Thursday September 22, 2005 - 11:22:29 GMT
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Black Swan Capital - www.blackswantrading.com
Stocks leading the dollar...
•Key reports due today (Global-View):
23:50 GMT- JPN- July Tertiary Activity Index
23:50 GMT- EU- July Ind Ord
06:15 GMT- CH- Aug Trade
10:00 GMT- UK- Sep CBI Ind Trends
11:00 GMT- CDA- Aug CPI
12:30 GMT- US- Weekly Jobless Claims
14:00 GMT- US- Aug Leading Indicators: vs. +0.1% in July, see -0.3%
“With the real universe of action and unceasing change, with the economic system which cannot be rigid, neither neutrality of money nor stability of its purchasing power are compatible. A world of the kind which the necessary requirements of neutral and stable money presuppose would be a world without action…Money is an element of action and consequently of change. Changes in the money relation, i.e. in the relation of the demand for and the supply of money, affect the exchange ratio between money on the one hand and the vendible commodities on the other hand. These changes do not affect at the same time and to the same extent the prices of the various commodities and services. They consequently affect the wealth of the various members of society in a different way.”
Ludwig von Mises
It seems the Fed sees inflation risk and long-bond players see recession risk. The Fed appears concerned high energy prices and fiscal largesse will feed into consumer goods inflation. The bond market appears concerned higher short-term interest rates and higher energy prices will crater the consumer, and thus the consumers’ demand for goods will fall, tampering the impact of rising commodities prices. Who knows more: Mr. Greenspan or Mr. Conundrum?
One more time with the help of Mr. George Soros:
“What gave me the courage to hold on to my currency positions was the pronounced weakness in the stock market [US]. The strength of the dollar depends on the strength of the economy. A decline in stock prices can have a considerable influence on the spending decisions of consumers and those in business. Moreover, if there is going to be a recession, it will be brought on by the decline in collateral values, and the stock market is one of the most important repositories of collateral.”
Chart: Gold, S&P 500, Dollar Index Weekly
If we had to make a comment on this chart it would be: Besides the obvious inverse relationship between gold and the dollar, it seems the stock market is leading the dollar; that would validate the view Mr. Soros’ shared with us above.
Black Swan Capital
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