Breaking The Buck

By MICHAEL GRAY

Dollar collapse continues today as Treasury Secretary Tim Geithner speaking in Beijing told his Chinese hosts how the Obama administration was more concerned about its government spending than the China government was.

Take a look at the Dollar Index over the last three weeks. Besides the cratering dollar trend, look at the intraday trend. Each day during the Asian trading block you will see dollar strength then by the time US markets begin trading a sell off of the greenback.

If you take this trade as walking the walk, China needs a stronger dollar to buoy its dollar-denominated investments, so the Chinese are probably in the market selling treasuries for dollars with Uncle Sam. There could be many trades to accomplish this, but I have to think there are inside trades being backed by the administration’s approval.

The Yen-carry trade is also a player in this trade as the dollar strength against the yen is still generating profits.

Reuters had a story over the weekend about Washington’s confusion over dollar weakness and the attack on the longer bonds. The administration tried to spin the thought that a steeper yield curve was good for banks and was perhaps a precursor to economic recovery.

Holy Sh-t! How in the world can you even think of running that story?

These market responses are in direct relationship to Washington funding everything on its plate with fathom money generated from Ben Bernanke’s magic box at the Fed.

FUTURE SHOCK

With the GM bankruptcy filing at 8am, the market’s futures were up over 100 points on the Dow Jones industrial average. On Sunday night futures were down 25 points.

Admittedly it was probably on light volume  –– no way for me to see volume –– but it just does not pass my smell test. Who is seeing economic strength going forward to sustain these numbers?

Can it be the Plunge Protection Team?

If the market can bid up the S&P index to close over 928, then the average will close above its 200-day moving average for the first time in over 18 months.

From the technicians, that should take care of business for Washington for a few days.

Market participants will bid up equities for a few days on that news so the PPT will have a few days off while some of its team is abroad in China.

COMMODITIES

Silver is at a 22-year high. Gold approaches $1,000. Oil is on a tear along with copper. As the dollar drops these commodities will climb since the products are dollar denominated.

Its my belief that gold and silver will disconnect from the dollar and move higher even in a dollar rally, until were hear another threat of IMF or World Bank gold sales to suppress prices.

For more on Wall and Washington and the economy see: https://mgray12.wordpress.com

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