Warren Buffett says U.S. Treasury bubble one for the ages

February 28, 2009 by · Leave a Comment
Filed under: Opinion 

With the fundamentals in place on the dollar, it does seem like we have a huge crowd of “safe haven” investors sitting on the sideline in cash waiting for some sign of a bottom, which may or may not be in the near future.  I would say we are not close and we most likely see another bear market rally before we really start continue declines in the Dow and S&P.   I am personally shorting treasuries in anticipation of a fall in the dollar after these record levels of debt issuance.

News:

Warren Buffett, whose Berkshire Hathaway Inc sits on $25.54 billion of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing.

In his widely read annual letter to Berkshire shareholders, the man many consider the world’s most revered investor said investors are engulfed by a “paralyzing fear” stemming from the credit crisis and falling housing and stock prices. Treasury prices have benefited as investors flocked to the perceived safety of the “triple-A” rated debt.

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With quantitative easing under way, where is M3?

December 1, 2008 by · 1 Comment
Filed under: Opinion 

Well it would be nice to see what this number would be at if they still published it?  Many other people has reconstructed data sets that try and emulate the old statistic.  From all they I have read, the M3 measure of the money supply would be in double digits.  That does not say much for inflation when the business cycle picks up again.  At the time of this writing, the Dow Jones Industrial Index lost 7.7% today alone.  

I believe people are losing confidence in the system and the information they keep being told.  We are bailing out bad institutions with good money and in turn, reducing the confidence in our currency with their bad assets which should of never been made whole.  Why do I have to accept $24,000+ in debt to people who got greedy and wanted to raise their relative advantage higher?  

Why are we saving a system that has created more wealth disparity than wealth itself?  I thought we are suppose to have life, liberty and the pursuit of happiness protected and not oppressed?  You can see it in all the currently writings by our press and government.  It is all about getting the credit (debt) flowing and not actually address the problem of deficit spending, incentification of profit over job creation & raising of living standard which is what drives consumption in the first place.  We actually encourage companies to send job overseas to make products for consumption in the U.S.  

Who are we actually benefiting in that situation, I would say the shareholders to the determent of our people.  I am not advocating stepping away from free markets with prudent regulation at all, but I am saying that we should take into effect what the costs and benefits are by focusing on consumption and not production.  We need to address the real problems and make a system that give equal opportunity to all its people.  From their a person can and will choose their path in life.

News:

With quantitative easing under way, money supply is going to become an increasingly important gauge.

Morgan Stanley notes the measure will be a key indicator of when ‘QE’ actually starts to kick in. Before adopting QE, all excess reserves created by the Fed were being hoarded by banks. Rather than increasing, the so-called money multiplier (the link between the Fed’s balance sheet and the money supply) had actually plummeted. The only other time this has happened is during the Great Depression, say Morgan Stanley. But there is reason to be optimistic.

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The World Tires of U.S. Dollar Hegemony

November 6, 2008 by · Leave a Comment
Filed under: Opinion 

Here is a nice article that explains the dramatic rise in the U.S. Dollar and the USDX currency basket.  The yen has been quite strong in the last few weeks while the carry-trade unwinds.  At the time of this writing, the USDX was at 85.88.  This is a decline from 86.32, which was the top of this last rally.  Now that presidential elections are done and we have had a 900 point drop in the DJIA, this is not a good sign but fits my prediction of the calm until the elections.  We will see more declines and that will mount more pressure on congress to do more bailouts.  The Big 3 automakers were meeting with Nancy Pelosi to beg for $50-100 billion more in emergency loans or they will go bust.   Be safe.

Commentary:

What explains the paradox of the dollar’s sharp rise in value against other currencies (except the Japanese yen) despite disproportionate U.S. exposure to the worst financial crisis since the Great Depression?

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Pimco limiting U.S. Treasuries exposure as supply builds

November 5, 2008 by · Leave a Comment
Filed under: Currency News 

Good move on their part.  With the amount of issuing that is going to take place over the next 12 months, I would not want to have too much into treasuries.  Many economist are calling the dollar, “the next bubble to burst”.   Now with President-elect Obama, he needs to get serious about creating jobs in our country.  

I would say infrastructure in our highway system, transportation (rail) and energy should be his priority in reverse order.   These type of projects are great for creating jobs.  I would also do a mix of federal programs and private programs through our bidding process will be a nice balance.  I think we are going to start seeing inflation pick up as soon as people start feeling more confident and that will be are next major crisis.  You really notice inflation when the velocity of money speeds up through economic activity.

Release:

Fund manager Pimco is limiting its Treasury holdings amid expectations the United States will ramp up issuance to pay for a slew of new programs aimed at easing the credit crisis, Chief Executive Mohamed El-Erian told Reuters late Tuesday.

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U.S. Dollar drops most since 1985 before Fed’s decision on rates

October 29, 2008 by · Leave a Comment
Filed under: Currency News 

You should not be surprised at this action in the currency markets.  With the 50-75 basis points cut coming later this afternoon, logically it should be dollar negative with the easing of credit.   We have also had some serious money printing to bailout almost every type of institution under the sun.  

Long-term, we have two distinct paths that will be taken.  We will raise interest rates and protect the dollar and suck the major excess of liquidity from the economy.  Or, we will continue easing and keeping interest rates at this historically low levels, that will lead to massive inflation down the road when the economy picks up.

News:

The dollar fell the most since 1985 against the currencies of six major U.S. trading partners as economists forecast that the Federal Reserve will cut the target lending rate by a half-percentage point today.

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