November 25, 2008
Benny Says He’s Never Lost a Penny
U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
“The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.”
Keep a beady eye on the US dollar index. My guess is that it will give up all its gains and fall below 70 once it reverses. You can’t socialize losses and privatize profits without a reckoning. I have no doubt now that the USD will lose its reserve currency status in my lifetime.
Cat: | Time: 10:16 am (utc+8)
November 25th, 2008 at 3:37 pm
CM said:
“You can’t socialize losses and privatize profits without a reckoning.”
So true. $USD showing triple top on the daily charts from Oct. 27 to Nov. 13 and then Nov. 21, with today’s action showing a sharp 2.2% selloff.
November 25th, 2008 at 4:39 pm
@Todd: This has been a monster countertrend rally in the dollar, but the bailouts and bumbling are going to catch up with us fast … it’ll be an interesting day when the US loses its AAA rating (and that day is surely coming).
November 25th, 2008 at 7:05 pm
AAA rating - since when has the underlying asset actually been taken into account when the ratings agencies come up with these ratings? It should be less than AAA now, however can’t see it being downgraded in my lifetime. Too much rigging for that to happen.
Anybody want to give me 100 cents on the dollar on some sub prime paper I have? it is AAA! Ok I will take 75 c, maybe 50 c because you look like a good guy. OK OK, 25 c because I really like you, 15 c? Man you are killing me but sold to the man in the back row with deep pockets!
November 25th, 2008 at 10:39 pm
If anyone wants to play this via an etf (ira, 401k’s etc) then use UDN. I can’t find a ultra short, if anyone does post it here?
November 25th, 2008 at 10:40 pm
The euro isn’t viable as a reserve currency. It’s the dollar or nothing.
November 26th, 2008 at 1:00 am
@Dan:
DXDDX
Direxion Dollar Bear 2.5X Fund
Probably terrible liquidity and correlation.
November 26th, 2008 at 2:55 am
the simplicit of the statement: “The US will lose its reserve status in my lifetime.” Maybe but no time soon. ANd at worst it shares status with other countries as their economies grow. but that down the line. while it a sure thing now i say it a long way fromm sure US will be overtaken by china. folks tend to discount china’s weaknesses while emphasing its strengths. many problems in china, india not being addressed very well.
November 26th, 2008 at 3:49 am
The unwinding of the dollar should obviously cause a spike in oil or is this time different? Strange day today with the dollar, oil, and gold all down.
November 26th, 2008 at 3:50 am
I don’t want dollar in my pockets:
Sell Dollar =
BUY 57.6% EUR (or buy emerging currencies to diversify - ZAR, BRL, AUD, CLP etc.)
BUY 13.6% JPY
BUY 11.9% GBP
BUY 9.1% CAD
BUY 4.2% SEK
BUY 3.6% CHF
and buy commodities (dollar denominated).
November 26th, 2008 at 11:01 pm
play with futures contracts. Interest rate futures, such as 5 year, 10 year, 30 years, are also very interesting.
November 27th, 2008 at 1:27 am
The whole financial framework must be redefined with a new Bretton Woods-like meeting. There was too much tension in the financial world already before the financial crash. The dollar (i.e. USA) is centric to any commercial transaction but now the world has changed: it has multi poles (USA, China, Europe…); that’s because of other large, strong groups of consumers tied by other common currencies. Then we have contrapposed areas which have to rebalance and compare all the time against the dollar (the centre), even if they are on balance on their own. That means that the whole world can only work if the dollar (i.e. USA) works and, it appears, it does not now.
To me, that’s why we have global financial tensions.
No calculation or theory, just observation and common sense.
November 27th, 2008 at 7:54 am
We sold, perhaps too soon, but I agree. It won’t happen right away, of course, but it will happen. Inflation, or too much currency chasing too few goods. When? Perhaps two years into the Obama Administration. The Johnson Administration funded the Vietnam War escalation with borrowed money. It took another 30 years or so for 30-year US Treasury bonds to finally bite the dust.
It should be pointed out that the incoming Obama Adminstration will have to deal with all that currency George Bush Sr.’s son borrowed from the Chinese government to make the United States safe from whomever it was his son said United States citizens were supposed to be fatally fearful of…
Stop the War! Stop the War! Stop the War!
Respectfully submitted
David L. Jennings
Organic Farmer
(and lifelong Kennedy Democrat)
November 27th, 2008 at 9:52 am
@Kay: I do use the model on the more active Bond ETFs like TLT, AGG, SHY, TIP, etc. so I have a good sense of the trends in interest rates.
@Franz: I like your common sense and I always say things will get much better when the Americans start to act more Chinese and the Chinese start to act more American. :)
November 28th, 2008 at 6:26 am
US currency is being ruined, although exchange rate is also dependent on what other countries do, is it not?
Just because the politicians are going to destroy our currency doesn’t mean it’s going to be devalued against others. Their bailouts aren’t any better than ours.
November 28th, 2008 at 2:55 pm
US currency is not ruined. This is a natural market mechanism to restore trade balance. Under a high dollar policy from Clinton and then maintained by Bush, we’ve had an unsustainable trade deficit. Since there is no one in Washington to use policy to address the problem, the market has taken up to resolve the problem by itself, which means it will be ugly. One benefit though will be the return of manufacturing.