Key News
* Euro gains on positive manufacturing data (AFP)
* Greenspan Says US Growth of 2.5% Is Possible in Third Quarter (Bloomberg)
* Tight credit could limit eurozone growth: analysts (AFP)
* Russian manufacturing industry shrank at slowest pace since September
(Bloomberg)
The Event Agenda
The Morning Run-Down
Better than expected manufacturing data in the Eurozone, China and the U.S. this morning set off a bid in nearly all currencies against the dollar. Add to that, positive commentary over the weekend about prospects for recovery from Greenspan, Geithner and Summers …and you get another risk-loving jolt higher in financial markets.
The activity this morning continues the sharp move in currencies from Friday. After better U.S. GDP on Friday morning, market participants put a square focus on currencies and ran the pound and the Aussie dollar through critical resistance (the 2009 highs).
Here’s a screenshot at Friday’s close…
While stocks have been leading the move in this highly correlated risk trade, on Friday stocks took a breather, and market focus turned squarely to currencies and commodities. But one market clouded the picture. Treasuries (10-yr notes) moved higher (see row 5).
The safety correlation between gold and the dollar broke down in May and has returned to its traditional inverse relationship. Thus the dollar moved lower, so gold moved higher. Considering the confluence of market performance, a move lower in Treasuries on Friday might have given the clue that the market was going after the dollar. But that wasn’t the case.
However, 10-year notes (Treasuries) have fully reversed the move now, and today, across all markets, it’s clear that it’s a risk appetite thing. And all things are pointing toward a higher risk trade. The close today will be important for currencies. The dollar index is trading into December lows. And the Australian dollar (the outperformer among currencies on this ride up) is trading into the 61.8% retracement of the move down from the July 2008 highs to the October lows…a 39% collapse, now met with a 40% climb.
With the docket set with rate decisions this week from Australia, Europe and the UK, the market is obviously positioning for positive language on the economy from central banks, hawkish sentiment from the RBA and clues on exit plans from the ECB and BOE.
And then we get employment data in the U.S. on Friday.
{ 2 comments… read them below or add one }
Dear Mr. Rich:
Real wealth and real monetary value is created only when the members of a family (or an organization, tribe, country, etc.) grow and harvest something from the earth, extract something of commercial value from the earth, provides professional services (medical, legal, dental, engineering, architecture, accounting, land surveying, technology, etc.), and/or makes (manufactures or constructs) something that is consumable (or permanently useful) and then sells, leases or rents these items and/or services to parties outside of their family in return for a net transfer of gold, currency or commodities from other parties outside of their family into their own family. The members of that family can reflect their real wealth with the accumulation of grain, gold, cattle, jewels, land, buildings, commodities and/or other marketable products for reserve use in times of emergency and/or also to raise the standard of living for the members of that family.
The US Government essentially became bankrupt when the US stopped redeeming our US T-Bills, US bonds, US dollars, and etc. for gold from our gold reserves at Fort Knox in 1971 or 1972. The US government then declared that the dollar is now backed by the “full faith and credit of the USA” (aka Junk Bonds). We now redeem foreign earned US dollars and other currencies for the title to privately owned US property (real estate, farms, agri-businesses, food supplies, dairies, forests, industries, breweries, hotels, factories, casinos, financial institutions, retail businesses, etc.) located in the US, instead of gold. This allows US citizens to sell assets generated by previous generations in lieu of US citizens having to work to produce the things that US citizens consume. These privately owned US located assets are finite, and the day will come when there is nothing left to sell to foreigners, and then we will then have to re-industrialize because we will not be able to pay foreigners to make the things that we consume.
If US citizens are not willing to work for lower wages than the foreigner workers employed in foreign countries are paid, then the USA cannot compete based upon lower product costs. If we cannot compete on lower costs, then maybe we could be competitive internationally through other areas such as superior technology, as we did in during WWII and the few decades following.
The USA is no longer the World Technology leader that the USA was until the 1970’s. Asian countries are now are the technology leaders. The best & brightest students in the USA have pursued non-scientific careers, instead of educations that might create technically innovative products that people in foreign countries might purchase.
The USA is selling our children’s legacy, including title to all of the wealth accumulated by previous generations in order to keep from re-industrializing and working to produce the things that US citizens consume. This is “sort-of like” US citizens selling our body parts to keep from working! The US government calls this “Investing in America”. US citizens are racing to sell title to everything in the USA of value that was created by previous generations in order to keep from working.
What will be the buying power of the US dollar when there are no remaining US assets that the foreigners want to exchange for the US dollars, T-Bills, and bonds that they earned by manufacturing the things that US citizens imported and consumed? The USA will very soon run out of title to any assets that foreign manufacturers will want to purchase with their freshly printed US government currencies and securities that they purchase at Federal Reserve auctions with the US Dollars that they earned by making items for US consumers.
The USA needs to direct the remaining funds that will be derived from the sale of the remaining US real property assets toward investing in activities such as technical education and re-industrialization so that US citizens can get the Gold, property titles, and US dollars back from these foreign countries and into the USA economy via re-industrialization. Wall Street and Banking Business bailouts will not accomplish anything to correct the basic flaw in our economy which is the foreign trade deficit.
The USA is selling our children’s legacy, including title to all of the wealth accumulated by previous generations in order to keep from re-industrializing and working to produce the things that US citizens consume. This is “sort-of like” US citizens selling our body parts to keep from working! The US government calls this “Investing in America”. US citizens are racing to sell title to everything in the USA of value that was created by previous generations in order to keep from working.
What will be the buying power of the US dollar when there are no remaining US assets that the foreigners want to exchange for the US dollars, T-Bills, and bonds that they earned by manufacturing the things that US citizens imported and consumed? The USA will very soon run out of title to any assets that foreign manufacturers will want to purchase with their freshly printed US government currencies and securities that they purchase at Federal Reserve auctions with the US Dollars that they earned by making items for US consumers.
The USA needs to direct the remaining funds that will be derived from the sale of the remaining US real property assets toward investing in activities such as technical education and re-industrialization so that US citizens can get the Gold, property titles, and US dollars back from these foreign countries and into the USA economy via re-industrialization. Wall Street and Banking Business bailouts will not accomplish anything to correct the basic flaw in our economy which is the foreign trade deficit.