lordofdelusion
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Dollar bull
Commentary: U.S. doing a better job restraining money growth than euro zone
By John Dessauer
Last update: 12:01 a.m. EDT June 2, 2008Print E-mail RSS Disable Live Quotes
NAPLES, Fla. (MarketWatch) -- Currency traders know Albert Einstein was right: All things -- especially in the currency market -- are relative.
You can't talk about one currency in isolation. Headlines tell us that the dollar is down. That means other currencies are up. But do they deserve to be up? Are those other economies that much better than the United States? And does the dollar deserve to be down? Is the United States making more serious fiscal- or monetary-policy mistakes?
The answer is no. Popular dollar bashing shows that crowd's ignorance of Europe and Japan. For example, one popular, but completely wrong, notion is that the U.S. is flooding the world with dollars. In fact, the U.S. has been doing a much better job restraining money growth than the euro region.
Money supply growth rates
Country/region Broad Narrow
United States + 7% + 0.2%
Euro zone + 10.3% + 2.9%
Source: The Economist.
If money-supply growth were the main driver of the world's currency market, the dollar would have been going up versus the euro. Instead the euro has been very strong. The common answer to this point is that interest-rate differentials are currently more important than money growth.
That sounds good at first. Three-month interest rates are 4.86% in the euro region and only 1.96% in the United States. That makes the euro more attractive for interest income. But if interest-rate differentials work for the euro, they should work for the Japanese yen as well.
They don't. At 0.75%, three-month interest rates are lower in Japan than in the United States. If rate differentials were that important, the dollar would be rising versus the yen. Neither money growth nor interest rates explain the dollar's recent decline.
In spite of widely differing interest rates and monetary policies, the euro and the yen have marched in the same direction versus the dollar. From roughly June 2007 until March 2008, both the yen and the euro rose 19% versus the U.S. dollar. The reasons run from diversification by oil producers and China to outright momentum-based speculation.
Recently, the dollar has rallied; it's up roughly 3% from the March lows. This rally has sparked the debate: Which way next for the dollar? My opinion is the dollar is headed higher, to 1.30 versus the euro and to 120 versus the Japanese yen. The reason: The dollar has fallen so far that both Europe and Japan are suffering. Their pain is our gain. We can see that in the recent strong growth in U.S. exports. Our gain leads to a stronger dollar.
A strong argument can be made that the euro is not a sustainable currency. Separating monetary and fiscal policy just can't work for long. To me it is a wonder the euro has lasted this long. But strains are building.
Spain desperately needs lower interest rates to prevent a real-estate collapse from dragging the whole economy down. Germany, a major exporter, likewise wants lower rates to bring the euro down. The strong euro is taking a bite out of German profit margins. But the euro-zone central bankers are focused on inflation and rapid money growth. They refuse to come to the aid of Germany or weakening economies such as Spain and Italy.
Trading Strategies: June 2008
"It is only a matter of time, probably less than three years, until the euro experiment meets its end," said Avi Tiomkin, a currency expert and adviser to hedge funds.
Japan is in worse shape. It's almost 100% dependent on imports of raw materials -- especially oil. The surge in oil and other commodities has cut deeply into Japanese corporate profits and consumers' buying power. The strong yen on top of the commodity-price surge is a major blow to the short-term outlook for the Japanese economy. The long-term record is no better. It has been 19 years since Japan's Nikkei Dow stock index peaked near 40,000. It recently stood at 14,000. Meanwhile, the U.S. Dow Jones Industrial Average has climbed from 2,800 to more than 12,000.
The dollar, the euro and the yen are the world's three major currencies, and, the more you know about Europe and Japan, the more you like the dollar. Thirty-five years ago, the dollar was falling versus the currencies of Europe. It was widely expected to fall to 1-to-1 against the legendary Swiss franc. It finally did that on March 8, 2008.
And this dollar plunge, down 19% in nine months, looks a lot like the overshoot in the late 1970s. The dollar rose in the early 1980s.
The dollar will rise again.
John P. Dessauer is the author of two books on global investing and writes the monthly value-investing newsletter John Dessauer's Investor's World. He also manages portfolios for private clients.
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I hope he is right. Interesting myth busting.
http://www.marketwatch.com/news/story/doll...;siteid=yahoomy
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You know who else is on the list?
Delta House. They're on double secret probation.
Only one thing to do. Attack the parade!!!! -
Again, bingobongo, you make a prediction and, when it blows up in your face, you resort to insults. Less than a year ago, you were touting Vietnam as the place to invest...and now we can all see just how foolish your prediction was.
Ahh, be nice people. A year ago Vietnam would have been a place to invest. You have to create a bubble before it can burst.
And Naam, usually I would agree with your point of view but I think this time it's different. The US is not going into a funk, it's coming out. Dollar stronger, markets getting traction. Add to that another govt. shake-up here so soon after the last, and with Vietnam teetering, I think LOS gets hurt. By the PM's remarks today, I believe his quote was "take them out" in reference to the protestors, I would not look for a bloodless coup the next time around. And with one of the ministers accused of insulting the king.... ugly business.
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I would agree with those who say they have seen nothing like this. My reason is this. When I was born, (OK, 1956) there were 2.8 billion people on Earth. There are now 6.5 billion. That's a lot of strain on resources and food. Supply and demand issues. And oil is not renewable or infinite. On the bright side, the planet will be forced to seek renewable energy and develope more efficient agriculture, 2 things that can sustain all these people.
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Would this mean a stronger dollar and weaker baht? Oh yes, oh yes, oh yes....
very much so, go short the dong (nice pun eh), baht depends on when the tanks start rolling for coup part deux
From the Bangkok post.
Kobsak Pootrakul, the executive director of the SET Research Institute, said the latest CEO survey showed that 75% of listed company chief executives did not see the current government lasting more than one year, a sharp change from 45% in the last survey three months ago.
The survey covered 118 listed companies that collectively represent 60% of the total market capitalisation of the Stock Exchange of Thailand.
THE PERFECT STORM?!
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I was wondering when someone might begin posting on Vietnam. I have watched their stock market meltdown over the last couple of weeks. Didn't they stop trading and close the market? Yikes!!
I also was catching up on the Thai papers recently and noticed several articles regarding the recent SET move from the 880's back to the 820's. Seems foreign investors fear this unstable government. Something in the air for sure. Here on Phuket the place looks deserted. More staff sitting everywhere than working. Tough times ahead.
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As my neighbor from Arizona, ( I'm from New Mexico) and others have pointed out, it is still cheaper to live here than back home. More expensive yes, but imagine if if you were one of the millions of Thais who farm, drive tuk tuks or operate the local food cart. Those people are really suffering.
I read an article about a year ago regarding wealth in the world. Much to my surprise, I was in the top 1% on the planet in net worth. It took only the equivilant of $250,000 US dollars to place in the top 2% on the PLANET!
I try to count my blessings every day. Not the least of which is the opportunity to live a simpler life, eat more vegies, eat smaller portions, go without luxuries that I really don't need. I wasted too much of my life chasing "stuff". Now, out of necessity, I can look for something else for meaning in my life. My family and friends back home: they are busy trying to work a second job, max the credit cards, have weekly yard sales, have a meatless day in the menu, and drive that SUV less and maybe take a walk to the corner store for a change! I have free time to spend with my baby girl -
do you think that those in power that are compiling the list put their own names on it or just those that they dont like?
I was wondering how many Democrats are on the list and how many PPP's.
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This is just wrong on so many levels.
http://www.phuketgazette.net/news/index.asp?id=6507
If these people are KNOWN to be involved in criminal activity, why haven't they been charged?
"be known to have the support of a powerful person, such as a government officer,” Again, why didn;t the official get charged? And the lists are to be circulated to said officials. Huh??
Secret black list??
TIT I suppose but really <deleted>??
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If the Nation says down, then it's going up for sure!
It's funny because I was going to post the same thing. I've been here about 22 months now and follow the financials closely. I can't remember a time someone in the Thai government or banking industry made a correct prediction. Uncanny.
Very recently when the Baht was 31.24 and the Set was 850, the paper reported that the Baht would strengthen to 30.5 and the Set would hit 900. Wrong again!!! -
Not too much to get excited about at under 33THB to the $. Over 33, that leaves the possibility open for a run to 38. The USD has undergone such an orderly selloff in recent years that one should expect overhead resistance at almost every level. The best argument it's got going for it is that most, if not all the other currencies are pretty shitty too.
Curious, what do you base that on? What's magic about 33? At the rate things are going, 33 will be here in the next week. 38 would be sweet!
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If I hadn't of read your link I wouldn't have believed it . Only in America....
This comment provoked me to post the link: "So they'll be free at Christmas? If not how low will they drop? Will it be lower than the last cycle or the cycle before that?"
A bit surprising that real estate pros have no clue whatsoever it is not only possible but is really happening that houses become worthless.
NOTHING is worth more than someone will pay for it. No buyers, ===== worthless. That's how all markets work. You have to find the right price. As for me now, I am taking a long look at buying property in the US rather than Thailand. Better construction and infrastructure. Government is not as stable however
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Thanks for all the good replies. To those parents who have problems with chronic ear infections or sinusitis and bronchitis, how many of you have had your children vaccinated with the relatively new pnuemococcal vaccine? Here is a clip from the world health organization site.
Pneumococcal diseases are a major public health problem all over the world. The etiological agent, Streptococcus pneumoniae (the pneumococcus) is surrounded by a polysaccharide capsule. Differences in the composition of this capsule permit serological differentiation between about 90 capsular types, some of which are frequently associated with pneumococcal disease, others rarely. Invasive pneumococcal infections include pneumonia, meningitis and febrile bacteremia; among the common non-invasive manifestations are otitis media, sinusitis and bronchitis. At least 1 million children die of pneumococcal disease every year, most of these being young children in developing countries
(Otitis media is ear infection)
I know many of you have strong feelings regarding medications and vaccines but I would consider the vaccine.
So it sounds like March and April are a bit of a problem but the rest of the year is better than most places. Guess maybe just find a nice suburban place away from a major highway.
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Thanks for the replies. I don't know if I'm any closer to deciding where to live. Kids get sick everywhere but I don't want to take any unneccessary risk. I worked in children's hospitals for years and sometimes siblings wouldn't even get sick at the same time with the same illness. So much depends on the individual and their system. And as someone pointed out, the micro environment around your own place may have a lot to do with allergies. Mold in your house may also be an issue. Still I haven't heard from any parent in CM yet that says their kids are always healthy. Hmmm, or anywhere else for that matter
Maybe I'm just overprotective of my 1st and last child.
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I posted this in the family section and got no responses!? Are there no parents in Ching Mai?? Anyway, what I was lookinng for was feedback from parents of little ones regarding any problems or experiences with the air quality in Chiang Mai. The air quality being an oft debated subject on this forum, but I was looking for specific info on the effects, if any, on kids. Secondly I was looking for comments on the availability of quality pediatric care.
Thanks
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The wife, babe and I are considering a move to Chiang Mai. The air quality there is debated at length around this forum. I was hoping to hear from some Chiang Mai parents regarding any health effects on their children. Secondly, how are the hospitals in regards to pediatrics?
Thanks for your opinions.
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I've had the problem twice. Each time it was resolved with a phone call. The first time someone threw a switch and Thailand was blocked. The second time I had just changed computers and they had to reset my security page. In both cases I found them to be very responsive and eager to help.
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Miami signs OT Jake Long, making him the number 1 pick Saturday. Much news about trades and positioning for the next few picks. It's wide open!!!
Seattle released Shaun Alexander too. The 2005 MVP. Life is short in the NFL
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I received the letter also - but we will not be receiving any money by my reading of the law - both parties on a joint return must have SSN and be citizen or resident alien.
Yep, and you need to file a 2007 return to be eligible. Because niether my Thai wife or my infant daughter have a social security number or a taxpayer ID #, they don't count. So I thought I may get a check based upon filing married with child, but I will only get the stimulus check based on a single person. Around $600 instead of $1200 for the family of 3. But still, money to spend in Thailand will be nice and help the US economy in oh so many ways. There's complete info at the irs.gov website. Incidentally I understand that the letter telling you about the check cost something like $60 million to mail out. My government at work!!!
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The biggest off season days come up April 26-27.
The NFL draft.
Who do you like as the #1 pick?
Should Miami trade that?
Who do you like for your team to pick?
I'm looking for my Raiders to draft Mcfadden, and with Rhodes,Jordan and Fargus to run the ball down the throats of the AFC West next season.
For those of you who are not familiar with American football please do not bash or troll, if you have not played it, you cannot relate, thanks.
I think it's a cool irony that your avatar is the father of your teams leading running back, Justin Fargas.
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Huggy, Toad is correct...despite containing the word "football" in it, this thread is for the Brits who go ga-ga over that game that we call "soccer".
Now to your post: The Raiders couldn't run the ball down the throats of their cheerleaders. First of all, you need an offensive line to create some holes. The only holes these clowns can create is in their undies when they get knocked on their asses.
I'm sure Miami would love to trade out of that Number 1 slot...but the folks at ESPN say they have no takers. I look for them to take Jake Long, the offensive tackle out of Michigan. But if they don't take Long at #1, then he could fall all the way to the Raiders and they should snap him up. McFadden might be the best athlete in the draft, but the Raiders truly need offensive linemen to give JaMarkus Russell a chance for survival in his first year as a starter. Besides, Rhodes, Jordan and Fargus are a pretty decent trio of running backs.
Or the Raiders could trade out of the slot with Dallas and get two #1's and fill some of the other holes they have.
The last few drafts have been pretty predictable...not a lot of draft day moves. Maybe this year will be a little different.
The Raiders had the 6th ranked rushing offense in the league last year http://sports.espn.go.com/nfl/statistics?s...07&season=2
It looks like Miaami is negotiating $$ with Jake Long this week.
I don't know who the Raiders will take. They were very busy in free agency getting WR S CB DE and OL. Anything will help.
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I am sure China needs work on human rights. Unfortunately, my US govt. lost all credibility when they invaded Iraq, displaced and killed hundreds of thousands of Iraq's and remain today as an occupying force to "stabilize" the country. It just seems outrage from the US and UK rings hollow. Regime change begins at home!!
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With all the protest worldwide, do you think that there is a chance of a major disruption or even a boycott??
Here's a story that ran on Yahoo today.
http://news.yahoo.com/s/ap/20080331/ap_on_...s/olympic_torch
Violent Mugging In Rawai
in Phuket
Posted
For what it's worth, I have written the US embassy with my concern over Phuket safety. Aside from the frequent news like that above, some of my neighbors as well as myself have been burglarized. They come in the night and if if I wasn't such a deep sleeper a violent confrontation would certainly take place. What outcome then??? I see the Governor related a story in the last Gazette about a woman being robbed in front of his house! You would think he lived in a safe area.