Debt/Dollar Crisis...aren't "STATIC"
I think building the funeral pyres for the USD may be a bit premature...
Should the USD have fundamentally contracted here of late ?
Yes, of course it should have...and it probably will continue to weaken in the near future.
That isn't a surprise to anyone here on this thread...the inevitable correction of King Dollar was acknowledged over 2 years ago.
The issue is whether the USD is going to go to "crisis" levels that will propel Gold significantly higher, or to speculative levels.
THAT is what separates the Gold-Hypesters from those who view the Big & Easy Money portion of the Gold Cycle as having possibly already passed.
re: the article linked earlier on currency hedging
["Butler acknowledges the "war footing" over Iraq, after roughing up the dollar in recent months, could stop in its tracks. "An Iraq resolution would help the dollar, of course," Butler said Monday.
Another challenge for those looking to chase foreign currencies is President Bush's $600 billion stimulus plan. "These plans could put some wind in the dollar's sails, but it won't last long," Butler says.
Butler, who edits a report called The Daily Pfennig, still sees the dollar's fall from grace continuing throughout this year and into 2004. "We're about half way through this," he said, forecasting the euro will reach $1.10 this year from its current $1.04. "We have a lack of corporate earnings, the stock market has questions to answer, and the current account deficit is on the threshold of 5 percent of gross domestic product."]
...EURO going to $1.10 vs the USD is NOT going to drive POG to significant new highs, as I think $350 Gold reflects that, if not more.
EURO has been as high as $1.17 in the past with lower Gold Prices than present levels.
People seemingly think that the Gold Market, or even other currencies markets aren't forward looking.
Don't you think that future USD weakness from the Fed's reflation is already anticipated and priced into present Gold prices ?
I think even the most nascent of Mega-Gold Hypester Bulls would also conceed that there is a "significant" WAR/TERRORISM premium already priced into Gold...based on the War taking a negative turn, Saddam unleashing bio-weapons, or even a domestic terrorist retaliation.
And as far as the Debt Crisis... the Mortgage Refinance Bubble is a self-limiting mechanism...with more upside benefits than potential negatives. Main St USA has NOT experienced anything close to a Real Estate Bubble. People have tapped their Equity, but when paying down higher cost debt and increasing their tax deductibility - they are significantly reducing their overall debt burden and building savings. Cash drawn out in addition to rate & term reductions has extended the consumer spending cycle and helped support the economy into a soft landing.
This may turn out to be one of the few things Greenspan did right.
Lenders over the last 6 mos have dramatically tightened credit. Consumer finance has tightened to levels unseen over the last 10-15 years in many market niches.
Rate spreads in consumer finance are near historic highs and Greenspan keeping rates down here will allow many of theses lenders to make themselves whole.
Lenders are responding a bit late, but they are FINALLY responding & responding very strongly with deliquencies, charge off's and former reckless lending practices now quickly being brought under control.
...gotta give credit where credit is due.
Actually I am seeing very strong signs that we've actually passed the peak of the debt crisis and things are being brought under control much more quickly than many thought possible.
If consumer spending/retail numbers hang in there to any reasonable degree over the 1st 2 qtrs of 2003...I think many, many people are going to be surprised at how much light will soon appear at the end of the tunnel...especially if we quickly establish control in Iraq.
We're exiting a reckless spending & debt accumulation cycle and entering a traditional cycle where people will increase savings, pay down debt and the entire nesting cycle will support the housing market...and there is NOT a Housing Bubble to burst anyway... sans a few "hot" markets - that occur in every up-cycle for housing.
Gold will ebb & flow with the geopolitical & economic crisis du jour...but, don't fail to acknowledge how much bad present & potential future geopolitical & economic news is already priced into both the USD and Gold.
As usual, the expectations on both the upside and the downside will be proven to be somewhat exaggerated...with both the USD and GOLD settling somewhere near the middle of opposing expectations.
The "play" of late - was whether the USD and the US Economy are going to "crisis" levels, or whether we've already seen the peak of the downside cycle; and whether those forward looking negative expectations have been fairly priced into both the USD and Gold.
...many think they have and were and have cashed of of the Gold Cycle for "now" - if not for good...
Gold may move to $400 on a future War, or Terrorist driven event; but goldstocks may have already double-topped for this cycle as their disconnection from POGS move to higher highs may have already signaled...and when, not if...the free-flow of CHEAP OIL returns (and don't kid yourselves that this isn't the other side of GW's DAILY DOUBLE in taking out Saddam)the stabilization and then revitalization of the global economies may occur much sooner than most anticipate.
US Companies have drawn tremendous benefits from the recent Technology Boom, they are lean, mean and ready to lever any economic recovery and any benefits via a weaker USD in Manufacturing & Exports.
The USD may go a bit lower and Gold may go a bit higher...but, sans a historic level bio,or nuclear event; imho - the BIG & EASY / HIGH REWARD-LOW RISK money has already been made in this Gold Cycle imho... |
