Wednesday, October 31, 2007

What's The Market Telling Us?

Today oil is up over $3 a barrel, the largest single day move in a long time. And, Newmont Mining, my favorite gold proxy is up nearly 10%. This on a day when the Federal Reserve is set to announce actions to affect the environment unfolding before us. Is this massive speculation tied to the dollar or otherwise? Or is it just something to be expected? Do we know the source of all investors pushing assets in global markets with the seamy world of unregulated capital? Could it even be money from sovereign funds attempting to destabilize the U.S.? Is it simply the market telling Bernanke to think before he acts? It could be many issues or none of the issues.

Ironically, Bloomberg had a timely video interview with Robert "beefy dollar" Rubin as I have called him in the past. I am not shy about extolling my admiration for someone I believe is one of the most brilliant people of integrity in the world today. Now, Hank Paulson might be a capable CEO and Treasury Secretary but we should listen when someone like Robert Rubin has something to say. As an aside, there is an article from Global Finance written over a decade ago that asks if Rubin is the greatest Secretary of the Treasury since Hamilton. It's an interesting read.

Regardless of short term policy or global dynamics, I believe we might be witnessing a massive speculative push against the dollar just as we have seen massive speculation in many markets this cycle. This happened to the dollar a quarter century ago as well so it is not unprecedented. It isn't helped by a "do nothing but give lip service" to a strong dollar policy by nearly every politician in Washington.

Regardless of what politicians decide to do or not do, I don't expect the dollar to break but it appears nearly everyone else does. It's interesting to note that one of the few people whom I respect on Wall Street, Marc Faber, has started espousing this view as well. (Although I respectfully disagree with him on many conclusions he is drawing otherwise. We shall see.) I do expect the dollar to strengthen comparative to other currencies as many macro events unfold. There is nothing I have seen to change that perspective. Now, given I don't stare at the dollar every day, that could happen tomorrow or next month or the month thereafter. My position is driven more by fundamentals than day to day gyrations.
posted by TimingLogic at 1:08 PM

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