Why will the dollar rally?

[Jimbo]

[ QUOTE ]
how well do options on NEM track the value of gold? i'm assuming pretty highly.

thats a good idea actually then since i could just buy the calls in a very close to actual exposure and hedge my bet. (the overall bet was for more than $100) so that is a good idea.


[/ QUOTE ]

You are welcome, glad you think it may prove useful. Some (but not all) gold stocks will actually leverage higher than the price of gold increases due to a fairly fixed level of production costs for each oz of gold reaped, among other relevant factors. Additional spot gold prices add additional value in future earnings to the company which assuming a fairly constant P/E ratio means you gain better than a one to one ratio basis as gold prices increase on the spot market.

You noticed I said "some" gold stocks will offer additional leverage which is why I suggested Newmont Mining, another good choice is Barrick Gold. I'm pretty sure these two producers do not hedge themselves as many others do. That is why I own AUY (they hedge their gold prodiction with futures) and use options on NEM. I own shares of a company with stable and predictable earnings and speculate on the others with increased built-in leverage which tends to dissipate some of the time premium of the options cost. Yes I know this should be factored into the options price but I find it often is not.

Jimbo

[gonebroke2]

[ QUOTE ]
[ QUOTE ]
how well do options on NEM track the value of gold? i'm assuming pretty highly.

thats a good idea actually then since i could just buy the calls in a very close to actual exposure and hedge my bet. (the overall bet was for more than $100) so that is a good idea.


[/ QUOTE ]

You are welcome, glad you think it may prove useful. Some (but not all) gold stocks will actually leverage higher than the price of gold increases due to a fairly fixed level of production costs for each oz of gold reaped, among other relevant factors. Additional spot gold prices add additional value in future earnings to the company which assuming a fairly constant P/E ratio means you gain better than a one to one ratio basis as gold prices increase on the spot market.

You noticed I said "some" gold stocks will offer additional leverage which is why I suggested Newmont Mining, another good choice is Barrick Gold. I'm pretty sure these two producers do not hedge themselves as many others do. That is why I own AUY (they hedge their gold prodiction with futures) and use options on NEM. I own shares of a company with stable and predictable earnings and speculate on the others with increased built-in leverage which tends to dissipate some of the time premium of the options cost. Yes I know this should be factored into the options price but I find it often is not.

Jimbo

[/ QUOTE ]

NEM took a huge loss due to hedging. They no longer hedge.

ABX also hedged and now they claim they dont:
http://www.barrick.com/Investors/Hed...n/default.aspx

All gold stocks will rise during the run to $1000/ounce, but after that those who do not hedge will outperform those that do.

[ItalianFX]

Dollar is dropping like a brick.

Anyone know why?

Edit: nevermind: http://www.bloomberg.com/apps/news?p...refer=currency

[gonebroke2]

[ QUOTE ]
Dollar is dropping like a brick.

Anyone know why?

Edit: nevermind: http://www.bloomberg.com/apps/news?p...refer=currency

[/ QUOTE ]

wow. this is going to get ugly a lot faster than i anticipated. they should throw ben bernanke in jail and dismantle the federal reserve. contrary to what those idiots say on cnbc, a falling dollar is not a good thing.

[Jimbo]

[ QUOTE ]
wow. this is going to get ugly a lot faster than i anticipated. they should throw ben bernanke in jail and dismantle the federal reserve. contrary to what those idiots say on cnbc, a falling dollar is not a good thing.

[/ QUOTE ]

Bernake is a genius, please explain in more detail why the falling dollar is bad at this particular moment in time compared to the alternative choices available.

Jimbo

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
Dollar is dropping like a brick.

Anyone know why?

Edit: nevermind: http://www.bloomberg.com/apps/news?p...refer=currency

[/ QUOTE ]

wow. this is going to get ugly a lot faster than i anticipated. they should throw ben bernanke in jail and dismantle the federal reserve. contrary to what those idiots say on cnbc, a falling dollar is not a good thing.

[/ QUOTE ]

your thought process is fairly retarded.

china diversifying holdings ----> bernanke behind bars.

the dollar has been fundamentally weak as an anorexic baby for a long time now...mainly the result of massive global imbalances of savings vs. investment/consumption. the 75bp drop in US IRs only brought the fundamentals in line with reality in terms of the dollar price to other currencies.

further, the USD/GBP moved about .01 from 2.0851 (where i said it would be a good idea to start building a long position ... i.e. short GBP/USD) to 2.096something.

the most affected currency will likely be the euro in the long run since that is where the chinese will probably ship most of their money that they plan to diversify.

also, you should have taken me up on the bet about the dollar being the world reserve currency in a year:

[ QUOTE ]
The dollar is "losing its status as the world currency," Xu Jian, a central bank vice director said...

[/ QUOTE ]

and yay yen moving up [img]/images/graemlins/smile.gif[/img] ... price target for that currency vs. the dollar shoudl be 100-105, best case <100

Barron

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
wow. this is going to get ugly a lot faster than i anticipated. they should throw ben bernanke in jail and dismantle the federal reserve. contrary to what those idiots say on cnbc, a falling dollar is not a good thing.

[/ QUOTE ]

Bernake is a genius, please explain in more detail why the falling dollar is bad at this particular moment in time compared to the alternative choices available.

Jimbo

[/ QUOTE ]

pros of very weak dollar: adjustments of CA deficit, increased demand for US exports, reduced US imports due to prices.

cons of very weak dollar: inflation in US. economic susceptibility to increased wage pressures not reduced by disinflationary pressure of globalization (mostly occurred already). this restrains (or should restrain) monetary policy and makes US recession harder to deal with.

i think that is the main tradeoff at this point.

also, does anybody know where ic an get daily US TIPS 10yr yields? i want to see how the BEI rate reacts to the diversification of chinese FX reserves.

thanks,
Barron

[CrushinFelt]

S&P futures already down 20 points and the dollar down against every single currency lol.. this might be a lil' nasty

[Bump_Bailey]

Will the news of China diversifying out of dollars mean that the FED will have to stop cutting rates? It seemed to me that China was happy to borrow from the US at artificially low rates and now it might be coming to an end.

[tippy]

It is a poker game. Nice bet China.

If you were holding Euros and wanted to dump them at the top what would you do? Yeah, nice move China. Seeing how
China loves dollars, I wouldn't be surprised if they dumped their Euros here and are about to accumulate more dollars very very cheaply.