The Plumber is Fixing Everything

Thursday, July 30, 2009

What can one say when the world seems to be coming together nicely? President Obama gave a wonderful speech yesterday about how the US in on the road to recovery. His stimulus packages have helped turn the corner, the stock market is up, thousands of new jobs have been created, and as Hillary Clinton cynically said during the Election “the sky opened up, the sun rose brightly, famine and poverty were erased, as the savior has come.”

I wish I could believe Obama but the umbers there just do not add up. Let us look at unemployment as an example of how the numbers are not what they seem. In Oregon, a state in the North Western part of the US just above California, Obama’s stimulus created 7,500 jobs – or at least that is the claim they are making. Now while it is true that those jobs were created, they were not permanent – in fact, most of them were no more than 37 hours, about 1 weeks’ worth of work.

Considering that they spent over 10 million dollars creating those jobs, you would think that 7,500 people would still be employed, in fact close to 74% of the recipients of those jobs are no longer in those jobs and are not eligible for unemployment insurance as they did not work long enough at this job to qualify for the benefits.

So, you can take 7,500 people off the unemployment lines, or more specifically, off the books – but the fact remains that they are still jobless. Forex Traders need to have all the information before making trades, they cannot rely on words alone as many times the choice of words used are meant to deceive.

Padding the numbers is not going to make things better, action will. And Obama seems intent on continuing his spending – overpaying for things like cheese and ham and toilet seats in the name of stimulating the economy.

A Federally subsidized program that repairs public toilets cost the taxpayers more than 18 Million Dollars, the total number of toilets that were repaired were 993, that is a total of 18,127 Dollars per toilet. I don’t know about you, but I would like one of those I my house.

I could use it to truly be presidential in my own home by flushing my Dollars down the drain.


Aussie and US Dollars rally - One on good news and one for bad

Wednesday, July 29, 2009


The Dollar recovered on Tuesday off its lowest level of the year against a basket of currencies, as a steep drop in US consumer confidence raised concerns over the pace of the economic recovery.

This brought back safe-haven flows into the USD and helped pick the Dollar up, after hitting new lows in the past week.

The ICE Futures US Dollar index, which measures the performance of the USD against six of the major currencies, rose to near 79. Earlier, the ICE had fallen to a low of 78.315, the lowest level it had seen since early December.

At 11:00PM GMT, the Dollar was up .43% to the Euro 1.4169, up .3% to the British Pound to 1.6437, up .15% to the Canadian Dollar to 1.0826, and up .5% to the Swiss Franc to .8284.


The Australian Dollar rallied in the Forex market, after Australia's Central Bank governor fuelled speculation that they might be raising interest rates in the coming months.

Reserve Bank Governor Glenn Stevens commented that the risks to the economy were more balanced and manageable, and that low interest rates could create a housing bubble crisis. This was the clearest sign that the ACB was through with its quantitative easing policy.

At 11:15PM GMT, the Aussie was up .7% to the USD to .8275 after hitting an 11 month high of .8338. The Aussie was also up 1.1% to the Euro to 1.7117, up .3% to the Japanese Yen to 78.38 and up .4% to the New Zealand Dollar to 1.256.


Stock markets are rising? Look at the Big Picture!

Tuesday, July 28, 2009

With many of the primary stock markets reaching yearly highs, it would appear that optimism about the prospects for a global recovery is high. The increase in overall risk appetite in the Forex and the jump in stocks have been incredibly impressive.

According to the news reports, these shifts in sentiment have been driven higher by better than expected corporate earnings out of the US along with good economic data. But something is just not adding up for me, and I am not quite sure where to place my disbelief.

It is odd that just as the markets are flying, bond yields for the major economic countries, the US, Japan, England etc, are going higher. Now obviously this is due in part to trader speculation that once the recovery takes hold, these countries will have no choice but to start raising their low rates.

But what concerns me is the effect of quantitative easing that many of these countries employed. Funnelling money into the system at such a large rate as many of these countries had, will no doubt cause mild to moderate inflation – which would require lower rates. So what is going on?

Last week gave us a clue that all is not so rosy though. England reported a weaker-than-expected GDP figures for the second quarter – much weaker than expected to be specific.

Perhaps the Brits are not fudging their numbers like the Americans are – not that I know anything for a fact, but it wont surprise me to find that out in a few months.

This week's vast amount of economic data coming out of Europe and the US should help paint a better picture. I fully expect sugar-coating, but I know that the Forex traders will be keen to pick up on that.

Among the core numbers to look for this week are the US GDP and the Chicago Purchasing Managers Index. Consumer Confidence and Housing Prices along with New Home Sales numbers are important, but this is where my scepticism is most pronounced as we have seen anomalies in these numbers in recent months and they are easier to manipulate – so keep a sharp eye out there.

I expect the general tone of this week's data to support the recent signs of improvement. It remains to be seen, however, whether the outturns will be sufficient to maintain the bullish momentum as we head into August. Short of very strong numbers, I doubt it will happen.

Look for a weaker week in the Dollar and look for the Aussie and Kiwi to be the beneficiaries of that.


My Forex Blog says....The Shift from Fundmantals is Coming....

Thursday, July 23, 2009

This week has been a strange one on the Forex. Typically, when the US or Japanese stock markets are up, the Dollar and Yen are down and when they are down, the Dollar and Yen are up.

The equity markets are a marker for risk appetite, and the dollar and Yen usually suffers as investors flock to stocks to quench their hunger. But this week has seen the reverse happen alongside puzzling comments from US Federal Reserve Chairman Bernanke, ECB President Trichet and to some degree, the Japanese Finance Minister as well.

As the US stock index, the Dow Jones Industrial Average raced towards 9,000, a level unseen since October 2008, the Dollar too made gains, albeit not as dramatic. The Nikkei Index was also up this week while the Yen as well did not suffer for the excitement of it all.

Patterns like this are rare, and make trading difficult, especially for fundamental traders who rely on hard data, not theoretical formulas and exotically named technical achievements (no offense Fibonacci…).

Yesterday saw Ben Bernanke, AKA helicopter Ben, give a second round of testimony to congress, this time in front of the Senate Banking committee. And while he pretty much towed the party line that he established the day before, he made one alteration which sent the Dollar on a roller coaster as Forex traders tried to figure out what he was saying.

He spoke of positive signs out of the housing market one day after putting part blame for the woes of the country on the depressed housing market. It is inconsistencies like this that can cause panic, and for a while with the Dollar it seemed as if it had.

I trade on fact, things I read, things I hear, things I piece together like a jigsaw puzzle – and for the most part it has worked out well for me. The stock market is not the same kind of market as the Forex, it is a market where emotions and psychology can rule the day.

The Forex market is too large for that, Online Forex traders know this to be true, sentiment cannot move a currency – but hard data, good or bad can. But what I witnessed this week has made me reconsider this. What I saw this week was pattern trading based on emotional instinct, not fact and numbers.

The US is in a bind, and while the Chairman of the Central Bank might allude to positive signs, the warning signs are large and in our faces. With swelling debt, with an administration bent on “fundamentally changing the United States of America” (Obama’s words, not mine) by redistributing wealth and socializing private industry at an enormous cost to not only the current taxpayer, but future ones as well – I do not see a strong Dollar right now. And I might not ever again if this continues.

It would be comforting to know that I am wrong, I would want nothing more than that. But seeing how the game of politics has consumed every inch of what is supposed to be objective and non-partisan departments – I do not believe I am.

Trichet wants to keep his job. Bernanke does too. Is it fair that their impartiality can lead to their dismissal (or non re-upping of their contracts)?

But, unfortunately, this is what we have – and in the long run it will ruin the trust that the markets have in any data that come out– and lead to the equitization of the Forex – we saw the beginning this week.


Another Duality We Just Cannot Afford

Wednesday, July 22, 2009

I spoke yesterday about a duality that exists when Central Bank figure heads, like Ben Bernanke and Jean-Claude Trichet of the US and EU Central Banks, Respectively, straddle political affiliations with fair representations of their economies.

My assessment yesterday was that both of them have toned down their views to appeal to a political agenda, rather than giving accurate interpretations of what is going on. One week they say this, and one week they say that was the thought.

Yet, after Chairman Bernanke gave his report to Congress yesterday, he seemed to play both cards on the same day – in the span of an hour, in front of the same panel, painting optimism and caution all at once.

In his remarks, the Fed Chairman said that he believes that the economy is moving along well for the situation and that he feels that the US can and will see growth in the coming months – that the recovery is poised to begin in the latter part of 2009.

Yet, only 15 minutes later he began to speak of a high unemployment rate, one that is at levels that were unanticipated, one that is expected to continue to grow through the end of the year.

He also spoke of a tight credit market which is squeezing consumers, even ones who traditionally have had great credit are finding it hard to manage in this climate. He spoke of record low real-estate prices which inhibit refinancing and have caused many relying on income from property bought at high prices to take monthly losses from leases and rental agreements.

As Mr. Bernanke spoke, the Dollar, which was down most of the day on a continued risk appetite rally, turned upward, then downward, then upward again – as if the Forex traders and those Forex online professionals tracking his words on the internet could not figure out where he was going.

This is a problem, a big one as I see it, because Mr. Bernanke’s role was, traditionally, to sober up the euphoria that exists or confirm that all is OK – not paint two pictures with one speech.

His predecessor, Alan Greenspan, was noted for his “party-pooping” ways – not giving in the political agenda’s of the administrations he served under – he served four presidents from Reagan to Bush 2.

Greenspan called the internet bubble two years before it happened – “irrational exuberance” he called the fervor with which public offerings were being valuated. He criticized presidential policy when he thought it was harming the economy – like with his testimony in Congress over Bill Clinton’s proposed health care reform – which ultimately failed before it even got to a vote in Congress.

This is the kind of honest and unbiased judgments the Central Bank chair needs to give – and what Bernanke did was coddle the administration of Obama, colluding with them so as not to cause any panic that might jeopardize Obama’s policy initiatives.

Forex traders are becoming less trustful of the Central Bank heads, and it is a problem as this is how fundamental trading is done. It used to be a reliable source of information that would directly affect the currencies of a specific country – now it is taken in stride like a stump speech before an election.

Obama is looking to overhaul the Health Care system by pushing through a bill that will cost more than 1 Trillion Dollar according to the Congressional Budget Office.

This is a bill he has even acknowledged that he has not read – and is making contradictory statements about what it contains because he really has no idea what is in it.

A dire economic outlook would kill it – and trust me, it is losing support by the day right now. Bernanke for his part, is up for re-nomination in January. It is widely expected that Obama’s senior political advisor, Larry Summers, will be the one tapped for the role instead of Bernanke, who was a Bush 2 appointee.

Bernanke would serve his job better, serve the people of America better and serve the Forex traders better if he would focus on his current job, and not worry about keeping it come next year. Chances are, he is not even in the running now anyway, and all this back and forth to help Obama is not going to change that.


When Politics and Economics Collide

Tuesday, July 21, 2009

What is going on with the markets these days? On one hand you get a sign that all is well – the Dollar dips on Risk Appetite and the stock markets rise. On the other hand, you get a report that undermines the recovery notion and the Dollar rises again sharply.

With all this back and forth, Forex traders are getting vertigo. And this contradiction is not only coming from different numbers of different sectors, it’s coming from the policy makers as well.

Only last week, European Central Bank President Jean-Claude Trichet gave an optimistic outlook, just two weeks after giving a dire outlook. Today, Ben Bernanke, the Federal Reserve Chairman in the US, is expected to give a glowing outlook for the economy, just one month after talking about how slow things are moving in the direction of recovery.

What is this all about? Well, today, I read an article from the ‘Washington Post’ which kind of spelled it out – at least partly.

The article was focused on how the Obama administration has been holding back economic data reports from Congress that they are obligated to provide. With Obama out on an ambitious journey to change the American system of healthcare and unemployment, the numbers apparently will alarm many and perhaps cause a delay or even rejection of his spending plans.

Trichet is also vying for something other than the full disclosure – he is looking to be reappointed to his post. With EU elections over, he is seeking to maintain his post amidst a hostile group who views him as too pessimistic – kind of like the way Alan Greenspan was viewed in the late 90’s. So by changing tone, he hopes to convince the decision makers that he is not the man they think he is.

The problem is, the real state of the economy will come out – and then what? Does the market tank? Does the Dollar collapse? Probably not, but it will go a long way to the trust issue.

IF Obama’s team is purposely holding back info, and Bernanke is a party to that – what effect will they have in convincing Forex Online traders and investors that what they are telling them is the truth? Historically, Fed Chairmen and Central Bank heads have been non-partisan – saying it like it is even at the expense of the current administrations popularity.

This cannot change – but I fear it is. If an obscure article in a key Washington daily gets plastered all around – if the American people get wind of the fact that the government is purposefully holding back information in order to advance their agenda.

If the EU re-ups Trichet and he goes back to his truthful but dire ways, what will the markets do? I figure they will punish the Dollar and Euro I the short term and not reward them moving forward when there is actually good news to report. We just might see the beginning of a new trading pattern in which good news is not met with an upswing, but rather no swing.


A Tale of Two Numbers

Monday, July 20, 2009

Last week saw a convergence of two distinct pieces of information regarding the US economy, information that contradicts one another as to the state of the world’s largest economy.

And, as we are seeing from around the globe, the pattern is the same - Corporate earnings were released and for the most part, it seems as if many companies are struggling – but still edging out a profit.

Some in the banking sector, the companies that have been accused of starting the fire, were at record highs as the companies took advantage of the volatile markets to turn a profit.

The fact that Goldman Sachs and Citigroup and several other US funded bailout recipients declared enormous profits; the fact that these companies are now set to dish out huge bonuses once again gives investors the sense that all is better.

The system is working and the economy is getting stronger. But this thought is misleading – and if you “go with the flow” when trading, especially the Forex, you could wind up in a big mess.

There is a misconception that the health of big investment companies is relative to the health of the overall economy. Paul Krugman, the noted NY Times columnist, wrote on Sunday that what is good for the banks is not good for the common people. And I tend to side with his point of view here.

The rationale is this: Banks make earnings by exploiting the very people they are purported to serve. The financial crisis gave the banks an excuse to increase fees and raise loan rates on those who sought them, because the economic situation was bleak.

They also made money by taking tax dollars and using them as a back-up as they ventured into risky positions, not bearing much risk at all due to the taxpayer.

Forex traders should be weary when a bank that needed double digit Billions to stave off insolvency only five months ago, comes in with record breaking gains.

Forex traders also should not look to the state of the banks to determine the fate of the overall economy – one has nothing to do with the other.

The second batch of numbers that came out last week had to do with manufacturing in the US – and the number keeps on declining.

What drives a currency is the output the country produces. GDP is based on many factors, yet only 1.3% of it is attributed to banks and investment companies. The heart of the issue is production, manufacturing, building stuff to sell overseas, and in this category, the heart of the matter, the US is in trouble.

With 10% unemployment looming – with factories and warehouses and large retail outlets closing - with the commercial real-estate market in its biggest slowdown ever, the six digit bonuses that a greedy bank hands their traders is side-news that has no bearing on anything.

Last week the Dollar was up and down like a yo-yo as the Forex online traders shuffled in and out of Dollar positive positions as the different data came out. We need to be looking at the overall state of the economy – not just one little, small and irritating piece of it in order to assess the real scope of the problem.


Dollar and Yen lose safe haven appeal, but not for the same reasons

Thursday, July 16, 2009

As the Dollar and Yen lose their luster for now, partly due to positive news and partly due to political uncertainty (in Japan primarily, but to some extent the US), I want to take this opportunity to rant.

I have been involved in the markets for the better part of 15 years. I started my career as a stock broker and find myself now a staunch advocate of the Forex.

I have weathered turbulence in the markets, former Fed Chairman Alan Greenspan’s “irrational exuberance” speech (which ironically sent the markets on the biggest rally in 50 years), the internet bubble burst and now the “biggest recession since the great depression.”

I lived through 8 US presidents, saw two of the greatest leaders – economically speaking – in Reagan and Clinton and saw miserable failures like Carter and the senior Bush.

But, in my life I have never witnessed such irresponsibility and lack of basic understanding of free market thought, as I have with the current president, Barack Obama.

Carter was a failure, not because he held such liberal policies as many would have you believe, he failed because he was weak, in domestic and international relations he was viewed as timid and non-confrontational.

Perhaps, had he been more assertive he would have succeeded in reforming the system to his liking – and I would be blaming him for killing capitalism. And, as much as people compare the two – Obama is not a Jimmy Carter.

We need to look at the core of the man - Carter was weak, Obama is strong. Carter had the support of the US Congress, but was not able to achieve, because he sought bi-partisanship which he did not get.

Obama does not care about what the other side thinks, as long as his side is on board it is fine. But Obama has another tool at his disposal that enables him to push his agenda through, without the help of the Congress, the Czar.

In the US, cabinet members need to go through a vigorous vetting and approval process by both branches of Congress. A Czar is not a cabinet member. First introduced by Ronald Reagan to head up the war on drugs, a Czar has broad powers to do – and answers only to the president.

Reagan created this role because he did not believe the drug war would go on for so long and therefore adding a cabinet post, a move that takes a constitutional amendment, would not be necessary.

Obama however has gone beyond this level, appointing 33 Czars, each with an average salary of $250,000 and annual budget for office and staff of over 10 million. This is the single largest expansion of governmental agencies ever – and the fun part is this is not part of the government as the Czars answer only to the president.

It is shocking – and it is why Obama is not like Carter – he has the power to achieve what he wants, whether congress says yes or no to the idea, he has a back door to his goals if he needs it.

I am not sure if the American public should be more upset at the wasteful 340 million plus that this group is costing them, or the fact that Obama has given powers to a group of people that subvert the system of checks and balances that has made America unique and safe from tyranny.

Congress gave Reagan the approval for this post for logical reasons - quick and decisive action was needed, and waiting for congress to approve each mission was pointless.

Obama has exploited this rule and it will be to the detriment of the US populace. Take for example the idea that his health czar is proposing – taxing the rich 5% to pay for health coverage for everyone else, or his employment czar, extending benefits to the unemployed by and relaxing the rules so that they do not need to be seeking employment while getting the benefits (their rationale for this: “it is a hard job market you know – it might demoralize the unemployed to have to keep searching for a job in this tight market”).

And just how do they pay for this unlimited benefit? You guessed it, taxing the rich. This makes no sense. Why penalize those who work and reward those that don’t? all you do is make the productive less ambitious to be productive and you make the non-productive dependant on a system that is willing to care for them indefinitely – so in turn there is less productivity by default.

In my opinion, you don’t need a stimulus that will give people money to do nothing; you need a stimulus that will spark production – as that is what will save the economy over the long haul.

For Forex traders and Forex Online enthusiasts what does this mean? It means the US is moving in the direction of China and Russia and Venezuela, in which there is a central government that controls all things. So what does this mean for the Dollar? Only time can tell, but it does not look too good.


When leaders mislead – Tell us the real story please!

Wednesday, July 15, 2009

Monday saw the return, albeit a moderate return, of risk appetite into the Forex trading arena. Listening to the analysts and news reports of trader sentiment, you get a sense that the worse is behind us, that the economic crisis that has been billed as the worst since the 1930’s is struggling to survive.

I am skeptical as always when it comes to this, as my view on the market is a more long-term one. I do not see the double digit unemployment and rampant spending by the US and some European countries as a product of circumstance that will go away, rather I hold these indicators as a problem born from a problem – and it will be the cause for bigger problems down the road.

Let us look at two specifics, European growth and US unemployment. Monday, ECB president, Jean-Claude Trichet, backed off of his dire assessment of the economy that has marked the last four months of his tenure.

He stated that the EU can see growth in this fiscal year, rather than the latter half of 2010 as he has maintained prior to this. Speculation by Forex online chatter and “professional” analysts, have attributed his doomsday views to lack of clarity on the issues – the picture was not fully painted and therefore he could not assess appropriately.

So my question is: what changed from three weeks ago when he last made his 2010 recovery statement? What new information did he acquire that reversed nearly half a year of policy? I don’t think anything changed and I dare not speculate as to what Trichet’s motivation is. But my gut, and it is usually right, tells me this is not over – we will see a return to his naysay with regard to a 2009 recovery.

Now US unemployment has been rising for nearly a year now, and it is on the fringes of the 10% mark – a psychological and technical barrier that spells out how bad the economy is.

In recent months, there has been a fallback on the actual number of people filing for unemployment each month, a sign that traders interpret as an easing of the crisis. But my instincts and my knowledge of this situation is on target and I am telling you the numbers are not telling the whole story, unemployment is worse than 10% and I will tell you why.

The way the US calculates the “unemployed” is deceptive. You need to have applied for federal benefits in order to be considered jobless. One of the criteria for filing is that you must look for a job, and prove you are searching by providing letters (form letters most human resource departments give new applicants) from your hunting prospects.

Given the fact that the baby-boom generation, people 50-65, are among the highest group of the unemployed, and given the fact that this group is also the lowest in terms of new employment – as many employers want fresh blood, not someone who has more experience than the managers – many of this generation who are unemployed are not seeking it anymore.

US benefits run for 7 months, after that you are on your own – and you are no longer considered unemployed because you are no longer on the federal governments radar. With key states like Michigan, having over 20% unemployment, and California with over 14% and Georgia with over 13%, not to mention Tennessee, Alabama, Louisiana and the Carolina’s – all hit hard by the recession, it is not logical to assume that the national average is under the 10% mark.

With many people working part-time jobs at McDonald’s or the Gap, earning minimum wage in a country where the minimum wage is less than the cost of living – yes, technically the numbers might be right – but is the economy growing?

Just watch for the mortgage defaults on AAA rated individuals – no one is talking about it – but I promise you here, that you will be shocked in a month or so when you see a resurgence of mortgage defaults, and not on sub-prime, but prime mortgages.

We will talk more about this in a few weeks when we get the official data – then I will ask Mr., Trichet and Obama, “Is all this spending really working?”


Dollar retreats again on good corporate news, Euro reverses after German data

Tuesday, July 14, 2009


The Dollar slid on Tuesday in very up and down trading against most currencies, after US Investment Bank, Goldman Sachs, reported better than expected earnings and US retail sales surpassed expectations.

This raised hopes for an economic recovery and continued the risk appetite rally that began on Monday. Retail sales rose by .6% after it was expected that a rise of .2% would prevail.

Goldman Sachs, which is one of the most prestigious institutions on Wall Street, was the recipient of nearly 20 Billion Dollars of federal money in December, after posting their worst losses on record. They have since paid back the federal money and still managed to squeak out a profit in the second quarter.

At 10:00PM GMT, the US Dollar was down .35% to the British Pound to 1.6274, down 1.03% to the Canadian Dollar to 1.1385, down .63% to the Australian Dollar to .788 and down .32% to the New Zealand Dollar to .6342. The Dollar did rise .7% to the Swiss Franc to 1.0911.


In a switch from Monday’s Forex trading session, the euro fell on Tuesday as a result of less than spectacular data out of Germany.

The German think-tank, ZEW, came out with their first drop in consumer sentiment in nine months. Monday the Euro responded well to comments from the European Central Bank President, Jean-Claude Trichet, who eluded to a recovery later this year.

At 11:50PM GMT, the Euro was down .8% to the US Dollar to 1.3936, up .1% to the Yen to 130.17, down .65% to the British Pound to .8556, down 1.55 to the Canadian Dollar to 1.5834, and down 1.1% to the Australian Dollar to 1.7647. The Euro did rise against the Franc to 1.5205.


The Point of No Return - A Warning to All

Monday, July 13, 2009

Last week’s G8 meeting started out well for the US Dollar, after China’s president left the conference to deal with unrest at home. However, the conference did not spare the Dollar some shame and humiliation after all.

In the last day of the conference, which focused specifically on emissions and global warming, Russian President Dmitry Medvedev made a stunning presentation at a press conference. Medvedev produced a newly minted gold coin that symbolized the “united future world currency.”

What? You might ask yourself, is a united future world currency. The short answer is a system similar to the EU, but the kunst of the meaning lies in Russian hopes for a collapse of the Dollar as a dominant force in the investments of most industrialized nations.

In presenting this coin, Mr. Medvedev said, “We are discussing both the use of other national currencies, including the ruble, as a reserve currency, as well as supranational currencies”, which means – out with the Dollar, in with something new.

Many who thought that the Chinese, Russian, Indian and Brazilian calls for the International Monetary Fund to issue SDR’s or “special drawing rights” as bonds, were shocked to learn of how far Russia is willing to go. SDR’s are a hypothetical solution based on the charter of the IMF which allows them to issue bonds to nations.

However, they are not used for normal person consumption, meaning you and I cannot walk into a McDonald’s and buy a Big Mac with them. Medvedev made something abundantly clear, that the new currency “would be used for payment by citizens as a united future world currency”. Game over!

The cries are getting louder and now the plan is taking shape. IT will not happen overnight, and thus the Forex online traders can still profit from the popularity of the Dollar, but make no mistake, this is not going to end well for the Greenback.

The US president is watching as his plans are falling apart, his honeymoon is ending and reality is setting in. He has spent so much money that belongs to future generations; he has compromised the integrity of the strongest currency on earth.

There is no stopping this now, to do so would mean rolling back the clock – the money has been spent already – the debt has accrued. Forex online traders playing with the Dollar beware, it might not be today, it might not be next month or year – but it is coming, and a gradual decrease in value as the calls get louder and louder will happen. Don’t say you did not see it coming when it does.


Dollar Debate Misses at G8, but Criticism is still there

Thursday, July 9, 2009

So the Dollar was spared yesterday, spared by a seemingly minor situation in an obscure city in an insignificant province of a very relevant state. The Uighur uprising in China took the debate about the value of the dollar as a global reserve unit off the table at the G8 (due to the fact the Chinese president, Hu Jintao, was forced to leave the summit), however it did not stop the show of concern that America’s counterparts in the G8 had.

Germany, one of the US’s staunchest supporters during the Bush years, have chilled that relationship and have become more openly critical of the Obama administration. In the past, when the German government had a problem with the US’s policies, you read about it weeks after it had been sorted out, George W. Bush had a great relationship with the German Chancellor Merkel, and it showed.

It is ironic. Obama’s social philosophy is more aligned with the German’s and much of Western Europe for that matter, Bush was far to the right of where Europe was. However, we are seeing a spate of discontent from the Western European leaders at the Obama policies – and this is most evident in the words and silence of Germany.

Long-time Forex traders know this to be true as in the past, we did not see the spikes we do today in the Dollar, after a European leader gives a speech, today it is routine.

In the absence of the BRIC debate on a global reserve currency, Angela Merkel, the German Chancellor, filled in nicely and spoke of how the focus of many nations vital to the economic stability of the world has been on reliving mistakes of years past.

By assuming the policies of stimulating the economy through a broad array of spending programs, a tactic that was employed and failed in 1933, the rising debt has been ignored and has grown in such a manner, that the entire world is now under threat of jeopardy in more profound manner.

Merkel’s concerns are valid and Forex online traders need to keep this in mind when dealing in the Dollar. As we have seen, the Japanese Yen has been profiting nicely from the return of safe-haven flows where it usually took a secondary role to the Dollar in this capacity.

The Dollar is volatile, more than ever before, because traders as well as the long-term investors are unsure of which way to go. Sentiment keeps us in the Dollar, but reality forces us to look away.

I believe the next three months are vital to determining which way the pendulum will swing for the Dollar – and it starts with the criticism of a European leader that an American policy is too liberal. Go figure.


Uighurs Save the Day!!

Wednesday, July 8, 2009

Who would have thought that a group of Uighurs, the ethnic Islamic population in western China, could be the saving grace for the US Dollar? Not me, but this morning I awoke to surprising news that might, just might, spare the dollar of some of its harshest criticism at this weeks G8 Summit in Italy.

The news is out that Chinese President, Hu Jintao, has left the earthquake ravaged city of L’Aquila in Italy, where the G8 is being held, to return to China where social unrest is escalating in the Western City of Urumqi where the Uighurs call home.

I am not going to waste this post speaking of the background of the unrest or taking a side, I am a capitalist that believes in free markets and people, and this should say it all. However, I will focus my efforts here on talking about how these Chinese citizens, who are literally fighting for their rights, could have unwittingly helped the Greenback.

For the past several months, China has been playing a game of cat and mouse with the US with respect to the Dollars standing as the global choice for currency reserves. They would make a comment that hinted towards their discontent at how the Dollar is not being managed well only to half-heartedly reaffirm their “trust” and “faith” in the strength of the Dollar. They would hypothesize on the introduction of a new global reserve run by the International Monetary Fund one day, and talk of the Dollar’s necessity the next.

And most recently, they, specifically Mr. Jintao, called on the G8 to openly debate the implementation of a new reserve structure that would see the Dollar put on the same level as all other major currencies.

Mr. Jintao’s departure from the Summit before it even began is not necessarily a good sign, however it might just be based on the order of things in China. While there is still a nicely sized delegation from China, including the Prime Minister, it is seen as the President’s role in China to cover this sort of financial issue.

The Prime Minister, Wen Jiaboa, is more likely to be the point man on the global warming and subsequent emission regulation debates than on the status of the currencies. The Finance Minister might bring it up, however it will not be strongly debated from his side without Mr. Jintao present. China is a society that operates with respect for authority and deference to that authority, and this cause is widely seen as that of the President’s.

What does this mean for Forex traders today and tomorrow? Perhaps nothing, however I believe there will be strength in the Dollar as a result.

The past two trading sessions have seen a return to risk aversion and safe-haven currencies, and for the first time in a long while, the Japanese Yen has beaten out the Dollar for this attention.

The world is still a messed up place economically (and as we see from Iran and now China, socially as well), and safe-haven bids will figure prominently into the trading in the coming sessions.

But, it is my standing that the Dollar will recapture the interest of Forex online trader’s as its harshest critic, and largest single investor, will be muted this week. And the irony of it all is that all of this would not have been possible without the help of several thousand poor and underrepresented people in some small, obscure and economically irrelevant part of China. It’s a strange, strange world.


The one thing that is turning the world upside down...

Tuesday, July 7, 2009

What happened in the span of three weeks that enabled the market to lose its confidence in a global recovery? For some months there, things were going well – numbers out of the US and Europe were promising, they did not give a clear cut date for when things will be back to normal, but they did leave many with a glimmer of hope that it will be soon.

I know I have been mocking all of those optimists in the past, and I am – but really? What is the turning point on the market sentiment, that has caused things to go south in Forex land?

It is not the Jobs numbers out of Europe and the US, if it were, then there would have been no hope in May or April either as jobs still fell hard – just not as hard as in June. It could not be the constant ramblings out of the BRIC’s about a new reserve currency for global consumption - this story has been playing out for six months and has been etched on every Forex online trader’s mind ever since – simply, it has been traded out already.

It cannot be the yapping from ECB president Trichet about how things are getting better later than expected – he did this twice and people expect it already from him.

So what can it be? The easiest answer is buried thousands of feet below us – the black gold, oil. I read an article on Sunday in the New York Times that spoke of how the ups and downs in the price of oil has really hurt the financial sector and its ability to stabilize.
As oil prices fluctuate up and down, losing more than 2/3rds of its highest value and then doubling from there and then dropping off 10% in a week, we see the lack of a pattern and hence - the problem.

Most thriving economies rely on energy to move, when the price of the primary energy source is uncertain from day-day, it makes planning for the future quite difficult. Forex traders and those in the Online Forex arena are not too familiar with this level of volatility.

While currency prices do fluctuate up and down, there are never these massive swings – but lately things have been changing, and I am not so sure this is a good thing for the overall Forex market.

One of the things that made the Forex great was the relative stability, and now it seems as if this era is over. Perhaps China, Brazil, India and Russia can make black gold their new reserve, perhaps this will help stabilize the price.

The idea that something like grease can affect change all over the world is humorous – I just don’t know if I should laugh or cry about it.


US unemployment is bad - I told you so

Monday, July 6, 2009

I would normally not like to gloat about being right, but in this case I must. I wrote last week on Wednesday that the US unemployment numbers will disappoint and disappoint badly even though the “experts” (defined as those who make 100 times my salary) were on CNBC telling the world that the numbers will come in line with previous expectations. And what happened the next day seemed to shock those same “experts”. I cannot figure out why.

If you learn anything from me in reading these blog entries, it is that Forex online trading is all about information. Forget candle sticks charts, technical support and resistance points, you need to see what is going on in the world and then, confirm that this is actually the truth.

As we saw from the CNBC panelists, they are just so called analysts who are paid by their companies to “spin” the tale that best suits their employer. In order to bypass and neutralize them, we need to dig even deeper.

On Wednesday, the ADP (remember, the payroll service) came out showing that they had dropped over 470,000 jobs from their weekly rosters, which means 470,000 people were no longer getting paychecks. But Forex analysts don’t take this seriously because it does not suit their interests, they only look at the hard data.

Well, the hard data came out on Thursday from the US government and guess what? 467,000 jobs were lost when the street was calling for 360,000 – over 100,000 jobs more than anticipated were dropped. But here is another lesson for you – and perhaps you can profit from this as well.

The US unemployment figures released last week do NOT include those who are no longer getting unemployment checks (In the US you get benefits for several months and then it stops), it does not include those who got part-time jobs (which is called under-employment as the money they make is not enough to sustain themselves – but they do not qualify for federal benefits) and it does not include those who were recently laid off (by my count there was at least 38,000 in the second half of June from the Auto dealers and manufacturers) as it takes three weeks to process these claims.

SO what I am saying, is next month, you will see a revision upwards in the June number and while it is too early to tell how July will fare, I can almost bet that the ”experts” will be a bit more cautious with their predictions.

The funny thing is, the information that I get is more readily available to those you see on the TV. I am thoroughly surprised that not many more Forex Bloggers are reporting this either. I am no genius, I am not an expert – I am just someone who trades and wants to make sure I do the best I can to not lose my money. And information is key to making sure this happens.


Forex News: China, Unemployment and Oil conspire against the Dollar

Thursday, July 2, 2009

The US’s non farm payrolls are due out later on today and for all their trying, the US government has been trumped by a private firm in revealing these numbers.

The street expected about 360,000 jobs were lost, a nice decline and a sign that things might be getting better. However, ADP, the largest payroll processing service in the US, reported that 470,000+ jobs have been “removed from the payrolls” of the companies that ADP services.

Keep in mind that ADP does not service everyone – there are other services and many small businesses do the payrolls by themselves. So it is not out of bounds to think that this number, 470,000 will be higher. For the Dollar, a higher number can be damaging but it is not the only threat to the greenback.

Yesterday, China called for an open debate at next weeks G8 Summit on the viability of another global reserve currency being established. This is a blow to the US efforts to keep the debate out of the IMF and World Bank boardrooms, as they and Britain control the flow at those institutions.

The voices are becoming louder and the masking of their intentions are becoming less – China has now entered the point of no return, the point at which they have firmly committed themselves towards establishing a new world financial order, in which the Dollar is no longer king.

The Dollar fell on this news and the shock from ADP – ironically, the US stock markets rose late in the day. Forex Online traders and Forex chat rooms were abuzz with the news, however the US governments official stance is that ADP’s numbers are NOT official and do not necessarily reflect the non-farms payroll number.

And while the US stock investors seemed to gobble this up, those Forex online traders did not. And I say: good for them.

This is the story that does not die, and it won’t for a while. But as we see the US’s hopes for a second half recovery fading – we should look at the opportunities that are out there for us.

I am still bullish on the Aussie and I am starting to like the Canadian Dollar. As Oil prices rise, as tensions in the middle east drive that precious commodity up, I see opportunity knocking. And I hope everyone is there to answer the door with me.


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