Forget the stress test. The big story in the markets today is the plunging dollar. The Dollar Index is getting crushed, down 1.27 points to 82.66 at last count. For you technically inclined readers, it’s also plunging through its 200-day moving average.
What’s going on? The positive read is that this move signals a return to risk taking. Investors are selling the dollar because they no longer are flocking to safe havens.
The negative read? That the Federal Reserve and Treasury Department are completely out of control when it comes to banking bailouts, money printing, borrowing, and spending. We now have both falling bond prices and a falling dollar. If gold starts heading toward and through $1,000 an ounce as well, it will be a trifecta of signals that investors are losing faith in U.S.-denominated assets. My take, anyway.
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Did you see the utube videos of perfectly good houses getting destroyed by bulldozers because the Mortgage company doesn’t want to pay city fines for not keeping the house in good shape? The times are strange.
So, if the stock market turns back down, do you think that the dollar will rise again?
Thank you for your excellent analysis. God bless.
@ Mike:
I find your commentaries very interesting, and realize that you “know your stuff regarding the real estate market (CRE & residential). However, I have a concern related to your commentary on 8 May entitled: “An important Housing Market Update.”
With the continuing slide in employment data, doesn’t that also mean that foreclosures will increase in the months ahead? And that doesn’t bode well, given new foreclosures, existing overhang, looming Alt A problems, etc.?
So you believe that the ETF “SRS” is no longer a good investment? Or even a reasonable one?
I agree that gold is a must have today and going forward(I’ve been big in gold since just after 9/11).
BUT, GDL, is not a good vehicle, IMO, since it is sponsored by some of the same NY banks that you guys are always warning against, and much of the “gold” in the fund is actually derivative based, futures contracts, etc.
GTU, a Canadian based closed end fund(a sister fund is CEF), which has been around since the mid-1960s, actually has all of their fund’s gold in actual bullion, in a vault in a Canadian bank. No counterparty risks, there.
It is a fund that would seem to appeal much more to you, if you checked it out. James Turk, one of the godfathers of gold, is a backer of GTU.
BTW, here’s GTU’s website:
http://www.gold-trust.com/
The foreign currencies definitely seem to follow the Stocks. So, the question is if we get a pull back in the Stock market again, then will the US dollar get stronger. It seems so. Not a good hedge buying the foreign currencies if you think the stock market is going down.
The dollar got stronger and on Friday the rising trendline on EUR/USD along with support at 1.355 have been violated. I tend to believe the dollar is still in consolidation and I expect it to brake away with another wave of panic in the financial world.
P.S. Where is Larry and Jack? I miss them…where I can follow their newsletters?