The Decline of the US Dollar

[Sean K]

Re: The Death of the Dollar

That' fair enough, depends on ones approach/goals.
If one is a buy and holder, they are forever a bull and need to have the patience to ride out all the pot holes along the way or at least he some type of hedge.

Having said that, given that this has been such a strong bull over the last 4 years, most are expecting to see a continuation of the same, and any deviation from this can hit them very hard psychologically if they are not prepared for it.

This is very evident here on this forum every time we have a correction by the types of posts that are made. You can see the emotion in the posts. I hate see what it will be like when we get a lower high or a deeper correction.

Yes, absolutely, I agree. When we get into a sustained sideways/downward trend (which is inevitable for some period) then many people are going to feel some pain. As those who have been 'long term investors' over the past 20 years have experienced at some time.

Might depend on if you are a professional investor or not, and need to make an income every month/year.

However, if the uber bears have it right, and the US entirely implodes, then there will be more damage to the long term investors......

 

[Smurf1976]

Re: The Death of the Dollar

Without trying to turn this into a thread about bio-fuels. I remember around twelve months ago one of the Aussie TV networks ran a story on 'peak oil.' It centred around a politician in Northern Queensland who was advocating the Queensland government make massive investments in public transport rather than the current policy of building more roads.

His saw this as urgent as oil production was set to peak at the end of this decade. He also claimed that if all the sugar-cane in Australia was used to produce ethanol for alternative fuels it would only be enough for 1 litre of petrol, per car, per week. This is all from memory so apologies in advance if I got some of that info wrong.

The peak oil debate seems to have died down a bit but I suspect it will rear it's head again given where oil is at the moment.

Each person eats, roughly, food equivalent to 2 litres of petrol per week. Allowing for losses in turning that into ethanol etc, if we take ALL the food supply then that gives each of us one tank full of ethanol per year. And literally nothing left to eat.

Biofuels aren't the answer unless we're going to drastically reduce, in a short space of time, the number of people and cars on the planet. In 50 years that turns Sydney, for example, into a city about the same size that Hobart is today. And that's assuming we find a way to live without food.

As for the Dollar, we'll there's some toast we could possibly eat or perhaps we could just burn the notes for heating. Or use them for toilet paper once the cost of a roll exceeds the cost of simply wiping your bum with greenbacks.

IMO we''ll see competitive currency devaluations underway before too much longer. That's when the real inflation starts.

Price inflation is everywhere now. Petrol, houses, food, power, insurance, commodities, medical costs... All rising far more rapidly than the supposed 3% inflation rate. Not surprising after years of rapid money supply growth and loose credit.

 

[rederob]

Re: The Death of the Dollar

That' fair enough, depends on ones approach/goals.
If one is a buy and holder, they are forever a bull and need to have the patience to ride out all the pot holes along the way or at least he some type of hedge.

Having said that, given that this has been such a strong bull over the last 4 years, most are expecting to see a continuation of the same, and any deviation from this can hit them very hard psychologically if they are not prepared for it.

This is very evident here on this forum every time we have a correction by the types of posts that are made. You can see the emotion in the posts. I hate see what it will be like when we get a lower high or a deeper correction.

wavepicker
You make some fair points.
However, very few here - I suspect - trade currencies, and are more reliant on working out what a weak greenback will mean to our stock market and/or economy.
There is no standout answer because a weak greenback has strong positive and negative influences on different market sectors.
My suspicion is that too many that actively trade have lost sight of the bigger picture here.
The weak greenback is not just a symptom of economic policies that also have the power to cure an ailing American economy.
The weak greenback today reflects a major transitional phase in global market dominance wherein America's mantle is being shaped by Asia until, ultimately, they steal it for keeps.
The subprime fiasco will hasten the demise of the greenback because we are all becoming familiar with not just the levels of per capita indebtedness, but also with the far reaching tentacles of that debt burden: In other words, those thousands in the UK who have unwittingly made deposits to banks that could collapse because they have bought the debt of US homebuyers through various financial instruments, will leave an indelible impression in the minds of all other UK depositors that your money is not as safe as houses!
Similarly, some Australian mortgage lenders feeling the subprime pinch have sent ripples through our vast community of mortgagees that debt carries huge risks. And knowing how that debt is now purchased will be something more of us examine before putting the house on the line.

But they are digressive points.
The stock market is a giant bull market and every chart of the major indexes will tell you that, if you see them from a very long term perspective.
The present bull run is relatively short, although has had some nice corrections since the massacre of 1987: Since that peak we are sitting over 300% higher. More and more corrections are ahead.
A 4-5 year buy and hold strategy will not cut it if you want to be a long term investor. Adjust your mindset to a 10 year horizon, minimum.

And what of a recession?
Will it be compartmentalised to the US, or must it be global?
And what happens to the greenback if there is a recession?
These are not questions that can be quickly canvassed here.
My view is that a US recession will occur soon after the US has withdrawn the majority of its troops from Iraq and its printing presses turn to the issue of productive money.

Summary: The dollar is in its death throes. Any recovery will be short term (perhaps up to 12 months, but I suspect very much shorter) only.

 

[noirua]

Re: The Death of the Dollar

The Death of the Dollar is as unlikely as China adopting the Dollar as its currency. The strength of the Euro against the Greenback is worrying Europe, as its extension has gone well beyond just keeping commodities priced lower than they would otherwise have been.

America will benefit as imports increase in cost and exports cheapen and they no longer need sanctions against cheaply imported steel etc.,

Australian miners and oilers have a big problem with the Aussie heading for A$1 to the greenback.

After 2008 and the China Olympic Games that may signal a slowdown, America may start to show its strengths.
China stock indexes have changed in format, but a rise in 12 months of about 320% appears ridiculous and a sudden reversal, combined with problems in their property markets and racing ahead with opening 2 or 3 powerstations a month, will eventually take its toll.

Time will tell of course, as it always does, and makes fools of most of us.

 

[dhukka]

Re: The Death of the Dollar

Yes, you bears would be shocked with the recovery! : I think it has everyone in a daze.

What's the story??!!??

Have the markets got it completely wrong?
Is it becasue it's not that bad?
Is it because humans are more gready than fearful?

Whatever the case, the bears calling a start to the end 2 months ago (as far as stock markets go) have got it wrong perhaps.

Or, is the stock market totally out of touch with reality? I can't see that. Isn't it a measure of all things?

Why do assume that bears thought the market would not rally post Fed rate cuts? I'm hardly surprised, I posted on my blog at the end of August that I thought the market would end up for the month of September.

How does a one month rally invalidate bearish views on the market? In September 2001 the XAO slid more than 7%. Then in October 2001 the XAO rallied 6.6% and then rallied a further 6.7% over Nov, Dec, and Jan 02. Then what happened? The XAO fell over 18.4% between the end of Jan 02 - Feb 03.

So by your reasoning 6 years ago you would have declared the bears wrong for a good 4 months only to watch all those gains given up and then some. Was the market right back then?

This above is not a forecast nor is it meant to imply that we will have a repeat of the the 2002 - 2003 episode. It just demonstrates that calling bears or bulls right or wrong at this stage has no merit.

Below is another piece of history from Nouriel Roubini. Again this is not a forecast but a reminder that markets can and do get it wrong.

The stock market is still blissfully ignoring the onslaught of lousy macro news deluding itself that the Fed easing – and more to come – will rescue the economy from a hard landing. But it had the same delusion in 2001 when the S&P500 rallied 18% in April and May on the expectations that the aggressive Fed easing would lead to a second half of 2001 rebound and would prevent a recession. Too bad that the recession had already started in March. It took three months – until June – for the stock markets to lose their delusion and realize that – in spite of a most aggressive Fed easing – the economy was in a hard landing; thus, stock prices started to sharply fall again starting June 2001 after the 18% “sucker rally” of April and May.

 

[wavepicker]

Re: The Death of the Dollar

Kennas,

I am first to admit I was bearish post 16th July. In fact I think I was one of the only ones who shorted at that time. I will also admit that I though we ere going further down. I got the start of the correction right but the depth of the correction wrong.

Financially that was not a problem because I was not short post 17th August. In fact I was expecting a rally after then but not new high. So what went wrong with the bearish view??

Firstly in my opinion in terms of EW the market did complete an impulse on the 16th July. Although we have made an unorthodox new high IMO this is still part of the correction that started on the 16th July. If this is the case then we might get a very fast impulse down starting mid to end of next week right through to mid November to exceed the August low to finish the correction.(This is an irregular or expanded flat under EW parlance-unfortunately it's impossible to tell when they will happen) I know that sounds like a bit of a long shot but that is how I am looking at things at present as the volatility has not let up yet.

The important thing I see is that there is a downward cycle between 5th October and 14/15th November. This might reasult in a mild move or a big move, no one knows, but I am banking on a big move. If it doesn't happen that way then I can eat crow and shutup.

After that move down, that is when I am looking at going long term bullish for the next 12 months.

Cheers

 

[CFD]

Re: The Death of the Dollar

Each person eats, roughly, food equivalent to 2 litres of petrol per week. Allowing for losses in turning that into ethanol etc, if we take ALL the food supply then that gives each of us one tank full of ethanol per year. And literally nothing left to eat.
.

I don't know enough facts to argue with this, but to me it seem illogical.

Ethanol is mainly produced from wheat and sugar cane, both of which have been in over supply in resent years. Oz is still storing wheat faster than we can bribe people to buy it. If these over supplies (and any possible increased production of the same land) was used for ethanol, we could again become self sufficient in petroleum with the added benefits to the environment, balance of payments and farmers.

 

[CFD]

Re: The Death of the Dollar

Kennas,
If it doesn't happen that way then I can eat crow and shut up.
Cheers

To share the in depth knowledge you have gained for the benefit of others and use this to make predictions on a public forum, says heaps about your character IMHO. If you do get it wrong, I'm sure many of us will still hold your views in the same high regard next time.

(ie there would be no need to eat humble pie in my account.)

 

[Smurf1976]

Re: The Death of the Dollar

I don't know enough facts to argue with this, but to me it seem illogical.

Ethanol is mainly produced from wheat and sugar cane, both of which have been in over supply in resent years. Oz is still storing wheat faster than we can bribe people to buy it. If these over supplies (and any possible increased production of the same land) was used for ethanol, we could again become self sufficient in petroleum with the added benefits to the environment, balance of payments and farmers.

It don't want to hijack the thread (feel free to move this post someone) but I'll answer the question.

A few facts and figures.

A small (50g) bag of potato chips contains about 1 MJ (megajoule). It's about the same for a small chocolate bar.

An adult office worker needs to eat about 10 MJ of food per day. Perhaps 15MJ for a labourer.

One litre of liquid petroleum is 35 - 41 MJ (varies depending on whether it's crude oil, petrol etc being considered).

Running an electric oven for half an hour requires about 13 MJ of coal into the power station. The oven uses far more energy than is contained in the food being cooked in most cases.

To heat your 250 litre hot water tank from cold (15 degrees) to hot (70 degrees) requires about 160 MJ of coal into the power station.

Overall, human food production just isn't in the game in terms of energy volume. If we take the Australian population as 20 million each using an average of 10 MJ per day (labourers etc higher, children etc lower) then we have 200 million MJ or 200 TJ per day of energy being eaten.

Now, if we take that 200 TJ, Australia's entire food consumption, and put it into a power station then we get about 800 MW baseload. That's all of Australia's food generating enough power to run a bit over half of South Australia.

Turn it into petrol instead and we'll do slightly better with almost enough to run every car in SA. Pity about trucks, buses, trains, planes, ships or the rest of the country.

Biofuels might work based on algae or something like that but it won't work based on corn and wheat. And that's without even considering the oil and gas used to grow the crops in the first place.

As for the Dollar, I don't see it crashing as badly as some when measured against other currencies. That's because I'm expecting all currencies to go down all at once. Odds are the Dollar will fall more than some of the others but in my opinion there's more chance of me landing on Mars than fiat currencies collectively gaining value in the foreseeable future.

 

[Mofra]

Re: The Death of the Dollar

Ethanol is mainly produced from wheat and sugar cane, both of which have been in over supply in resent years. Oz is still storing wheat faster than we can bribe people to buy it. If these over supplies (and any possible increased production of the same land) was used for ethanol, we could again become self sufficient in petroleum with the added benefits to the environment, balance of payments and farmers.

There are also alternatives to wheat and sugar cane - Palm Oil is another tipped to be a large contributer to the global alternative fuel industry.

 

[explod]

Re: The Death of the Dollar

There are also alternatives to wheat and sugar cane - Palm Oil is another tipped to be a large contributer to the global alternative fuel industry.

The debate on ethenol is off the thread but as others have I will dabble also. It has been an interest for a number of years and I can assure that it is in no way a viable alternative, there is not enough land//or sea for that matter. The internal combustion engine as we have enjoyed it is doomed.

At out current level of technology we have hydrogen and electric for future engines. Fuel will come from wind, waves, solar, thermal and nuclear. The sooner we stop bullcrap debate, playing politics and get on with it the better chance that in a few years we will still have air to breath.

Back on the subject itself, go back and have a good read of rederob's excellent post. He is right on the ball and if you do not agree then in my humble opinion you have a lot yet to learn or you are just listening to the Wall Street spin doctors. Notice in news overnight that even Goldman Sachs has become bearish on the dollar, struth,,,,talk about the captain leaving the sinking vessel.

 

[wayneL]

Re: The Death of the Dollar

The SM is not a good indicator of the health of the economy. It is only a good indicator of prevailing sentiment. So for that purpose it can be discounted.

Is this your own strawman Wayne?

Other points satisfactorily picked up by others , but wanted to address this one:

NO, this is not a straw man argument at all. Look up what a straw man is. It is assigning an argument to an opponent he didn't make.

For example, here is a real life example:

Me: Call centre operators all live offshore and speak Hindi.
Straw Man: That's racist, I suppose you think we are all suicide bombers as well.

Once the logical fallacy was pointed out and destroyed, the straw man bade a humiliating withdrawal.

So you can see that my point about the SM being a measure of sentiment, is nothing like a straw man argument, nor is is logically fallacious, as Nouriel Roubini illustrated via dhukka.

OK one more point:

Greed is good!

Greed is beneficial to the greedy while it works. But greed can destroy the greedy, indeed, it is destroying the earth.

Cheers

 

[theasxgorilla]

Re: The Death of the Dollar

Having said that, given that this has been such a strong bull over the last 4 years, most are expecting to see a continuation of the same, and any deviation from this can hit them very hard psychologically if they are not prepared for it.

It's also worth balancing this statement with a statement which says that it must be excruciatingly frustrating for wave counters and bears these last four years to keep calling for tops and corrections down to much lower digits on various world indices and to have no fruit from said labour. With each threat of an actual correction the anticipation in the 'bear' camp to get ready to finally be able to say, "I told you so!" becomes immense.

It seems there is an ego driven psychological need for some people to be right when the majority are wrong. Makes them feel special I suppose. Not having a personal go at you wavepicker...just spring-boarding this point off your quote as I believe it's the yin to your yang.

ASX.G

 

[It's Snake Pliskin]

Re: The Death of the Dollar

Greed is beneficial to the greedy while it works. But greed can destroy the greedy, indeed, it is destroying the earth.
Cheers

Wayne,

Considering communism has done more to destroy the planet than any other political doctrine/system known, how is greed linked to such a system?

Those who own look after what they own.
Those who don't own abuse to the fullest extent what they don't own.
Russia is a good casestudy.

No straws intended

Cheers...

 

[wavepicker]

Re: The Death of the Dollar

It's also worth balancing this statement with a statement which says that it must be excruciatingly frustrating for wave counters and bears these last four years to keep calling for tops and corrections down to much lower digits on various world indices and to have no fruit from said labour.
ASX.G

What makes you think EW people are frustrated ASXGorilla? E Wavers make mistakes like everybody else they also make stunning forecasts and trades.

Times are not frustrating for me at all, I am as happy as a pig in sh.t. I don't have long term positions ATM so I don't care, just trade the market step by step. It was E wavers that called the peak to the day just prior the last correction AND WENT SHORT, only to be ridiculed and laughed at on the day by the likes of yourself and others like we were nuts or something, have you forgotten??

It's E Wavers that went long the market thereafter while you and others where still waiting for signals from your lagging indicators in your systems. You know what? It's gonna be E Wavers and market timers that will be short next month while you and the others comfort each other while looking for reasons why it happened.

I really can't understand what you have against E wavers ASXGorrilla. It's like a hate tract, just because you tried it, and just "couldn't get it" then you automatically dismiss it. Well not everyone is like you ASXGorilla, some can and do make it work, much to your dismay.
Very rarely will I come out and attack you and "Quantative analysis". What and how you conduct your business is up to you and I respect that. If you think EW is a load of garbage, fair enough. No one is forcing it down your throat, just ignore the posts I and other Elliotticians make and stick to what interests you. Does that sound fair enough?

Sure I like to be right, everybody does, it's human nature because it means I have traded correctly and will profit, but if I am wrong I have contingency plans. Unfortunately the system, method, trader, forecaster that does not make mistakes when looking at the probabilities of future market action does not exist.

 

[theasxgorilla]

Re: The Death of the Dollar

You said:

most are expecting to see a continuation of the same, and any deviation from this can hit them very hard psychologically if they are not prepared for it.

I'm just saying that the psychology cuts both ways. I don't think its easy being a wave counter with long term wave counts or a bear with half a clue about macroeconomics when markets continue to defy gravity.

For the life of me I can't remember laughing at or ridiculing anyone.

ASX.G

 

[Sean K]

Re: The Death of the Dollar

NO, this is not a straw man argument at all. Look up what a straw man is. It is assigning an argument to an opponent he didn't make.

..........OK one more point:

Greed is beneficial to the greedy while it works. But greed can destroy the greedy, indeed, it is destroying the earth.

Cheers

Yep, sorry Wayne. Damn it! I was trying to catch you out!

And I agree about the greedy thing, and I agree with Snake also. Perhaps humans will find a way no matter what political path we take...

 

[wavepicker]

Re: The Death of the Dollar

For the life of me I can't remember laughing at or ridiculing anyone.

ASX.G

Let me refresh your memory then:


https://www.aussiestockforums.com/forums/showthread.php?t=4888&page=34

Your reply(post #678) to post #676(which was a continuation of posts #603,662,and 676.)

I'm just saying that the psychology cuts both ways. I don't think its easy being a wave counter with long term wave counts or a bear with half a clue about macroeconomics when markets continue to defy gravity.
ASX.G

It ain’t easy being a trader using any methodology ASX. Including what you are doing. This is the hardest game in town and anyone who has a methodology that can beat the market as well as the rest of the pack CONSISTANTLY in most market CONDITIONS is probably doing something quite different to others.

Your basic algorithms in your systems have worked a treat in a strongly trending market ASX, but if you have been around long enough you will quickly realise this is not a normal market. So ASX Gorilla what are you going to do when market conditions do change and say stay choppy in a multi year sideways or bear?. Even some of the best systems traders like Nick Radge and Tech/a realise this and have taken steps to diversify their knowledge into more discretionary approaches?

As for long term wave counts I will make the counts, but I don’t take long term trades(plans) as I focus on trading the market move by move and are predominantly a swing trader.

I am still of the opinion that EW was not wrong in the last correction, nor is it wrong now, the current leg is still part of the correction that started on the 16th July unless it’s invalidated and disproved which it has not just yet

Good Luck

 

[chops_a_must]

Re: The Death of the Dollar

Let me refresh your memory then:


https://www.aussiestockforums.com/forums/showthread.php?t=4888&page=34

Your reply(post #678) to post #676(which was a continuation of posts #603,662,and 676.

You're kidding aren't you?

 

[wavepicker]

Re: The Death of the Dollar

You're kidding aren't you?

I don't find it surprising to hear anything but that from you