Bite your tongue Jerome.

I told Bush; don't play chess with the freakin' Russians.

Euro has now hit 1.39

Pierre

I don't think so. It likely will get worse but there needs to be a quite a cascade of things to happen before 2:1 is achieved.

Please though, pray to the gods of money markets that it doesn't happen before I cash out of here.

"C'est un scandale !"

Thanks for a very opportune thread Jérôme.

As I write the € is breaching 1.39 in intraday trading, and we have the USDX below 79.50. The USDX has now been below 80 for four consecutive trading sessions and will keep until Tuesday.

Everyone's expecting a rate cut by Tuesday, the discussion is around the value - 0.25 or 0.50. I'm not that certain a rate cut will come given the greenback's dire situation. See it to believe it. But the secular downward trend will keep there.

The USDX all time low is 78.33. I expect at least a new bear-rally before that mark is reached. But if there's a rate cut by Tuesday we could see values close to that before a new bear-rally; the 200dma is leaning perilously downwards which could be a signal of acceleration of the secular downward trend.

Meanwhile Jean Claude Trichet has been continuing with his injections. There's no point in giving injections to a dying man.

We are very far from a $2 €, but a 1.5$ series looks promising. I do not venture to predict the dollar's final bottom, right now it look really far away, but we can have an aggressive move on money supply like in 1980 if the Fed comes to think that a Recession is inevitable.

As for Oil, I guess everyone understood how hollow that 500 kb/d promise by OPEC was. If the Cartel is producing more than 1 Mb/d above quota, what's the point? Ali Samsam Bakhtiari once said OPEC died in 2004 when its pedal hit the metal. It is not exactly clear if there's any spare capacity at Saudi, but Bakhtiari's words look very right today.


Vencit omnia veritas.

There is a reason I haven't been to Europe since 2002... I cannot afford it. I had figured the weak dollar policy of the Bush administration works in two ways: 1) the national debt slowly becomes worth less to those who hold it and 2) keeps a lot of Americans at home, isolated from the rest of the world.

It is interesting to read the press reports of the one year period that ended with the 1929 crash. Each upward fluctuation in the market was hyped as a sign that all was OK.

Some of this was self serving by those who were trying to get out, but this was a minor factor. Most people just didn't want the party to end. If you look at price fluctuations during the period you will also see something that resembles what has been happening recently, the sharp swings accompanied by contradictory explanations.

We have a disease of swamp maples around here where the fungus eats away the core of the tree. It continue to look OK for a long time since the nutrients flow through the outermost layers, but the first good storm and they all fall over.

This is so common that the localities now test the trees and cut down the ones that are weakened even before the signs are obvious. There is no core drilling in the financial markets, but there needs to be.

Assuming one wanted to unwind one's position how would you go about it? Where would you put your money? During the stagflation of the 1970's both stocks and bonds did poorly.

Assuming a society wanted to unwind it's position how would it do it? Do the central banks even have an idea what to do, and if they do, do they have the will?


Policies not Politics
---- Daily Landscape

Oil above $80 for the first time

In the long run, we're all dead. John Maynard Keynes

Keep in mind that futures markets have a mass hysteria element to them.  Just 4-5 months ago, with WTI at $68 and Brent closer to $70, US gasoline was bouncing off the moon at $2.40/gallon = $ 101/bbl.   With a double handful of refinery problems in the mix we got a shocking $30+ bbl. This was in April/May BEFORE true gasoline season.  

The herd believed there was a good chance of a shortage and bought more than they needed and held on to anything surplus "just in case".  Add to that, speculators bidding into a vacuum and you get a price bubble.

Then what?  Nothing.  No shortages, refining came back and gasoline prices receded to $2.00/gal even with crude steadily rising.  We now have $80 WTI (Brent back under which is more normal) with $2.02 gasoline.  Crack is under $5/bbl.  That's pretty low.  Heating oil is the product with the margin now so stocks may build fast there.

On Sept 12th, no one is short petroleum.  This is the lowest demand period of the year.  Refiners are doing maintenance and stockpiling for winter.  Distillate stocks are already generous in the US (anyone seen reports on German home stock levels?).   Any panic now is purely anticipatory.

OPEC has drained world inventories a bit since their cuts last November and Feb, and are relaxing now that non OPEC supply increases only came to 600 MBD instead of the projected 1.5 MMBD.  They're opening the spigot a little, but not enough to make the speculators afraid of a down wave in price.

So what's the prognosis?  With no hurricane problems and normal glide into winter, prices are likely to abate somewhat.  With a warm December, we could do like last year when prices dropped like a stone from $70 to $50 for a brief touch triggering the production cuts.

The dollar -- with Bushco policies in place it's the American Peso.  Guess we'll have to visit Asia instead of Europe for a while.  I doubt we see $2/Euro.  $100 oil is a lot more likely.  

I was thinking about this today. If I remember correctly, when the euro came into general circulation (2002?), it was about US$1.35-40 or so. Now, the US$ is 0.60 euros, so there's been a 50% (did I do that right?) devaluation in the dollar. Thanks, Bush.

Like so many others, I'm probably going to limit foreign travel in the next year because of this exchange rate. I hate the feeling of being trapped in Junior's fortress Amurreka.

If I might respectfully ask those who have some clue about these things (as I myself have none) ... what happens to the AUD if the USD really tanks? I mean, tanks enough so that the whole thing starts to come undone and everyone is fleeing for a decent currency (presumably the euro).

The decline of the USD is a pain for me, as the HKD is pegged to it. When I actually had money to take from Australia to HK, the miserable A$ bought less than five Hong Kong dollars. Now that I actually have to work things the other way, of course the AUD is at all-time highs. Ripped off by fate at both ends, as always.

Sorry to vent. I can't bear it. I'm an utter loser financially, always with my money on the mangiest nag to straggle last over the line.

Thanks, guys. I think I'll just go kill myself now, seeing as I have consistently been on the losing end of every major departure from financial normality over the last fifteen years, i.e. housing market in Australia is always, always, always flat, and I sell a valuable property just before the whole thing goes insane and I could have made the killing that (would have) saved me from near-bankruptcy; I always lose on the FX moves, and so on ... oh, forget it. Where did I put the cyanide? The heavens have spoken, via the invisible hand of the markets ... die, loser, die ...)

Seriously though. Jerome is of course right as regards the trend for the moment. I should buy AUD before the damn thing goes even higher. (Which means pain for me. Now, where did I put the cyanide again? ...)

But, if the USD tanks badly enough, then there is no 'consumer of last resort', and the Chinese economy tanks, and then the AUD is, presumably, worth nothing, because no one is buying any of the raw materials my home country is so eager to flog for pennies on the dollar in the interests of a decade or two of 'prosperity' ... in that event, which may yet come to pass, it would have been nice to have been able to afford some euros :(

OK, so I am a child amongst giants speaking the obvious and ought to be quiet. (It's beer night.)

Actually this raises another thing, OT but I would like to mention it. Howard has now been, I think, the longest serving PM in Australian history. And those pig bastards the Liberals will always be going on about what a great job they did with the economy.

But, of course, it isn't anything to do with them and never has been. The whole thing is to do with the voracious appetite of the Chinese economy for Australian raw materials. A blind dog on kidney dialysis and attended to by a team of drunk and negligent veterinarians could run the country with exactly the same results. Hey, even Australia's Labor Party could do it :)... as they were gearing up to do before a stupid electorate voted for a moral and indeed literal MIDGET named John Howard.

And interestingly, history actually gives us proof. In the 1970s, during the Liberal Fraser government, John Howard (the very same!) was TREASURER - the second-most important post in the land ... and the economy was, of course, utter crap. Or as my father put it (and he is a die-hard anti-communist Liberal voter who literally keeps a copy of 'Mein Kampf' by his bed): 'The bastard never did anything before (in the 70s), so I don't see why any bastard should vote for him now.'

But no. History will record 'the wonderful economic management of the Howard years' or somesuch.

In these days of globalization, it is worth remembering (for Australians, anyway) that saps who make their money on the backs of primary industry have always had their fates determined by international markets. Their governments have meant little, at least in terms of economic policy.

Anyway, again I ask your forgiveness for this. It's late, there has been beer, and I face the uncomfortable prospect of (yes, like I said above) again being screwed over by FX fate ...

But thank you for your patience and graciousness.