Via The Big Picture, Art Cashin talks about something that a bunch of us have been talking about for months - the dollar has become the counterweight to everything else …
There is speculation among brokers that a “dollar carry trade” may be evolving. For decades, arbitrageurs would borrow money in Tokyo at zero percent and short the yen. They would then take the “free money” and buy commodities, crude, high yielding bonds and even stocks. With U.S. rates held at zero for months, traders wonder if an American version of the “carry trade” is beginning to evolve.
Whatever the source, there is no denying the influence of dollar movements across asset classes. It is clearest against oil and commodities but quite evident versus stocks.
Art Cashin is one of two (maybe three) worth watching on the Wall Street propaganda chucklefest that is CNBC. If he’s writing about this, you can bet your bottom dollar … or yen … that it’s a topic of discussion in the halls of power. My question is: “What comes next?” I mean, the Dollar Carry Trade can’t last forever , can it?
I suspect that the anti-dollar trade is becoming crowded now that the dollar has broken important resistance. When the dollar bounces, we’ll have to see what the dollar shorts do - will they run for the exits, or use it as an opportunity to short the dollar even more?
I’m writing on this topic for this week’s UncommonWisdomDaily.com column.
In overnight trading, both the Australian All Ordinaries and Australia’s gold mining index both closed down. This has been a good (not great) indicator of what will happen in the U.S. markets. Be careful out there.
OTHER STUFF I’M READING
Over at Econbrowser.com, James tells us that despite the improving auto sales numbers, we’re probably still screwed. He has some good charts as well.
Speaking of charts, Jesse had some good imagery on the hurricane season yesterday.
Hat-tip The Automatic Earth: This is something else I’ve been talking about. The next big wave of “offshoring” jobs is just beginning …
Offshoring by US companies surges
US companies are increasingly turning to offshoring their functions to achieve cost savings, and few plan to bring those jobs back to the United States, the Conference Board said Monday. The number of US companies with a corporate offshoring strategy in place more than doubled in the past three years, according to the fifth annual report on offshoring trends, published by Duke University in collaboration with the Conference Board.
Of the companies surveyed, 53 per cent had a corporate offshoring strategy in place, up from 22 per cent in 2005, said the Conference Board, a nonprofit business research organization. “Sixty per cent of companies that had already offshored say they have aggressive plans to expand existing activities, and very few plan to relocate activities back to the United States,” it said.
Unless we adopt a mercantilist policy (like China has), we can expect to U.S. jobs flee across our borders, probably lost forever.
By the way, the Automatic Earth has some of the most gorgeous pictures on the web.
SEC to Ban ‘Flash Trades’ of Stocks That Give Brokers Edge, Schumer Says
The U.S. Securities and Exchange Commission will seek to ban flash trades that give some brokerages an advance look at orders, Senator Charles Schumer said, citing a conversation with SEC Chairman Mary Schapiro. Schapiro assured Schumer in a phone call yesterday that the agency plans to ban the practice, according to a statement from his office. In a separate release, Schapiro said she has asked her staff to draft rules that “quickly eliminate the inequity” that flash orders cause.
“It’s preferencing one group over another, and that’s not the way markets should work,” said Michael Panzner, author of “The New Laws of the Stock Market Jungle” who once traded for George Soros’s hedge fund. “It certainly on its face seems unfair and up until now was against the spirit, now perhaps against the actual rules, of fair play.”
XX Sean’s note - this will go some way (not all the way) toward restoring investor faith in a system that is obviously broken.
We all take turns kicking the Washington Post - a seriously broken news organization - but they still manage, now and then, to serve up excellent reporting: For Many Americans, Nowhere to Go but Down
Related Posts
- The Dollar and Oil (11/30/09)
- The Dollar’s Long Kiss Goodnight (08/21/09)
- Bullish Dollar has Stocks and Commodities on the Run (06/15/09)
- Great Video on Rise in Gold & Decline in Dollar (10/01/09)
- Tuesday — Question Time on Gold and the Dollar (08/18/09)
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