Thursday, October 22, 2009
McAlvany Weekly Commentary, Oct 21, 2009
Our Listeners Questions Answered
October 21st, 2009Past Archived Shows Referenced in Today’s Commentary:
New York City Defrief: http://www.mcalvany.com/podcast/?p=99
The Silver Lining: David Morgan: http://www.mcalvany.com/podcast/?p=96
The Perspective Triangle Video: http://www.youtube.com/watch?v=XYDmYA2gAac
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Trends Journal, History of the Future (Autumn)
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French official says U.S. trying to inflate away debt
The United States is pumping out liquidity to try to inflate away its debt, leading to the depreciation of the U.S. dollar, Henri Guaino, a top advisor to French President Nicolas Sarkozy said on Tuesday.
He told reporters on the sidelines of a conference of Sarkozy's ruling UMP party that the United States was 'flooding the world with liquidity'.
Guaino worried about a risk of an inflationary cycle.
'Historically, we have only ever got out of such situations with inflation. We can also get out with deflation, but it's much more painful politically, socially,' he said. (more)
Is a Weak Dollar a Strong Sign? Not So Fast!
Readers of George Orwell’s 1984 might recall Big Brother’s claims that "war is peace" or "freedom is slavery." Orwell was writing a novel, but some of the commentary these days makes me think that elite economists have taken residence in Oceania’s "Ministry of Truth."
Today, the champion—the uncontested champion of Orwell’s "truth"—is Paul Krugman, the 2008 Nobel laureate, Princeton professor, and New York Times columnist. For those who read his twice-weekly column or glance at his blogs and commentary elsewhere, it is like reading the latest pronouncements from the "Ministry of Truth," and, like in Oceania, it seems that the masses believe the nonsense. (more)
Dollar hits 14-month low against the euro
The euro broke through $1.50 against the dollar for the first time in 14 months Wednesday as a recovering stock market further sapped the U.S. currency's appeal as a safe-haven investment.
The dollar's slide came despite recent supportive comments from Treasury Secretary Timothy Geithner and senior European finance officials, who are growing increasingly anxious about the euro's appreciation. A stronger euro makes European exports more expensive in other currencies, and thus less competitive.
The 16-nation euro peaked at $1.5046 in New York, up from $1.4928 late Tuesday. That's the euro's strongest level since August 2008, when it traded above $1.56. (more)
Dollar Dumping Will Remain the Hot Trade
The dollar slumped to a new 14-month low Wednesday, and it could continue floundering well into next year.The green back was trading at $1.50 to the euro Wednesday, a key psychological milestone. It also fell to a level near 75 on the dollar index, well below its year high of 89.62 and another important round number. The dollar index represents a basket of currencies, but the majority weighting is the euro.
"The dollar is just in a funk, and nobody lifts a finger to help it," said Brian Dolan of Forex.com. "We had Euro zone meetings Monday and Tuesday. They voiced their concerns but showed no signs of any action to counter the euro strength. All the feed back loops are in perfect motion here. We got some oil inventory data that was oil positive and that added to the dollar's woes." (more)
Precious Metals Correcting Normally
Watch for larger, stronger rallies later this year and into 2010.
The first leg of our fall gold and silver rallies appears to be over. Next, we should be selling and correcting on standard profit-taking. Our first signals are the current, choppy ABC wave top followed by (1) A continuation sideways triangle or, (2) A new trend either up or down for prices. (3) Then a new rally.
We have noticed in technical signals on faster charts the past few days that gold has not wanted to sell despite it’s time to do so on the cycle calendar. This shows itself in mild and shallow selling price bars or, in neutral price levitation. Gold simply does not want to sell with any conviction. Further, after a December futures drop from near $1,070 and back to $1,042.50, support for the B corrective wave this morning is back up at $1,055.40. This does not show me a market with serious selling on its mind. Can it come soon? Sure it can but so far so good. (more)
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