The Dollar: Helplessly Hopeless

U.S. March PPI up 1.1% on higher energy, food costs
WASHINGTON (MarketWatch) - Wholesale prices surged 1.1% in March, led by rising energy and food prices, the Labor Department reported Tuesday. Energy prices rose 2.9% in March, while food prices gained 1.2%. The core producer price index, which excludes volatile food and energy, rose 0.2%. Economists surveyed by MarketWatch had expected the PPI to rise 0.4% and the core to rise 0.2%. Year-over-year, the PPI is up 6.9%. The core PPI is up 2.7% over the same time period.

Odds of a half-point cut to fed funds dip after PPI report
SAN FRANCISCO (MarketWatch) -- Fed funds futures slid early Tuesday after a U.S. wholesale inflation report for March showed a sharper-than-expected rise in price growth. The May contract fell to 98.08 mid-morning on the Chicago Board of Trade from a settlement of 98.11 Monday. The contract is now pricing in a 32% chance of a half-point cut to the fed funds target rate when the Federal Open Market Committee meets April 29-30. It fully prices in a quarter-point cut. Late Monday, the contract reflected about 44% odds of a half-point cut. The fed funds target rate is currently 2.25%; a half-point reduction would bring the rate to 1.75%.

And so the Dollar catches a bid because the addle-minded believe that rising inflation will curtail Fed rate cuts and thus strengthen the Dollar. Wishful thinking. The Fed could stop cutting interest rates this minute, and never cut them again, and the Dollar will not be strengthened in any way. Only ONE country has worse interest rates than the US and that's Japan. Rising inflation is the result of a weak Dollar and is Gold positive.

So what if the US Fed stops cutting interest rates. The rest of the world currencies still offer better returns. An interest rate cut by the ECB could help the Dollar marginally, but they are predisposed to fighting inflation so that is unlikely anytime soon if at all. The US Fed could raise interest rates to fight inflation and support the Dollar, but in a slowing economy that would prove disastrous so that is unlikely anytime soon as well. The fact is the Dollar is underwater and sinking...soon to be sinking ever faster...there is little that can offer it much hope in an environment where the government stewards backing it are not interested in taking fiscal responsibility for it. The Dollar is helplessly hopeless.


Crude oil at new high just above $114; gas also at a record
NEW YORK (AP) -- Energy traders rewrote the record books again Tuesday, pushing oil futures past $114 a barrel as gasoline and diesel prices struck new highs of their own at the pump.

Light, sweet crude for May delivery jumped as high as $114.08 a barrel shortly after regular trading ended on the New York Mercantile Exchange. That is nearly $2 above an intraday high set last week.
http://biz.yahoo.com/ap/080415/oil_prices.html

Oil prices are vaulting higher by the day. Today's move higher in Oil prices firmed current bids under Gold and Silver. Rises in both Gold and Silver today were capped by the false strength in the Dollar. It is only a matter of time before the lids come off these two Precious Metals. 935 Gold and 18.32 Silver. Wednesday's CPI report could be just the catalyst to push Gold and Silver through resistance and towards their recent highs. That PPI report, coupled with another poor petroleum inventory report mid morning Wednesday, may be just what the Precious Metals Bulls need to squeeze the shorts cluttering these markets.


Net Foreign Purchases Of U.S. Securities Increase In February
Monthly net TIC flows, which include non-market flows, short-term securities, and changes in banks' dollar holdings, were $64.1 billion in February, nearly twice the $35.7 billion from January.

Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit. The February TIC flow compares with the $62.32 billion trade deficit during the month, reported last week by the Commerce Department.
http://www2.blogger.com/post-create.g?blogID=7490177925219574159

By the slimest of margins, the US was able to finance it's trade deficit in February. It will be interesting to see how much longer this country can avoid having the World turn it's back on us. There's a sucker born every minute, and there were plenty of them around the globe buying US securities in February. Today's TIC report for February was Dollar neutral.


John McCain Gets It
McCain blamed the slowdown of the nation's economy in part on bankers and lenders who ``forgot some of the basic standards of their own profession,'' leading to the current crisis in housing and credit.

He singled out James Cayne, 74, chairman of hobbled securities firm Bear Stearns Cos., and Angelo Mozilo, 69, chief executive of Countrywide Financial Corp., which lost $704 million last year.

``Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while Mr. Cayne of Bear Stearns, Mr. Mozilo of Countrywide, and others are packed off with another forty- or fifty million for the road,'' McCain said.

Yes John, something is seriously wrong, and Gold knows it. Spread the word.

Rich In Debt

The Market Oracle, UK - Apr 9, 2008 Just how busy will the IMF get when it helps host the G7 meeting of policy wonks from the world's seven richest nations in Washington this weekend? ...

Reuters - Apr 11, 2008 WASHINGTON - Finance chiefs from rich nations offered a gloomier assessment of the global economy on Friday as ...

Daily Times, Pakistan - The Group of Seven (G7) rich nations surprised the market by abandoning their usual mild language on foreign exchange in a joint communique following a ...

Reuters - Finance chiefs from the Group of Seven rich nations grappled at the weekend with proposals for tightening global scrutiny of banks and pressed the private ...

BullionVault (press release), UK - But the Group of Seven rich nations stopped short of announcing any formal G7 Action in the Currency Markets – leaving the Euro to recover all of its losses ...

International Herald Tribune, France - ... but near-term global economic prospects have weakened," the finance ministers and central bankers from the seven rich nations said. ...

France24, France - The Group of Seven (G7) rich nations surprised the market by abandoning their usual language on foreign exchange in their joint communique which followed a ...

Six separate sources above ALL refer to the almighty "G7" as the rich(est) nations. I guess if you equate mountains of DEBT with wealth then perhaps these seven are the world's richest nations. I suspect China and India may disagree. The G7 should be referred to as the "world's seven most indebted nations".

Who are the The G7? - the US, Japan, Germany, the UK, France, Italy and Canada. LOL, you have got to be joking that Italy is one of THE seven richest nations on Earth. Canada probably is the the richest of the seven in natural resources. France? Who gives a damn about anything French? The UK sold most of their Gold reserves at the bottom of the Gold market. Not a very "rich" move. Germany is probably by far the closest to actually being "rich" of the seven. Japan? If debt is any measure of wealth, their hoard of US Treasury debt may make them one of the richest nations on Earth. The US is the WORLD'S biggest debtor nation the planet has ever known...mathematically then they should be the World's POOREST nation.

Well then, taking all that into consideration, it's no wonder when they open their mouths about the currency markets, NOBODY listens. How naive of these seven Western economic hasbeens to think that when they speak about the imbalances in the currency markets that anybody would listen. The currency markets sent a message of their own today, "Hey G7, GET BENT!"

What does Hank Paulson really mean when he says the US is committed to a "strong dollar" policy? I think what he really means is that the US is committed to seeing the Dollar remain the World's reserve currency. Too bad Hank, I think the World feels differently...as in goodbye Dollar! Are any of the World's other paper currencies better than the Dollar? NO! Only Gold, and Silver are real money.

G-7 may have to do more than talk to stop dollar's slide

Group of Seven officials, signaling concern over a sliding dollar for the first time in 13 years, may have to match talk with action before the currency stages a sustained rebound.

U.S. Treasury Secretary Henry Paulson, European Central Bank President Jean-Claude Trichet and G-7 counterparts warned after talks in Washington on April 11 that recent "sharp fluctuations" in exchange rates risk hurting the global economy.

The new language was the most significant change to the G- 7's stance on exchange rates since a meeting in Boca Raton, Florida, in February 2004, when it cautioned against "excess volatility."

"I hope this concerted wording on currencies will help," French Finance Minister Christine Lagarde said in an interview with Bloomberg Television.

http://gata.org/node/6231

So... because of today's "sharp fluctuations" in currencies, as opposed to yesterday's "excess volatility" in currencies the world should stop selling US Dollars? The strength or weakness then in the Dollar is now to be determined by some arcane phraseology? Is this some kind of perverse joke? These pompous asses actually believe that their "words" are going to sway the currency markets? It's little wonder then that the World's Financial System is falling to pieces. With arrogant ignorance at these levels, how could we expect anything but the demise of all funny money.

The Dollar got dragged all around the school yard today as the currency markets showed the debt ridden West who controls the money now. The US Fed and Treasury may be printing the stuff likes it's going out of style, but they certainly have no control over the money any longer.

Time is working in Gold and Silver's favor now as both build bases following their unexpected sell offs in March, and await the next new low in the US Dollar as a prelude to their explosion to new highs on the back of the Dollar's demise.

Tuesday offers March PPI, The Empire State manufacturing index, and the February TIC report. All should be abysmal. A TIC number below 62 would be bad for the Dollar. High PPI could be spun into a dollar positive by suggesting inflation is to hot for the Fed to continue cutting interest rates, but unlikely to hold water...inflation is Dollar negative PERIOD.

You Can Only Laugh

I heard a great joke today.

THE US DOLLAR.

LOOOOOOOOOOOOOOOOOOOOOOOOOOOL!!!!

That was a good one!


So the Euro gets to 1.59 vs Charmin this morning for the third time in the past 4 weeks. March 17, March 31, and today. It actually hit an all-time high vs Charmin this morning. And just like the previous two times it puked and went down like a stone in the ocean. Hmm, I would have to say that somebody definitely does not want the Euro above 1.59.

So this reaction in the Euro signals everybody to race to Charmin? I'm convinced now that whenever the Euro hits 1.59 a wave of diarrhea descends onto the currency traders and the demand for Charmin rises. It is amusing ...frustratingly so. And hey, why don't I throw my Gold and Silver out the window on the way to the toilet so I can get to the Charmin faster.

This is what happens when humans are not making the trades in these markets. Little black boxes and their algorithms are. Algorithms designed by the genius types that came up with all these keen alphabet derivatives that have brought the world's financial system to it's knees. Nobody knows what to do for themselves anymore...they just pray that the machines do. Well, the machines don't have a clue. And in the end, Precious Metals will just go higher and the US Dollar will just go lower. It really is that simple. A tug of war in cyberspace that will eventually end with everybody outside the Precious Metals Markets scorched and penniless.


Gas, Diesel Prices Hit New Records
Gas, Diesel Prices Hit New Records a Day After Crude Hits Its Own New High Mark
NEW YORK (AP) -- U.S. retail gas prices extended their record run Thursday, adding to the pain consumers feel every time they fill up. Experts predict prices will rise even higher as peak summer driving season approaches.
http://biz.yahoo.com/ap/080410/oil_prices.html

Hey, good time to sell your Gold and buy Charmin!


Henry Paulson, U.S. Treasury Secretary
Thu, Apr 10 2008, 15:28 GMT
Thomson Financial News - "The US economy has turned down sharply and the risks are to downside."


Hey, great reason to sell your Gold and buy Charmin!


Lehman Brothers Holdings Inc. disclosed in a regulatory filing Wednesday that it liquidated three funds because of the tight credit markets and bought the assets of those funds, valued at $1 billion, on Feb. 29. The investment bank said it also purchased deteriorated assets valued at $800,000 from other funds.
http://biz.yahoo..com/ap/080410/wall_street.html

Hey, the banks are doing great. Sell your Gold and buy Charmin!


Dollar trims losses vs euro as Trichet remarks same
NEW YORK, April 10 (Reuters) - The dollar fell to a record low against the euro on Thursday, but pared losses as European Central Bank President Jean-Claude Trichet did not drastically change his growth and inflation views for the euro zone.

The greenback's recovery was also helped by Trichet's remarks that recent volatility on foreign exchange markets was excessive and was to be deplored.
http://www.reuters.com/article/marketsNews/idUSN1033018320080410

Hey, I knew there had to be a good reason to sell Gold and buy Charmin. ECB President Trichet himself said that a strong Euro was deplorable? So if the Euro at a new ALL-TIME high is deplorable, what does that make the US Dollar? That's easy, ...a substitute for Charmin!


Retailers Post Sluggish Sales in March -AP

Increase in Trade Deficit Raises Concern -AP

Paulson Says US Economy Has 'Turned Down Sharply' -CNBC

Bernanke: New Crisis Must Be Stemmed Now -AP

Lenders Drop Out of Student Loan Market -AP


Machines can't read headlines. Apparently a lot of currency traders can't read them either. These are just a small sample of headlines seen on Yahoo's Finance page today. Not a single one of these is US Dollar positive in any way, shape, or form. Yet for some bizarre reason, the putrid Dollar gets up off the mat and an all-time low versus the Euro, and ends the day up?

You can only laugh. Bitch a little, and get it out of your system. Volatility is part of building a base. From a strong base markets can launch to new highs. For many, $1000 Gold was the Moon. Gold is orbiting the Moon now, refueling for it's next leg up. "Passengers, please remain in your seats. Our ride to places no Gold Bug has gone before may resume at any time with out warning."

Gold and Silver, Preparing for the Next Launch to Greater Heights
During the recent drop in silver a few weeks ago, the number of ounces in the SLV, silver ETF actually increased! A very bullish development!

Silver seems to bottom towards the end of each quarter: March, June, September and December often carve out a bottom in silver. The drop in March came right on schedule.
http://www.marketoracle.co.uk/Article4266.html

Whatever...

MBIA Loses AAA Insurer Rating From Fitch Over Capital
April 4 (Bloomberg) -- Fitch Ratings cut MBIA Inc.'s insurance unit to AA from AAA, saying the bond insurer no longer has enough capital to warrant the top ranking.

MBIA, the world's largest financial guarantor, would need as much as $3.8 billion more in capital to deserve an AAA, New York-based Fitch said today in a report. The outlook is negative, Fitch said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUKrtfm0u4yI&refer=home

Fitch Ratings, Moody's Investors Service, and Standard & Poor's are at the root of the sub prime blowup and the ensuing credit crisis. It was these three "ratings agencies" that carelessly hung AAA ratings on the toxic Mortgage Backed Securities that were sold to naive investors around the globe. This news slipped through the cracks Friday as it flies in the face of the "this is the bottom" nonsense that has hypnotized the equity markets for the moment. Fitch's downgrade of MBIA's insurance unit now casts a darker shadow on the bond markets. Uninsured toxic waste...when you see the flash, duck and cover.


Gold futures drop as IMF announces gold sales
NEW YORK (MarketWatch) -- Gold futures dropped Tuesday, as the dollar strengthened against other major currencies and the International Monetary Fund said it would sell more than 14.2 million ounces of its gold reserves.

Um,...didn't we all agree weeks ago the FIRST time we heard this "news" that IMF Gold sales are "bullish" for Gold. And here we are, same story, different day, and the media is using it AGAIN as reason to dump your Gold. LOOOOOOOOOOOL! Bring it on! 14 million ounce of Gold will be sucked up quicker in this market than a Hoover sucking up dog pooh on the rug.

The IMF gold sales "would come in handy for the gold market -- and I say that as a gold bull," wrote Ross Norman, joint managing director at FastMarkets Ltd., in a research note.

"Gold mine production is failing to keep up with burgeoning investment demand and the supply deficit has already seen a quadrupling of prices since Gordon Brown, former U.K. chancellor, sold precisely the same tonnage in 2001," Norman said.

"Given that the sales would happen over some years and within the CBGA [Central Bank Gold Agreement], this amount -- if approved -- would be readily absorbed by the investment and jewelry quarter," he said.
http://www.marketwatch.com/news/story/gold-futures-drop-imf-announces/story.aspx?guid=%7BAC726D16%2DC196%2D4271%2DAD03%2D37106B08CB7B%7D&tool=1&dist=bigcharts


Fed Officials Saw Contraction in Economy `Likely'
April 8 (Bloomberg) -- Federal Reserve officials anticipated that the economy would shrink in the first half of the year, with some concerned about ``a prolonged and severe economic downturn.''

``Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' the Fed said in minutes of the March 18 Federal Open Market Committee meeting released in Washington today.

Policy makers also found little sign that housing markets have reached a bottom, the minutes showed.

The minutes encompass a period when Chairman Ben S. Bernanke invoked rarely used authority to provide emergency financing for investment banks and rescued Bear Stearns Cos. from bankruptcy. Officials are seeking to limit the impact on the broader economy of what former Fed chief Alan Greenspan today termed the worst credit crisis in 50 years.

The Bear Stearns financing took the Fed ``to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles,'' Paul Volcker, chairman of the Fed from 1979 to 1987, told the Economic Club of New York today.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTzx2EeRx0wY&refer=home

...And the Dollar closed up today and Gold closed down? "Toto, I have a feeling we're not in Kansas any more." "We must be over the rainbow."


Ex-NYMEX director pleads guilty to fraud
NEW YORK (Reuters) - A former New York Mercantile Exchange board member pleaded guilty to defrauding customers and tampering with evidence on Tuesday in exchange for serving 5 months in prison and paying $850,000 in fines and penalties.

The head of NYMEX, James Newsome, said in a statement: "Today's action should serve as an unmistakable notice to our market participants that NYMEX will not hesitate to work with law enforcement authorities, or take whatever steps are otherwise necessary, to protect the integrity of our markets."
http://biz.yahoo.com/rb/080408/nymex_director.html

I only have two words for that statement: "YEAH, RIGHT."


GOLDEN GUT CHECK
Why gold is likely to keep moving higher over the long run

Gold Fields Mineral Services (GFMS), the industry's most reliable source for gold supply-demand statistics, reports a total mine supply of 2447 tonnes for 2007, but that number is problematic. When you account for the dedicated Chinese and Russian production, the projected central bank quota shortfall, the curtailment of sales from South Africa, and the potential for accelerated producer buy backs, a different picture emerges -- one not of copious supply but of shortages. The fundamentals lead us to the conclusion that there has been real substance to the gold rally of the past two years -- a rally which has taken the price 75% higher. Those who have called gold's up trend the latest in a string of speculative bubbles do so from a lack of perspective and understanding. Likewise, the fundamentals hold out promise for the future in that none of the trends in place are likely to reverse anytime soon. We are left with the impression that the gold bull market is likely to stay on course in 2008, even if we experience a short-term correction or two.
http://www.financialsense.com/editorials/kosares/2008/0408.html

This is an excellent essay by Michael J. Kosares. I highly recommend reading it in its entirety. Mr. Kosares makes a terrific fundamental case for owning Gold by virtue of an underestimated actual bullion shortage that may exist in the Gold market today.

I cannot remember a time when the fundamentals have lined up more favorably for gold. The factors which have driven the price up over 75% over the past few years remain in place and in fact seem to be intensifying. The past, in this respect, could very well serve as prologue. Great forces, mostly benevolent, are at work in the gold market. Demand, as reported copiously by the mainstream financial press, continues to grow steadily on a global basis. It is on the supply side of the equation, however, where we now find the strongest arguments for resumption of the bull market. To come to the point, fundamental trends suggest that the gold market may be moving from a period of general scarcity to outright shortages. Unless some formidable source for gold is suddenly found, the period of shortages could come to full flower as early as 2008.


Gold and Silver remain on sale today. Try not to get too frustrated with the market here. The action nonetheless, is very constructive in building a new base in the Precious Metals to launch them higher. Particularly in Silver. We are watching the charts closely for a developing Head & Shoulders bottom in Silver.

Wednesday's crude oil inventories will be released at 10:30AM est. These numbers, if they are bad enough, could be the catalyst that launches Oil quickly to a new high. The key will be gasoline inventories. European Monetary Union GDP numbers come out at 5AM. Strength here would be very good for the Euro and very grave for the Dollar. Weak Eurozone GDP would force selling in the Euro, and probably put a bid under the Dollar. I know, I ask myself everyday why anybody would buy that piece of ass wipe... But I would have to believe that weak GDP in Euroland would encourage Europeans to run to Gold instead of the fecal Dollar. Of course, lately none of the markets seem to be doing what they should be doing, so I guess it would be foolish to make predictions one way or the other. So I will close today by saying, "Whatever!"

Approaching A Crossroads

Oil prices breach 109 dollars after OPEC rejects output hike calls

NEW YORK (AFP) — Oil prices surged to near all-time highs Monday after OPEC oil exporters rejected Western calls to increase output and ease supply pressures.

Over the weekend, the secretary general of the Organization of the Petroleum Exporting Countries, Abdullah al-Badri, rejected calls for an increase in the cartel's crude output, saying that non-fundamental factors were to blame for current high prices.

"At the moment there is enough oil in the market and no need to change OPEC's output," Badri said in Tehran late Saturday.

http://afp.google.com/article/ALeqM5hnjJSa09GHxFvSUAjUwoTgygU_Yg

Hey, these guys might wear towels on their heads, but they ain't stupid. It's no secret to anybody that high Oil prices are a direct result of the US Federal Reserves poor monetary policy. The falling Dollar is having hugely inflationary effects on OPEC nation economies. If Saudi Arabia wasn't the largest OPEC exporter, the group would have by now dumped the Dollar as payment for their Oil. But the natives are getting restless, and the Saudis may have no choice soon but to dump their Dollar peg. The negative effects such a move would have on the US Economy would be horrific to say the least. And remember too, that the rest of the world has to convert local currency to Dollars to pay for much of their Oil. This in effect gives foreigners a discount on the cost of Oil. Few will be anxious to prop up the Dollar and see it rise if the result would be a higher energy bill.

WaMu Poised to Get $5B in Cash From TPG

Wall Street cheered news that WaMu may join a growing list of battered financial institutions that have secured much-needed cash since the credit crisis began last summer. Share jumped 17 percent, or $1.73, to $11.90 in early trading.

As of Friday, WaMu's stock had fallen another 25 percent in 2008. Cuts to its credit ratings erased a brief moment of investor optimism sparked by a positive comments from Chief Executive Kerry Killinger at a Wall Street conference in January.

At the time, Killinger said WaMu had enough cash and access to loans to get through the fiscal year.

Despite WaMu's tough year, Killinger received $14.4 million in compensation for 2007.
http://biz.yahoo.com/ap/080407/washington_mutual_tpg.html

It continues to escape me the euphoria surrounding news of banks "raising cash". I would think the exact opposite would be the result. They can pay their CEO $14.4 million for his efforts in leading them towards bankruptcy, and then turn around and dilute shareholders stock by issuing more to "raise money"? How is this a good thing? Run, run, run away from financial stocks!