Dollar decline, round II, starts here

Is this a pivotal time for the dollar?

  • Yes, it's going down - way down from here

    Votes: 23 37.1%

  • Don't worry, still going up

    Votes: 30 48.4%

  • Could care less, and you're crazy

    Votes: 9 14.5%
  • Total voters
    62
Quote from Ivanovich:

Interesting report from IFR:

"The twin deficits drumbeat has subsided a bit in recent weeks as the US continues to suck in unprecedented amounts of foreign capital, far in excess of its monthly needs. But listening to the strategists and media, one would assume that the US is by far the biggest debtor in the world. In absolute terms it is, owing to the colossal size of its economy, but on a deficit to GDP basis, it comes off quite favorably compared with its European rivals. From this morning"s GDP report, our economists calculate the US deficit/GDP ratio at 2.9%. A year ago, the ratio was 3.8%. Compare that the France, Germany and Italy which have chronically missed the 3.0% cap for the last 3-4 years and will likely do so again next year. Just today, Italy announced a "goal" of 3.8%. All things considered, not too bad for the greenback."

And which "Long Term Trend" would you say is "sharply down"?

Lastly, can you please verify what source you use to determine that dollar shorts have all been cleared out?
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Ivan,

all these threads are a perfect example of how "price makes news" and not vice-versa.

And those who happen to be on the right side of a move, look like geniouses. Like people being long TZOO during its parabolic run-up. Or oil longs 2 months ago. Or nowadays GOOG bulls (hint: wait until it finally gets into SP500 and see what happens next).

On the USD issue:

If those "unprecedented amounts of foreign capital" cited in IFR were "real" savings, then I argue that foreign central banks wouldn't have to absorb almost HALF all US debt issuance (go look at the auction results). Plus all the agency paper (FNM) which Fannie has been unloading. And do so by printing fresh counterfeit money (not all of it, but most of it).

And this artificial, government created, demand by FCBs is in addition to the fund flows due to tax-free corp profit repatriation of 2005.

What is private US capital doing? It's flowing out of US for several years now. Recent stats showed that 30-40% (depending on country) of EU stocks were held by US citizens.

And where exactly are those "unprecedented amounts of capital" being parked ? Both US stocks and bonds are flat or LOWER than 1yr ago. Compare this to e.g. the meteoric rise (15-30%) of EU stocks and EU bonds yields being at all time lows, which proves "real money flows".

Also, go look the projected new debt issuance by US for 1Q06. Go look at the savings rate in US (negative for several quarters now). Look at the savings rate in EU or Asia. And think about the consequences of having to pay back accumulated debt with more "valuable" dollars.

When comparing debt/GDP, keep in mind the US GDP data are imo in the same category with CPI, unemployment etc (i.e bogus gov stats, comparable only with itself through time).

Having said, with confetti currencies and politicians in the middle, it's very hard to make long-term projections.

But for such policies to work, sheeple cooperation is necessary:
E.g. USD/JPY touched 79 ten years ago and it's now almost 117. Commodity index in Yen is up over 60% YTD. Incredible erosion of the buying power of their savings. Talk about boiling a frog alive.
 
i'm a very passive trader. my trades typically take months, sometimes a year +, so I'm not sure it will be that entertaining to read my trades. I'm at the plate, I've started my swing...we'll see if i make contact or whiff.

Quote from Ivanovich:

LOL...not sure that's meant as a compliment, is it?

Feel free to take dollar shorts, Killa, and make sure to post them here.

If you believe that strongly in the round 2 of the dollar decline, step up to the plate.

I'm not saying you're wrong. I believe you are, but knowing and believing are two distinct things.
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Quote from mtzianos:

Ivan,

all these threads are a perfect example of how "price makes news" and not vice-versa...
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Read through your post, but am confused as to which side of the fence you're on. Are you supporting the USD goes lower theory or not?
 
Quote from LionTrader:

Dollar has turned, and that's it. You won't see 1.35EUR/USD for a long time, if ever.
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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.

This is THE top. Top of the tops.
It would be naive to think all goes down at once. On the contrary.
We are still in the growth and prosperity never experienced before!
No wonder we don't see all the slow down we should.

I already made my point here sometime ago. In my opinion we are on the edge of the dollar crash.
I think this move will take approx. 4 months with the peak of the move somewhere between February and March 2006.
This will balance the current account.


You people are closing your eyes to the slowing paste of mortgage applications.
You obviously overlook the car market collapse. The real estate prices are going down. The REITs are going down like never before for the last 20 years.
Gas on the pump went up more than 50% (currently ~65%) over last 24 months which ALWAYS triggered depressions over last 25 years.
The GDP of this country depends heavily on the monetary expansion. No expansion = no GDP growth. No GDP growth = labor market shrinkage. Smaller Labor market = more unemployed Americans. This leads to lower revenues. Lower revenues = higher deficit = higher risk = higher yields = slower growth.
Slower growth = more unemployed and less mortgage applications.

This is reality, Mr. Ivanovich.
I do not know where you are, but I am here in the heart of this and I assure you it is real.

This will not last any longer.
I am giving the US economy 1 year from now until it freezes.

FYI: I was long on the USD for the whole year of 2005 until 4 weeks ago.
 
i agree that the dollar is likely to go down, but do you have reasons why you think it will go so quickly? just wondering what your logic is. Our current account situation is nearly 3 times as bad as it was in the 80s before the plaza accord, and it took a couple years for the dollar to drop and bring the balance of trade to equilibrium.

Quote from MrProfit:


In my opinion we are on the edge of the dollar crash.
I think this move will take approx. 4 months with the peak of the move somewhere between February and March 2006.
This will balance the current account.

[/B]
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Yes, of course I have reasons to think so.

I explained these briefly here:



http://www.elitetrader.com/vb/showthread.php?s=&threadid=57444


It is a wide issue and as such requires a lot of resources and explaining.

I just want to make a strong point here:

Japan is currently SELLING their UST.
China is currently escaping the dollar in the amount of 19 billion per month.

The current inflow is mostly from EUROPE, thus it is hot and unreliable inflow.

This is VERY DANGEROUS.

For the last few years we had a steady paste of interventions from CBs in Asia.
They just widened their monetary bases in order to keep down the USD liquidity.
Hot money from Europe is just what it is. Hot money. They will leave as soon as they realize their mistake.

Without CB's the dollar will not hold its value. No f*ing way. It is impossible.
Unsustainable.

Why now?
Again I'll repeat:

It is the flow NOT the % moving the market.
Ultimately if the flow is negative - the dollar moves down.
% is just a tool to hold the market.
FED FUNDS is just holding it together for a while.
But without the ASIAN CB's the market CAN NOT stay at this level any longer.

European funds cannot hold the market, because it is not the ECB creating the long position in USD as a part of it's monetary policy, but it is speculators from London hunting for few dollars risking their fortunes along the way.


NEVER FORGET it is 65 billion dollars PER MONTH in current account deficit.

NEVER FORGET the USA economy is THE BIGGEST ONE IN THE WORLD!

NEVER FORGET the deficit IS NOT GOING TO DISAPPEAR without MAJOR exchange rate move.

This is not going to hold.
That's why.


One more thing.
Ultimate goal of ANY CB is to keep their market together and the inflation in check.
Most of the markets are such, that the foreign trade is only a small percent of the internal activity.
Therefore it is very logical to assume that if there is an internal pressure on prices the CB will more likely compromise their exports in order to save the internal activity from the inflation.
That is why BoJ and BoCh will forget their sentiments towards the USA and their exports into the USA.

It is just one step from reversing their monetary policies of weak currencies.
 
yes, I understand what you are saying, but why 4 months? that just seems a little arbitrary to me.

Quote from MrProfit:

Yes, of course I have reasons to think so.

I explained these briefly here:



http://www.elitetrader.com/vb/showthread.php?s=&threadid=57444


It is a wide issue and as such requires a lot of resources and explaining.

I just want to make a strong point here:

Japan is currently SELLING their UST.
China is currently escaping the dollar in the amount of 19 billion per month.

The current inflow is mostly from EUROPE, thus it is hot and unreliable inflow.

This is VERY DANGEROUS.

For the last few years we had a steady paste of interventions from CBs in Asia.
They just widened their monetary bases in order to keep down the USD liquidity.
Hot money from Europe is just what it is. Hot money. They will leave as soon as they realize their mistake.

Without CB's the dollar will not hold its value. No f*ing way. It is impossible.
Unsustainable.

Why now?
Again I'll repeat:

It is the flow NOT the % moving the market.
Ultimately if the flow is negative - the dollar moves down.
% is just a tool to hold the market.
FED FUNDS is just holding it together for a while.
But without the ASIAN CB's the market CAN NOT stay at this level any longer.

European funds cannot hold the market, because it is not the ECB creating the long position in USD as a part of it's monetary policy, but it is speculators from London hunting for few dollars risking their fortunes along the way.


NEVER FORGET it is 65 billion dollars PER MONTH in current account deficit.

NEVER FORGET the USA economy is THE BIGGEST ONE IN THE WORLD!

NEVER FORGET the deficit IS NOT GOING TO DISAPPEAR without MAJOR exchange rate move.

This is not going to hold.
That's why.


One more thing.
Ultimate goal of ANY CB is to keep their market together and the inflation in check.
Most of the markets are such, that the foreign trade is only a small percent of the internal activity.
Therefore it is very logical to assume that if there is an internal pressure on prices the CB will more likely compromise their exports in order to save the internal activity from the inflation.
That is why BoJ and BoCh will forget their sentiments towards the USA and their exports into the USA.

It is just one step from reversing their monetary policies of weak currencies.
More...
 
Btw, the E.U/London specs MrProfit is talking about:

I assume he's infering from US Treasury TIC flows, which indeed show that the main big buyer (besides the Carribean pirates) has been UK (note: this include Isle of Man, which again is a base of offshore funds).

Personally, I think those UK buyers are petro-dollars, but I agree that their nature is probably short-term.
 
Quote from Ivanovich:

Read through your post, but am confused as to which side of the fence you're on. Are you supporting the USD goes lower theory or not?
More...

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/
 
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