Dollar Submerged February 28, 2008 2:00pm by Barry Ritholtz Spread the wealth. twitter facebook linkedin What's been said: Discussions found on the web: cinefoz commented on Feb 28 Like I said before, I you don’t want those little pieces of dirty green paper in your wallets, just send them to me. I will even pay for postage. No need for thanks. It is my duty as a public spirited soul to save you from such embarrassment. VennData commented on Feb 28 The administration’s strong dollar policy is a lot like Paulson’s pro-claimed “no bailout” policy… …except the just opened the spigots on Fannie and Freddie… Gov’t to Lift Fannie, Freddie Limits http://ap.google.com/article/ALeqM5hZMu_zy8j8jS-ZGoLa7TRsySUaHwD8V2P3PG2 …and the uber-backstop FHLB How The Government Kept Countrywide Afloat http://www.dealbreaker.com/2008/01/how_the_government_kept_countr.php MarkTX commented on Feb 28 To cinefoz, Ask and you shall recieve….. http://clubnosebleed.com/?p=59 MooPoint commented on Feb 28 I don’t think you need any more proof of a recession than this headline: “Bush: U.S. is not headed for recession” http://www.msnbc.msn.com/id/23389508 costa commented on Feb 28 stores in ny are now taking Euros. http://www.amny.com/business/am-euro0228,0,2872977.story Scott Frew commented on Feb 28 Are you telling me that the greenback sleeps with the fishes? glory commented on Feb 28 Q: why is gold approaching $1000/oz? A: because Fed/Treasury is debasing the currency (into worthless IOUs… they represent claims against what you say?) sam commented on Feb 28 did barry just nailed the bottom in dollar. hope it is mainstream enuff .. Vermont Trader.. commented on Feb 28 The US Dollar… it’s the world’s newest source of funds for the carry trade. For fun and profits, borrow cheaply in ever declining dollars and invest in growing markets worldwide! Marcus Aurelius commented on Feb 28 Posted by: cinefoz | Feb 28, 2008 2:10:08 PM _______ Will you still pay for postage when a stamp costs more than a dollar? cliffynator commented on Feb 28 Hey, is it just me, or does today’s NASDAQ chart resemble the CISCO logo? Bob A commented on Feb 28 But don’t worry because Bernanke says there’s no inflation and Fearless Leader says everything’s gonna be awright. John Badalian commented on Feb 28 Barry – I’ll acknowledge all the abstruse and insidious tricks that the Fed is employing to prop this Enron of an financial system up! Your friend (?) James Grant in the February 22nd Edition of his Interest Rate Observer, quotes one stategist (Christoper Wood at CLSA) who asserted that the Fed is taking “the garbage collateral nobody else wants to take”. My question is – and remains – as bad as we are, aren’t the other kleptocracies – Russia, China, the Saudis – even worse. Hell, take the Germans out of the EU and what you have is a weak confederation, as Jim Grant calls it: ” confederate money”! Gotta admit though, Enron is looking like more of a portent every day! Stuart commented on Feb 28 real interest rates are negative = Adios greenback. tm commented on Feb 28 Ok, so question. I’m not a high net worth investor or anything, just another person off of the street. But see, I’m not leveraged to the hilt, I actually have some cash savings. (Yeh, I must be unAmerican) How do I protect my savings (say 20 to 50k) from the continuously sinking (and probably much further) dollar? Brian in Seattle commented on Feb 28 Talk about a sinking dollar, in 2001 I went to the Czech Republic and pulled a 500 Czech bill out of the ATM. At the time, a dollar was worth 38 Czech Koruny, so that 500 was worth about 13.15 US. Now the exchange rate is 1 US dollar equals 16.5 Czech Koruny just 7 years later. That same bill is now worth 30.29 US dollars. That equates to about a 18.5 percent annual decline in the dollar vs the czech currency. Thankfully I decided to keep the bill .:) It makes me wonder what the next 7 years will bring. Brian in Seattle commented on Feb 28 Talk about a sinking dollar, in 2001 I went to the Czech Republic and pulled a 500 Czech bill out of the ATM. At the time, a dollar was worth 38 Czech Koruny, so that 500 was worth about 13.15 US. Now the exchange rate is 1 US dollar equals 16.5 Czech Koruny just 7 years later. That same bill is now worth 30.29 US dollars. That equates to about a 18.5 percent annual decline in the dollar vs the czech currency. Thankfully I decided to keep the bill .:) It makes me wonder what the next 7 years will bring. sam commented on Feb 28 tm..10% oil, 15% euro,10% gold,15% EEM,30% short term bond,20% cash. This way you will beat BArry’s returns philip commented on Feb 28 tm, I am working on the same problem. Here is my quick summary from my two years of work on the problem (reading many blogs and doing what research seems needed). I have very few long positions, was short WM (and several less successful shorts), and am currently short BAC and COF. I opened an account with Everbank and bought a couple pounds of gold, got my 401K out of equities, and am waiting for long positions to look reasonable again. You really don’t want to be short the U.S. over the long term, but over this particular term it seems prudent. I have stayed away from foreign diversification because there are a lot of “tensions” built up that can snap and unravel at any moment, IMHO. Getting into Euros last year would have been a good idea, but that ship has sailed. As for Asia, they need a strong U.S. and they won’t have one for a little while. Agricultural commodities seem to be a new bubble since there is no reason to suspect there is actually a massive shortage of these products (even with the ethanol subsidies eating up production). I am currently trying to decide whether to go short any or all of C, LEH, or GS. Each is a bit different. C is obviously weak, but have taken a beating already and because of how shorts (not options) work the lower the price per share the more risk. GS has mostly avoided the beating and probably have one coming but their high stock price means you might be able to short them if you only have ~20-50k to play with. Sorry to write a disseration, but I hope I can help someone else in a similar situation. larry commented on Feb 28 Lest anyone overlook it, one of the driver4s of the sub prime/credit debacle was the need to obtain more yield. Well, here we go again. Yields are declining due to the rate cuts, the dollar is sinking, home values are sinking, there are fewer and fewer defined benefit pensions out there, and our fearless leader says things are good. How do you stabilize an economy that needs increased savings for both down payments and retirement, when yields are below inflation? I do not think you can. AGG commented on Feb 28 You know, Bush is right. We aren’t headed for a recession. We’ve been in one for some time. Wait until the BLS restates the employment figures for last year come March 11. Don’t buy airline stocks if you think we are headed for a depression. The railroads did lousy during the 30s. PFT commented on Feb 28 People bought up gold for the same reasons in the depression. FDR then confiscated everyones gold, and those who did not turn it in went to jail. The treasury paid them 20 dollars an oz. Once he had all the gold, he devalued the dollar and gold was worth 35 dollars and oz. The big boys in Wall Street had shipped tons of gold to London since they were tipped off about the devaluation, and nobody was going to jail them. They made a nice profit. The gold the Fed banks turned in was not paid in Federal Reserve Notes since they knew these were worthless after going off the gold standard, and instead they got gold certificates (everyone else got dollars) As for the printed dollars in circulation today, there is only 220 billion in the US, and 500 billion is overseas. If they gave each man women and child an equal share of dollars in circulation, that would be about 700 dollars. The cost for each dollar is 6 cents, so it cost 42 dollars to make your dollars. The value of the paper is even less. Of course, dollar depreciate (inflation, devaluation). Pat G. commented on Feb 28 tm: The short answer is precious metals until inflation is no longer an issue. To me, it is a matter of preserving capital while making a profit by hedging on the obvious; inflation. As PFT writes; another reason why of the two monetary metals I prefer silver. Mises commented on Feb 28 The deflation is a fig leaf to fool the unwary of what is going on. Oh my god! The monetary base isn’t really growing. The deflation I have been predicting for 50 years is right around the corner. You Wish! Like the returns on money will ever go positive. Don’t delude yourself the dollar is a paper currency and you know what paper currencies are worth nobody wants them. Your best protection right now is to buy real estate with a fixed rate mortgage. Go for it. You have my blessing. rickrude commented on Feb 28 Ok, so question. I’m not a high net worth investor or anything, just another person off of the street. But see, I’m not leveraged to the hilt, I actually have some cash savings. (Yeh, I must be unAmerican) How do I protect my savings (say 20 to 50k) from the continuously sinking (and probably much further) dollar? Posted by: tm | Feb 28, 2008 4:34:36 PM /////////////////////////////////// Bud, buy gold and oil stocks Vermont Trader.. commented on Feb 28 tm – I don’t know where you live but in Vermont a lot of us are investing in Budweiser 5 cent certificates of deposit these days… Stuart commented on Feb 28 Today, tomorrow and Monday, the Treasury is issuing 76 Billion in new treasuries. The Fed has to monetize this as the primary dealers cannot carry this much inventory of treasuries, it’s just too many $$. This is on the heels of already tens upon tens of Billions in earlier treasuries this year. This is key to what’s unfolding. We are getting buried in treasuries and that is what is starving out other markets for capital. With this now compounding at an accelerating rate, alot of scuttlebutt about people getting nervous about holding T-bills as the fiscal deficit (federal) blows sky high. Watch out for a sharp and sudden increase any day in long term rates. Drowning in treasuries we are. This is what’s killing the dollar, and there’s no end in sight, in fact it’s going to get worse as the need to issue more treasuries mounts further due to a drop off in tax revenues and an increase in expenditures (federal). The Federal Govt is broke. End of story. drey commented on Feb 29 TM – I wouldn’t pull the trigger too quickly on the oil sector at this juncture as energy may well take a hit along with everything else when the reality of recession sinks in, today’s comments from the assclown-in-chief notwithstanding. Shit, look at the volatility of good companies like SLB lately – it’s enough to curl your hair if you have any left. That said, I would expect energy to rebound strong after decoupling from the rest of the market but before that happens there may be some tough sledding… Good advice from others on precious metals, etc. Merk Hard Currency Fund is good for a play against dollar with a decent if unexciting yield. rickyny commented on Feb 29 you might like that one: http://lemondequivient.typepad.fr/mon_weblog/2008/02/1-euro-152-usd.html Read this next.January 16, 2011 “The Fed No Longer Even Denies that the Purpose of Its Latest Blast of Bond Purchases … Is To Drive Up Wall Street”November 21, 2011 Look Out Below, Super Committee EditionDecember 8, 2005 Apprenticed Investor: More Reading for Investors Posted Under Currency Previous Post Who Are These People Surprised by Economic Data? Next Post Does Google Lose Market Share as Web Advertising Grows?