Dollar decline, round II, starts here

[mtzianos]

Quote from MrProfit:

4 months are on my TA charts.


Look, the money market is like a sponge.
You soak it with water and at one point it won't accept any more water.

USD is a simmilar issue.

~60 billion dollars every month with no CB's interest to keep them.
The sponge is well done now.

Be realistic.
It's all over.
Look around.
The market is flodded with US Dollars.


http://www.contraryinvestor.com/imagesCImain/foreignpurchUSTs081605.png

The facts you suggest have existed throughout 2005 and yet USD held very well. As I wrote earlier, both Japan and China are inflating their money supply with double-digit rates (China is printing money at 18% rate) and buying USD.

I think the wildcard here, again, are the central banksters (bank+gangsters) and primarily Japan's. Which is already on the hook for $420billion (USD not Yen) of counterfeit money, printed solely for forex manipulation in 2003/2004.

Under the idea of "if you owe the bank $100k, you have a problem. If you owe the bank $100mil, the bank has a problem".

We have cornered rats in this situation and desperate men do desperate things (look at the Yen for example).

 

[MrProfit]

Quote from mtzianos:

The facts you suggest have existed throughout 2005 and yet USD held very well. As I wrote earlier, both Japan and China are inflating their money supply with double-digit rates (China is printing money at 18% rate) and buying USD.

I think the wildcard here, again, are the central banksters (bank+gangsters) and primarily Japan's. Which is already on the hook for $420billion (USD not Yen) of counterfeit money, printed solely for forex manipulation in 2003/2004.

Under the idea of "if you owe the bank $100k, you have a problem. If you owe the bank $100mil, the bank has a problem".

We have cornered rats in this situation and desperate men do desperate things (look at the Yen for example).

You are VERY incorrect. Wake-up. Japanese rely on fuel imports. They are in fear of inflation. They will NOT continue to influence the FOREX with the USD purchases. On the contrary. They ARE NOW in the process of selling their UST to keep the USD/JPY steady. Japanese want strong YEN now. BOJ will ultimately secure strong Yen in 2006.

I'd say the primary goal of BoJ is to secure Japanese monetary policy. This is way more important than supporting their exports. I'd also say the total holdings of BoJ are just one of their tools to reinforce their policies.

BoJ will never act as a regular market participant worrying about their return on investment. Their point of view would always be the best interest for Japan. Therefore if they say they want a strong yen - thay will also support it.

 

[killATwill]

couple points here...

if dollar bulls are right, the trade deficit will get worse - to the point where, if history is any guide, a correction will get as close to imminent as possible. remember though, there has never been a current account deficit in a g7 nation that hasn't reverted within a year after crossing the 7.5% of GDP line. the dollar index can easily drop by half from here as a way of bringing the current account to equilibrium. yes the dollar dropped against the euro, but not much against asian currencies. get ready for round 2, and take a look at the attached pic of current account reversals.

the other point is that japan has been in a liquidity trap. they have been trying to create inflation for years. i'm not an expert but i doubt they would try to squelch a trend of rising prices after they've been trying like the dickens to create one in the first place.

 

[MrProfit]

Oh, man. How can you compare all these countries? What's their GDP, man?


Do the math:
Look at the mortgage growth in the 2004. It was the largest 1 year growth EVER. The real estate prices went up so much, that the average loan went up rougly 60% in 4 years. So the market now is more vulnerable to rate increase than ever before. Therefore 4% now is like 6.5% in 2001 in terms of a comparable mortgage payment! 5 years ago market froze and we had FUNDS rate cut from 6.5% to 1%. Now, we face an increse to 4.5% in January, which imo is about 7% as of 2000. Prices went up, and salaries were not indexed by inflation. Gas is up over 200% since 2001. Wake up. This market will not hold that. The real estate correction is taking us to an unknown territory. There is no other way for USDX but down. Down quickly.

Quote from killATwill:

couple points here...

if dollar bulls are right, the trade deficit will get worse - to the point where, if history is any guide, a correction will get as close to imminent as possible. remember though, there has never been a current account deficit in a g7 nation that hasn't reverted within a year after crossing the 7.5% of GDP line. the dollar index can easily drop by half from here as a way of bringing the current account to equilibrium. yes the dollar dropped against the euro, but not much against asian currencies. get ready for round 2, and take a look at the attached pic of current account reversals.

the other point is that japan has been in a liquidity trap. they have been trying to create inflation for years. i'm not an expert but i doubt they would try to squelch a trend of rising prices after they've been trying like the dickens to create one in the first place.

 

[Ivanovich]

Quote from MrProfit:

You people are blind.
US Dollar goes down next year. Period.

Mr Ivanovich:

You're smart guy. Don't be fooled by some 3rd party statistics or cheap talk.

I don't understand you. Do you think I'm making my plays for the next few years now? Of course not. Even if what you say is correct, and the dollar begins to decline again next year, well what will happen?

1. At the onset of the reversal I may have one or two, possibly even three of my stops hit (that's why stops were invented).

2. A new trend will resurface and I will follow IT instead.

I've stated repeatedly that I am neither dollar bear or bull. I'm a profit bull, meaning I'll trade what I believe will occur in the timeframe I look to play. If the dollar goes north, south, or sideways, I'll be there right along side of it making money.

That is, after all, the point of trading.

So you're beware commentary is thoughtful and appreciated, but do you really think it's going to get me?

Come on now.

-Ivan

 

[Ivanovich]

Quote from mtzianos:

The funnymentals, as I interpret them, suggest that USD goes lower. When, is unknown. The rationale has been beaten to death over the past few years.

The current scenario suggests a US slowdown / recession, as the US consumer gets squeezed by the combination of higher costs and the housing ATM stops working, as the housing bubble stops inflating (due to higher interest rates).

Many early indicators suggest tgat housing has already started to decline. Have a look at
http://calculatedrisk.blogspot.com/

Ok, I'm still confused, my friend. Nowhere did I say that long term the dollar is going up/down or doing loops. I simply have been saying for months now that it's all dependant - short term - on rates and the perception of where rates are going. If that stops, then we return to structural problems.

 

[mtzianos]

Quote from MrProfit:

You are VERY incorrect. Wake-up. Japanese rely on fuel imports. They are in fear of inflation. They will NOT continue to influence the FOREX with the USD purchases. On the contrary. They ARE NOW in the process of selling their UST to keep the USD/JPY steady. Japanese want strong YEN now. BOJ will ultimately secure strong Yen in 2006.

I'd say the primary goal of BoJ is to secure Japanese monetary policy. This is way more important than supporting their exports. I'd also say the total holdings of BoJ are just one of their tools to reinforce their policies.

BoJ will never act as a regular market participant worrying about their return on investment. Their point of view would always be the best interest for Japan. Therefore if they say they want a strong yen - thay will also support it.

MrP, ofcourse I agree Japanese PEOPLE would want a stronger Yen. Afterall, whereas one can argue that US might benefit from a temporarily weaker USD (to decrease the value of its accumulated outstanding debt and pay its debt back with cheaper dollars, sortof pardoning part of its debt), the opposite is true for Japan (Japan is the world's biggest pool of private savings).

But the issue is what policy BoJ banksters and politicians implement!

Just look at USD/JPY! Yen has lost about -15% of its value in 2005. Yen has been the weakest of ALL confetti currencies!

The Goldman Sachs Commodity index (mostly energy) expressed in Yen has increased by a whopping 70% during 2005.

In another thread ( http://www.elitetrader.com/vb/showthread.php?s=&threadid=51798 ), we have discussed the Yen issue in more detail.