<Don't you think it would be pretty easy to spark a short covering event to "buy time??" such a rally could be pretty powerful -- as Faber suggests??>
I don't think it will be easy now to spark a real USD counter-rally, but it could be done to a degree. But, not through talk, bluster (the Larry Kudlow view of "scaring the speculators" with currency intervention*), and BS. The test will come when the rate hikes start kicking in (which I expect well before the consensus view). It might take a few too.
Speaking of CI, there is a chart in the 11-25 issue, p. 11 of the Fed funds and core CPI going back to 1958. Out of those 540 months, only 78 had a Fed fund rate below the CPI, with now 26 (and counting) of them on this run. So even for those who believe the bogus 1.8% CPI number, money is still far too cheap. The USD will continue to decline until this changes.
* If this (or a token rate increase) actually knocked the crap out of foreign currencies, and gold, I'd be all over it, especially after the specs got washed out.
commitmentsoftraders.com
What a gift that would be, they wouldn't do that just for me would they? Naw, that would be too easy <vbg>. The problem for the Treasury that the Kudlows don't get, is that if the USD rallies against the Yen, the BOJ would disappear from the auctions (looks like the Chinese are already MIA judging from the treasury numbers posted this AM by philv), and rates would spike just because of that. So a USD rally of any cause will spike rates IMO. |
