Why will the dollar rally?

[Jimbo]

[ QUOTE ]
Will the news of China diversifying out of dollars mean that the FED will have to stop cutting rates?

[/ QUOTE ]

Short answer: No
Long answer: It isn't going to happen anyway
Longer answer: If it did happen there would be little effect on the "average" American. As I implied above the dollar is falling, the Fed is cutting, unemployment numbers/percentage is low and inflation is well below acceptable limits.

Jimbo

[Bump_Bailey]

OK, What if any relationship is there between Fed overnite rates and yields on Treasury Bonds?

[DcifrThs]

[ QUOTE ]
OK, What if any relationship is there between Fed overnite rates and yields on Treasury Bonds?

[/ QUOTE ]

tons. i'm assuming you mean effective fed funds rate as overnight rate.

for treasuries do you mean 3mo? 1yr? 2yr? ...10yr? 20yr? 30yr?

it all depends on many factors but generally:

short term (3mo-2yr) treasuries typically are driven mostly by expected and realized monetary policy.

longer term treasuries are more driven by inflation expectations since in the long run real yields are mean reverting and inflation rates can move around alot more. in other words, volatilities of real yields drop off while volatility of inflation can increase over time.

further, the reverse can be true. yields in the mkt can influence fed policy. if long rates are artificially low, this might result in the fed holding off on interest rate cuts since the mkt is already accomodative.

you have basically asked one of the most fundamental macroeconomic relationships.

hopethis helps
Barron

[The once and future king]

[ QUOTE ]
[ QUOTE ]
Will the news of China diversifying out of dollars mean that the FED will have to stop cutting rates?

[/ QUOTE ]

Short answer: No
Long answer: It isn't going to happen anyway
Longer answer: If it did happen there would be little effect on the "average" American. As I implied above the dollar is falling, the Fed is cutting, unemployment numbers/percentage is low and inflation is well below acceptable limits.

Jimbo

[/ QUOTE ]

Sorry to be a linktard but this bit of video pefectly encapsulates my thoughts on the above:

The stats are all lies, lies I tell you.

[gonebroke2]

[ QUOTE ]
[ QUOTE ]
Because it is the mighty, mighty dollar!

Seriously though, the dollar is not going to become worthless. It might continue to slide a bit more but I think most of you are severly understimating the strength of the U.S. Economy and the strength of the country in general, long-term.

Get greedy when others are fearful.

[/ QUOTE ]

It is not going to become worthless. Just worth about 40-50% less than current values on the USDX. A short lived dollar rally is probably around the corner, but I am not changing my positions. Short CFC, WM, puts on GS and long on gold and silver related assets. Liquid cash currently in Canadian Dollars ETF (+20% on the year) and might be moved to Swiss Franc ETF.

[/ QUOTE ]

The financial stocks are getting slaughtered. CFC is going bankrupt and WM to single digits, maybe even extinction. These financial institutions are marking to myth and hiding their derivate exposure. They are finally starting to leak out one by one how bad of shape they are in. Citi dumps their CEO, MER dumps their CEO. Morgan Stanley just announced a 2.5B write-down. You guys are kidding yourselves if you think Goldman is immune. They are going to get slaughtered. [img]/images/graemlins/grin.gif[/img]

[The once and future king]

[ QUOTE ]
Wall Street's biggest firms have written down at least $40 billion as prices of mortgage-related assets dwindle because of record foreclosures. Morgan Stanley has 251 percent of its equity in Level 3 assets, making it the most vulnerable to writedowns, followed by Goldman Sachs Group Inc. at 185 percent, according to Janjuah. Goldman, the biggest U.S. securities firm, fell 4 percent in New York trading today.

[/ QUOTE ]

From

Bloomberg

Edit to add:

[ QUOTE ]
Look at the info Citigroup just filed with the SEC today: they have $135 BILLION in LEVEL 3 ASSETS.

I have a neat idea.

Why don't we take every single major financial institution out there and then divide their total Level 3 assets by their equity capital base and make comparisons?

This will give us a better idea as to which of them may really remain solvent at the end of the day. Shall we?

Let's have a look at Citigroup. Their equity base is $128 billion. Therefore, their Level 3 assets to equity ratio: 105%

How about Goldman Sachs? Level 3 assets are $72 billion, equity base is $39 billion. Their Level 3 assets to equity ratio is 185%.

Morgan Stanley: $88 billion in Level 3, equity base is $35 billion. Ratio: 251% (WOW!)

Bear Stearns: $20 billion in Level 3, equity base is $13 billion. Ratio: 154%

Lehman Brothers: $35 billion in Level 3, $22 billion in equity. Ratio: 159%

Merrill Lynch: $16 billion in Level 3, $42 billion in equity. Ratio: 38%

Here is the Level 3 assets to equity ratio summary:

* Citigroup 105%
* Goldman Sachs 185%
* Morgan Stanley 251%
* Bear Stearns 154%
* Lehman Brothers 159%

Merrill Lynch 38%

This becomes very interesting now, doesn't it?

Looks to me like Goldman Sachs and Morgan Stanley are by far in the WORST situation among the investment banks.
And yet the media is focusing all of their attention on Merrill Lynch---which actually has by far THE LEAST EXPOSURE of all of them. What a joke.

As I said before, the media should stop diverting attention and trying to make this into a "Merrill-specific" problem.

All of the investment banks are in deep trouble. These numbers should make that extremely evident. The deception must be exposed.

[/ QUOTE ]

From

write offs to reach 500 Billion $ ??

[captZEEbo]

7 Countries Considering Abandoning the Dollar

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Because it is the mighty, mighty dollar!

Seriously though, the dollar is not going to become worthless. It might continue to slide a bit more but I think most of you are severly understimating the strength of the U.S. Economy and the strength of the country in general, long-term.

Get greedy when others are fearful.

[/ QUOTE ]

It is not going to become worthless. Just worth about 40-50% less than current values on the USDX. A short lived dollar rally is probably around the corner, but I am not changing my positions. Short CFC, WM, puts on GS and long on gold and silver related assets. Liquid cash currently in Canadian Dollars ETF (+20% on the year) and might be moved to Swiss Franc ETF.

[/ QUOTE ]

The financial stocks are getting slaughtered. CFC is going bankrupt and WM to single digits, maybe even extinction. These financial institutions are marking to myth and hiding their derivate exposure. They are finally starting to leak out one by one how bad of shape they are in. Citi dumps their CEO, MER dumps their CEO. Morgan Stanley just announced a 2.5B write-down. You guys are kidding yourselves if you think Goldman is immune. They are going to get slaughtered. [img]/images/graemlins/grin.gif[/img]

[/ QUOTE ]

immune to me = not posting one negative eranings quarter from now until 2009 [img]/images/graemlins/grin.gif[/img]

Barron

[ArturiusX]

The herd mentality on the dollar drop though is so sexy though.

[ahnuld]

goldman may have alot of exposure in terms of level 3 assets but they hedged that with bets against subprime. Equity drop,s profit increase to be put right back into equity. Smart people always step out of the way to avoid the falling safe.