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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: Wayners who wrote (36295)	8/12/2012 8:45:22 PM
From: GROUND ZERO™	Read Replies (3) \| Respond to of 223348

It looks like the SP broke below the head and shoulder pattern a few months ago and has now only retraced back to the neckline... very possibly... GZ

To: Wayners who wrote (36295)	8/12/2012 10:36:00 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 223348

A devaluation of currency is aimed at providing an economic advantage vis a vis other competitive economies, as well as devaluing the holdings of foreign bondholders. But in this case, any devaluation by the US will be quickly followed by devaluation by other countries of their own currencies. We're in a currency war where the weapons of that war are FX contracts that provide an advantage in exports, as well as protectionism, against rival economic powers. Japan, despite it's very low interest rates, has been unable to avoid deflation of asset prices, and strength in its currency. I'm not sure it's going to be any different for the US. I see the likelihood of continue decline in asset prices, particularly those for which CDS contracts are available. CDS holders have every interest in seeing asset prices destroyed so that they can make their counter-parties pay off in cash (this does not include those holders who have purchased CDS to hedge against the decline of an underlying asset they hold). I see this problem perpetuating the hesitancy of banks to loan money, when they know the underlying collateral is vulnerable to depreciation where CDS determines the mark to market value of that asset. So making asset prices rise by devaluing the currency will not succeed in the long run. It will just punish the sector from which economic recovery is dependent, namely the consumer. And consumers are de-leveraging and restoring their balance sheets at this moment, out of fear of the future. And given the demographic age of the US population, it would seem that they will be seeking to live within their means, as well as increase their savings, not go on another credit splurge.. In sum.. money supply may be soaring, giving some signal that PMs should be accumulated in anticipation of a currency devaluation and/or inflation. But inflation requires a demand for credit expansion and that just doesn't exist at this time in the developed economies. And this is reflected by the severe decline in monetary velocity (the number of economic transactions that occur with that increased money supply). What increases velocity is demand for credit, and the subsequent monetary transactions that credit increase creates. Now.. the "black swan" in this would be a global conflict. But while that would definitely increase demand and provide jobs to support the "war machine", it would not increase domestic spending as the population would have economic rationing and price controls implemented. Let's all hope this is not the scenario that plays out.. Hawk