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."
“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.”
LOL...I thought I was taking out a little insurance with a Rydex short fund which I’ve been in for about 8 months.
Yup, but to illustrate the point, the lower the dollar goes, the more absurdities come in to play, in the global sense. This summer, I was in a Honda showroom in the Philippines, they wanted 1,200,000 pesos for a made-in-Thailand CRV. Back when the dollar was 55 per, that was a moderately expensive ~$22,000 equivalent vehicle. Now, at 44 per and dropping, we're talking over $27k - when you can buy the same vehicle made in the USA but with better quality, better safety, more features etc for about the same price.
I'm sure there's more but that's off the top of my head. The lower the dollar goes from here, the more absurd things get. That won't last.
Yes, Irrational decisions, that is what I’m talking about...
1987 was NOTHING like being a rep during 2000-2003. 1987 recovered within what, 11 or 15 months? Many of my clients and colleagues were there, and I’ve read the books. Granted, nothing like being there though.
You know what it is like to wake up every day, see the market down another 200 points, just like yesterday? Then Bill Gross says 5000? Was like chinese water torture. A ton of people left the biz during those three years, couldn’t take it, or make money.
But, i did some very smart things back then, based on reason, logic. I also worked EXTREMELY hard. From 2000 to now, my book of biz increased by 400% in AUM. My clients (1200 hhlds) made money, very few bailed out, even though they were tempted. I did whatever it took, to keep them properly allocated too, so that when the markets recovered, they made all the money back, then some.
PS, i love the hubris part! It’s true, you better have that or the customer doesn’t listen, or think you believe in your own story. Conviction/hubris... I get it.
That’s what I am thinking too. But what do you put your cash into?
Exactly, and so obvious isn’t it?
Imagine an airline buying new planes. Airbus or Boeing, the price differential makes the decision a no brainer. Now that I think about it, that is exactly why Airbus took market share away from BA back in 2000 and so, because the dollar was sky high, the Airbus cheaper.
So, here we are, in the luxurious position of being the most efficient manufacturing nation, and the cheapest.
While the dollar has lost value, it has not been at the expense of govt borrowing costs, as the going rate on bonds is still less than 5%, and inflation is not a problem either, but for some global currency denominated things like oil and gold. Thank god I don’t need gold for anything, cuz the gas is expensive enough.
You drink coffee right? The can...
I use the bagged stuff. But Why would you put cash in there, isn't that losing value each day?
Will likely not make it over $800 by then. Will get there, and then perhaps a cup-and-handle higher next year.
When you are long, short, sideways, covering this base after the other, and looking under the bed for the boogey man, the only thing that happens is, the account slowly goes down due to expenses!
For me...
Better to be long and just always try to avoid the really stupid over inflated nonsense stuff. When a great long bond comes along with a decent rate, throw it in for good measure...
And when you buy stock, pick the ones that are the biggest/cleanest most household names, after they’ve been beaten down, kicked, spit upon. I just love those kinds of stocks, and amazed at how much money can be made, with little risk. The funny thing too is, that they are always available, no matter what the market.
Back in 1999 and 2000 there were tons of great big value names with big dividends trading half of their previous highs. While the market tanked for years, they doubled, tripled and even quadrupled. CMI DE and CAT were some, along with most bank stocks, insurance companies, and defense contractors...
The really really big and cheap thing does typically mean you need to be patient, wait a few years. And that is so boring to people that think they’re entitled to doubling their money every six months...
That's means "bet on Russia"
That was my hubris at work apparently.
What to do with your cash is a complicated question, since you have your own goals, financial picture, etc...
Now, if you said what part of the investments markets is the cheapest, has the least historical risk to its mean, while presenting a higher rate of return than its mean?
Is that what you are saying?
In my opinion, that would be domestic growth, with the best scenario of them all, if you are looking at say ten years, would be small cap growth. But, lots of large cap growth stocks are real no brainers in my opinion. Very cheap compared to historical pricing, no debt, lots of cash, trending higher, little downside risk, etc
I came across this scenario last year, have acted heavily at it, while being laughed at. Well, growth is up like 15% ytd, while value only 2%. This will be the first time since 1999 that growth leads the way, and that means something.
Small cap growth is a very interesting story. For ten years ending 2006, 4% rate of return. If the next ten years, making a 20 yr cycle is to hit the average twenty year cycle, it needs to perform at about 20% per year to do that. SCG is also the sector that benefits the most..... from a weak usd.
Lots of ways to buy SCG, be careful, lots of bad/dishonest funds, shady companies...
Your rationale for the beasts like Boeing and other multinationals/exporters that can now do some traveling because of the dollar makes sense. I’ve been going there as of late along with picking off some corporate bonds now and then.
PS I’m not in your business but I have been trading my own $ for some years.
Yes, I can tell.
Or that common malady known as, "Buy high, sell low."
yitbos
Discipline is learned, eh?
yitbos
Exactly. The euro started at $1.20, no? It went to $.80. EADS was cleaning Boeings clock. A380 started at the right time but each delay only made it more expensive for all those Arab customers who had petro $$$. FR has had articles on A380 vis Boeing for years. The $/euro has been stressed all along.
yitbos
Ping
What did Bear Stearns charge, up until recently?
Can you explain two things? (1) A bit of a primer in chart talk, such as cup-and-handle, doji, etc. (2) Maybe you’d know why gold mining stocks are not running up nearly as much as gold itself?
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