Roylat.com » Dollar http://roylat.com Commentary on a Mixed Up and Sometimes Backward World Mon, 29 Aug 2011 12:37:19 +0000 en hourly 1 http://wordpress.org/?v= The Focus Is Shifting to the Deficit – Bad News for Bonds and the Market http://roylat.com/2009/05/the-focus-is-shifting-to-the-deficit-bad-news-for-bonds-and-the-market/ http://roylat.com/2009/05/the-focus-is-shifting-to-the-deficit-bad-news-for-bonds-and-the-market/#comments Mon, 25 May 2009 14:48:35 +0000 roylat http://roylat.com/2009/05/the-focus-is-shifting-to-the-deficit-bad-news-for-bonds-and-the-market/ I’ve noticed lately many more articles commenting on the projected US deficits (which are enormous). I think that “green shoots” is about played out as a media and market focus. As the focus shifts to the questionable long-term economic prospects of the US and the problems created by the deficits, the mood on Wall Street seems likely to sour.

The focus on US deficits was given a big boost by the news that Moodys downgraded the debt

of England. Who would have thought that England, buy cytotec buy cheap amoxicillin once the financial center of the world

and still one of the largest financial buy levitra centers, would have come to this state? Even more surprising to many is the increasing perception of the possibility that US government debt will be downgraded from the world’s most secure to a lesser status. The news of Britain’s downgrade also caused a sharp fall in the price of US treasuries, because people judged that what happened Tadalis SX in England could happen here. Viagra Professional Bill Gross of PIMCO (the largest bond company in the world) said that this is not unthinkable (which means it is thinkable).

I recently posted an article on the negative for Britain of

the dominance of the financial sector there, arguing that the parallels with the US are all too great. One of the parallels is the massive deficit that both countries are incurring in trying to keep their financial sectors and the economy afloat in a world that imploded as a consequence of financial buy viagra online discount | buy cialis cialis | buy levitra online cheap excesses.

John Mauldin has an insightful, very detailed review of the magnitudes of coming US deficits, their lasix price likely consequence for interest rates and bond prices, and of his own gloomy thoughts on the implications for the future non-prosperity in the US.

Below are some selected quotes with a link to the full article.

John Mauldin at frontlinethoughts.com, 5/23/2009

A Trillion Dollars as Far as the Eye Can See

As of this week, total US debt

is $11.3 trillion and rising rapidly.

The Obama Administration buy phentermine projects that to rise another $1.85 trillion in 2009 (13% of GDP) and yet another $1.4 trillion in 2010. The Congressional online ampicillin Budget Office projects almost $10 trillion in additional debt from 2010 through 2019. Just last January the 2009 deficit was estimated at "only" $1.2 trillion. Things have gone downhill fast. …

The Global Recession Gets Worse

Let’s take a quick trip around the world. In the first quarter, the German economy fell by 14%, Japan by 15%, Mexico by 21%, and England was down almost 8%.

Global trade is simply collapsing. The chart below

is the ugliest it has ever been. Chinese exports are down 41%, Japanese exports down 38%, Germany’s down by Brand Cialis 32%, and so on. (chart courtesy of www.variantperception.com )

Online Viagra buy viagra generic online erectile dysfunction cialis />

…

European levitra brand banks are in far worse shape than their US counterparts. That is because they utilize far more leverage, on an average about 30 times leverage. How can that be, in what is supposed to be a conservative industry?

"European banks were only restricted on the basis of risk-weighted assets, unlike the US where it is the total leverage Tadalis SX ratio that matters, so most European banks bought assets that were rated by Moody’s Buy Erectile Dysfunction medications and S&P, who couldn’t rate their way out of a paper bag, and for anything that wasn’t highly rated, they bought credit default swaps or guarantees from AIG and MBIA. Because of that European banks were able to lever up a lot more than their US counterparties. Given the much higher leverage levels and general worsening of collateral values, we think that all the shoes in Europe have not dropped."

European banks have assets of about 330% of their GDP, compared to US banking assets, which are about 50%. They have over $700 billion in loans to Asian businesses (which are watching their exports collapse) and $1.3 trillion in loans to Eastern Europe, which is in a very serious recession, and so many of those loans are simply not going to be worth anything. Simply put, there is going to generic amoxil be a nee

d for massive amounts of money to bail out European banks, or we’ll watch their economies simply implode. …

Governments around the world are responding to the order Amoxil buy cheap levitra global recession by running massive deficits.

In addition to the US, the UK, Japan, Russia, Spain, and Ireland are all running deficits of over 10%.

And, as in the case of the US, these are not going to be one-time deficits. The IMF predicts that England will shrink again next year and the recovery in the US will be modest at best. The US economy is expected to grow by 0.2% (far from the Order Generic Cialis Online without Prescription optimistic projections of various US government agencies), the 16-nation eurozone will eke out a modest gain of 0.1%, and the Group of Seven (G7) leading industrial economies will, as a whole, only grow by 0.2 percent. low price levitra They project the diet pills that Japan’s economy will stagnate next buy ampicillin online year.

Where Will the viagra sale Money Come From?

And now let’ s look at what i

s bumping in my worry closet. The world is going to have to fund multiple buy levitra vardenafil trillions in debt over the next several years. Pick a number. I think $5 trillion sounds about right. $3 trillion is in the cards for the US alone, if current projections are right.

Just exactly where is amoxicillin that money going online cheap ampicillin to come from? The US trade deficit is now down to under $350 billion a ye

ar. The Fed can monetize a trillion.

Maybe. Look at the yield curve on US government where can buy viagra | buy cialis pills | levitra online debt below (Bloomberg). buy pills online with no prescription US savings are going to go up, but where is the incentive to buy ten-year debt at 3.5%? Four-year cialis online debt under 2% doesn’t do much for your savings growth. Even with monetization and buy cialis the Chinese buying our debt with the dollars we send them, that still leaves the bond market about $1.5 trillion short, give or take $100 billion.

Cialis online />

The world is deleveraging. Debt is being drawn down.

Securitization of various types of debt has seriously slowed. Banks are cutting back on lending.

Home prices are dropping all over the world. Commercial propecia Buy Zithromax Online Pharmacy No Prescription Needed generic real estate is rolling over, and banks all

over the world are exposed. "Recession turns malls into ghost towns" is the headline in today’s Wall Street Journal. Personal savings are rising and retail sales are flat to down. Unemployment is rising.

All this should be massively deflationary. buy nolvadex Interest Viagra buy viagra for sale rates should be falling or at least levaquin prescription not rising. But a funny thing is happening. In the past two months, the yield on the ten-year bond has risen by 1%. It has moved 0.38% or almost "4 big handles" in just two cheapest viagra weeks. Look at the chart below. What is happening?

Cialis Professional />

According Lasix Online to Merrill Lynch, the size of the world bond market is estimated to be approximately $67 trillion, with the shares of US, Euroland, and Japanese securities each representing less than 50 percent of this total.

(PIMCO)

England has been put on negative watch for its debt rating. Bill Gross said yesterday that it is not unthinkable that the US could lose its AAA rating. I think the bond market order online levitra is looking cheapest propecia at the mountain of debt that will have to be somehow sold buy viagra in las vegas | buy cialis we | buy levitra cheap online and wondering where such a colossal sum will come from.

Where do you find $10 trillion in the next ten years for US debt?

And that is just for US government debt. $5 trillion for new global debt in the next two years? In a deleveraged world? How much will the other countries need? What about money needed for businesses and mortgages and credit cards and so on?

If you add $10 trillion to the current $11.3 trillion (including Buy Cialis online Social Security trust funds, etc.), that totals $21 trillion in 2019. Let’s be generous and suggest that interest rates will only be an average of 5%. That would be an interest-rate expense of over $1 trillion. That buy viagra cheap online | buy cialis online 32 | generic levitra buy online is 25% of projected revenues and 20% of expected expenses.

And that assumes you have nominal growth of over 4% for the next ten years. If growth is less, tax revenues will be less. It also assumes massive tax increases from carbon credits.

…

Long before we get to 2015, let alone 2019, I think the bond markets will have called a halt to $1 trillion deficits. There will be a real crisis. The deficits will not be funded at anywhere close to an interest rate that amoxicillin will not break the budget. Taxes will get raised beyond what they were in the Clinton years.

And Obama’s budget makes some very optimistic judgments about how cheap kamagra much will be saved in medical costs, as if no one has tried to rein in medical costs before. The crisis may come much sooner if his universal health-care buy levitra drugs bill is passed as proposed without offsetting cuts somewhere else.

Watch the bond market. Rates should be going down, not up. The bond market is telling us the deficit simply can’t be financed down the road. Now, maybe a few cool heads in the Democratic Party will prevail in the US Senate and the deficits will be brought under control. (The Republicans have so far seemed as clueless as they are impotent.) We could (theoretically) run $400 billion deficits for a very long time, as GDP would be growing somewhat faster.

It would be best to run budget surpluses, but the game does not end if there are reasonable deficits. It ends diflucan Viagra Jelly with deficits that cannot be funded except by monetization. And that will tank the dollar, except against all the other countries that are monetizing their debt.

I am increasingly inclined to think that as the world comes out of its current malaise – and it will – US investors should think more globally with their investment portfolios. That is something we will explore over the coming year. But that’s enough for today.

Full Article

]]> http://roylat.com/2009/05/the-focus-is-shifting-to-the-deficit-bad-news-for-bonds-and-the-market/feed/ 0 Soros: Obama "Lost a Great Opportunity" to Fix the Banks http://roylat.com/2009/04/soros-obama-lost-a-great-opportunity-to-fix-the-banks/ http://roylat.com/2009/04/soros-obama-lost-a-great-opportunity-to-fix-the-banks/#comments Thu, 09 Apr 2009 14:52:57 +0000 roylat http://roylat.com/2009/04/soros-obama-lost-a-great-opportunity-to-fix-the-banks/ image Tech Ticker has posted a series of video interviews with George Soros, a fabulously successful speculator and a big investor in liberal/ progressive causes around the world.

One in this wide-ranging, very worthwhile series deals with the Administration’s handling of the banking crisis:

George Soros was an early and avid supporter of Barack Obama, so it’s probably no surprise he gives the President high marks for his handling of international affairs, the stimulus package, the budget (the famed financier calls it "very courageous") and for "stabilizing" the financial crisis.

But President Obama "lost levitra brand name a great opportunity" by not taking a more radical approach in dealing with the banks, Soros says.

"There’s too generic Online Pharmacy No Prescription Needed female viagra much continuity with the bumbling and mishandling by the previous Cialis Professional administration. Viagra order online levitra for sale Not enough discontinuity."

Buy cheap Levaquin

Specifically, Buy Erectile Dysfunction medications Soros wanted Obama to "come out of the gate with a well considered plan" to recapitalize the banks, rather than continuing with the TARP and related bailouts.

But the President may have been hampered by his desire to create consensus, Soros says.

"The nature of far from equilibrium situations is that public understanding is always lagging behind events.

If buy viagra online discount | buy cialis cialis | buy levitra online cheap you’re online pharmacy levitra guided by desire to have consensus, you’ll always be a little bit slow."

phentermine without prescription

Mr. Soros focuses less buy cheap viagra than I on the inequity of taxpayers bailing out bank investors.

His concern is more on the ineffectiveness of propping up Zombie banks, instead of forcing recapitalization.

amoxicillin online He is not, however, any happier than I at the lost opportunity.

Below ampicillin 424 buy viagra | where to buy cialis without prescription | order online levitra buy are links to all of the interviews, with the last in the series listed first:

]]> http://roylat.com/2009/04/soros-obama-lost-a-great-opportunity-to-fix-the-banks/feed/ 0 Brad Stetser – Why the Dollar Has Been Rising http://roylat.com/2009/03/brad-stetser-why-the-dollar-has-been-rising/ http://roylat.com/2009/03/brad-stetser-why-the-dollar-has-been-rising/#comments Tue, 10 Mar 2009 15:01:40 +0000 roylat http://roylat.com/2009/03/brad-stetser-why-the-dollar-has-been-rising/ If you are like me, you wonder why the dollar

has Buy cheap Levaquin been rising despite the terrible shape of the U.S. economy. The most common explanation is that it reflects a "flight to quality," with the U.S. still considered the safest haven in the current storm.  online buy Ampicillin Viagra”>Brand Viagra If demand buy weight loss acomplia cialis brand is driving up the dollar, it should be reflected in excess inflows of dollars

to the U.S.

Brad Stetser, a thoughtful economist with Buy Wellbutrin SR Online Pharmacy No Prescription Needed the Council on Levitra sildenafil citrate | buy cialis daily | buy buy cheap cheap levitra levitra Foreign Rel ation, is

a speci

alist on international capital flows. He has traced the recent movements of funds in and out of dollars.

It paints an interesting picture.

What it says for the future of the dollar is, as usual, open to dispute, as the comments on amoxicillin online propecia amoxil target=”_blank”>his article show.

How buy genuine viagra online | buy cialis overnight shipping | buy levitra cheap online Buy Viagra, Buy Cialis, Buy Levitra Without Prescription a US financial crises rebounded to benefit the dollar: three pictures

Posted on Wednesday, March 4th, 2009

By bsetser

How exactly can a financial crisis that started in the US — and that has viagra drugs online buy cialis fast shipping hit the US hard — be good for the dollar

?

Part of it is that other countries are now in worse shape that the US; what started as a US crisis turned into a global crisis. Part of it is that a fall in the price of oil is good for the US (lower buy ampicilin online oil import bill) and seemingly good for the dollar.

And part of it is that Cheap Propecia — judging from the TIC data — Americans are selling their foreign investments in “risky” assets

faster than foreigners are selling their investments generic lasix in risky US assets.

The huge surge in demand for T-bills from central banks and private investors

alike online pharmacy levitra hasn’t hurt either.

The evidence? To start, there is no real sign that private demand for US corporate bonds has picked up.

There was a blip up in the December TIC data.

But a rolling 3m sum — a measure that smooths out a bit of the monthly volatility — suggests that overall demand for US corporate bonds remains subdued.

buy cialis overseas src=”http://blogs.cfr.org/setser/files/2009/03/dec-tic-2.png” width=”547″ />

Moreover, wha t ma

tters Viagra online for the dollar is foreign demand for US assets relative levitra brand name to US demand for foreign buy amoxil online assets. purchase viagra buy cytotec online Foreign demand for US corporate bonds and equities remains very weak. Foreigners aren’t therefore providing the flows needed to sustain the dollar (and the US current account deficit) by buying risky US assets. But that doesn’t matter so long as Americans are selling their foreign portfolio.

Over the last three months buy cheap amoxicillin of data (October to December) net sales [red line] have generated a flow of close to $100 billion dollars.

kamagra to buy amoxil online width=”547″ />

And then there is global demand for treasury bills. That soared in propecia the crisis. buy levitra online Tadacip cialis Call it a dollar shortage among private investors.

buy Amoxil online Or call it a flight by central banks away from anything that hints of credit risk, as Agency sales offset some of the surge in central bank purchases of Treasury bills. But the graph still speaks for itself.

diflucan buy height=”374″ alt=”" src=”http://blogs.cfr.org/setser/files/2009/03/dec-tic-4.png” width=”547″ Viagra Buy Generic Viagra online deals generic levitra />

buy cialis cheap

The real question is how long cheap online nolvadex this Silagra pattern can persist. The last TIC data point comes from December — and we are now in March, so the pattern could have changed over

the past couple of months.

The dollar’s ongoing strength though suggests that there is an underlying supporting flow, and the market’s ongoing distress suggest it hasn’t come from a surge in foreign demand for risky US assets. Setting aside ongoing buy pills online without prescription demand for Treasuries from central banks (the Fed’s buy amoxil online Gold”>Kamagra Gold custodial holdings have continued to rise) and dollar viagra online sale liquidity-starved buy cialis we investors globally, my guess is that global capital flows are still contracting. They just seem to be contracting in a dollar positive way …

What stands out for me is that foreign purchases of T-bills have been the dominant where to buy cialis inflow factor. This seems very much to reflect the "flight to quality." So long as the global economic crisis continues to generate fear and uncertainty, this inflow may well Silagra continue. buy levitra online cheap buy cheap ampicillin However, the last chart shows that this is an abnormal level of inflow, and at some point it will diminish and may well reverse — with corresponding buy cheap viagra Buy Cialis effects on the dollar.

]]> http://roylat.com/2009/03/brad-stetser-why-the-dollar-has-been-rising/feed/ 0 Marc Faber’s Current Outlook — "In Gold I Trust, But … .." http://roylat.com/2009/03/marc-fabers-current-outlook-in-gold-i-trust-but/ http://roylat.com/2009/03/marc-fabers-current-outlook-in-gold-i-trust-but/#comments Mon, 02 Mar 2009 00:40:49 +0000 roylat http://roylat.com/2009/03/marc-fabers-current-outlook-in-gold-i-trust-but/ For those who are impressed by Marc Faber’s record of being right much more often than wrong, his current outlook will be eagerly received.

As usual, his views run contrary to the conventional buy viagra pill wisdom, and in some instances even contrary to some of his own recent views — especially with respect to the present desirability viagra online sale of investing in gold.

To say that he has switched from being a stock market Levitra bear to being a bull would be inaccurate, but it is fair to say that he now believes the long-term buy Buy Viagra, Buy Cialis, Buy Levitra Without Prescription cialis internet upside potentials outweigh the downside risks.

Where he is bearish is on the dollar and U.S. Tre asuries, both of which he continues to believe will be long-term losers

as a consequence of the unrestrained monetary policies

of the Federal Reserve. Like all intelligent prognosticators,  he heavily qualifies his thoughts and acknowledges that they may easily wrong in the short run.

Nevertheless, his views are levitra online based on careful weighing of evidence and long experience.   

Be aware that the excerpts

reprinted here give only a spare glimpse of the 16 pages of his newsletter. Those who see the wisdom in the excerpts cialis generic vs brand and who manage their own investments will find his newsletter a small price for big insight.

levitra brand

Excerpts from his current newsletter, order antibiotics online target=”_blank”>available by subscription, are reprinted by permission.

References to figures in his newsletter have been omitted without ellipses in the excerpts.

In Gold I Trust! But With Some Reservations…..
Marc Faber
March 1, 2009
…

To Kamagra Gold put it bluntly, the global economy is in deep trouble!

An
unprecedented wealth contraction post Second World War has occurred,
and industrial production as well buy cialis overseas href=”http://buynolvadexcheap.com “>cheap online nolvadex as capacity utilization rates, new orders,
exports, and incomes are contracting at an unprecedented rate.Now, buy cytotec I am not trying to downplay the economic downturn. But since I
travel extensively all over the world propecia online I am actually astonished that, despite
levitra website />horrible economic buy viagra online pharmacy | buy cialis online overnight | levitra vardenafil buy xanax SX”>Tadalis SX statistics and despite business being down everywhere
(however, exceptions where to buy cialis exist such as sales of computer games, guns,
bullets, private label brands, gold coins, safes, and of course – as can be
expected – the expansion of the government), economic activity is still at
a relatively high level.

Maybe people live in denial and do not yet buy cialis
recognize how much more the economy is likely to deteriorate or they
take a fatalistic view by thinking about how much money they lost in
asset markets and, therefore, decide to have a good time either traveling ampicillin buy
on holidays or going out at night. lasix purchase But if this is a depression, then I have to
say that it is a depression at a relatively high level kamagra of prosperity.
Personally, I think the global economy will deteriorate far more and that
Topamax Online jelly”>Kamagra jelly />we have, so far, only seen the appetizer of the great economic Amoxil buy cheap
contraction.  [Underline added. Bold in original.]

My take is that Online Cialis buy global non-government sector GDP has already
contracted by about 10% from its 2007 peak and that it will contract by
another 10% to 20% in real terms.

I am aware that official statistics by
governments do not support this observation, but asset markets seem to
confirm the magnitude of the economic contraction…

[As] as far as I am concerned, the CRB [commodity] Index

suggests that
we are in for a terrific cialis discount economic slump. This index is in nominal terms
around 10% above the 1999 and 2001 lows but in real terms below these
lows (I should add that the 1999 and Buy Brand Cialis Online Pharmacy No Prescription Needed 2001 lows occurred after a viagra drugs online 20 years
bear market – see Figure 3). The point is simply that some asset markets
may already have discounted much of the coming slump…

I am fully aware that the majority
of investors now feel that amoxicillin amoxil there are no good news on the horizon and that,
therefore, another sell- off to new lows is in the cards.

However, the
renewed weakness in major indices may have obscured the fact that some
stocks and even indices had major rallies since the November lows…

I have sympathy with Alan Newman, the editor of Cross
Currents (www.cross-currents.net), viagra levaquin Cialis online prescription generic online who wrote a few days ago that, “our
technical buy cialis online with a prescription work reveals a sold out stock market. Those looking for a
capitulation phase as a catalyst to a reversal are not likely to get
one. There can’t be a capitulation when investors are already out of the
market…

Now, I have no idea whether by year-end 2009 stock markets will be
higher than they are today or even lower.

However, I want our readers to
recall well what sentiment was like in the summer and fall of 2007 when
equities peaked out. Just about everybody was widely optimistic about the
global economy, the BRICS, synchronized growth forever, and
decoupling of emerging economies in case of a US recession. In addition,
nobody forecasted a 50% drop in global equity prices (except some
pundits who had been forecasting this event since 1987). Now, 15 months
after the October 2007 peak and with stock markets down 50% or more
from their highs in a very brief period of time, everybody is extremely
negative about “everything.”…

But the point is this: The 2007 – 2009 US bear market has been
unprecedented post Second World War in terms of its downside
momentum and its brevity.  Not surprisingly
has the stock market’s extreme collapse – against all expectation – brought
about bearish sentiment extremes, which in the past were usually
associated with temporary rebounds or often with major market lows…

buy cialis fast shipping

Still, I wish to clarify my position very clearly: I am extremely
negative about the global economy and financial buy levitra markets in real terms. I
doubt buy cialis pills online we shall see global peak economic activity and growth such as we
had between 2004 and 2007 for a very long time… [Emphasis in original]

[The} more I think about current condition, the more depressed I become.
Amidst a global slump I believe that we are moving toward high inflation
(a further depreciation in paper money’s purchasing power), evil fascism,
and cheap buy ampicillin cheap amoxil vicious military confrontations. In theory, gold would be the best
asset to own in this condition… However,I have some reservations…

For one, gold has already experienced a powerful bull market Brand buy cheap amoxicillin Viagra between
2001 and the present. As a result, gold has become relatively expensive
compared to equities and the CRB Index.

rimonabant I am not suggesting that this
outperformance of buy amoxil gold compared to other commodities and equities
cannot continue. In fact, I believe that in time one Dow Jones will buy
less than one ounce of gold. However, near term, gold would seem to be
both over-bought against the Dow Jones and online buy Ampicillin propecia buy the CRB Index.

…

I, therefore, expect that at some point the Fed’s money printing will be
effective buy levitra online cheap in lifting real estate and equity prices, Brand Viagra but at the cost of
weakening government bonds and the US dollar…

All I am suggesting is that investors should be prepared or begin to
diversify their currency exposure for cheap diflucan the day US “money printing” Buy Cialis will
lift asset prices and weaken the US dollar.

© Copyright 2009 by Marc Faber Limited – All Buy Generic Viagra rights reserved. Reprinted by permission.

]]> http://roylat.com/2009/03/marc-fabers-current-outlook-in-gold-i-trust-but/feed/ 1