The dollar has reached all-time lows
against the euro
Posted on 10/18/2007 6:07:42 PM PDT by bruinbirdman
The dollar has plummeted to all-time lows against both the euro and a basket of global currencies amid growing fears of a disorderly rout as the US property slump spreads to the broader economy.
The greenback dived after the US 'Philly' business index dropped 10.9 to 6.8 in October, with a shock fall in new orders and inventory, raising the chances of further rate cuts by the Federal Reserve this month.
The dollar has reached all-time lows
against the euro
David Page of Investec Securities also noted that sales of toys and games were high due to fears that stocks would not meet Christmas demand following Mattel's toy recalls. Shoppers seem to have shrugged off any impact of the recent market turmoil, prompting economists to speculate that the Bank of England may wait until next year to cut interest rates.
Other data lent support to this view. Bank of England figures showed that growth in the country's broad money supply, which can fuel inflation, cooled in September but stayed high at 12.8pc.
Growth in total lending by banks and building societies, known as M4 lending, appeared entirely unaffected by the credit crisis, rising from 12.3pc to 13.1pc. Vicky Redwood of Capital Economics said: "With inflationary pressures still strong and retail sales figures supporting evidence that the economy grew more strongly in the third quarter than the Monetary Policy Committee expected, interest rates look likely to stay on hold until next year."
The housing market, however, showed signs of cooling. Data from the Council of Mortgage Lenders revealed a stark 12pc decline in mortgage lending over the month, around twice the average fall in August.
Separately, the ONS released data giving a gloomy picture of the state of the public finances, in a fresh blow for new Chancellor Alistair Darling.
Public sector net borrowing, the Government's preferred measure of the public finances, rose to £7.4bn last month, the highest September borrowing on record and above expectations of £6bn.
Howard Archer of Global Insight said: "With slowing growth, a softening housing market and substantially lower City bonuses all likely to weigh down on tax revenues, the prospects for the public finances look worrying."
To All: If you get H&C and missed RUSH the first time tonite he is on for an uninterrupted 20 minutes. (FNC) It’s good. :^) (Sorry for the hi-jack, but it is good)
all true HP
I know the history of British currency devaluations after WW2. A month of lies and denial then a devaluation. That’s what we will have. A month of lies and then a Fed rate cut to bail out housing which will **ALSO** kill the dollar a bit more
They have to drop the rate to kill inflation. I am prime to help homeowners keep their credit rating.
RUSH on deck, Hannity and Colmes!
This is the deal. Our perceived military strength is a major prop to the USD. As in we defend Japan from China and that’s why J will never dump USD
Anyways .... A major wasting of Iran nuclear facilities will make the USD go up. Of course there will be fallout and Russia&China just might back up the Iranians
But a strong military props up your currency
When the dollar goes to zero, Americans will be hard pressed to buy the burgers we'll be flipping for each other...
Fine but it kills the USD on world markets. You bail out housing but you kill the USD
oh—— you will be paying lots more for heating oil this winter due to the USD you killed bit by bit by lowering the Fed discount rate
Old man Rockefeller handed out dimes during the great depression. Back then dimes were silver. 90% I think.
Dime went a long way back then
I think it is all related to Gasoline prices, the US is most effected by the rise, Europe much less. Overlay any chart of interest and the relation might become apparent. I remember when the Dollar was 1:4 to the Deutsch mark, it never returned to that. Gas price today, here, 3.45 premium, at some point it has to show.
Thank you for your reply, at least yours is not name calling, and states an articulate opinion. In every case, when I’m stating my opinion, I’m backing it with examples either real or metaphorically, so people can at least understand what I’m talking about.
Two people can have different opinions about the markets. Actually that is what makes a market. The problem here, is that some people have an opinion based only on “it is going up, therefore it will continue to go up”.
I thought, that since I work as a professional in the finance business, and have lots of experience, that some folks might find my opinion not only educational, but might save them from losing a significant part of their life savings.
Not to brag, but people pay me and my team about $600 per hour for our advice. Here I’m just giving the shit away, and I’m bieng called all sorts of nasty namees.
Fine, I’m also working on my communication skills, learning from others, having some fun, so I guess it isn’t a complete loss.
The biggest thing it kills is retirement accounts. I don’t care for that but that is our Country. People are free to put their money wherever they want. (I am not bailing out anybody BTW)
Hubris? That is a great answer.
Apparently you could not articulate a discussion?
Another fellow just told me why he disagrees, spent some time explaining why. I can respect that.
You, well, you just have some stupid one liners.
he Amero, the currency of the Americas(North + South and all points in between), the only thing that can save us.
////
wrong
It strikes me that there are 2 reasons for something being cheap.
First is poor quality leading to low demand - hence the term "weak" applied to "cheap" currencies.
The other is greater productivity than the competition.
It strikes me, given our current economic conditions (as nearly perfect as have ever been), that the USD can hardly be considered poor quality. To the contrary, by all rights it is very high quality.
So if it is "cheap," is it not more likely that US economic productivity is going through the roof compared to our competition of other currencies?
That is, it strikes me that given a greatly increased worldwide market of "middle class" economies now able to buy American, coupled with our efficiency at "making money," it actually bodes extremely well for us.
Ok, here is why I disagree with you disagreeing? And again, it is logical that we can have two different opinions.
First: Americans are making more, to offset the weak dollar, so spending power is neutral. They are however encouraged to buy american goods, over imports... I thought this was a good thing?
Second: They invest in US, because they don’t think the trend will last forever, and must protect themselves from a completely correlated financial structure. 100% correlation of a portfolio will kill you if things go the other way. So, the US, no matter how bad things get, still need to be part of the entire portfolio/pool.
Three: Sharp reduction or not, the evaluation of price in goods, favors domestic brands, whether they are being exported or domestically consumed. Ask a farmer how they feel about a new found lack of competition from Mexico or Canada?? The trade imbalance will still be there, but much less, which makes a big diff if you’re in that kind of biz.
Fourth: Weak dollar may be inflationary, but it isn’t yet. Some goods are more expensive, but not beyond any reasonable measure in almost ALL cases.
Fifth: I’m not aware of companies right now, in the US that are selling goods overseas at a break even or loss. Why would they do that, they don’t have to? Price is cheaper, because the dollar has been completely whacked to the Euro and Canuck.
Sixth: Most companies have actually abandoned the really complex hedging you talk about. They found it only added expense, and put the firm at risk of some stupid moron. They just figure some times they win, some times they lose. Again, not all, but most companies don’t play games in this arena due to past losses. My company does do stuff like this, and boy did they lose money a few years ago, fired a whole ton of people over it.
“My view”...
The rest of the world will come back to the US bond and stock market, when the currency recovers. They are incredibly underallocated in the US now, and they know it. But the pain is too much for them...
The currency will recover when absurdity kicks in, and we hear stories of people from Canada nad Mexico coming in droves to buy stuff at our shopping malls. And that is just what is happening, right, now... I’m not buying a French bottle of wine at 80, when I can get a great Cali for 20 bucks, and neither will you, you, or you.
Ok ok ok, so now, if anyone is going to call me names, or other crap like that, at least back it up with WHY you think I’m a stupid idiot. Ok?
It does bode well for us. Fortunately, you are a simpleton as you say, and have not educated yourself into insanity. A handful of books here, and some magazines there is more likely to confuse the heck out of you, and give you a small part of a huge puzzle.
Look, even though I’m in this professionally, for 15 years, will readily admit that I don’t know all of it. In fact, anyone ever tells you they do, run away from them...
The USD got weak for a number of reasons that are completely sound in the historical context of normal trade, economic action, reaction. The problem here is, people think this time is different, and the dollar will never recover. That is just plain stupid.
Most folks don’t realize that primary reasons for gold and oil being high, is that it is only high as it relates to the dollar, which is much weaker in value than it was in 2000. In 2000 it was at an all time high, hardly what you’d call the “appropriate” level. Who knows what that really is, but this leverl is WAY too low. It will benefit us so much, that the advantage will disappear, as it always does, our currency will go back up.
What is important is, when it DOES go back up, which I think is fairly soon, the world will flock to our securities (stocks and bonds) because they will make money on the security and the appreciation of our currency compared to theirs. It has ALWAYS worked this way, and will ALWAYS work that way.
And why on earth would they come back? For the same damn reasons we buy their stocks and bonds, opportunity and need for diversification. Remember which stock and bond market is the LARGEST in the world????? Yes, so a foreigner with no exposure here, is a flat out idiot.
The problem is, foreign investors have been losing money here for many years, cannot handle the pain. They are making more at home and other abroads and naturally pull from the weakest link, the US.
So, when the tide goes the other way, they will be back from every corner of the Earth. You realize just how much money that will be, coming into our markets???
Thanks for your question, it also allowed me to continue to formulate how I see things. I see things looking very good for the USA.
Been that way for years. These kinds of folks don't last long, but always seemed to be replaced. Wonder how the Prudent Bear fund's been doing the past 3 years.
Cultivating, retaining and sustaining another’s business does require a bit of hubris which could be viewed as confidence. And confidence is necessary when what you do with a client’s money can mean the difference between their security or destitution.
I pulled this from tonight’s Fin Times from some in depth look at the ‘87 crash...Pro if you have been doing this for 15 years you wouldn’t remember!
“So crashes can be great buying opportunities, but only if markets reach favourable valuations and if there is reason to be confident in the underlying economy.
Can they be prevented? Markets are different now. Average daily volumes on the New York Stock Exchange alone have increased tenfold since 1987, the venues on which stocks can be traded have proliferated and the speed of trading is unimaginably faster. The range of hedging opportunities using derivatives is much larger than it was.
The view from the floor is that the improvements in technology will not prevent crashes. “But it will help them happen that much faster,” says Mr Cashin, the veteran broker.
Andrew Lo, an economist at the Massachusetts Institute of Technology, argues that these developments have also made crashes more likely. “We have a much more well-integrated and well-connected set of financial markets. Disruption in one market can very easily spill over into other financial markets.”
He draws comparisons with recent events, which saw a number of quantitatively managed hedge funds – which use complex mathematical algorithms to trade swiftly among different stocks and asset classes – suffer huge losses in August amid the fall-out from the credit crisis. Portfolio insurance, Mr Lo suggests, was “a microcosm of what we see today, writ large”.
Further, a growing field known as neurofinance attempts to apply insights from cognitive psychology to decisions made by investors. These insights suggest that the human mind is “hard-wired” to make the kind of collectively irrational decisions that can lead to crashes such as Black Monday. No amount of technology will change this.
According to Richard Peterson, author of Inside the Investor’s Brain, when markets are rising, investors show primitive “chasing” behaviour, expecting gains. Once gains fail to fulfil their expectations, the loss-avoidance part of the brain is engaged. This is when herd instincts come into play and sentiment grows more negative. Then comes panic – and the crash.
These factors are constant. Mr Peterson suggests that investors can try to be more emotionally self-aware, but this is difficult and requires behaviour that many people find unnatural.
Mr Lo puts it differently. “Our brains are hard-wired and optimised for decision-making on the African savannah 100,000 years ago,” he says. “If we are being chased by a sabre-toothed tiger, it’s perfectly appropriate for the brain to get a shot of adrenaline and run like hell. Unfortunately, that won’t help you on the floor of the NYSE when the S&P is down 20 per cent.”
In your opinion, is knowledge or fact based opinion “self pride or over confidence”?
I think if you look at my statements on the subjects of finance, you’ll see that I obviously know what I’m talking about. I may have a differnet side of the market opinion, but what I discuss is not a bunch of made up nonsense?
Fair enough, I can sometimes come across a bit smarmy, but that is also just my sense of humor too, much like most freepers actually?
Simply put, I’m not going to sit here, let a bunch of folks say the dollar is going to hell forever, the US is lost, and that we are a third rate nation, and that investing in gold and china are the answer. Some folks here, don’t realize that their current investmetn strategies are going to put them in serious financial jeapordy.
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