Last Sunday night I wrote about the coming week:
If next Friday the Buck is lower across the board and the BoJ is a bit bloodied Ben Bernanke will light a cigar.
Okay, so our boy Ben is smoking a big fat cigar tonight. He could not be happier. Everything is going his way.
-On the week the dollar got crushed against the majors.
-The Japanese central bank did get its nose bloodied. As of the close in NY they are down about $700mm on the 9/15 intervention of $25b. It’s not just the money (actually it is the money). They lost a battle. The USD/JPY has to go lower. The BOJ has tipped their hand. They are playing defense. And that is losing strategy. Their internal effort at QE just got trumped by Ben’s weak dollar policy. They must be pissed.
-Euro group chairman Junker (ZH article) said the weak dollar will hurt EU growth. Sure it will. That is what Ben wants. He wants to export our deflation to our “friends”. They also must be pissed that Ben is dishing this out to them.
-The gold moves were impressive. If I were at the Fed and watching this near daily slap in the face I would be unsettled. I wonder if they even care. At one time they did, but not in the last few years. Ben is probably pleased with the ratchet up in gold. He not only wants to boost inflation he wants to increase expectations on inflation. High marks on that score for the week.
-Stocks keep going up. Why shouldn’t they? A weak dollar makes top line numbers of a big chunk of the S&P look better. Also, you have to look at what money is competing with. The five-year closed at 1.1%. After-tax that comes to 0.7%. Against a very low rate of inflation the tax adjusted yield guarantees the investor a negative 8% return. Not hard to beat, one would think. So stock multiples have to widen. Right? If so, can we do this forever? If not, how long can we continue?
-The commodity numbers are blowouts. Sugar, wheat, corn, copper, every
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.