Bolster the Buck!

I have been saying watch the US Dollar for clues as to equities. In a liquidity-driven market (aka a Bubble Echo market) the huge global monetary stimulus is popping up as rising equities and dropping Dollar.

Today the effort to bolster the buck has accelerated. Wave Theory noted 74.50 in the Dollar Index as a key level; apparently the break below 75 and the run down to 74.77, too close to 74.50 for comfort, has spurred a heightened effort by central banks to strengthen the Dollar so as to keep their currencies from rising too much. China sits fat and happy since they dropped their policy of a slow rise in the RMB and went back to a link to the Dollar last summer (2008), and it has kept them competitive with the emerging economies around them. Those economies - and some of the older Asian Tigers - have seen their currencies rise against the RMB as the Dollar drops.

It is an odd global economy when everyone is in a race to the bottom, including the US. Yet that is what all this monetary stimulus means. The US needs China to buy Treasuries, so has backed off putting pressure on them to let their RMB rise against the USD. In that dynamic someone gets hurt. Not everyone can race to the bottom! In the West it is Europe whose Euro is hovering at the $1.50 level; in the East it is the emerging economies who were taking manufacturing share away from China. 

The many emerging Asian countries (ie. other than Japan & China) lack the scale to truly move the USD; so it is the intervention of the European ECB that is critical. News on this is mixed; an sketchy goldbug site claims a "secret plan" by the ECB to intervene. Geitner made the obligatory remarks supporting the USD in Singapore yesterday, and may have encouraged a coordinated effort by Asian central banks to intervene, but he lacks credibility. Perhaps the most telling snippet is the ECB indicating it is preparing to exit the heavy monetary stimulus. In any event, if the ECB is intervening they will try to keep it secret as long as they can. 

If the US Peso has truly bottomed, it signals not the end of global monetary stimulus, nor end of the beginning, but the beginning of the end. Now the ball will go back to the court of fiscal stimulus: if the Fed begins to exit gracefully, with global coordination, but the US economy is still on government life support, Obama will have to come up with yet another Porkulus Stimulus in the new year.

Comments

[Mamma Boom Boom]

I've been thinking that gold was a black swan, ready to take a dive. It certainly fits the scenario.

[Michael]

Paul Tudor Jones disagrees with you and your "scenario" . . .

http://www.scribd.com/doc/21753600/Tudor-Third-Quarter-Letter

:)

[RNB]

Yelnick,

Essentially the RMB has been pegged to the USD at 6.83 for quite some time (since the blow ups last year). Thus, since the USD has fallen against most currencies, the RMB has also fallen by default. Eventually (maybe now) other countries will realize that a weak dollar is not in their best interest since the Chinese have a "competitive" advantage against their economies because of the default peg with the USD.

It is quite strange how everybody is linked with everybody else directly or indirectly!

[da bear]

Robin Landry and others had DOW 10,350 as a target high.
well, yesterday the DOW got damn close to it but couldn't close there.
and today stocks are down.
so the top could be in.
and the dollar low could be in.
gold could then correct to $800 or $900.

da bear

[da bear]

Primary wave 3 is coming soon.
but i think that Figure 5-7 of At The Crest of the Tidal Wave is right on (as far as wave count goes, not time) so we COULD be at the start of wave 3 of C down of Grand SuperCycle Wave C.

Wave 3 down in this scenario would be TOTAL GLOBAL ECONOMIC COLLAPSE.
Wave 4 up in this scenario would be TOTAL GLOBAL WORLD GOVERNMENT.
Wave 5 down in this scenario would be TOTAL GLOBAL RAPTURE.

Any questions?

da bear

[joe]

Yelnik - you know the question as a trader here - is there going to be a squeeze on dxy shorts when it hits the 2nd gap?? What point do you think is necessary to start the squeeze? 76.25?

I will just point out, "kill the dollar Russia" was one of the buyers today. They said one thing and did the other - not surprising.

99 to 1 shorts on dollars - seems to me it will just take a gentle breeze to fall that house of cards.

What level are you looking for on dxy??

Joe

[yelnick]

Joe, I think the STU has pegged the level to watch: DX76.82, the prior wave iv top. Whether or not the Forex world is focused on ewave, a break of that level will be a huge signal that we are out of the downturn, at least for a while. The next level above that is 77.50.

[joe]

You know - I would have or did say 76.90 yesterday. It is lower now, I can sense it.

It is going to hit that 2nd gap now - and if it does, I think there will be fireworks.

Joe

You by far have the best site on the internet I have ever seen - the quality of the posters. It is amazing.

You are very good.

[twitter.com/DrBubb]

"Paul Tudor Jones disagrees with you and your scenario"

PTJ is a smart guy. Has made tonnes of money, but if he's so clever on Gold, why did he wait for a 4-fold increase in the price before buying?

I think he made the last $100-150 dollars of the price move, but don't expect him to hold thru a $100+ drop. He and the other Hedgies than jumped in will turn sellers if the price falls thru their stops, then the slide may really begin.

[joe]

You know Nathan - I think you have the makings of a really good trader - ask the right question at the right time.

You will do well.

Joe

[Michael]

"PTJ is a smart guy. Has made tonnes of money, but if he's so clever on Gold, why did he wait for a 4-fold increase in the price before buying?"

--- Nathan D.R. Bubb | Thursday, November 12, 2009 at 02:34 PM

Who says he did?

[joe]

Miachael - Nathan is quite right - he really did "double clutch"

You will get hurt Michael if you end up defending a bad situation and think you have to.

Back up - and think it thru. I don't want to see you get hurt - and it seems to me you think you have to prove something because of a position you took yesterday. Every single day - you can be a buyer or a seller - and every single day you have to reevaluate that. The smart people do - the people that don't or can't are doomed to fail. It is really true.

Joe

[Michael]

Joe,

How do you know that Paul Jone's has "double-clutched" on his opinion on Gold, let alone his actual position on Gold? Do you read through his most recent investment letter to his investors? Have you ever met the man? Ever worked for him?

I have, on ALL THREE COUNTS.

In fact, I was his COMEX broker back in 1986 and a full-time employee of his at the Tudor Investment Fund.

[joe]

Yeah Michael I do. I was a financial principal in 1987 - and frankly I always thought of him as a little worm - and that is exactly what he has proven to be.

You understand - I was a series 27 officer Michael - you understand that, right??

Joe

[joe]

I know - let me make this really plain for you. In 1987 I was the fin/opps guy at a "broker deal" - I met Prechter - cause his book was just out and he was hustling his services. I watched in horror as that October played out - and I ever ever forgot that time.

You know what a really good "market timer" is? - anyone that gets it right more than 51% of the time and that is a fact.

SO my first experience with the Elliot wave was trying to pick myself up after just getting the shit knocked out of me from those "waves."

Let me tell you, the first thing you learn after getting the piss knocked out of you is how to avoid getting the piss knocked out of you in the future.

Joe

[joe]

Yelnik -
Some years ago, after that 1987 thing my real experience with the SEC was with a company I was a director for - I screamed to shut down trading in that goddamn thing - I knew damned well the spin. I got nothing - and the louder I screamed the louder that "nothing" got.

So tell me again how that "stock thing" works???

Maybe I missed something.

Yelnik - My father was one of the most decorated pilots in the USAAF - My mother was a Nurse in Europe then - and they were both probably more liberal than I am now - I am not trying to be cute man - just realistic. I am sick of hearing that "Obama did this or that crap" - My family could do a war - start to finish - and I am sick of hearing how some wannabe - and I call BS - and if you want to tell me how to do a war - better tell me how to die first.

I grew up with that kind of death -every day of my life. Funeral by funeral.

I think you and I have a differnt kind of politics Yelnik - but a similar kind of capitalism.

Lets just stay with that ecconomic macro and skip the political. You will not appreciate my take on war at all - I wanted to study war to make sure it was not so necessary - and that was my conclusion in the end too.

Joe

[joe]

I will say this one last thing - some years ago I wrote a book about the war and Libra press published it.

It was called "On a Wing and a Prayer" -and I wanted it done FBO the people I came to love over those early years of my life - came to worship. I gave all proceeds to them from that book. It was always their book to me anyway. I just got to write it.

They stood up for us once - and I want to think we would do the same for them. I will.

Joe

[yelnick]

Joe, I assume your comment about keeping the political out refers to characterizing the Obama Stimulus as a Porkulus? You must be relatively new to this blog as I have referred to it that way previously. I appreciate the time you have spent on comments, and would like you to continue, so out of a due respect for you and your opinions please allow me to set forth why I use that characterization. It wasn't chosen lightly, albeit it was borrowed from an Obama opponent.

First, the Stimulus was very poorly structured and hardily deserves to be deemed "Stimulus". You may have read commentators deploring why China can do a stimulus right and we can't. Well, we certainly could, but chose not to. This bill had ulterior motivations that were for political advantage not stimulus, such as postponing much of the spending until the election year in 2010. I have analyzed it previously, and concluded that only about $100B of the $787B is stimulus in the Chinese sense. Much of it is financing various political fancies and paying off factions (such as ACORN getting part of $5B). A major part was a tax rebate that has been dribbled out in small chunks. We have had three prior experiences with one-time tax rebates: once under Ford and twice under Bush. The conclusion was reached years ago: one-time tax gimmicks do not stimulate; they are saved or used to pay down debt. Only a permanent change results in stimulus, either investment (which is then spent by the company) or consumption. Obama had to go no farther than his own Economic Advisor, Christina Romer, who studied this.

Second, the Stimulus is already seen to be a failure, even as much is left to spend. We are right now in Peak Stimulus - the peak of quarterly spending. The impact is hard to measure. In Q2 defense spending was the major contributor, not Stimulus spending. In Q3 about half the GDP growth was due to a gimmick - cash 4 clunkers - that was a one-time event that I believe was not part of the original Stimulus. A make up for a prior mistake so to speak, and one of dubious value since it seems to have largely just pulled demand forward, not saved the auto industry.

Third, the Stimulus is properly understood as a pork bill. It needed to be laced with earmarks to get it passed. Similarly, the ill-designed TARP of Bush was meant to be $700B, but required around $150B (or was it $180B? I lost count) of earmarks to get it passed. One of the inane moments in the debates last year was McCain railing against earmarks and Obama saying "but they are small relative to the Trillion-Dollar budget." Both missed the point: earmarks are bribes to get bad bills passed. The problem is the whole bill. And the bribes have gotten ridiculously large. Just think of how awful the healthcare bill has become to gain enough votes in the House.

Fourth, it is hard for me to understand how one can separate politics from macro economics, certainly not right now when so much of macro is intertwined with politics. Just read any Krugman column in the NYT; it is hard to fathom him as an economist anymore since his political agenda is front and center and the economics merely a backdrop.

Finally, I think this is a time for calling out our leadership when they intend to obfuscate and disguise. It helps to use hard-hitting words, not fall into the Orwellian milquetoast of much academic discourse. As a recent reader you may not appreciate that I used the same shots against W as I do against Obama. His tax cut for example was very poorly considered, and his policies have helped pluck the Golden Goose of venture capital about dry. While not in this thread of my blogs, his Clear Skies Act was an Orwellian abomination since its purpose was to eviscerate the Clean Air Act. It just so happens that Obama is in power and seems to be a master at the sleight of hand of saying one thing and doing another. Better to call him out than dance around the issue.

[joe]

Oh Yelnik - I don't diagree with you - from all I can tell there is no difference between Obama and Bush on the key issues at all- it is not that at all I am driving at.

It is more to me that- we took a country saved by a great war and are driving it off a cliff - for no greater reason than that a cliff is the closest place to drive it.

I cannot begin to express how pissed off I am about this - how disgusted I am that we did this, how much we pissed on their memory to get to this point.

But to you - The difference between you and I yelnik -is my kid - MY KID - got caught in this little war this time. And I figured our family did enough war to pay for a couple generations of war.

How to say this - If I see one more yellow ribbon on a car - I will piss on it - how is that??

It is not that you did anything wrong friend - it is more along the lines that so many people did the wrong thing.

It is nothing personal - It is more like - any justification of the Bush Administration needs to be purged from our collective history as a country - to me. I will never forgive what they did to my kid - ever. And I have a long memory. I would support Obama totally on the single basis that he is not Bush and cannot send my kid back to hell ever again. Money is just money - fuck with those kids and you fuck with me - that kind of thing.

Joe

[joe]

Yelnik -

I'll add this - from the time I was a kid I have been on parade grounds from Ord to Wood. The difference was that on Ord they were my brothers - by the time it got to Missouri it was my kid.

From as long as I could remember my dad would have violent nightmares once a week. I understood why - because of the killings he had to do in Germany. I never imagined it could be my kid having such nightmares from a war - that he thought was bullshit -how could that be allowed to happen to those kids??

Ever been on those parade grounds? It will strike you quickly, they really are little kids pretending to be soldiers - in 1967 or 2002 - same little kid faces.

No Yelnik - what you do is a good service. Just don't tell me how bad Obama is compared to Bush.

As long as Obama doesn't get kids killed he can burn down the whitehouse and create hell generally - and never in my mind be confined to the hell that little bastard deserves.

Those were little kids he got killed Yelnik - just little kids.From a parade ground in the middle of nowhere. I can't forget those faces - I won't forget those faces.

This has nothing to do you here, You did the right thing.

Joe

[yelnick]

Joe, I wonder why the Presidents since Ike did not take to heart his views about the military-industrial complex. Ike also kept us out of wars after settling Korea quickly. Takes a military man to know the perils and limits of warfare. Bush's dad did a good job of fighting with overwhelming force to a quick end, and then not being sucked into a quagmire. Why his son got stuck in a land war in Asia with inadequate peacekeeping forces and a shifting mission is one of those moments in history that make you shake your head. Why O is dithering in Afghanistan will become another of those head shaking moments. As best I can tell our initial goals in the Afghan theater were met as well as they could be in the first six months; we stupidly let the enemy slip across the border at Tora Bora, but we broke Al Qeada as an organized force. I also believe Bin Laden is long dead; the tapes seem to be digitally concocted. Why not get out? Especially now, where we are in no shape politically or economically to support Imperial wars in far away places.

[Newbietrader]

"Why not get out? Especially now, where we are in no shape politically or economically to support Imperial wars in far away places."

we are squeezing Iran between Iraq (rock) and Afghanistan (a hard place) but not doing it successfully.

Why? cause the Saudis want us to, that's why. It's in their best interests to have Al quada fighting in Afghanistan as opposed to Saudia Arabia. And a check on Iran also is a boon for Saudi Arabia. (shia v sunni and all that)