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Home‘Beggar Thy Neighbor’ Leads to Currency Wars
Posted by Larry Doyle on February 14th, 2013 6:56 AM |
The United States still has an official policy of pursuing a strong dollar, right?
Yes, right, and if you were to believe that, might I interest you in a bridge in Brooklyn?
The simple fact is that five years into our economic crisis, the major economic centers of the world, those being the USA, the EU, and now Japan are all employing the same central bank policy to support their economies. This policy of quantitative easing is an attempt to accomplish a combination of the following, with different emphasis depending on the region: (more…)
May 15, 2010: Market Week in Review
Posted by Larry Doyle on May 15th, 2010 6:12 AM |
The European Union, the European Central Bank, and the International Monetary Fund (and the Fed, as well, although they don’t want to truly highlight it) provide $960 billion in backstops for the Euro-zone and what happens? The Euro ends the week lower by 3%!! Ladies and gentlemen, that is nothing more than a major “F&%@ Y#&“ on behalf of global investors to the aforementioned central banks and government entities.
Think there is tension in Euroland, and specifically between France and Germany? As The UK-based Telegraph reports, President Nicolas Sarkozy ‘Threatened to Pull France Out of Euro’:
President Nicolas Sarkozy slammed his fist on the table and threatened to pull France out of the euro at a meeting of European leaders deciding Greece’s aid package last Friday, according to Spain’s El Pais newspaper.
The last time there was this kind of tension between these countries, guess who was coming ashore at Normandy? (more…)
March 2010 Market Review
Posted by Larry Doyle on March 31st, 2010 6:03 PM |
The 1st quarter 2010 returns are now in the books.
The Euro continued to lag given problems in the Euro-zone. That development supported our greenback:
The commodities index has given ground, but in the midst of that oil and copper have outperformed:
Although the equity markets started the year off on a rough note, the returns for the last two months have been impressive, albeit on generally light volume:
Bonds gave ground but remain within the trading range we have experienced all year:
LD
March 6, 2010: Economic/Market Week in Review
Posted by Larry Doyle on March 6th, 2010 6:08 AM |
Markets continued to rebound this week. Why? Dramatic improvements in Greece? No. Solid economic news here at home? I don’t think so. A slew of positive earnings reports? Hardly. What are we to make of it?
Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic data and news, along with month-to-date market returns.
ECONOMIC DATA
Recovery? I would not classify the data this week as defining a recovery. I will be gracious and define the data as mildly negative. Don’t take my word for it, let’s review the data together and you tell me what you see and what I may be missing. Let’s dive right in. Unless a hard number is indicated, the data represents the percentage change for the prior month along with the consensus expectation for the current month and then the actual change for the current month. (more…)
February 13, 2010: Market Week in Review
Posted by Larry Doyle on February 13th, 2010 8:12 AM |
Markets remain volatile and skittish. Why? Our global economy along with our domestic economy remain under the pressure of massive debts and deficits across the sovereign, corporate, and consumer spectrum.
Global governments can not prop economies and markets forever, try as they might. Can 2010 successfully transition from these total government supported and propped markets to a hoped for return to private enterprise with private capital? This week brought us more ups and downs in the markets as the economy overall searches for its footing. We remain a long way from being out of the woods. Pack lightly and lets navigate.
Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic news and month-to-date market returns. (more…)
January 2010 Market Review
Posted by Larry Doyle on January 30th, 2010 10:49 AM |
As January goes, so goes the year.
Does this adage hold water? The market direction for the year is correlated approximately 70% of the time with January’s move. I certainly would not make investment decisions based purely upon that rule of thumb. The rule did not hold in 2009 as major equity averages were down 8% last January. That said, 2009 was anything but a normal year given the massive economic and market supports implemented by Uncle Sam.
What rule of thumb would I recommend? Read and review Sense on Cents regularly to most effectively navigate the economic landscape. On that note, let’s review the market moves for January. The figures provided are month end statistics for the respective markets, then month-to-date and year-to-date returns. (more…)
January 23, 2010: Week in Review
Posted by Larry Doyle on January 23rd, 2010 7:15 AM |
From Massachusetts to Washington and from Wall Street to China, fireworks were flying this week across our global economic landscape. While the political focus in America is grabbing center stage, make no mistake, the issues driving the politics are largely economic.
Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic news and the month-to-date market moves. Pack lightly as we have much ground to cover. That said, let’s enjoy the journey as the twists and turns along our landscape are truly fascinating and historic in nature. Let’s navigate.
ECONOMIC DATA:
1. Housing Starts: a disappointing report as starts fell 4% after an upward revision to a 10.7% increase in the prior month. I still take all the housing numbers with a pound of salt knowing that delinquencies and defaults continue to move higher. (more…)
January 9, 2010: Week in Review
Posted by Larry Doyle on January 9th, 2010 11:37 AM |
The economy continues to send very mixed signals. The market screams like a scolded dog. The more things change, the more they stay the same. Welcome to our weekly Sense on Cents Week in Review. I will provide a streamlined recap of the major economic news and the month-to-date market moves. Let’s navigate.
ECONOMIC DATA: (more…)
The Market’s Greatest Risk
Posted by Larry Doyle on December 3rd, 2009 12:26 PM |
What is the greatest risk in the market currently? Is it the fact that the American consumer remains strapped? Unemployment showing no signs of improvement? Is it the continuation of problems within housing? While all of these issues are significant, I would maintain they are not anywhere close to being the greatest risk in the market. Why? Let’s navigate.
Each of the previously raised points is an economic factor, but the market is trading to a much greater extent based on technicals and excessive liquidity provided by the Fed than any individual or group of fundamental economic statistics.
Thus, let’s return to my original question. What is the greatest risk in the market currently? If the market is being supported by easy money provided by the Fed and that easy money is pressuring the dollar ever lower, then the greatest risk is that the dollar stops its decline. What might precipitate the dollar to increase in value? Coordinated intervention by international trade partners who are disadvantaged by a weak dollar. Could this happen? Without a doubt. In fact, our friends in Japan just started intervening in the currency markets to weaken the yen against the dollar.
The Wall Street Journal highlights this development in the brief video clip, Calls Increase for Japanese Intervention More Acute:
The yen has moved up to a current valuation of 88.14 versus the U.S. dollar from a month end level of 86.38 just this past Monday.
While I have no doubt that our political leaders in Washington are not unhappy with the weakening of our greenback, our international trade partners, such as Japan, are less thrilled. To the extent that these partners fashioned a coordinated response to strengthen the dollar and weaken their own currencies in an attempt to support their own exports, that coordinated effort is ‘the market’s greatest risk.’
LD
Liu Mingkang Provides Sense on Cents
Posted by Larry Doyle on November 16th, 2009 8:21 AM |
Liu Mingkang, Chairman of China Banking Regulatory Commission
With friends like this, who needs enemies?
That trite saying is far too simplistic in defining the diverse and convoluted nature of U.S.-Chinese relations. That said, as President Obama prepares to arrive in the People’s Republic of China for the first time during his Presidency, he is faced with an extremely aggressive overture from Liu Mingkang, China’s chief banking regulator.
What does Mr. Mingkang have to say? Well, let’s just say he has a drastically different opinion on U.S. monetary and fiscal policy than his counterparts in Washington. While our wizards in Washington, Messrs. Bernanke, Geithner, and Summers would lead us to believe that the rebound in markets is a precursor to a rebound in our economy, Mr. Mingkang has a decidedly different take. The Financial Times sheds light on this topic in writing, China Says Fed Policy Threatens Recovery:
The US Federal Reserve is fueling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned just hours before President Barack Obama arrived in China for his first visit.
Liu Mingkang , China’s chief banking regulator, said the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”. (more…)
