How many rosy scenario articles are in Barrons today? Sure seems like quite a run of rosiness. I wonder why?
Posted on 04/27/2008 3:01:19 PM PDT by shrinkermd
When the Federal Reserve cuts interest rates for a seventh consecutive time this Wednesday, it will begin to wind down a pernicious campaign that has flooded the market with cheap dollars since last summer. At the same time, the whoosh of air from Europe's deflating credit bubble puts new pressure on the European Central Bank to begin cutting borrowing costs in order to goose growth.
The strategy shifts by central banks will drive a greenback comeback against the overpriced euro, turning back the 15% slide that since August has lifted the euro -- to a record $1.60 last week -- even as the dollar continues to struggle against the undervalued currencies of Asia.
Monetary policy isn't the only catalyst for a healthier dollar. "A lot of what has happened since last summer also is emotional, and that can change on a dime," says James Paulsen, Wells Capital Management's chief investment strategist. Among other drivers: mounting evidence that the credit crisis loosening its grip stateside is still tightening across the Atlantic, and a growing belief that the U.S. economy could bottom and rebound before Europe's.
The rehabilitation, ironically, is driven by a weak dollar, which makes bargains of our exports, fills Manhattan's 65,000 hotel rooms with European tourists, and entices foreign giants from Ikea to Toyota to open factories here to exploit our increasingly cheap labor.
Already, the dollar has begun to strengthen against commodity-driven currencies from the Canadian loonie to the South African rand, and odds are it is close to a bottom against the euro, sterling and most developed-world currencies. On top of that, "negatives about the dollar are more fully discounted compared to the potential positives," says Marc Chandler, Brown Brothers Harriman's currency strategist, who expects the euro to pull back to test the $1.40 threshold this year
(Excerpt) Read more at online.barrons.com ...
A lot of them have been since 2006. Can’t find the link right now that supports that statement, but I’ll keep looking.
I certainly hope so!
The people who are shrieking about the tens of trillions of dollars of derivatives are either stupid of have an agenda. I liken them to the Y2K doomsayers. Yes, there was a code issue that required attention prior to the year 2000. Everyone knew this and knew how to make the required changes. Of course, we know about the horrible catastrophe that occurred on January 1, 2000 (sarcasm off).
The overwhelming majority of derivatives are used to manage risk. While I agree that Level 3 asset accounting is bizarre and easy to manipulate, value loss events associated with writedowns typically trigger counterparty payments in the nature of a margin call for a borrower against stocks to put the asset values in balance with the associated liabilities according to the contract formula.
To read the hysterical rants of some of “the-sky-is-falling” crowd is amusing. I have never found a better barometer of macroeconomic financial condition than the market. It is speaking loudly now that the worst of the credit pinch is over and that the worst of the excesses (particularly subprime residential real estate mortgage lending) have been managed or adequately reserved for (by a combination of asset writedowns and new capital infusions). I am in agreement with those who see a second half recovery, especially in financial stocks.
From where I sit, the people who should be worrying now are those with 2009 calls on oil and other bubble commodities that are going to deflate big time.
Ya know, I find it kind of entertaining to see the bastions of college educated liberals losing their shirts, Kalif,NY,etc, while us'uns down in the stupid south are not.
House prices leveled out for a year or so and now are going back up. This does not include fools buying concrete boxs on the Gulf of Mexico, condo's, or the optimist's that signed up for ARM's. (I never understood the logic in those.)
How many rosy scenario articles are in Barrons today? Sure seems like quite a run of rosiness. I wonder why?
Because we're doomed?
One thing I have going now is my shares are increasing greatly. After the turn everything should look good. I’m in a high risk category and not recommended for the faint.
Not to agree or disagree - but are you aware that the for most financial companies (MS, LEH, GS) these level II assets are greater than their entire capitalization?
Not to agree or disagree - but are you aware that the for most financial companies (MS, LEH, GS, etc) these level III assets are greater than their entire capitalization?
For the past eight years, regularly and magically, the county auditor has waved his magic wand, and suddenly my house was worth more! (On paper, anyway.) A house we bought for $43,000 twenty years ago topped out at $110,000. Now, all this means to me is I have the pleasure of paying nearly 3 times the property taxes to my local government for little more than good garbage pickup. If I don't plan on selling my house (and trading up to even higher taxes for a level of consumption I don't want to adopt) this supposed value, which I could never actually get for my house, means nothing to me.
Over this time, I have watched Bright Young People speculate and make a killing in realty. I have watched Greedy Wastrels Of All Ages rush in to buy sub-rate homes they couldn't afford from banks drunk with profits who should have known better than to sell homes to these people. I have watched the Democrats who dismissed Bush's perfectly sensible tax cuts as "Voodoo Economics II" pat themselves on the back for "helping the poor man own a home he couldn't afford otherwise." And I have watched ENDLESS federal and local feel-good giveaway programs funded with the ever increasing tax dollars generated by artificially low interest rates pandering to people who never thought far enough ahead to actually ponder what "variable rate" really means.
After this tsunami of spending, now my local government is pulling its collective hair out over the giveaway programs they can no longer fund...and surprise! They are insisting that not only won't my property taxes be going down because my home is worth less, they are going to need me to pass a whole BUNCH of new taxes to pay for the giveaway programs they enacted without asking me in the first place!
If anyone can find Reagan's GOP, the ones who thought we should not only cut taxes, but send nonproductive government paper pushers home permanently, please let me know!
“quite a run of rosiness”
It’s their rosy red bottoms.
Don’t you worry.... that big rebate check is in the mail! It will solve it all.
Gosh, you think Barrons is in on it too? They're in cahoots with Bernanke and JP Morgan?
That’s surely amusing to the few who are convinced that mockery is proof of their own superior intellect.
You are, if you've been playing the U$D up, for the last few years.
Maybe Barrons utilizes a different set of Bollinger Bands than the rest of us :)
Or Arabs...
I don’t play really long-term positions anyway, but you’re right about that if you trade from 40,000 feet and you’ve been a dollar optimist.
However, the Euro is seeing it’s own problems as of last week. The ECB can’t sustain their current rates forever, and now the ugly economic data has started to come in. Their relatively high rates are primarily the reason for Euro gains against the dollar. That is starting to unwind now, I think- but time will tell.
I have a feeling that it will hurt the EU throughout the year, if they continue to believe their own socialist stupidity. They don’t have the philosophical capacity to dig their way out unless they abandon it for real capitalist thinking. It will be interesting to see how long it lasts.
The real threat to us is if China unpegs the yuan to the dollar, or if fat Middle East money is pulled from US investments. That will hurt.
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