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Thursday, December 1, 2022

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Monday Monetary Meltdown – Chart Art

[G20]Last Friday, Geithner's message was "Do as I say, not as I do."

This weekend, Timmy took a big doo doo on the rest of the World as he pressed fellow Finance Ministers into (in theory) setting mechanisms to address trade balances (which means export countries need to strengthen their currencies against the dollar) while importing countries (like US) should not try to manipulate their own currency.  Well, that sounds reasonable EXCEPT, before the ink is even dry on the G20 release, Timmy flies off to China to get them to commit to revalue the Yuan, which is pegged to the Dollar and effectively DE-values the dollar in an entirely manipulative manner.  

No, WE didn't manipulate the Dollar, China did.  We only told them to manipulate their currency which is tied to the dollar, so it's not the same thing at all as us manipulating the dollar and —- oh my God Tim, how can you sleep at night???

So good morning, America, how are ya?  I'll tell you how you are, you are 1% poorer than you were on Friday as the Yen rises to 80 to the Dollar and the Euro rises to $1.41 and the Pound hits $1.58.  That drive oil back over $82.50 and gold back to $1,350 and copper hit $3.89, up from $3.75 on Friday – that's 3.5% inflation of a basic material OVER THE WEEKEND!  That annualizes out to about 1,000% but let's be fair and say this only happens on weekends and call it 52 x 3.5% for 182% – hyperinflation accomplished!  Of course, we don't need 182% increases in commodities to achieve hyperinflation, hyperinflation is anything over 26% and our Dollar is down 15% since May and that's 5 months so we're heading for 36% over 12 months already.  

I've been invited to attend the Economists' Buttonwood Gathering in New York today where the agenda will be discussing the State's Fiscal Crises led by Robert Rubin and Josh Bolten over lunch followed by BOE Governor Mervyn King's speech on "International Reform in the Financial Sector" and then my favorite bond pimp, Mohamed El-Erian will be speaking about "Sovereign Risk and the Banks" followed after market hours by Vikram Pandit (Citigroup's CEO) and then Nassim Taleb (Black Swan) after which there'd better be drinks!  

I usually can't be bothered with these things but this conference is likely to move the markets and I should, in theory, be able to chat with our Members live from the conference, so this should be fun.  Tomorrow is currency day with the after-lunch meeting titled "Global Currency: Crisis of Confidence" with Joyce Chang (JPM) and Paul Volcker giving their views and the 3:30 lecture is titled "China: The Decade of the Dragon?" with the exiled Stephen Roach, Jim Chanos, Gene Ma and Xu Sitao, who is the Economist's China Director.  So, lots of interesting stuff from interesting people and, while the gold bugs and the dollar doomsayers should be able to pull plenty of good quotes, I will be looking to get the mood of the attendees, who are themselves a veritable who's who of the investing World.  

With this global gathering of market movers, I guess we'd better get a global perspective on the markets, right?  Let's take a look at our global multi-chart and see how we are doing.  The blue lines are our mid-points and the greens are the 10% lines and they reveal an interesting pattern

 

It's a tale of two economies with our net exporters following the path of copper (mirroring the collapsing Dollar) and up around those 20% lines.  As we can see from the Baltic Dry Index, which is DOWN 10% – there is not any more demand for goods, they are simply more expensive when priced in a weak currency.  Germany's currency is artificially held down by the weight of the rest of the EU while the UK gets less of a boost despite their oil and mining economy because the pound is not artificially tied down to the weaker EU nations.  France is the World's 5th largest economy and on par with US performance as that country enjoys week two of national strikes.  

As we discussed last week, the weak Dollar allows our markets to "ignore and soar" as 15% pullbacks in our currency are reported as 15% earnings beats to US investors while the MSM does nothing to educate it's readers as to VALUE.  In Friday's Member chat, we compared the Dow, S&P and Nasdaq priced in Dollars, Euros and Yen to get a better picture of where our markets are now:

 

Priced in real currencies, our markets are DOWN 10-20% since May.  That's not entirely a bad thing – it means we look like a bargain to global investors, providing they are as clueless as to exchange rates as their American counterparts.  Unfortunately, I don't think foreigners are that stupid, which is one of the reasons I look forward to going to the conference today as I can actually quiz some of these famous foreign investors to see if they can pass the old "Jay Leno" test.  

OK, that is just sad, isn't it?  But not as sad as the MSM in this country cheerleading stocks and the market as if they are "en fuego" when they are, in fact, LOSING ground to the declining dollar.  October alone has seen a 5% drop in the dollar and only the Russell has managed a 5% gain.  This is interesting because small-cap, relatively local companies benefit the least from the declining dollar but we haven't gotten a lot of Russell earnings yet as the S&P had the floor last week so it will be interesting to see what holds up as the smaller companies begin reporting their earnings.  

 

 As I said to Members last week: "It looks like we COULD break out and up if the sentiment turns enough in favor of the US markets and we certainly look like a cheap laggard compared to EU or Asian investors local markets and that does mean a 10% upside is possble but, from ourt perspective – only if the Dollar stay here or goes down AND foreign investors start to buy American. Not at all coincidentally – that’s exactly what Timmy’s asking for in South Korea this morning!"

Not counting our 10 new Dividend Plays, which are all bullish of course, we did manage to get a little more bearish than the prior week's 21:10 bull/bear ratio of trade ideas.  Last week we cut it down to 16 bullish to 10 bearish trade ideas although, once again, the bear plays were mainly of the hit and run variety as we are still fundamentally bearish but technically bullish – which means we have to take a lot of trades we don't really believe in to play the game (although I favor not playing (cash!) into the election, but we service a large Membership and it is kind of dull not to trade at all, isn't it?).  

Generally, we just want to make sure we make 2.5% a month to keep up with inflation but, other than that, the markets are a very scary place to be and, with Halloween approaching, you never know what horrors you are going to find when you pull that mask off.  

We have a Datapalooza this week with Existing Home Sales at 10 today followed by the old Case-Shiller not adjusted for the declining dollar Home Price Index at 9 and Consumer Confidence (or lack thereof) at 10 along with the FHFA also not reflecting the declining dollar Home Price Index.  Why is it that it's easy for us to understand that if the $1M Zimbabwe Dollars becomes $1Bn Zimbabwe Dollars a year later, that a man selling his home for $10M is a fool but we don't understand how 1 US Dollar, that is now $1.35 US Dollars to buy the same oil, gold, copper, silver, diamonds, corn, wheat, soybeans etc that it did last year means your "stable" home price is actually an additional 35% drop?  Is it really that hard to see?  

The same goes for the people selling cars and clothing and even beloved IPods – if you are collecting the same amount of money but getting paid in what is effectively Monopoly money – are you really doing well?  Now, where was I?  Oh yes, data!   Wednesday we get to see if anyone applied for a Mortgage last week and at 8:30 we get Durable Goods Orders, which should be up as we sold the Saudis a bunch of WMDs in the form of fighter jets.  At 10am we get New Home Sales and, of course, Oil Inventories at 10:30.  Thursday another 450,000 pink slips will be handed to US workers but, more importantly, on Friday we get the Q3 GDP where bad news will be good news for those who pray for QE2.  We also get the Chicago PMI and Michigan Sentiment on Friday and, of course, then we head into the election so fun, Fun, FUN!  

It's going to be an exciting week and it's starting off with a bang as the Dollar tests new lows at the open.  I think this is an excellent opportunity to cash in long positions and sit on that worthless cash through the election or at least to get very, VERY well-hedged.   Seven banks were shut down on Friday, lifting the year's total to 139 banks that were in such bad shape that FDIC examiners had to storm in and confiscate everything over a weekend.  

The Hillcrest Bank of Overland Park, Kan, had $1.6Bn in assets and we are just 1 more bank away from topping last year's mark of 140 bank closures, the most failures since the year after the first Bush left office in 1992 (just a coincidence, I'm sure).   

Perhaps BAC will make the list one day as the are being hit with a Class Action Suit on behalf of homeowners seeking damages for alleged disregard of foreclosure process rules.  The suit, filed Wednesday in federal court in Newark, N.J., accuses Bank of America and two subsidiaries, LaSalle Bank and BAC Home Loans Servicing, of “an undisciplined rush to seize homes” through “pervasive and willful disregard of knowledge, facts and statutes.”  The putative class in the suit, Beals v. Bank of America, N.A., 10-cv-05427, consists of all named defendants in pending New Jersey foreclosure actions initiated by Bank of America or its affiliates. The complaint includes counts of common-law fraud, breach of the covenant of good faith and fair dealing and violations of the New Jersey Fair Foreclosure Act and Consumer Fraud Act.

It continues to be all about the Dollar this week and we shall see how low it can go.  I'll be talking to the luminaries all day at the conference and I'll keep you informed as to the mood, as well as the official spin from El Erian and company.  

Be careful out there!  

 

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 gel1 
You`re getting all worked up. You still have a week until the elections, pace yourself.
The real problem in France is that the retirement age with full benefits is being moved from 65 to 67. Partial benefit retirement is being moved from 60 to 62. 
The MSM likes the idea of reporting the 60/ 62 battle because it makes the French seem pampered compared to us. 

Goldman … lol …. Phil streaking on CNBC at conference would be a sight to behold !

ROFL Cap! Talk about the pot calling the kettle black! .Biodiesel’s group is probably a lot more nonpartisan than the "nonpartisan" groups that produce the political drivel you usually post Cap.

Gel … union violence & intimidation … just like SEIU …. so Obama appoints the head to his economic commission …. no problem.

Believe it or not, Gel, I do not support what has gone on here with regard to the unions, especially the teachers and the prison guards.  They are too inflexible, and need to come to the bargaining table and make some adjustments, like everyone else.
Whether that can be done or not, I don’t know, but we’ve had Republican rule via Arnold for 7 years and nothing has changed.  I trust Brown to give it his best shot to try and fix things, which includes cutting spending where it can be cut.

Obama the tax cutter !
Obama the fiscally prudent !
 
He’s gonna go through the budget "line by line" to eliminate wasteful spending.  Wasn’t that one of his core campaign lies, er, promises …  How’s that working out ?
 
Has a nice ring too it ….
 
If only it were true….

Maybe he looked but just couldn’t find anything to cut ….
 
No waste, no cuts, right ?

ben
 
Sorry about that…. but I love California, and it has some monumental problems that can only be solved by government. The government has failed us in the past, and it looks like change is not coming. Government, like all families must work within budgets, and I get very frustrated when I watch the demise of the state because the budget process is so excessively violated. Time for me to take a cold shower, I guess!

So, buy buy buy, right?

Gel, its no different in New York if that makes you feel any better (it shouldn’t)

does anyone know what’s going on w/ RIMM

it’s taking off like a rocket

RIMM – no idea … could simply be "why not" ?

C Options
I noticed they added .50 options to the chain.  Phil is right, the volumes are very large.

yeah CA with all of its problems and waste. God I hear about that all the time. Why doesn’t Cali WAKE UP and realize that Google started in Butt*** Nebraska and Facebook, when Zuck dropped out of Harvard, he went to central Alabama to start Facebook and Silicon Valley is really in Oklahoma – weird thing, I recently drove through the Bible Belt in Palo Alto and Menlo Park, those wasteful liberals, why can’t they congregate somewhere and produce VALUE like Wyoming can

this might be it  RIMM launches new blackberry tablet

Are they seriously rolling their eyes about caring for people?! That makes me furious. Many of you are already wealthy but I am far from it. I live very modestly and volunteer and work among the poor. I know many people who have suffered in a very personal way because of these bankers. I can barely contain myself when I hear things like this. I’d love to take a group of my MMA friends into that room and just rage on those arrogant, self-absorbed pricks. Individualized pain is sometimes the only thing to break through certain people’s defense mechanisms. No wonder people want to set off bombs near the stock exchange and fly planes into the IRS. The greed, corruption, and indifference is literally maddening, in the original sense of the word — to drive one crazy.

 Hi All – here’s the latest weekly newsletter — click here. Feedback welcome! – Ilene

From the opttrader board: rumor that CSCO is going to buy RIMM

 Wow, first link from my "source" I so meticulously posted (some people can’t click on links?) and I find this.
 
I forgot I fill out tax returns for people so they are so dumb they have no idea what a Schedule M is, but I would expect intelligent people on this site to know better
 
SOURCE DOC

 RIMM broke the $50 resistance area, so this is PURE TECHNICAL MOVEMENT.. 

cap / line by line — Obama’s campaign was about "change". The first thing he did, was changed his mind! The second thing he did is gave everyone the change they wanted. My pocket is full of change now!

Thanks Irene

escohen
I must agree…. Arnold was not good for the state, and nothing has changed to reverse the galloping debt problems. Brown is frugal, for sure… drove a 20 year old Phymouth when he was Governor… but so what !!!  Who cares what he did personally – it is what he did as a Governor that matters. ( This guy is a prevacator -I knew personally a gal he dated back then – Linda Rhonstatt, and I can tell you this she was VERY hormonally endowed- just the inverse of Jerry, who was trying to change his image  as he was considered hormonaly deprived, and she confirmed it )  Why not Meg Whitman…. she created 30,000 jobs at E-bay, and Jerry has created nothing but headaches for the unemployed….. no jobs whatsoever !

Cap…. the malady might be "bi-coastal"…. at least we in California are not alone, and wordering if we are isolated.

Phil…. Ask Bill Gross if he likes his house…. Don’t tell him I embedded a "bug" in the upstairs bedroom before I moved out.

Phil,
Please ask one of those hot-rods if they think it is fair to investors and good for the nation when they are allowed to go on CNBC and manipulate certain assets for the sake of their own profits?

Gel, we here in Illinois are only about 5 min behind CA in race to destruction.  another state gov’t strangleheld by unions.  the machine that runs IL is how BO is attempting to set up the Federal Gov’t.  if you want to know where US is going, come to IL.
spoiler alert…….it SUCKS here…

 AAPL is deprecating Java starting in Mac OSX 10.6 update 3. 
 
"As of the release of Java for Mac OS X 10.6 Update 3, the Java runtime ported by Apple and that ships with Mac OS X is deprecated. Developers should not rely on the Apple-supplied Java runtime being present in future versions of Mac OS X.
 
The Java runtime shipping in Mac OS X 10.6 Snow Leopard, and Mac OS X 10.5 Leopard, will continue to be supported and maintained through the standard support cycles of those products."
 
I wonder if this is because of patent disputes with Oracle? Might affect thinkorswim users since thinkorswim desktop uses Java.

gel ROFL !

I don’t know what time period you’re talking about when Brown did all these things to the unemployed, or failed to create jobs.  He left office in January 1983, during a severe nationwide recession.  It was bad here, but it was bad everywhere.  Other than being Attorney General for the past four years, he has not held state-wide office since.
Anyway, the jobs will come when and if the economy improves.  But the first order of business is the state to reform itself financially.  How and why would Meg be any different than Arnold?  But if Jerry says "we need to cut spending," people will listen, and we can get it done.

OK…. Time to make some money….  Bought AUD/USD on FX market…. set my stop loss @ .9838

escohen
 
Brown was the one who "championed" the infusion if the public service unions during his tenure as Governor. This reflected as well in the support of other union expansion. This is his legacy !!!!  Unions are a disease to corporate formation, and a pandemic to fiscal responsibility in government.  So if Brown is the "grand-daddy" ) of this tsumami of debt in California, and the state is fiscally impared as a result of this situation, then why would we want to repeat the past ? Would it not be prudent to try something new, that at least has the promise for change? Meg Whitman built one of the most successful enterprises in the history of the State….. what in the hell did jerry Brown ever build ???? he was merely a legacy from his father who was a decent Governor, but the son – Whew!

 you’re welcome, exec

"There are many investors with money on sideline waiting to pile onto any sign of us or Japanese weakness. Ability to take down “whale” market is opportunity of the century for short investors. WOW!"
 
Is this in reference to China or investors in general?

Phil: don’t read this – you have already given your $.02 worth. Or maybe its now  $.05 due to the debased dollar? RevTodd? do you understand why the VIX is pretty much unchanged since I bought VXX, but VXX is down 15%  (and it is the loss of a paper shirt atm)???? I thought they were related?

 Not sure why the cons hate the IRS so much. They define marriage as ONE MAN AND ONE WOMAN. Why are cons anti-marriage? They must hate families.

Bio- This is ridiculous. I’m not trying to pry into your personal preferences but curious where  you would draw the line? Man/child is okay with you as a marraige? How about Man/goat? Is that a suitable marraige for you? Why not man/grandmother. Why can’t you marry your damn grandmother??? I realize this is difficult for a lib to understand. Sorry to be anti-marraige.

Lol, Pandit accent – my dad has the same but a Kentucky & Indian accent.

You know, a lot of you folks do not adhere to the "live and let live" idea. We have much more to worry about without involving marriage or personal choice(s) into the debate. Get With It!

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