Dollar Burns as Fed Policies Come Home to Roost

Posted on by

I told you to start buying stuff you need. Everything is going to get more and more expensive as the dollar drops. From Financial Times:

Please respect FT.com’s ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article – http://www.ft.com/cms/s/0/9a977da0-6bfd-11e0-b36e-00144feab49a.html#ixzz1KJsREqHL

The dollar dropped to its lowest level in more than two-and-a-half years on Thursday as buoyant risk appetite prompted investors to sell the currency to fund carry trades.

Analysts said robust corporate earnings figures had boosted hopes over global growth, while the prospect that US interest rates would remain at ultra-low levels was fuelling demand for carry trades, in which low-yielding currencies such as the dollar are sold to finance the purchase of riskier, higher-yielding assets elsewhere.

Market rumour that the People’s Bank of China was poised to implement of substantial, one-off revaluation of the renminbi also weighed on the US currency.

The dollar index, which tracks its progress against a basket of six leading currencies, fell 0.8 per cent to 73.785, its weakest level since August 2008. Traders said the stage could now be set for the index to target the record low of 70.698 it hit in March 2008.

The dollar also dropped 0.9 per cent to a 16-month low of $1.4641 against the euro, fell 1 per cent to a 16-month trough of $1.6560 against the pound, lost 0.8 per cent to a record low of SFr0.8817 against the Swiss franc and plunged 0.7 per cent lower to Y81.93 against the yen.

The Australian dollar, which with its relatively high yield and commodity-linked status has been a favourite target for carry trade investors, surged to a fresh 29-year high against the dollar, rising 0.6 per cent to $1.0758.

Lee Hardman at Bank of Tokyo-Mitsubishi UFJ said dollar weakness continued to be mainly driven by widening expectations of monetary policy divergence between the Federal Reserve and other major central banks.

He said the downgrade of the outlook of US sovereign debt by rating agency Standard & Poor’s on Monday had reinforced this dynamic by increasing expectations that the Fed would have to keep interest rates at ultra-low levels for longer to offset the negative impact from the expected fiscal tightening.

Mr Hardman added, however, that while near-term concerns over monetary policy divergence and heightened US fiscal concerns were genuine, he believed there was a strong case that current dollar weakness was overextending.

“With market liquidity thinning heading into the Easter holidays, it provides the ideal conditions for a dollar undershoot relative to fundamentals,” he said.

This weakness is coupled with some of the worst crop yields in recent history – especially things like cotton. Time to go out and buy the things you will need next year,because you won’t be able to soon.

Dollar Continues Slide into Collapse

Posted on by

The AP tries to put a pretty face on this but as your money loses buying power you’re not going to care about stock windfalls:

NEW YORK (AP) — The dollar fell against most major currencies Wednesday, hitting a 15-month low against the euro, after solid earnings from major U.S. companies and a healthier reading on the housing market fueled investors’ appetite for currencies linked to higher benchmark interest rates.

Higher interest rates tend to support investor demand for a currency, since it can generate a bigger return on investments denominated in that currency. The Federal Reserve has kept its key rate near zero since December 2008, while most of the world’s other central banks are raising interest rates.

The euro jumped to $1.4514 in afternoon trading Wednesday from $1.4340 late Tuesday. Earlier, the euro hit $1.4547, its highest point since January 2010.

The dollar had advanced against the euro earlier in the week as speculation mounted that Greece would need to restructure its debt, but that fear wasn’t weighing on the euro Wednesday as investors turned to assets of countries where interest rates are higher.

Greece’s finance minister also said that the country’s debt was “absolutely sustainable.”

Investors’ distaste Wednesday for the low-yielding dollar came after good news from major corporations and the troubled housing sector. The Commerce Department said that home construction rose 7.2 percent in March from February. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.

Strong earnings from technology companies in the U.S., including those from Intel Corp. and Yahoo Inc., pushed U.S. stocks higher, with the Dow Jones Industrial Average rising 1.5 percent. Oil prices settled above $111 per barrel on the New York Mercantile Exchange, while gold settled at $1,498.90 an ounce, its seventh consecutive day of gains.

Stock up now.

Government Handouts Top Tax Revenue

Posted on by

This is why we’re doomed. Via Fox Business:

U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression.

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.

But that’s more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

Also, an estimated 59% of the 308.7 million Americans in this country get at least one federal benefit, according to the Census Bureau, based on 2009 data. An estimated 46.5 million get Social Security; 42.6 million get Medicare; 42.4 million get Medicaid; 36.1 million get food stamps; 12.4 million get housing subsidies; and 3.2 million get Veterans’ benefits.

And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments–for things like the income and payroll tax, among other taxes–have fallen by $312 billion.

Obviously this is completely unsustainable, even in the short term. But if you cut entitlements what will the lefty protests look like? This?

 

U.S Corn Reserves Hit 15-Year Low

Posted on by

You do have at least a few months of food around I hope. Prices are going to skyrocket so start getting sales while you can:

ST. LOUIS – Rising demand for corn from ethanol producers is pushing U.S. reserves to the lowest point in 15 years, a trend that could lead to higher grain and food prices this year.

The Agriculture Department has left its estimate for corn reserves unchanged from the previous month. The reserves are projected to fall to 675 million bushels in late August, when the harvest begins, or roughly 5 percent of all corn consumed in the United States. That would be the lowest surplus level since 1996.

The limited supply is chiefly because of increasing demand from ethanol makers, which rose 1 percent to 5 billion bushels. That’s about 40 percent of the total crop.

But the increase didn’t alter the agency’s overall estimate, mostly because livestock producers are expected to scale back their corn purchases.

The Agriculture Department estimated that demand from livestock producers fell 1 percent to 5.15 billion bushels.

Crops prices rose about 1 percent to $7.67 during morning trading, shortly after the report was released. The price of soybean rose 1 percent to $13.80 a bushel. Wheat was virtually unchanged at $7.76 a bushel.

Corn prices affect most products in supermarkets. Corn is used to feed the cattle, hogs and chickens that fill the meat case, and it is the main ingredient in cereals and soft drinks.

It’s also time to enjoy a last few steak dinners. If you haven’t already consider joining a bulk grocer like Costco – I did and have never regretted it.