HOLY SMOKES : Did i read this right? Dow below 10,000 S&P;1,100 Nasdaq 1500. Is this possible by October?

[ukyo116_IHB]

China had their banks raise their dollar reserves in order to spur some more trade.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/26/ccchina126.xml

Then mix in some Japanese and European banks.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aafNFhZiOg.w

and you get a nice little dollar bounce.

 

[awgee_IHB]

Interesting insight on the dollar I picked up from another blog

"James Turk - GoldMoney.com August 7, 2008

So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof.

When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.

So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.

"

Seems to be a good explantion for the unfounded dollar rally we have had lately. Especially since there is no fundemental reason for a dollar rally (any suggestions?).

Once foreign central banks realize that they are doing us a favor by reducing their quality of life, the floor will drop out on the dollar.

Most of this is verifiable fact except for the last statement, which is opinion. And I would be careful on that opinion. The CBs can continue doing whatever they think is in their best interests, even if they are wrong.

And IMO, James Turks analysis points to a very important question. How are you measuring the dollar?

The markets measure the dollar by the Forex number, or in other words, against a basket of other currencies.

But, most folks do not trade Forex, so they may want to consider what does the value of the dollar mean to them? For most Americans, those not trading Forex, the value of the dollar is whatever a dollar can buy them.

IMO, this is a much more relevant measure of the dollar. If the Euro, Yen, Renminbi, etc. also buy less goods for their currencies in their own countries, it matters much less if the dollar is "strong" or "weak" relative to those currencies.

The recent "strength" in the dollar is completely based on the idea that the US economy is going to be stronger because the European economy is showing signs of weakness, and the Euro is weaker. Less than two weeks ago, all the talking heads were saying US stocks and the thusly the US economy would stay out of a recession because the we are in a global economy and even if the US economy weakens, the European economy and the Asian economy would keep the US economy going. Now, they are saying the US economy will be stronger because the European economy is showing weakness.

IMO, both ideas are wrong and stupid.

The relevant questions and fundamental questions are: Do you think the dollar in your pocket will be buying the same or less or more for you than it did last year? Do you think asset deflation will cause the dollar to be valued more highly? What do you think the response of the Federal Reserve and the Treasury Dept. will be to asset deflation? What has their response been so far? What have they done historically?

 

[upperlowerclass_IHB]

Interesting insight on the dollar I picked up from another blog

"James Turk - GoldMoney.com August 7, 2008

So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof.

When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.

So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.

"

Seems to be a good explantion for the unfounded dollar rally we have had lately. Especially since there is no fundemental reason for a dollar rally (any suggestions?).

Once foreign central banks realize that they are doing us a favor by reducing their quality of life, the floor will drop out on the dollar.

Most of this is verifiable fact except for the last statement, which is opinion. And I would be careful on that opinion. The CBs can continue doing whatever they think is in their best interests, even if they are wrong.

And IMO, James Turks analysis points to a very important question. How are you measuring the dollar?

The markets measure the dollar by the Forex number, or in other words, against a basket of other currencies.

But, most folks do not trade Forex, so they may want to consider what does the value of the dollar mean to them? For most Americans, those not trading Forex, the value of the dollar is whatever a dollar can buy them.

IMO, this is a much more relevant measure of the dollar. If the Euro, Yen, Renminbi, etc. also buy less goods for their currencies in their own countries, it matters much less if the dollar is "strong" or "weak" relative to those currencies.

The recent "strength" in the dollar is completely based on the idea that the US economy is going to be stronger because the European economy is showing signs of weakness, and the Euro is weaker. Less than two weeks ago, all the talking heads were saying US stocks and the thusly the US economy would stay out of a recession because the we are in a global economy and even if the US economy weakens, the European economy and the Asian economy would keep the US economy going. Now, they are saying the US economy will be stronger because the European economy is showing weakness.

IMO, both ideas are wrong and stupid.

The relevant questions and fundamental questions are: Do you think the dollar in your pocket will be buying the same or less or more for you than it did last year? Do you think asset deflation will cause the dollar to be valued more highly? What do you think the response of the Federal Reserve and the Treasury Dept. will be to asset deflation? What has their response been so far? What have they done historically?

I certainly understand betting that foreign CBs will see the light is a risky bet. However, it has become increasingly more obvious that thier actions to prop up the dollar have been detrimental to their countries. They can't be enjoying our inflation they are sucking up.

The answer to your question is easy, the dollar will be worth less. But where to protect that purchasing power is becoming a harder decision every day. Fundementally, gold and foreign currencies would be good bets, but there is so much manipulation in both markets.

Gold, for example:

"Rob Kirby - Wake Up Call

August 26, 2008

For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This position was put on and resulted in massive market price collapse.

END.

Kirby notes that such a short position can be only the work of a central bank, "because no public entity -- bank or otherwise -- has the balance sheet maneuverability in an impaired credit environment to conduct such business.

Resource Investor's Gene Arensberg is suspicious as well, he seems convinced in his latest "Gold Gold Report" that the recent enormous shorting of gold and silver by a few banks was a market manipulation and likely a currency intervention inspired by the U.S. government.

"

So I guess the best you can do for now is hope these "powers that be" are only capable of causing pull-backs or buying opportunities for you and don't have the power to reverse the trend. This is the boat I'm currently sitting in.

 

[PANDA_IHB]

Interesting insight on the dollar I picked up from another blog

"James Turk - GoldMoney.com August 7, 2008

So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof.

When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.

So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.

"

Seems to be a good explantion for the unfounded dollar rally we have had lately. Especially since there is no fundemental reason for a dollar rally (any suggestions?).

Once foreign central banks realize that they are doing us a favor by reducing their quality of life, the floor will drop out on the dollar.

Most of this is verifiable fact except for the last statement, which is opinion. And I would be careful on that opinion. The CBs can continue doing whatever they think is in their best interests, even if they are wrong.

And IMO, James Turks analysis points to a very important question. How are you measuring the dollar?

The markets measure the dollar by the Forex number, or in other words, against a basket of other currencies.

But, most folks do not trade Forex, so they may want to consider what does the value of the dollar mean to them? For most Americans, those not trading Forex, the value of the dollar is whatever a dollar can buy them.

IMO, this is a much more relevant measure of the dollar. If the Euro, Yen, Renminbi, etc. also buy less goods for their currencies in their own countries, it matters much less if the dollar is "strong" or "weak" relative to those currencies.

The recent "strength" in the dollar is completely based on the idea that the US economy is going to be stronger because the European economy is showing signs of weakness, and the Euro is weaker. Less than two weeks ago, all the talking heads were saying US stocks and the thusly the US economy would stay out of a recession because the we are in a global economy and even if the US economy weakens, the European economy and the Asian economy would keep the US economy going. Now, they are saying the US economy will be stronger because the European economy is showing weakness.

IMO, both ideas are wrong and stupid.

The relevant questions and fundamental questions are: Do you think the dollar in your pocket will be buying the same or less or more for you than it did last year? Do you think asset deflation will cause the dollar to be valued more highly? What do you think the response of the Federal Reserve and the Treasury Dept. will be to asset deflation? What has their response been so far? What have they done historically?

I certainly understand betting that foreign CBs will see the light is a risky bet. However, it has become increasingly more obvious that thier actions to prop up the dollar have been detrimental to their countries. They can't be enjoying our inflation they are sucking up.

The answer to your question is easy, the dollar will be worth less. But where to protect that purchasing power is becoming a harder decision every day. Fundementally, gold and foreign currencies would be good bets, but there is so much manipulation in both markets.

Gold, for example:

"Rob Kirby - Wake Up Call

August 26, 2008

For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This position was put on and resulted in massive market price collapse.

END.

Kirby notes that such a short position can be only the work of a central bank, "because no public entity -- bank or otherwise -- has the balance sheet maneuverability in an impaired credit environment to conduct such business.

Resource Investor's Gene Arensberg is suspicious as well, he seems convinced in his latest "Gold Gold Report" that the recent enormous shorting of gold and silver by a few banks was a market manipulation and likely a currency intervention inspired by the U.S. government.

"

So I guess the best you can do for now is hope these "powers that be" are only capable of causing pull-backs or buying opportunities for you and don't have the power to reverse the trend. This is the boat I'm currently sitting in.

Upperlowerclass,

I am glad that there is some fresh blood bring up this issue on this forum as Graph and CalGal thinks that i am one Crazy Panda that has gone complete Nuts. I've read the articles that you posted that i agree with you where you are going with all this.

"Now we have not one, but two little Awgees" on the IHB.

Manipulation, Fraud, Corruption, and Deception is like a web where the truth will be eventually revealed at the end. I absoutely have no trust in our government and wall street. What happened to the founding fathers of our great country who built our country with integrity??? Our currency must go back to the gold standard.

 

[PANDA_IHB]

The Nasdaq, DOW, and S&P is getting creamed this week. Opimus, I may take on your $50 wager by end of this month.

About two weeks ago, I found out that some crazy Fidelity broker put my Poor Mother Panda's entire retirement money in three Fidelity Technology Funds, and I immediately liquided her entire portfolio on August 28th, 2008 as she is not even looking at her retirement money going down the drain. I told Panda's mom, from this point forward, I will look over your retirement money. When you are turning 59 in a half in two years, you don't mess around with technology funds.

It is time to open up that Everbank Money Market account for Mother Panda at 4.75% introductory money market account.

 

[awgee_IHB]

ULC - Where to put your money? That is the rub, isn't it?

I guess what occurs to me is that if the government or the banks have been manipulating the price of precious metals, how sucessful have they been? Check out a five year chart of gold. Since 2003, the price of gold in dollars has gone from $300 to $800. Maybe someone or some government can manipulate the price in the short run, but it does not seem to me that they have been very sucessful in keeping the price down over the long term. But, maybe you are seeing something I am not.

 

[upperlowerclass_IHB]

ULC - Where to put your money? That is the rub, isn't it?

I guess what occurs to me is that if the government or the banks have been manipulating the price of precious metals, how sucessful have they been? Check out a five year chart of gold. Since 2003, the price of gold in dollars has gone from $300 to $800. Maybe someone or some government can manipulate the price in the short run, but it does not seem to me that they have been very sucessful in keeping the price down over the long term. But, maybe you are seeing something I am not.

Nope, I see the same. Short-term corrections is all they seem capable of accomplishing.

 

[PANDA_IHB]

ULC - Where to put your money? That is the rub, isn't it?

I guess what occurs to me is that if the government or the banks have been manipulating the price of precious metals, how sucessful have they been? Check out a five year chart of gold. Since 2003, the price of gold in dollars has gone from $300 to $800. Maybe someone or some government can manipulate the price in the short run, but it does not seem to me that they have been very sucessful in keeping the price down over the long term. But, maybe you are seeing something I am not.

Nope, I see the same. Short-term corrections is all they seem capable of accomplishing.

Me Three!!!

Graph, I am still waiting for your answer on what you think are the fundamentals that is allowing the dollar to rally for the long run against other hard commodity assets and foreign currencies?

 

[ukyo116_IHB]

Awgee, ulc.

Are you guys aware of the lawsuit being filed against the canadian banks that short the juniors? Rumor is that there will be blood.

 

[CalGal_IHB]

Graph, I am still waiting for your answer on what you think are the fundamentals that is allowing the dollar to rally for the long run against other hard commodity assets and foreign currencies?

Panda, it would be a full-time job for Graph if he answered all of your questions.

 

[PANDA_IHB]

Graph, I am still waiting for your answer on what you think are the fundamentals that is allowing the dollar to rally for the long run against other hard commodity assets and foreign currencies?

Panda, it would be a full-time job for Graph if he answered all of your questions.

Geez CalGal,

What you got to hate the poor Panda so much? He is just a furry, innocent, harmless little bear just trying to have some fun.

Opps, I asked a question.

Graph and BK,

If Panda reaches the McMansion status, can you allow Panda to ask 200 questions a week instead of just 2 a week?

Opps, I asked another question.

 

[optimusprime_IHB]

Graph, I am still waiting for your answer on what you think are the fundamentals that is allowing the dollar to rally for the long run against other hard commodity assets and foreign currencies?

Panda, it would be a full-time job for Graph if he answered all of your questions.

Geez CalGal,

What you got to hate the poor Panda so much? He is just a furry, innocent, harmless little bear just trying to have some fun.

Opps, I asked a question.

Graph and BK,

If Panda reaches the McMansion status, can you allow Panda to ask 200 questions a week instead of just 2 a week?

Opps, I asked another question.

Panda, you probably mean no harm but I think I am not alone in finding your posts extremely annoying.

 

[PANDA_IHB]

Graph, I am still waiting for your answer on what you think are the fundamentals that is allowing the dollar to rally for the long run against other hard commodity assets and foreign currencies?

Panda, it would be a full-time job for Graph if he answered all of your questions.

Geez CalGal,

What you got to hate the poor Panda so much? He is just a furry, innocent, harmless little bear just trying to have some fun.

Opps, I asked a question.

Graph and BK,

If Panda reaches the McMansion status, can you allow Panda to ask 200 questions a week instead of just 2 a week?

Opps, I asked another question.

Panda, you probably mean no harm but I think I am not alone in finding your posts extremely annoying.

Optimus, feel free click on the ignore button. Be my guest.

 

[CalGal_IHB]

Graph, I am still waiting for your answer on what you think are the fundamentals that is allowing the dollar to rally for the long run against other hard commodity assets and foreign currencies?

Panda, it would be a full-time job for Graph if he answered all of your questions.

Geez CalGal,

What you got to hate the poor Panda so much? He is just a furry, innocent, harmless little bear just trying to have some fun.

Opps, I asked a question.

Graph and BK,

If Panda reaches the McMansion status, can you allow Panda to ask 200 questions a week instead of just 2 a week?

Opps, I asked another question.

Panda, I believe I proved the other day that you ask WAY more questions than 2 a week.

As a reminder, you asked about 20 questions in one day from one post! I didn't even tally the other posts.

You are getting on people's nerves.

Why don't you chill out for a bit.

 

[PANDA_IHB]

OK CalGal,

You Win.

Panda will hyberate for a bit. But if don't keep posting... How am i going to achieve the McMansion status you have?

Ok, seriously i will chill for a bit... Promise.

 

[CalGal_IHB]

Panda - hybernate - LOL

 

[awgee_IHB]

Awgee, ulc.

Are you guys aware of the lawsuit being filed against the canadian banks that short the juniors? Rumor is that there will be blood.

Yes, I am. All my long stock positions are Canadian precious metal royalty or precious metal mining, (some juniors), or oil companies, so the suit has peaked my curiousity. But, I am not holding my breath.

 

[awgee_IHB]

Is it Panda who is annoying, or is it the questions he is asking? I would venture than some of Panda's questions and the possible answers may make folks uncomfortable.

 

[muzie_IHB]

I enjoy the debate. There's just of lot of over-dramatizing, mostly from Panda .

My portfolio is something like 50% short, 10% gold, 10% commodities, 30% long stuff (can't short the 401k anyway). So I guess I'm a pretty big bear - but I don't really make calls like Dow Jones 10,000 by this and that date, etc. etc. I *think* it's going down but I'm not going venture by how much, and even if it does it's not necessarily that significant. It's a bear market, people are all scared (I am as well), things correct and over-correct and the deeper the cut, the better the wound heals later on imho.

I'm going to venture that deflation is a scenario to take into account. It's really hard to tell right now if deflation or inflation is what we're ahead for, but the end result is the impoverishment of the population, either way. If you we're long almost anything you bought in the last months, you probably lost money, and you were short, well, you may still have lost money if you couldn't deal with the volatility.

I would just keep the deflation card in the back of your mind. Not that it needs to be the main idea behind the portfolio. In a deflation, EVERYTHING goes down in value, as the supply of money gets too tight there's too few dollars to chase the goods and assets and they get repriced lower. In a deflation, a US dollar COULD RISE versus other currencies depending on the relative speed of deflation vs. other countries. Gold to me is a toss-up in a deflation scenario: everything should go down in price in a deflation, but gold has this "rock solid value" feel in people's minds that can balance it out so it goes either way.

Yes, the Fed is bailing out all these banks and providing liquidity for them and all that, so that should be inflationary. But it doesn't look like any of that is making it into people's pockets, so you have to wonder how real that kind of money supply is.

There's no real safe haven in a deflation. Doesn't mean it'll be a 1930s style "OMG" type of deflation but if every asset class and every commodity is being repriced at lower prices no matter, that kinda sounds like a deflation to me.

 

[awgee_IHB]

Muzie - I have to agree with just about, if not everything, you just wrote. But, there is another scenario in addition to the deflation or inflation scenario: Asset and credit deflation combined with cost of living price increases, (price inflation).

I would also add that the price of gold is not so dependent on the value of the dollar, the price of other commodities, credit deflation or inflation, or any other myriad of possibilities, but is rather mostly dependent on people's psychology and how they feel about their particular currency.