?

and as u pointed out other countries are struggling with the decline, if they get into trouble then the us also loses out as there export markets dry up.

have i got this right?

i only hope things keep going for another year or so, at that time my investments will mature and i can pull out with some money tucked away. from my position thats what i want to know, how long have we got? or are things not as bad as they seem?

sorry, alot of questions i hope someone can aswer a few at least.

Of course it's deliberate, as is the spending. It's a "beggar thy neighbor" economic policy. IMO it's an ill conceived and short sighted policy.

longway · November 12, 2007

Of course it's deliberate, as is the spending. It's a "beggar thy neighbor" economic policy. IMO it's an ill conceived and short sighted policy.

^ thx for the reply lanna

could i trouble you to explain the rationale behind this policy, or point out a good source that will do so?

sometime ago i had the option to cash in one of my investments but i chose to stick out to the full term, so as such there is not much i can do about it now.

however i would like to become more financially sophisticated as a general principle. it looks like i will be entering into my own businesses, rather than having FT emplyment, over the next few years. so i am trying to prepare myself by understanding micro and macro aspects of business and finance.

its been a very inetresting tread so far and have found many things in here that i could look into on a deeper level. many thx to the people who have put forth their opnions and information thus far.

Edited November 12, 2007 by longway

lannarebirth · November 12, 2007

Of course it's deliberate, as is the spending. It's a "beggar thy neighbor" economic policy. IMO it's an ill conceived and short sighted policy.

^ thx for the reply lanna

could i trouble you to explain the rationale behind this policy, or point out a good source that will do so?

sometime ago i had the option to cash in one of my investments but i chose to stick out to the full term, so as such there is not much i can do about it now.

however i would like to become more financially sophisticated as a general principle. it looks like i will be entering into my own businesses, rather than having FT emplyment, over the next few years. so i am trying to prepare myself by understanding micro and macro aspects of business and finance.

its been a very inetresting tread so far and have found many things in here that i could look into on a deeper level. many thx to the people who have put forth their opnions and information thus far.

If I were to explain it I would fill you with all the same prejudices i hold, which may or may not be accurate. I think it's sufficient to say that the US Treasury believes they can create a competitive advantage by allowing the US currency to fall. It is my belief that they think it will make other economies less competive in selling their goods and services when trading partners must pay more for that good or service. I think they think that debt creation moves the burden of economic sustainabilit offshore, ie "spread the pain". I'm not at all sure it's a well conceived policy and in fact I rather doubt that it is. I've got all kinds of theories on why else they might do this, but I won't burden you with what may be my own delusions.

Other posters here like sonicdragon might be able to give you a clearer insight into the various machinations of these global economic players. They are more focused on "macro" events and probably rightly so, while I tend to focus more on near term time frames.

Edited November 12, 2007 by lannarebirth

cooL_guY_corY · November 12, 2007

what about that canadian dollar !

jazzbo · November 12, 2007

Suggested reading as to how the US Federal Reserve sets Monetary Policy including how such policy affects "the exchange value of the dollar on currency markets."

http://www.federalreserve.gov/pf/pdf/pf_2.pdf

mackayae · November 12, 2007

what about that canadian dollar !

You mean the loonie?

Naam · November 12, 2007

So again, USD has to go down, because of the imbalances of US economy. Okay. But meanwhile asian currencies have to go up. That's the trick. And right now asian countries are still refusing this fact.

what do you mean by "refusing this fact"? take a look at the asian currencies, then you realize that they have appreciated vs. the Dollar. best example is Thai Baht.

Naam · November 12, 2007

what about that canadian dollar !

You mean the loonie?

my friends and me call CAD the "Northern Peso"

cooL_guY_corY · November 12, 2007

cads siiting nice at 35b'zzzzzzzz 2 the loonie

LaoPo · November 12, 2007

The Greenback gained today:

http://finance.google.com/finance?q=EURUSD

and Asian Gold drops; Oil drops:

http://www.bloomberg.com/apps/news?pid=206...amp;refer=india

LaoPo

LaoPo · November 12, 2007

Although we are flooded with financial news about the Dollar every single day and I'm sceptical at most news, I think this article is important enough because of the impact $ 100/Barrel of Oil could have on the US & World economy:

$100 Oil May Mean Recession as U.S. Economy Hits `Danger Zone'

Nov. 12 (Bloomberg) -- Rising fuel prices that businesses and consumers took in stride earlier this year may now be near the point of pushing the weakened U.S. economy into recession.

``We are in a danger zone,'' says Nariman Behravesh, chief economist at Global Insight Inc. and a former Federal Reserve economist. ``It would take two shocks to bring the economy to its knees. We got one shock in the form of the credit crunch. Oil could be that second shock.''

Crude-oil prices are poised to cross the $100-a-barrel mark while the U.S. economy is still reeling from a surge in corporate borrowing costs. Europe and Japan are vulnerable as well, after the U.S. subprime-mortgage collapse contaminated their credit markets.

Even before the latest jump in energy costs, economists expected U.S. growth to slow to less than 2 percent in the fourth quarter -- half the third quarter's pace. Andrew Cates, an economist at UBS AG in London, said his models suggest a 45 percent chance of a U.S. recession next year, up from 33 percent last month, as oil prices prove a ``growing concern.''

Japan risks its fourth recession since the early 1990s, with its index of leading economic indicators falling to zero for the first time in a decade. The European Commission last week cut its 2008 growth forecast for the 13 nations that share the euro to 2.2 percent from 2.5 percent, partly because of costlier crude. The economy grew 2.8 percent last year.

Energy Efficiency

The world economy may still dodge recession as emerging markets continue to expand. A report last week by Deutsche Bank AG said gains in energy efficiency mean the effect of more expensive oil will ``remain muted.''

Even so, gloom is spreading at a speed that suggests ``we're walking a really fine line,'' says John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ``Even a month ago, you probably wouldn't have thought we'd be seeing a sustained credit problem and oil holding up above $85 a barrel.''

Crude oil traded at a record $98.62 last week on the New York Mercantile Exchange and ended the week at $96.32, bringing its increase this year to 58 percent. Prices adjusted for inflation exceed the previous record, set in 1981 when Iran cut exports.

The dilemma for central banks is how to balance oil's drag on their economies against the risk of higher inflation. Fed Chairman Ben S. Bernanke told Congress Nov. 8 that oil prices threaten both ``renewed upward pressure'' on inflation and ``further restraint on growth.''

Accelerating Inflation

Such concerns prompted the European Central Bank to keep interest rates on hold last week, and President Jean-Claude Trichet said he still sees a danger that inflation will accelerate.

Clayton Jones, chief executive officer at Rockwell Collins Inc., says central bankers should err on the side of supporting growth. Jones, whose Cedar Rapids, Iowa-based company makes aircraft-cockpit instruments, said in an interview that he's ``much more worried about recessionary impacts rather than inflationary impacts.''

Manufacturers are among the first to feel the pinch: Rising energy prices are increasing their costs while drooping consumer and business confidence erodes demand.

In the U.S., the Institute for Supply Management's manufacturing index fell to a seven-month low in October as gauges of orders and production declined.

Lower Profits

Peoria, Illinois-based Caterpillar Inc., the world's biggest maker of bulldozers and excavators, cut its profit forecast on Oct. 19 and said the economy would be ``near to, or even in, recession'' in 2008.

The pain doesn't stop there. Rising jet-fuel prices are forcing airlines to curtail expansion plans. Chicago-based UAL Corp.'s United Airlines said it may cut capacity in 2008 to make up for higher fuel costs. Cologne-based Deutsche Lufthansa AG is raising fuel surcharges on long-haul flights.

Dallas-based Southwest Airlines Co. is ``reconsidering our growth rate for next year,'' because of ``very significant'' cost increases, Chief Executive Officer Gary Kelly said Nov. 7.

Meanwhile, U.S. shoppers, who helped propel most of the current expansion, may cut back as gasoline and home-heating costs rise. Retail-sales growth from November through January may be the slowest since 2002, consultant Ernst & Young estimates. Consumer spending accounts for more than two-thirds of the U.S. economy.

`A Huge, Real Shock'

Fuel costs are ``a huge, real shock'' to consumers, says Nouriel Roubini, chairman of Roubini Global Economics LLC and a professor at New York University. ``High oil prices are going to remain with us until we go into a recession.''

Europe's manufacturers are contending not only with increased energy costs but also the euro's rise to a record against the dollar, which is hobbling exports.

An index of manufacturing growth in Europe dropped to the lowest level in more than two years in October, and confidence among executives in Germany fell to a 20-month low.

Morgan Stanley's model of activity in the euro zone is now flashing the ``risk of manufacturing recession,'' according to Chief European Economist Eric Chaney, a former official at the French ministry of finance. He says the area's economy may run close to its ``stall speed'' of about 1 percent in the first quarter, and ``oil is not making things easier.''

Biggest Decline

Heidelberger Druckmaschinen AG, the world's largest maker of printing machines, last week reported its quarterly profit dropped by almost half, triggering the biggest decline in its shares since 2004. ``Energy and raw-material costs have made life difficult,'' says Dirk Kaliebe, chief financial officer of the Heidelberg, Germany-based company.

The pain extends to China and India as governments pare energy subsidies, putting more of the burden on companies and consumers. China increased fuel prices by as much as 10 percent Nov. 1, and India may follow as soon as this week.

``The stage is set for a significant slowdown in global manufacturing,'' says Joseph Lupton, a former Fed economist now at JPMorgan Chase & Co., which predicts industrial-production growth worldwide will decelerate by more than half before the end of this year, to about 3 percent.

The speed of the latest jump in oil prices tests the resilience of economies that weathered previous increases, says David Hale, president of Chicago-based Hale Advisors LLC.

``We've had stages in which the price has gone up over a period of two or three years,'' he told a Nov. 7 teleconference. ``The recent price spike from $85 to $96 has happened in just a few weeks, so this will pose more of a risk.''

The longer prices remain high, the greater the threat, says Neal Soss, chief economist at Credit Suisse Holdings Inc. in New York.

While Soss doesn't expect a recession, he compares the danger to ``driving on an icy road: You may get away with it for a while, but the risk of having an accident has gone up.''

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

lannarebirth · November 12, 2007

If they let you get short at 99.99 I'd be inclined to take it.

bingobongo · November 12, 2007

i have a yen for yen

lannarebirth · November 12, 2007

I agree, the Yen is trading very well. I understand the carry trade and the argument that at some point it gets unwound and that trillions of Yen must be repatriated. The affect if which should put constant upward pressure on the Yen bid. Is that the only argument for Yen? It's certainly not paying depositors anything and the Japanese economy isn't exactly heating up is it? I'd be very grateful for any illumination.

LaoPo · November 12, 2007

I agree, the Yen is trading very well. I understand the carry trade and the argument that at some point it gets unwound and that trillions of Yen must be repatriated. The affect if which should put constant upward pressure on the Yen bid. Is that the only argument for Yen? It's certainly not paying depositors anything and the Japanese economy isn't exactly heating up is it? I'd be very grateful for any illumination.

Large investors are lining up though in buying Japanese Real Estate.....

From an investment letter, last Friday:

• Japanese REITs are a great bargain, down 29% since June 1.

• Dividend yields are the highest income plays in the country, in the 4% range.

• There's a huge incentive to borrow and buy properties, as "cap rates" (essentially the rent minus the costs of upkeep) are 4%-6%, while the cost of borrowing money is only 1.5%.

• Rents in Tokyo are up 30% in the past two years.

• The city is crawling with investment bankers looking to buy properties... companies like Goldman Sachs, which has already spent billions acquiring Tokyo properties.

• There is no supply... vacancy rates are tight at 2.6% and there isn't much new building taking place.

So, although the ROI isn't very high, investors are speculating (is it ?) on rising rents and a rising Yen.

Not a bad middle term investment with a 'poor' Dollar I would think. Some of the big guys certainly know how and where to invest, even with a low Dollar.

LaoPo

highdiver · November 12, 2007

I agree, the Yen is trading very well. I understand the carry trade and the argument that at some point it gets unwound and that trillions of Yen must be repatriated. The affect if which should put constant upward pressure on the Yen bid. Is that the only argument for Yen? It's certainly not paying depositors anything and the Japanese economy isn't exactly heating up is it? I'd be very grateful for any illumination.

So what will happen if those trillions of Yens ca not be paid back??? what will happen to the Yen??

pointofview · November 12, 2007

To understand the deliberate devalution of the $ just google AMERO

Its surprising how many americanos have no idea that they will soon be using the AMERO

meom · November 12, 2007

Although we are flooded with financial news about the Dollar every single day and I'm sceptical at most news, I think this article is important enough because of the impact $ 100/Barrel of Oil could have on the US & World economy:

I assume $100/barrel is the spot market rate but how much of the total volume of oil traded is bought through the spot market?

As far as I understand it a lot of oil (for example oil that the US buys from Saudi Aramco) is sold on long term contracts at prices way below the spot market rate so $100/barrel will not have as much impact as being portrayed by the news.

Maybe I'm wrong though so it would be nice to hear from somebody in this business.

cdnvic · November 12, 2007

what about that canadian dollar !

You mean the loonie?

my friends and me call CAD the "Northern Peso"

That peso has been at record levels against the USD, the Euro, the Pound, and the Yen as of late. No currency has gained so much value in the past few years.

johnnyk · November 12, 2007

what about that canadian dollar !

You mean the loonie?

my friends and me call CAD the "Northern Peso"

Up here in the Great White North we are now calling the greenback the "Southern Peso". What goes around comes around.

cdnvic · November 12, 2007

what about that canadian dollar !

You mean the loonie?

my friends and me call CAD the "Northern Peso"

Up here in the Great White North we are now calling the greenback the "Southern Peso". What goes around comes around.

While the "experts" were making jokes, they missed a huge opportunity.

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