Now Iran is scheduled to do the same by March of 2006, set up a Tehran Oil exchange where their oil will be sold ONLY in Euro's, but as well ANY nation could use exchange to sell their oil as well!
SHOULD this come about it would "displace" the US dollar as reserve currency. Now oil purchased, is paid for in US Dollars, of which need to be purchased first from the other currency. WHAT if that was reversed? Where the US Dollar had to be sold, converted into Euro's for oil?
If this would cause a weakening in the US dollar, wouldn't other world banks begin to worry about their dollar reserves?
Might those same fiats come back into this country? in enough quantities could cause runaway inflation. Remember how many fiat paper bills have been created by FED? Nearly $1 trillion in last year alone!
We already have US Treasury debt near $8 Trillion and growing as deficits remain as far as eye can see.
We have a flattening yield curve. Fed has talked this down, Fed has taken it out of its data gathering to make our economy look better!
We never had our Recession from bursting of bubble, instead we traded one asset inflation for another, the result has been growing consumer debt and a savings rate of ZERO!
China unpegged its currency to US Dollar, even more pressure and less buying.
All of this could make foreign holders stampede back here to spend the paper money before it becomes worthless! Like when CHina tried to buy CONNOCO, they were refuted. Adding no doubt to their angst, what to do then with the dollars?
When Johnny comes marching home......it will cause a HUGE rise in interest rates here to keep attracting these dollars, we need them also to fund our debt edifice.
Why would Greenspan and BLS dismiss yield curve if it has accurately predicted the last 6 Recessions?
The 2 yr and 10 yr spread is now less than .20% !!! The next FEd meeting surely carries another .25% rise.???
WHat happens when banks can't lend out money because the short rate they borrow from is higher than the longer rate they lend?
I think it probable that ALL rates rise, especially longer term notes repairing the damage of loss of profit spread.
For so long the FED allowed the birth of the carry trade, where those who could took the short money and lent it long, helping to keep long rates from rising.
We ended with, even though mainly on the coasts, a housing BUBBLE. A worldwide housing bubble.
Driving costs for first time home buyers through the roof, forcing many to use piggyback loans or interest only to qualify.
The rise in values lured "speculators" who comprise more than 25% of all homes bought! Helping to drive up prices even more so. Is all that healthy?
FEAR of WHAT drove the FED to lower rates to 1% a depression era low?
ALL those adj loans are tied to SHORT TERM RATES? and if credit card debt payment is missed in just one month, the low rates can skyrocket!
And all we could accomplish with such historic stimulus, was a normal FIB retrace of the down trend? back to a distribution trading range? where smart money has exited, adding to bagholder lemming sack?
WILL the US attack Iran to forstall the MArch exchange date? WAs it a reason they attacked Iraq? With no KNOWN ties to terrorists? and no WMD? WE did it to spread Democracy? right.......
The Bear market of the 70's was puncuated by over 40 WEEKS straight of IIAA bearsih plurality, which caused a bottom to form of historic nature. So far since 2000, we have had only 9 weeks total of this!
AS dividend yields languish at historic lows of 2% the normal 6% yields that signal bottom of bear not seen. Nor are PE ratio's.
SHOULD we IGNORE 100 years of market history? Majority of SPX profit miracle can be traced to 2 areas, finance and energy ...imagine that.
Home sales continue to rise even as Median prices paid falls. A warning that a top is imminent.
2006 is shaping up to be a HORRIBLE year for the stock markets, but if dollars come flooding back home, could be golds golden year.
And Fed is caught in their own trap, needing to keep rates HIGH to attract funds and protect dollar.
OCT 2005 wil be 6 months prior to MArch 2006 Iran oil exchange date, doesn't the market look about 6 months ahead?
Destruction of our manufacturing base, our economy essentially just a consumption black hole, NO savings to fall back on, a scramble to find yield and income, A flattening yield curve, historic debt with several bubbles to burst....I personally think we have seen the best it can be...................
And what is left is the other side of the coin, and it might be a plug nickle.
The world has foot the bill for our "recovery" be careful that foot doesn't end up in your keester.
Duratek
No comments:
Post a Comment