Vinny’s Blog

I had been busy a lot and that is why since beginning of September I could not dig much on economy. This weekend I decided I will write something and phew ! the weekend just flew by. Friday I returned a little late from work.

Saturday morning bright and early I left for a racetrack ( those photos will be posted here later …..may be sometime this week). Saturday turned out to be a very hot and humid and noisy day with some 200 miles of round trip driving. That evening I was supposed to go and meet a friend of mine who is recently blessed with a baby and by the time I return home it was 1:00 AM (Sunday) in the morning.

Sunday pretty much was spent in sorting/selecting and judging which racetrack photos were good and which weren’t (more on that experience later….). Evening little grocery shopping and went for a movie (Bangkok Dangerous) by the time returned home it’s 10:00 PM. I am tired running around this weekend and could easily let this weekend slip without digging anything on economy but I decided to push myself further…………so here I am…

Recently USD has been up and Gold/silver/oil has been down. Gold has seen some very down days. From 1000$ per ounce not so long ago gold fell to 750$ an ounce. USD last week was trading equal to Indian Rupees 44+.

Gold, Silver, Rupee, Oil They are down. Where are they heading ?  What changed - that magically pushed USD up ? I don’t see any change, I don’t see banks suddenly doing so well that there is no more need for another fed bailout instead looks like Lehman might be next to go down and may require a bailout .
EU Believes US Would Rescue Lehman if Need Be
http://www.cnbc.com/id/26655535

Next could be Wamu ………..
WaMu didn’t comment, and Bloomberg reports JPMorgan isn’t in talks to buy WaMu. The New York Times, for its part, reports the company won’t make a bid unless the government asks it to.
http://dailybriefing.blogs.fortune.cnn.com/2008/09/12/wamu-on-the-block/

……. and then god (actually Feds) only knows who else is in line….for a bailout.

So you see I am confused, I don’t seem to understand why exactly USD is up ? Anyway…I kept looking . Here comes even a bigger surprise…I am trying to find news supporting stronger USD and what I find is exactly the opposite news. News that will kill strong dollar.

Federal Budget Deficit to Climb to $407B by October

The federal government will run a near-record deficit of $407 billion for the budget year ending Sept. 30, according to the latest Capitol Hill estimates.
http://www.foxbusiness.com/story/markets/economy/cbo-federal-budget-deficit-climb-b-october/

Somebody please tell me why exactly USD is up ? why gold/silver/oil  is down ?

OK so may be Chinese are buying USD, I mean they love it..they have plenty of it and may be, just may be, they decided to stock up even more. You never know they have like a trillion plus of it but just in case they thought it’s still not enough and they must buy more. So now I am now looking for that news……and once again was I surprised !! well, you tell me….check this out……..

China may cut its dollar holdings - CICC
(China Daily)
Updated: 2008-09-12 07:32
http://www.chinadaily.com.cn/china/2008-09/12/content_7020656.htm

Funny things is this news article is published on one of the most read websites in Asia (China Daily). News is somewhat disturbing as USD is world’s reserve currency and they are the biggest supporter. But if you Google “china may cut dollar holdings” you won’t find a trace of this news in popular US media go search it. Give it a try. Let me know if you find it on CNBC, CNN, some where. I will be happy to replace that link above from China Daily to one of US websites.

Same news article is available here on a Forex website just in case the link from China Daily does not come up. I had difficulty loading that article myself it came up only after 4-5 attempts.
http://news.tradingcharts.com/forex/8/9/113527198.html

Now let us re-cap - budget deficit is near record high, two more major banks inches away from failing. China biggest supporter of USD is cutting investment. But USD is up…….go figure.

It almost feels like I am watching a magic show and my eyes and mouth are open wide in disbelief. I want to believe there is magic and it’s cool but my damn brain - keeps telling me it’s a trick………..

If you’re able to recover from that awesome magic trick about ‘USD going up’  which is unfolding in front of your eyes………let us see why gold is down. First of all I don’t know a reason why it should be down ever.

Gold– if you remember this commodity is mined since the time of Great Pyramids. When dug these Pyramids come up with buried gold treasure along with mummies. This commodity is mined for last 5000 years. Gold mines should now be dryer and this commodity should become even more rare than it was 5000 years ago. I don’t see any reason why it should be down ever !!

I found this person John Embry on the net let us first see why we should listen to him on gold.

John Embry, Chief Investment Strategist for Sprott Asset Management and renowned industry expert, has researched the sector for 30 years.

30 years of experience that’s good…….I think he has earned it. Now let us see what he has to say about Gold being down.

John Embry: The downturn in both gold and silver was literally preposterous in magnitude relative to the rise in the dollar. This was a violent intervention by the paper players. Three U.S. banks on COMEX shorted something like 8,000 contracts in a very short time. That’s more ounces than all the world’s miners produce in a month

As always read full article here….
John Embry: “When the gold’s all gone, the market will go nuts”
Source: The Gold Report  09/12/2008
From the article

http://www.theaureport.com/cs/user/print/na/1624

I generally don’t like to believe just one guy for his/her opinion John Embry he is good, his experience his credential all of it. But if he is right there should be more than one person of equal or better qualification who should be able to confirm the same. So I kept looking and I found Mr. Rogers.

So, who is Mr. Roger …well no ordinary person I believe he created an index himself.

The Rogers International Commodity Index® (the “RICI”) is a composite, U.S. dollar-based, total return index created by James Beeland Rogers Jr. (“Rogers”) in the late 1990s. Funds were first invested to track the Index on August 1, 1998. The RICI® was designed to meet the need for consistent investing in a broad based international vehicle; it represents the value of a basket of commodities consumed in the global economy, ranging from agricultural to energy to metal products. The value of this basket is tracked via futures contracts on 36 different exchange-traded physical commodities, quoted in four currencies, listed on eleven exchanges in five countries.
Here is link to his website…
http://www.rogersrawmaterials.com/

Now let us see what Mr. Roger has to say about Gold –

“If you have gold, I will buy it from you. Gold is not something I plan to sell. Ever,” he added. Rogers remained extremely pessimistic on the dollar and said it is a “terribly flawed currency”. It is because of the pessimism of many investors like me that the dollar has suddenly appreciated, he said
“However, it is likely to weaken again and I intend to sell all my holdings in the dollar in the current rally,” he added. Rogers said as the dollar situation is likely to get worse, it will also have a positive effect on commodity prices, which are mostly dollar-denominated.
“The commodity’s price will go up no matter where the dollar is. A weak dollar only adds to the rise in prices and is not the major factor,” he added.
Here is full article……..
Govts’ moves can’t halt commodity rally: Rogers
Newswire18 / Mumbai September 13, 2008, 3:31 IST
http://www.business-standard.com/india/storypage.php?autono=334277

Let us see who else disagree with strong USD…….

“Definitely, it (the dollar) is not a safe place to be invested in, as real inflation is closer to 10 or 11 percent than the actual inflation numbers given by the U.S. government,” Hennecke said on “Worldwide Exchange.
Hennecke’s stock allocations are mainly Asian-based, especially in the Chinese market as the country’s government has a large amount of cash and the macroeconomics are fundamentally strong.

He also suggested investing in gold, despite the recent fall in price.

As always here is link to that article…. I warn you this is a real depressing article that you’re about to read.

http://www.cnbc.com/id/26656750
By CNBC.com | 11 Sep 2008 | 09:11 AM

Now that you have read so much -  do you think USD being strong is supported with fundamentals that will keep it strong ?

Updated : Monday Sept-15-2008 - 7:18 AM

Lehman Brothers, Merrill Lynch woes pile-up as Wall Street faces day of reckoning.

Three of the biggest names on Wall Street - Lehman Brothers, Merrill Lynch and AIG - poised to buckle under the seismatic credit crunch pressure.

http://www.telegraph.co.uk/news/worldnews/2959890/Wall-Streets-day-of-reckoning.html

My question again

Now that you have read so much -  do you think USD being strong is supported with fundamentals that will keep it strong ?

[news and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]