ZULAUF: PREPARE FOR A CORRECTION IN ALL MARKETS
by ilene - October 17th, 2010 5:38 pm
ZULAUF: PREPARE FOR A CORRECTION IN ALL MARKETS
Courtesy of The Pragmatic Capitalist
Felix Zulauf provided some excellent macro thoughts in a recent interview with King World news. Zulauf believes gold is in a secular bull market, but that the near-term move is overextended. More specifically, Zulauf says the downside in the dollar is overdone and he foresees a dollar rally into the year-end. This will cause a correction in most assets – equities, commodities and gold. He says the correction in gold as a buying opportunity, however.
As always, Zulauf’s thoughts are a must listen. You can see the full interview here:
WHY THE DOLLAR COULD RALLY 22%
by ilene - March 29th, 2010 7:35 pm
WHY THE DOLLAR COULD RALLY 22%
Courtesy of The Pragmatic Capitalist
Alan Ruskin, head of currency strategy at RBS Securities Inc. says the dollar could rally 22% due to being the best house in a bad neighborhood:
Source: Bloomberg TV
The US Dollar Rally of 2008: The Consequence of a Bull Market in Fraud
by ilene - October 28th, 2009 12:39 pm
The US Dollar Rally of 2008: The Consequence of a Bull Market in Fraud
Courtesy of Jesse’s Café Américain
The theory of a short squeeze in Eurodollars which we had first put forward last year "The Dollar Rally and Deflationary Imbalances in the US Dollar Holdings of Overseas Banks" seems to be confirmed by this paper from the NY Federal Reserve bank, and the latest figures on cross border currency transactions from the BIS.
"Highlighting the international dimensions of the financial crisis that began in the fall of 2007, authors Niall Coffey, Warren B. Hrung, Hoai-Luu Nguyen and Asani Sarkar examine the difficulties international firms encountered obtaining U.S. dollars and the ensuing effects on the foreign exchange (FX) swap market. Analysis shows that as firms increasingly turned to the FX swap market to obtain funding, the dollar “basis”—the premium paid for dollar funding—became persistently large and positive, primarily as a result of higher funding costs paid by smaller firms and non-U.S. banks." The Global Financial Crisis and Offshore Dollar Markets
Further, the latest data from BIS shows that the dollar rally tracked the acquisition of eurodollars with a significant correlation. This is shown on the chart at the right.
After the Federal Reserve alleviated the short squeeze through dollar forex swaps "The Fed’s Currency Swaps" with the central banks in the affected regions, the dollar squeeze dissipated and the dollar fairly quickly resumed its downward trend. There is a case to be made that some of the big US money center banks were using the dollar shortage to reap windfall profits, but this could have also been a side effect of the seizing in the short term credit markets.
But much of the European outrage, as least, was in feeling that they had been ‘set up’ by the very banks that had sold them the foully rated instruments in the first place. A classic face ripping, as they say at Wall and Broad. And this similar to the reason is why the Chinese government declared that its own institutions could walk away from derivatives arrangements that had been sold to them by the Wall Street wiseguys under false pretenses. US towns and states are not so fortunate it appears.
What does this mean? It implies rather strongly that those looking for a repeat of the sharp dollar rally from last…