Dollar getting stronger and the

[Dani]

$ is 7 now in Norway 3-4months ago it was 5.

Euro the same.

sucks.

[zzipy]

I wouldn't bet on US$ being strong for much longer than middle of next year. The USD is getting the benefit of shell shocked investors all over the world. In reality things are pretty weak here and without any dissing on Shundi's comments, fundamentally things are bad is US.

The consumers are tapped out and the US lifestyle dependent on a credit musical chair built on Ponzi scheme is coming to an end.

We don't produce much, or the things we produce are not competitive, and consume by issuing bonds not worth the paper they are built on. We have been putting off the debt to our future generations and the Medicare and Social Sec bills are due soon (starting 2013 US will have to pay out more outa SSN scam than they have been taking in. First time in its history).

[Shundi]

I wouldn't bet on US$ being strong for much longer than middle of next year. The USD is getting the benefit of shell shocked investors all over the world. In reality things are pretty weak here and without any dissing on Shundi's comments, fundamentally things are bad is US.

The consumers are tapped out and the US lifestyle dependent on a credit musical chair built on Ponzi scheme is coming to an end.

We don't produce much, or the things we produce are not competitive, and consume by issuing bonds not worth the paper they are built on. We have been putting off the debt to our future generations and the Medicare and Social Sec bills are due soon (starting 2013 US will have to pay out more outa SSN scam than they have been taking in. First time in its history).

No insult taken... I agree that our lack of manufacturing is most alarming and the credit swaps and debt pyramid is, as you say, musical chairs. I also am concerned about SS, Medicare, and ARM's resetting within the next few years...

I do believe, however, that many of our large multinationals and have fairly diversified risk portfolios and are properly leveraged...it's just a matter of panic.

I guess it depends on the criteria you're using to evaluate the economy... my personal take on it is that we'll come out of this..it just might take a few years.... I do hope that it teaches the US a lesson about risk management (not to mention sovereign fund managers and international companies who invest in our markets).

[StormTooper4]

The Aussie dollar has shrunk too...

0.9761 ---16 July

0.6521 ---16 Nov

That's a 33% drop.

If I bought a watch today, I'd be paying one-and-a-half times what I paid four months ago!

Think I'll wait a while...

FACT We down under are royally stuffed on the purchasing front.

ST4

[fat.tail.event]

The operative word going forward for the coming quarters will be 'whipsaw'.

When the proverbial 'S' hits the fan, the USD/Treasuries is still considered the safe harbor. Investors were borrowing the JPY at 1% to invest in riskier assets when the name of the game was 'risk on'. Well, its a 'risk off' environment at the moment, so there's Yen selling to go to USD. The commodities boom is temporarily on hold, so the benefit the Aussie dollar was seeing comes to a quick halt. The Eurozone was laughing at the US for a few quarters before they realized we buried a lot of our dead bodies in their back yard, and we come to find out their banks are levered even higher than ours were...woops...unload the Euro.

The US is printing money and Treasury issuance over the next couple quarters is unlike anything we've ever seen. Such an abundance of USD/USD denominated assets will soon mean oversupply, making them cheaper. Compound all of this with a possible .5% interest rate environment and the USD could get REALLY cheap, and fast. When 'risk on' comes back into vogue and the world realizes the USD is the same USD + a crap load more national debt and carnage over its shoulder, things should go back to regular scheduled programming (commodity currencies benefiting, shun the high debt:GDP currencies, Pound included). The question is when the big reversal will come...things could look pretty bad for a while, maintaining this artificial high in the dollar.

[zzipy]

I agree about our multinationals, but the game has been rigged against our favour. The bunch of idiots we call leaders have sold this country. They have not put their foot down, or rather up the ass (not in the Bush and war doctrine he lives by way) of other countries. Chinese can dump their goods in this country (cmon our reps are a small sliver, leave it alone) and we can't sell [censored] there. They buy our raw material, turn it around with no regards to our IP , get it made with cheap manipulated labour and sell it in their currency that is artificially kept down to make it competitive (by many estimates, the Yuan should be atleast 30% stronger than what it is). And what do we do? We send Paulson their 17 times in his tenure to appease them, you know why, we have sold our souls to keep everyone happy and select few rich - for the time being. We need them buying our debt. They are behaving like a dope dealer who keeps his customer coming back for more on line of credit - just to get users hooked and start his business.

The globalization concept is a fine machine and a big gear in it is not playing the part. This financial tension is bound to happen. In the end they win and we loose. And you know what, good for them. They care for their future and we want instant gratification. We think our multinationals are strong, but for whom?? The executives and less than 2% of us who own their shares. And also keep in mind that our Bluechips Multinationals are also full of hubris and arrogance. They have ruled for a while as other country companies could not get capital. In todays world captial and ideas flow freely and some of the most promising and future bluechips are taking birth outside US of A. Auto Industry is a fine example. In 60/70s is you would have told anyone that the Big3 would be where it is, they would have laughed at your face and told you to sober down and stop being a chicken little.

The Dollar fall will happen quickly and at the smallest hint that Chinese/Arabs will diversify from USD to other instruments.

[zzipy]

And BTW, Europe is in a bigger ditch than us and they have produced an entire generation that is not interested (or rather lost hope) in a brighter future. We just might get there with a new set of regulations and entitlements that will be passed soon.

[HauteHippie]

The operative word going forward for the coming quarters will be 'whipsaw'.

When the proverbial 'S' hits the fan, the USD/Treasuries is still considered the safe harbor. Investors were borrowing the JPY at 1% to invest in riskier assets when the name of the game was 'risk on'. Well, its a 'risk off' environment at the moment, so there's Yen selling to go to USD. The commodities boom is temporarily on hold, so the benefit the Aussie dollar was seeing comes to a quick halt. The Eurozone was laughing at the US for a few quarters before they realized we buried a lot of our dead bodies in their back yard, and we come to find out their banks are levered even higher than ours were...woops...unload the Euro.

The US is printing money and Treasury issuance over the next couple quarters is unlike anything we've ever seen. Such an abundance of USD/USD denominated assets will soon mean oversupply, making them cheaper. Compound all of this with a possible .5% interest rate environment and the USD could get REALLY cheap, and fast. When 'risk on' comes back into vogue and the world realizes the USD is the same USD + a crap load more national debt and carnage over its shoulder, things should go back to regular scheduled programming (commodity currencies benefiting, shun the high debt:GDP currencies, Pound included). The question is when the big reversal will come...things could look pretty bad for a while, maintaining this artificial high in the dollar.

Bingo. The current strength of the dollar is completely irrational and will be relatively short lived. You have a lot of deleveraging right now, which will settle down eventually. And at this point I do strongly believe that it is not a question of if but a question of when the dollar will collapse. The US economy is totally artificial, and as another poster stated, with the dollar having no intrinsic value (not backed by anything real) there is nothing to stop Helicopter Ben from running the printing presses 24x7 - which is precisely what he's stated he'll do. But we absolutely can not inflate our way out of this mess, and I can't overstate how unnerving these times truly are, especially when compared to 1932. Because the difference between then and now is that during the Great Depression we actually had a sound underlying economy based on production and savings. Today we have a phony service sector economy, 72% of which is based on consumer spending, which is entirely based on debt. So we're in a huge hole, just as we wound up in back then, but now we don't have the economic means to claw our way out. And while the symptoms of current bubble bursts are deflationary - to be expected when you had asset prices out of the stratosphere - I have no doubt that in the long run this recession/depression is going to be highly inflationary, unlike the Great Depression, which will make it even worse than in the 30s. This is a house of cards just waiting to collapse and everything that is being done by our leaders to prevent the collapse is only making things worse and making even more certain that the collapse, whenever it happens, will mean the end of the US dollar. What's happening right now, I believe, is a last hurrah.

Case in point... try buying some gold bullion from US dealers right now. Nobody has any. Some will try to sell Weiners but, for the most part, you can't get the more recognizable Eagles, Maple Leafs, or even Krugs. I was able to find some a couple weeks ago when spot had dipped below $700 and I sure wish there was more available at that time. And I don't know if it is a prepared line or not, but when I mentioned the dollar collapse to the broker on the phone he went into a spiel about how it is inevitable and that they already have warehouses loaded with Ameros (the presumed eventual replacement for the dollar) ready to go.

[Shundi]

I agree about the dollar going down soon and I realize (more than many) the issues with the current system of fiat currency and the inflation happy government we have but I will say that the US economy isn't "bad" in the sense that the entire GDP etc, etc is completely artificial... the US will recover at some point due to certain "Core" businesses and, I believe, drastic government intervention. I do agree that the USD's status as the currency of choice is waning in favor of the Yen (it won't be the Euro, I'll tell you that). As chief mentioned, the housing bubble, the speculation, the greed we saw starting in the 70's and continuing even until today have been etching away at investor confidence for the last 30 years and with the latest round of over-inflated asset and commodity collapses, we're seeing the stone rolling over the hill if you will.

I was fortunate enough to invest in a number of maple leafs and some eagles before the Iraq War (2) started in...what 2002-2003? Thankfully I had the guidance and advice to move to non-fiat derivatives...

Re: consumer spending: I agree that the way we've allowed debt to grow is absurd. I also think it's unfortunate we outsourced so much manufacturing... manufacturing gives raw materials value...it allows control and refinement of upstream industries and is really the heart of any consumption-driven economy... in our quest for higher profit margins and lower consumer cost, we outsourced most of our manufacturing to China, India, and South East Asia.

My point regarding multinationals is that they're actually "safer" in some regards than purely domestic industries...they have more foreign investments, they have assets and shells in other countries, they have some "mobility" in the sense that they're not "tied down" to one particular country or economy and thus may be able to weather the storm on the home front.

That being said, companies are panicking to the point of irrationality. Consider this- when the [censored] started to really hit the fan, companies and individuals flocked to US Treasury bonds... you'd actually lose money if you brought a US T bond right now if you consider the yield vs inflation- the yields have been driven down and the price of bonds has gone up...

Now, I think we'll start to see bond rates come up and prices on bonds come down due to the gov't printing money like it's air and the potential slack in demand but that means no one in their right mind would buy a bond NOW if they think prices will be lower in 6-18 months right? Any current income gain would be erased by capital losses...

Reits are suffering, retail is suffering...we'll see what happens. While our economy might not have the same "stability" it had during the Great Depression, I do not think the US economy is totally dead... but make no mistake, we're heading into what could become a major depression and as Buffet said: the days of 18-30% gains are over.

The classic 30-50 year old "recommended" investment portfolio breakdown has around 60% stock, 20% cash, 10-20% bonds and 0-10% alternative investments (REITS, MLPs, Annuities, etc)... I've been advising something like 40% cash derivatives (liquid so Money Market, ST CD's, corporate paper, etc), 20% metals, 30% stock (20% international, 80% domestic) and 10% in bond mutuals / alternatives but that's just what's worked for me...

All in all, I think the US domestic economy and, as an extension, USD is going to have a major impact on the way the world handles this crisis... I am absolutely shocked at the leverage ratios of some European companies and how...well...just terrible they're doing.

I think you're also going to have another month like last month in Feb-March when companies start to report abysmal holiday sales and targets... You're also going to see GM, with only $16 billion in cash on hand and churning through it at something like $6 billion a month (not sure on that stat), in crisis mode and ready to drag down the Big 3 and their suppliers, etc.

Despite all this, things will pick up again at some point - the USA isn't going to go bankrupt... the powers that be may need to start another world war over oil or something but I'm not sure we're Zimbabwe just yet.

But hey, cheap gas right!

[HauteHippie]

Well I'd like to share Shundi's optimism... Really, truly, honest to god I would. I'm not a pessimist. But I am a realist and I simply can't find anything in the fundamentals to be optimistic about. A few points... One, the GDP *is* artificial and effected by a totally bogus inflation number. It's also based primarily on borrowing and spending. It's not based on production and exports. By and large, we don't produce anymore. We don't have the means to accumulate any real savings. We've gone from the world's largest creditor to its largest debtor in less than a generation. People think a dollar collapse is far fetched. But what do you think people would have said in the 70s if you told them that by the turn of the century the US would be the world's biggest debtor? What do you think people would have said if you had told them the Big 3 automakers would be bankrupt and the federal government would be pouring in billions to save them? The dollar collapse isn't far fetched. The fundamentals point squarely at it, which leads me to point two: I agree that we aren't GOING bankrupt. We've gone! We ARE bankrupt!! We aren't Zimbabwe yet but Bernanke isn't done printing money yet. With all the stimulus packages, and buying of garbage assets, and mortgage restructuring, and god only knows what else down the road... we can easily get there. But make no mistake, bankruptcy has LONG since come and gone. The question now is, do we endure some big time pain in order to restore true solvency (not), or do we make things worse by pumping out dollars until they're literally worthless (likely). Man, I remember my second big gold buy when spot was almost $400. I couldn't believe I was paying THAT much for gold!! Now I can only believe that the sky is the limit.

[Shundi]

Yeah chief you must have brought near the same time I did... $400 seemed like it was really, really high, I know many who said stay away...

I understand your point and I really think the US needs to suck it up, stop sending out foreign aid, get out of the wars, shrink the bureaucracy and start making the long, painful trip back to true solvency. Unfortunately, for all our freedoms, elections and such our politicians can't come out and say this because they'd have their asses handed to them by the vast majority of their uneducated, fat, in debt constituents.

CPI not using oil etc has always [censored] me off and the GDP numbers are fairly absurd... that being said I think there are plenty of US companies with various IPs and assets which will allow them to weather the storm...I guess my point is that sure, the economy is in the [censored], but the actions of our own government with regards to regulating such businesses and improperly managing debt to the point where our government is like a larger version of GM is much, MUCH more detrimental than the way many private corporations act...sorry if that didn't come out in my earlier posts...it seems like we're saying the same thing- I believe that it's going to be the actions and debts of the government vs private enterprises that have to do with the lion's share of the current and future crisis... Sure the financial industry managed a royal [censored]up but as others have said, some of the current private stuff pales in comparison to selling the Chinese our debt and blowing billions on a war we didn't need to fight while neglecting one we arguably should be fighting.

[HauteHippie]

Yeah chief you must have brought near the same time I did... $400 seemed like it was really, really high, I know many who said stay away...

And I think plenty say stay away now, too. But I think this deflationary bust is an opportunity to get back in and buy more. And how about platinum?! The spread between gold and platinum is way off historical norms... platinum was at $2000 this summer!! But when you look at gold's relative stability compared to assets and equities and other commodities and just about everything else right now, and then call around to the brokers only to find out they all have ZERO inventory.... Well, you do the math.... There really are some potentially once-in-a-lifetime opportunities out there in precious metals and foreign stocks, IMO. The cure is going to be far worse than the disease for us, and positioning yourself accordingly could be immensely lucrative.

[Shundi]

Indeed... I've also been in companies with big copper stakes too... copper prices are heading the same way and with China and India expanding the way they are, they're going to need all the raw materials they can get...FCX is an interesting stock...it's down right now, has a huge surplus of cash (to keep paying me that 8.6% dividend ) and it's got the lion's share of copper in the US... might be worth taking a look at..

I was into platinum for a bit but I feel that there's a reason for the term "gold standard." You're absolutely right- people always turn to gold in this type of economy but I feel silver and copper are worth looking into also (copper more than silver IMO)

Edit to add: Dividend Yield

[HauteHippie]

I'm ALL about dividend earning stocks....... just so long as they're not paying dividends in US dollars.

[Shundi]

Hahaha...I hear ya... I'll just do what I've been doing: Taking those quarterly div payments and using a good portion to buy metals

I'm in a few ADR's too...some are doing MUCH better than others... pharmaceuticals seem to be fairly content so long as they've got decent pipelines and IPs... Pfizer got screwed when the Norvasc patent expired in 07 but they've got ~7% dividend and they're attractive right now...

In terms of div yielding stocks I'm heavy into:

BMY

RDS

DOW

FCX

PFE

VZ

GE

- Non Financial

- Dividend of at least 7% (Only taxed at 15%- as you're well aware)

- Surplus of cash to ensure (or at least, as sure as you can be these days) continuous divided payments

- Trading within 10% of their trailing 52 week low price

I actually attended a conference / presentation with one of the Sr. VP's for GE's asset management division whose speciality was international stocks... crazy what type of gain a 20% international diversification will get you...

[slay]

And BTW, Europe is in a bigger ditch than us and they have produced an entire generation that is not interested (or rather lost hope) in a brighter future. We just might get there with a new set of regulations and entitlements that will be passed soon.

what? at least over here the average household doesnt have 35k+ debt... WE are able to buy our BMW's, mercedeses and VW's, its you guy that can't buy any more GM because you can't afford it

[mars08]

The American dollar is "too big to fail". Foreign creditors would suffer horrendous losses if the US govt were to default or devalue its currency.

[zzipy]

Powermax: BMW/Mercedes and the rest of european premium brands (and columbian coke producers) would be like GM without US consumers.

I am not disshing the people, if you read my posts, but rather the policies that have caused this situation. If Mercedes, Toyota etc can produce A+ cars in US, why can't GM?

As for the debt situtation goes, US is the king. But Europe is too vitrified for its own good. Remember, that europe banks are even more leveraged than US on average.

I wouldn't go heavy on Copper just yet. Wait till spring and let things settle down. PCU would be my play. FCX is awesome too.

I have a net neutral position in Metals by being long some and short equal amount in companies I perceive as slightly lower quality and higher debt.

I love AGU, but unfortunately their dividend sucks and I am not going to own a stock without dividend while I wait for recovery, that might be a couple of years away. Any takers on Sasol (SSL)? I have intrugued by this company and am thinking of building a position.

Man, this board never amazes me. We have some good sharp people visiting here. Hope you lived in my hood

[Spy]

I agree, being in teh UK, the rapid fall of the

[fat.tail.event]

Chief- It sounds like you need to plug into some Peter Schiff, if you already have not---- http://www.europac.net/video.asp

BTW, there's an excellent video clip of Peter on Youtube highlighting his market/economy calls going back to 2006 where he foretells everything thats happened over the last year. You get to see pundits literally laughing at him, saying he's crazy, even Ben Stein saying that MER @75 is so cheap that it should be given away in cereal boxes...really good stuff

I do agree with the comment below. A 'collapse' wont occur in the sense that we are used to. It will be a slow bleed, maybe slightly more accelerated than the 1970-present...just like inflation robs us slowly over time. Eventually we will hear terms like currency deval, debt downgrade, IMF, 'bailout (and more palatable synonyms) in the same sentence with USA. Central bankers and finance ministers are working hard, and QUIETLY to make a controlled migration out of USD.

The American dollar is "too big to fail". Foreign creditors would suffer horrendous losses if the US govt were to default or devalue its currency.

[HauteHippie]

Chief- It sounds like you need to plug into some Peter Schiff, if you already have not---- http://www.europac.net/video.asp

BTW, there's an excellent video clip of Peter on Youtube highlighting his market/economy calls going back to 2006 where he foretells everything thats happened over the last year. You get to see pundits literally laughing at him, saying he's crazy, even Ben Stein saying that MER @75 is so cheap that it should be given away in cereal boxes...really good stuff

I do agree with the comment below. A 'collapse' wont occur in the sense that we are used to. It will be a slow bleed, maybe slightly more accelerated than the 1970-present...just like inflation robs us slowly over time. Eventually we will hear terms like currency deval, debt downgrade, IMF, 'bailout (and more palatable synonyms) in the same sentence with USA. Central bankers and finance ministers are working hard, and QUIETLY to make a controlled migration out of USD.

Peter Schiff is scrappy and has definitely made some accurate predictions... I've read 'Crash Proof'. With Peter, though, you always have to keep in mind that he owns a brokerage and is trying to sell you on it... And as those Europac accounts sink deeper, Peter's sales pitches get more outlandish.

[Shundi]

I take what I read from Schiff with a grain of salt but damn has he made some great calls... I haven't researched SSL very thoroughly so I can't comment on it...

I agree with zzippy regarding Merc, BMW, Audi/VW etc... a large percentage of their operating profit comes from the United States....they'd better pray the US keeps buying luxury cars or they'll suffer...

[Shundi]

RE: SSL

http://caps.fool.com/Ticker/SSL.aspx

Interesting...lot of the bearish members are also bearish on GE and BAC... might be a good long play...you'll probably see lower returns than with an RDS or XOM when commodities spike but it's got a lower beta, higher diversification, and should be more stable...

[fat.tail.event]

Its good to see some optimism relating to selected equities. I think there are some ultra long term bargains right now in energy and hard commodities, but for now would rather momentum trade the physicals, nothing to do with corporate structures. Across the board we are still massively short no matter the country or company and the earliest we are talking of pulling these off is Q1'09. Listening to our equity analysts every morning is like having breakfast with Jekyll and Hyde; one day the world is ending, the other is table pounding BUY. We are heavy equity option volatility right now.

There seem to be a lot of gems in the debt space, its so distressed...certain bonds, hybrids, preferreds. This is the only area where I have seen us make truely directional commitments in this market (meaning hoping it will go up). We are ramping up a convertible arbitrage segment. You can almost read into that and say that no one is hoping for more than a few percent next year, best case scenario. LIBOR plus 2 or 3 would be pretty nice in '09.

Keeping this somewhat on thread topic...its the currency traders who made out this year. Our FX desk will likely take home the lion's share of bonus.

Keeping it very on topic...I really feel for the folks who are just trying to simply buy a timepiece, and its like shooting a moving target with exchange rates. We have crossed into a realm of irrationality with these markets (speaking from a daily volatility standpoint) and its never fun/pretty to see it add another layer of BS into life, pleasures etc.

[HauteHippie]

RE: SSL

http://caps.fool.com/Ticker/SSL.aspx

Interesting...lot of the bearish members are also bearish on GE and BAC... might be a good long play...you'll probably see lower returns than with an RDS or XOM when commodities spike but it's got a lower beta, higher diversification, and should be more stable...

South Africa?? What is their exposure to the political situation there?