A little perspective please - Internal Polls in the US showed that Obama’s Honeymoon is Over

So with President Obama’s popularity waning, I thought I would take this opportunity to correlate the issues facing America right now and its affect on the all mighty Dollar.

As Forex online traders (and offline) we live and die, profit or lose, based on the Dollar, so this fine Tuesday morning in the latter part of June, 2009 is a great opportunity to reiterate that you cannot believe just words and that real knowledge truly is power in our business.

Yesterday internal polls in the US showed that Obama’s honeymoon is over. His social policies are unpopular and receiving criticism even amongst his own political party.

In his first six months as president of the largest economy in the world, he has virtually nationalized the banking sector, the auto industry and is now trying very hard to do the same to the healthcare industry, as I mentioned yesterday.

His Treasury secretary, Timothy Geithner, has been trolling the world giving speeches meant to boost the confidence that the investing world has in the Dollar’s value – and has been laughed at during these speeches in China, and most recently in Italy this past weekend.

North Korea is warmongering, Iran is blaming the US for their political unrest, Al Qaeda is threatening to use Pakistan’s nuclear arsenal on the US (should they get hold of it), Russia and China are openly calling for a new reserve currency on a daily basis and Brazil has removed the dollar as the primary currency used in trade with other countries. et, all the while we read reports that the economy in the US is rebounding and that things are getting better – well we need to look at these numbers to see just how good it is getting.

Monday, the US announced that the numbers of people on welfare have risen at the fastest pace since the recession began and are now at levels unseen since Bill Clinton’s presidency. Last Thursday they said that unemployment was at its highest rate in the US in over 30 years – hitting over 10% in 1/5th of the 50 states that make up the US and that interest rates are at the highest levels in close to a decade.

Let’s focus on these rates for a minute and how important they are – the interest rates set mortgage rates and personal loan rates – meaning, people looking to buy big have to pay more – and they are not buying and this is causing a trickle down effect.

Last week, the US government auctioned off 160 Billion Dollars worth of Treasury Bonds and Notes, and for the most part it was a success – even with the highest rates in years. But look closer, the record debt sale that went on saw the US Federal Reserve (a.k.a. THE central bank) as the biggest customer for these bonds.

This means simply that the US bought their own debt and is paying a larger price for it as well. And it is specifically this information which have brought Obama’s numbers down sharply – it’s one thing to preach fiscal discipline and take over industry after industry in the guise of showing them fiscal discipline – yet it is completely another thing to put into practice something entirely different.

And this is where the US is right now - they are not practicing what they preach and as we saw in China, Italy, France and Germany, the US is being laughed at when they tell people that an investment in the US is a good investment right now.

We might hear the pundits telling us that everything is great in the US of A, but looking at it logically, the use of the Dollar as a long term investment tool is not looking that smart anymore.

We have seen on the Forex and watched online as the dollar has dipped and has lost value – the DAC index is off nearly 30% from its highs – this says volumes about the Dollar – no matter how much they try to show us that all is ok in the USA.

Be careful – and if you were like me, watch down under – their Dollars are looking pretty good in comparison.

Livin' La Vida Loca Down Under

I have spent so much time talking about the US and Europe lately, that I have almost neglected my favorite currency, the Aussie. So I will try to avoid ranking on Obama and Brown and Trichet, while I put a plug in for the down under dollar and go back to my love relationship with the potential this currency has.

The Australian employment report that came out overnight brought about another rise in Online Forex AUD Trading, almost across the board (The Yen had a strong day too). While the key change in employment payrolls was much better than most Forex Online traders expected at almost unchanged levels, the internal numbers could spell trouble.

The numbers showed full time employment falling sharply and part-time employment rising sharply, which is normal in a recession when most of the world’s industrialized nations are dealing with a 10% jobless rate. However, you do not want this to continue long term.

As well, the unemployment rate surged to 5.7%, still far below the global average – but nonetheless worrisome as the number keeps going up. This number matches the highest level seen in Aussieland since late 2003.

But here is why the currency is strong: The AUD continues to find strength as bonds have not managed to rally and equities stormed back into the close yesterday in the US after a steep intra-session sell-off.

The background theme for Aussie strength is the idea that the global recovery, led by China, is underway. I read an article in the Wall Street Journal just this morning about the levels at which the Chinese are buying commodities, which is bringing about serious questions of its sustainability.

If this trend slows in the near future, which I do not think it will (and I will explain this below), the Aussie could be in for a very sharp adjustment lower across the board. Chinese trade numbers are still off sharply for both imports and exports on a year over year basis.

Now, while the vaulted WSJ might believe this trend will burst eventually, sooner rather than later as they said, I am finding it difficult to swallow. Here is why: The Chinese have been consuming commodities at an alarming pace for their building, this is how they are stimulating their economy. But back in March I wrote about how the Chinese are also buying up commodities using US Dollar (Yes, I know I promised I but cannot resist mentioning the Greenbuck) while at the same time making public calls for a change in the global reserve standard.

Essentially, China is swapping Dollars for tangible items – and while the WSJ uses the import and export figures to assume that their consumption has to end – I am looking at their 2 Trillion Dollar reserves and saying, they are swapping paper for copper and oil and gold and iron because right now, there is not option other than the dollar – except real stuff.

So have no fear, the Aussie will be here – trust me on this.

Is the Obama’s America a Free and Fair America?

The problem I have with what US President Barack Obama is doing with the “free market” US, is that he is making it impossible to actually be a free and fair market. By “investing” in 60% of GM and 70% of Chrysler, it allows for the government to incentivize the purchase of these vehicles over others.

Take for example the scenario in which a CEO wants to buy 100 new cars for a corporate fleet, and he is looking at Ford as his choice, the US government, in order to ensure that their investments succeed, can offer tax rebates and incentives on the GM and Chrysler lines that would not be available to Ford - the only US automaker that stands on its own.

I bring this up because over the weekend I read a story in the financial times about how protectionist ideologies are beginning to take hold in much of the world. The article focused specifically on Canada, and as Forex online traders know, the Canadian economy lives and dies by the price of commodities.

In response to a strong “Buy American” campaign south of the Canadian border, the Canadians are implementing their own buy Canadian campaign - from everything from Manitoban Wheat to Edmonton Oil. Canada, which has a small stake in GM and Chrysler, is being left out of the loop when it comes to the car sales. There is talk of plant closings and supplier chain closings associated with the bankruptcies of these two carmakers, and the first plants to close will seemingly be the ones in Canada – adding more Canadians to the unemployment rosters while sparing the US of these cuts.

Is this fair? No. And it goes back to my original thought – is the Obama’s America a free and fair America? The signs on the wall are clear, the answer is no. It’s one thing to meet and greet your counterparts from other countries and smile and say the right things like protectionist measures won’t work – yet, it’s completely another thing to put that ideology into practice during the worst economic downturn since the great depression.

Obama’s America is no different from that of the Smoot-Hawley America of the 1930’s - where some senators implemented measures designed to keep Americans working at the expense of their trading partners. This policy was the reason why the depression lasted so long. And if this is the case now, as I believe it is – we are in for a long and painful road ahead.

Forex online traders need not worry though, because unlike stocks – there is always one currency going up when another is falling.

Melting General Motors - Ask a Stupid Question….

So General Motors is going bankrupt after the US took a 70% stake in the company, China is concerned about the amount of money that the US is spending on its debt, North Korea is distracting the global financial community with its nuclear ambitions and the Eurozone economy is slowly creeping downward after all is said and done. What now? Well, a report in yesterdays Wall Street Journal reported that the US Treasury and Federal Reserve is puzzled over the spike in rates on the open market of their debt instruments.

I ask very cautiously, what is so hard to understand? The dilemma that they have is figuring out if the spike means there is less of a need for the quantitative easing that the US has made a policy of due to increased demand (with demand comes higher rates) or whether the market is spooked by the mounting debt the US is incurring during this downturn. I have a simple answer, and I am by no means an accredited economist. The latter is the correct answer and it is obvious.

The fact that in the last round of 10 year T-note auctions the US bought 30% of them, or should I say the Federal Reserve “invested” non-existent money in debt issued by the US Treasury should be a clear sign of what is going on. Aside from the fact that by bidding on their own debt they increase demand, falsely at that, the idea that an entity issues debt and then buys it themselves is alarming.

What else is new? President Obama had an interview with C-Span, the publicly owned network which covers the US congress and senate 24/7 and was asked if he was concerned that we will run out of money with all of these stimulus measures costing so much. His answer did more to spook the markets than anything else, and went largely unreported by the mainstream (liberal) media.

Obama said “we are already out of money.” A president admitting that can do much for causing an exodus by investors. Perhaps the Fed and Treasury need to look above, to the man in the big white house, and then re-ask themselves the question instead of acting so perplexed at the cause of rising interest rates.

Do you think the 70’s were bad when it came to inflation? Just watch…..

China has already Canceled America's Credit Card

The Chinese are making moves to dismantle the Dollars standing, in an article in the Wall Street Journal this weekend, it was revealed that “China has already canceled America's credit card” as a US senator put it.

As China is the leader in US debt holdings, 800 Billion Dollars worth of bonds and another 2 Trillion in Treasury Notes and Bills, it seems as if China’s concern over rampant US spending has taken its toll on the way China conducts business. Last month I told you in Forex Online land that China was beginning to amass large reserves of Copper and Aluminum. With a building sector down to near zero production right now, I am sure they are not stockpiling these metals for the future. They are converting their cold hard American debt to tangible assets.

The problem has gotten so bad that the US Federal Reserve has been compensating for the lack of interest in Treasury Bonds, Bills and Notes, by buying it themselves. It’s not even paying your MasterCard with your Visa, its paying one MasterCard with another MasterCard and it is going to get the US in trouble.

Anyway, for the week ahead my Forex trading friends, look for the European Central Bank meeting – nothing exciting will come of it as nothing ever does, but it has been hyped for some time. Also, look for Thursday when the US Treasury releases the results of the over talked about stress tests on banks . Tomorrow I will talk about why the US messed up by having them in the first place. Also, watch the markets flip flop as President Obama announces his new plan for Wall Street – I guarantee you they won’t like it.

Trade well people.

Stress Test Results in Adding Just More Stress

Rumor has it that US Regulators have told the two largest US Banks, Citgroup and Bank of America, that the results of their "stress test" show that will require further capitalization. What this means in simple terms is that the banks are not ok - they have so much debt, bad debt at that, and they are in need of more money to help them stay afloat.

We all knew that Citigroup was a zombie bank, a bank that is dead, bankrupt, kaput, but is being sustained by the generosity of the US taxpayer (with the help of the Chinese treasury Bill holders, of course). But after the results of Treasury Secretary Tim Geithner's test on bank stability - aka The Stress Test - we are witnessing the fact that the US has no intention of following through on their plan to fix the banking sector. It was said that the results will determine the fate of the banks - if they show that they are in fact needy of further capitalization, the US would either systematically disassemble the banks in an orderly manner, or let them fail outright.

The problem is, when the plan was announced, if you remember, it was amidst much criticism that the US did not really have a plan - that they were being too soft on banks with severe problems for fear that their bankruptcy would cause a panic. So Geithner came out with the stress test idea and said that banks that do not pass, will be reorganized (A nice way of saying taken over). But now the outcome has changed - and it seems that the US banks that are at the heart of this whole credit mess will be getting more money to run their failing operations. It looks like the whole plan was to get these results out AFTER President Obama's first 100 days, the yardstick that sets the tone for the presidency.

Is it not ironic that these results were planned for Obama's 101st day?

Wednesday looks like it is shaping up to be a tough one for the US Dollar as risk appetite returns for a bit. I call it profit taking - it will be short lived.

Be Afraid – The end is near

The Bank of England is screaming at the British Prime Minister to cease his policy of spending. In fact, they have gotten so vocal for an organization that usually conducts its business behind closed doors and through confidential memos, that every newspaper in England – and most across the world, featured this story on the cover. The Times of London has a picture of Mervyn King, the BOE governor with a headline that reads “No more stimulus” – while online versions of the story have titles – “Stop, we have no more money”. It is interesting to see that the fiscal policy of England is beginning to rattle cages over there. It is worthwhile to note that the Prime Minister, Gordon Brown, is on a whirlwind tour in advance of next weeks G20 summit, trying to garner support for his and US President Obama’s “global stimulus” – and in his home his central bank is saying they cannot even afford it.

Oh, the similarities between the two – US and England – spending silly in the name of recovery while the debt goes higher and higher. There is one difference though, no one is screaming to Obama to stop. IN fact, Treasury Secretary Timothy Geithner just blew another Trillion yesterday and asked the US Congress for powers to seize “troubled companies” in the non-financial sector as well. Sounds more like Soviet style economics to me – but it all came in the name of being able to address an issue before it becomes one. So essentially, a business can be taken over by the US Treasury and its assets sold to other companies if the Treasury secretary (in coordination with the President and Federal Reserve) decides so. In my day we used to have something called a bankruptcy procedure – which required that a company who was in trouble go through the legal system to do the same. Secretary Geithner plan seems to do away with that process – I am not sure that is legal in the US, but have no fear, Congress will pass a retroactive law making it legal.

The world is getting worse – and China and Russia as I spoke about yesterday calling for the world to adopt a global currency in lieu of the dollar just the tip of the iceberg. The UN is doing the same. And while there has been these ideas before, we are entering a period of fear driving decisions, where the irrational becomes the rational in order to save us all from economic disaster. I fear that the UN will get their way now – posing this idea which china and Russia now back as a solution to a problem. I fear a global currency system – as it will destroy the capitalism that has made so many wealthy – and allowed for free markets such as the Forex. IT will kill the Online Forex and commodity industries and turn us all into socialist sheep, following instead of leading and thriving. Be afraid – be very, very afraid.

President Obama signed PORK!

The problem with the world is not that there is an economic crisis, it is that the politicians who are “trying” to deal with it are just making things worse. When US President Obama was candidate Obama, he promised the US people that he would eliminate excess spending, known to all as Pork. Well, after three enormous bailout bills filled with this Pork passed through the US congress, President Obama signed them – saying things arrogantly like “it’s a stimulus bill, what do think we do in a stimulus bill, spend” to justify the frivolous dollars that were spent. Yet yesterday was the clearest sign that this young, charming, good-looking man has no experience as CEO and limited experience in politics. Prior to signing a new 410 Billion Dollar spending bill filled with 8500+ frivolous spending items (pork), he lectured the press about how earmarks (pork) are bad and how it was shameful that congress needed to continue this policy of adding items to a budget that have no place in a budget in times of a crisis the magnitude of which the world is facing.

He then went into a closed room and signed the bill – with no cameras present.

Forex traders took it out on the dollar yesterday as people are starting to worry about where all this money is coming from. The US printing presses are on overdrive trying to make enough money to meet the demands of this Presidency which is already responsible for close to three trillion dollars of spending – more than the GDP of most major countries – and he is not even past his first 100 days.

Sure, all this spending might help the economy in the short term – how can an infusion of so much money not start an economy. But he is sealing the fate of the global economy for the next ten years as interest rates will soar and taxes will be raised in an attempt to pay for all this. Forex brokers have it right, sell the dollar because inflation will kick in and then the devaluation will begin. Get out while you can – before the carnage on Forex street really begins.

Look for Online Forex traders and blogs to begin trying to find a new favorite. Perhaps the Australian Dollar as I have been touting for months. It has done quite well – the yields are high and the potential for growth is great. Keep watching the Aussie – and don’t say I did not tell you so.

Keep an eye out for the Kiwi and Aussie as the tides start turning on the Dollar

Monday saw US stocks fall the their lowest level in nearly 11 years after early indications showed that the markets would respond well to the US’s purchase of close to 40% of Citigroup. Monday also saw the Dollar losing steam against many currencies as the brokers trading the USD decided to take their chances somewhere else. President Obama has the economic world puzzled, on one hand he is spending like there is no tomorrow (by telling his citizens that if he does not spend like this there will be no tomorrow) and on the other hand he is promising to cut the deficit in half within two years.



This is one reason I always stress to people to not only listen to what someone is saying, but hear it too – President Obama’s actual words when announcing this yesterday was “I will work to reduce the deficit I inherited by half…” – the key part of that sentence is “I inherited”. While the US runs up a three Trillion Dollar debt in Obama’s first month, he is talking about lowering the debt he came into office with, which was 1 Trillion Dollars. So if you put the numbers together, he is looking to shave 500 Billion off of a 4 Trillion Dollar debt – which leaves 3.5 Trillion Dollars left owed to whoever buys up the bonds and treasury bills. 3.5 Trillion is larger than the entire fiscal budget for the whole of South America to put this number into perspective. It is enormous and it is this ultimate number that has many people scared.



The US Secretary of State was in China last week practically begging China to continue buying their debt – ironic that the capitalistic US is asking the communist China to basically fund all the activity that the communists have been preaching against since Lennon. I think we can begin to watch the Forex Online traders and investors’ shying away from the Greenback in the near future – as big spending and higher taxes to offset the big spending does not work well and from all indications, this is what Obama will be doing.



As for Europe, they are in for a rough ride. The Brokers trading the Euro woke up yesterday to news that Fitch (another feared rating company) is warning that Austria’s ‘AAA’ rating is in jeopardy – now even I know that this is not good – Austria was typically a well-to-do nation. Also, there is speculation that some of Spain’s largest banks might be insolvent – and the financial misery in Europe is worse than a Norwegian Winter. Forex Online traders were not too happy that the EU leaders met in Germany to talk about a game plan for the April G20 meeting – and not the pending doom that is facing Europe or a possible solution.



I still believe there is money to made down under – keep an eye out for the Kiwi and Aussie as the tides start turning on the Dollar.