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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (13521)	10/26/2008 9:49:13 AM
From: carranza2	3 Recommendations Read Replies (1) \| Respond to of 71407

The strength in the JPY and the clownie can be easily explained: The obvious unwind of the Yen carry trade and the high demand for the USD as deleveraging takes place. Dollar-denominated debts have to be paid in dollars. Deleveraging has caused fire sale prices in all paper assets as the Yen goes home and dollars are bought to pay debts are paid in USDs. The sale has included paper gold. [Hat tip to Privateer]. Both phenomenons will end sooner or later. The trenchant question is what happens when the sale has ended and there is no more deleveraging taking place. The even more trenchant question is determining what to look for as a sign of the end of deleveraging. One hint, IMO, will be a strenghtening of the price of gold. This may have happened Friday but it must last a few days, perhaps even more, before it is a real signal. One thing that's going to happen, absolutely, positively and without a doubt, is that the dollar will plunge as deleveraging ends and the demand for it as a means of paying off debt ends. We may see some strength in the stock markets at that point because I think we'll see a lot of foreign buying. American corporations will be seen as cheap. I wish I was confident enough to suggest a a time frame for all this. About all I can say is that the first sign will be the end of the disparity between paper and physical gold.

To: Wyätt Gwyön who wrote (13521)	10/26/2008 10:21:46 AM
From: gregor_us	Read Replies (1) \| Respond to of 71407

Thanks. What I see is that the parity level has been defended/bounced off since 1994. More broadly, I think it's the Yuan that needs to rise and I think the JPY is saddled with that burden, in part. eventually i think JPY takes out the 1995 level, which was 80-85 to the dollar. at that point, Citibank predicted JPY would go to "54" or something very precise. yes, and the meaning of life is "42". very precisely wrong: JPY went the other way, to 149 or so, and has been clawing its way back down for 12 years. Wouldn't you agree that 1995 level was a brief spike, that, when reversed, started a strong weakening leg? That was about a 6 month spike.I guess what I am seeing is that since the monster move higher starting in the back half of their stock market and property bubble, and continuing into 1994, that since that time the pattern has been to attack levels that are stronger than parity with the USD. On a shorter time scale, I would also note that since the JPY has made its move at the same time the USD has made its move, that the rate of change in the JPY against other currencies has been even more painful for Japan. That JPY/EUR pair has been a sight to behold. I would call it a dislocation. Let's say we agree the current move is a dislocation. My question would be, would you agree that dislocation type moves tend to not be repeatable in short periods of time? Do you see this Yen move, also, as a repricing move? If that was the case, then I would say repricing moves tend to hold for longer. Here is my view: I see the JPY move against GBP and EUR, and to a lesser extent against CAD and AUD, as a dislocation move. Which is to say I don't think it will repeat any time soon naturally. And also, as I look at the chart of the JPY, it seems intervention works best coming off these dislocation moves. Best, G