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Posted on 10/27/2008 10:05:21 PM PDT by Tailgunner Joe
One of the few things going up since the financial meltdown began? The U.S. dollar. ....
Since June 30, the greenback is up 26 percent against the euro, 28 percent against the British pound and 59 percent against the Australian dollar.
Looking at it another way: On July 15, the euro hit an all-time high of $1.599 and people were speculating about whether it might rise to $2.
Today, the euro buys only $1.25, and people are wondering if it could fall back to $1, or parity, with the dollar. ....
Early in the year, the dollar fell on fears that the United States was heading into a recession. Around midyear, it became apparent that the rest of the world was also slowing and the dollar started appreciating against other currencies.
"Currencies reflect relative economic strength," says Vassili Serebriakov, a currency strategist for Wells Fargo.
As the crisis intensified, the dollar started rising far another reason: a flight to quality.
"The world is pulling out of risky assets and putting it into safe assets, and U.S. Treasurys are still the ultimate" safe harbor, Serebriakov says.
To buy Treasury securities, overseas investors must buy U.S. dollars, and that boosts its value.
"It's a panic flight," says Axel Merk, manager of the Merk Hard Currency fund. ....
In a note to clients Monday, Wall Street strategist Ed Yardeni wrote, "The strength of the dollar is a bit ironic to say the least. Over the past year, around the world, there was schadenfreude - a sense of satisfaction in America's comeuppance.
"Our smug self-confidence in free-market capitalism irked lots of folks around the world, who preferred doing business their way. So what are they doing now? They are fleeing their currencies and buying U.S. T-bills as the only safe haven."
(Excerpt) Read more at sfgate.com ...
Many countries are now in the process of deleveraging their bad debt obligations. They need U.S. dollars to do this. There aren't enough dollars - so the price of the dollar is going up.
The buying strength of the dollar still stinks. It just smells a little sweeter than the septic tank called the euro. The Japanese yen puts them both to shame - but that's bad news for the Japanese since it makes their exports much more expensive.
The U.S. dollar will be going up for the next little while - and then it will come crashing down very, very hard. This will be when countries stop buying our debt - and it's only months away.
George W. Bush lifted the offshore drilling ban on July 14.
So does this mean that when the money moves out of treasuries it is going back into equities or is something else in the works?
Oil is WAYYYYY down. Gotta love it. Drill now and drive it down to $30 barrel where it belongs.
That’s good for now, but what is the dollar likely to do between now and next summer? ...Iran, Venezuela or Cuba?
It is the one thing that’s holding Gold stable in the 7’s. If the dollar tanks again Gold will sky-rocket. Just buying Eagles right now is hard. This is the strangest time I’ve ever seen.
Do me a favor and join me in telling the Dems to get away from foreign oil. Wall Street took a few trillion from us to bankrupt Europe and Asia. Can’t we at least Drill our own oil?
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Late night ping!
It will most likely go to yen, or swiss francs. It definitely will not go to U.S. securities since the market will be melting by then.
The S&P 500 has a very good chance of seeing 500 in the coming months (or less).
Commodities are in a huge deflationary cycle right now. OPEC could stand on their head and it still wouldn't matter. Oil is coming down hard.
Ping
Added to my radar.
Man, you are even scarier than I am! I thought ThePythonicCow was the Grizzly Bear of the bunch! Well, Travis McGee, too. The thing is, I can't disagree with this. We are in completely uncharted waters with only 1929 and the Great Depression looking similar. Not that GD I will NECESSARILY be our model here, but S&P 500 is a very real possibility. What I think is much worse is that it could take quite a long time, years, for the S&P to recover to 1550, because this means the returns for many current and impending retirees may not be able to cover their bills in the longer run, or fund their hoped-for lifestyle.
Thanks for the memories, uh, ping! lol ;-)
Actually, that is one hell of a Freudian Slip. Obviously I’m referring to the reknown song by Bob Hope, but the way this Bear Market is going, many investors may end up adopting that song as the “Official Song of the 2008 Bear Market and Financial Collapse”.
Profits, “thanks for the memories.”
Lifestyle, “thanks for the memories.”
Security, “thanks for the memories.”
We as a society will be going back to that time-honored tradition of children caring for their aging parents.
If the governments of the world keep making the moves that they are then we're looking at a 10-15 year recovery.
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