Wednesday May 10, 2006 - 07:24:19 GMT
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Black Swan Capital - www.blackswantrading.com
Fed pause in the price?
"Why should truth not be impressâ€™d
Beneath the cover of a jest.â€ť
The first question: Is an easy Fed already priced into the dollar?
Second question: Do you think it concerns Fed Chairman Bernanke that metals traders, and one-way speculators, think heâ€™s their friend?
We think Mr. B knows the phrase â€śmoral hazard.â€ť To refresh those who have forgotten, here it is from Wikipedia:
In law and economics, moral hazard is the name given to the increased risk of problematical (immoral) behavior, and thus a negative outcome ("hazard"), because the person who caused the problem doesn't suffer the full (or any) consequences, or may actually benefit. Such a concern typically arises in the context of a contract (for example, an insurance policy).
Gold Futures Daily:
Third question: Will we require CNBCâ€™s lead financial sycophant, Maria Bartiroma, to properly interpret Fed-speak after todayâ€™s announcement?
Answer: We have a feeling the market will take care of that interpretationâ€”thank you!
Fourth question: Is there a de facto weak dollar policy in play?
Answer: We think not, but if the market thinks so, it matters not the reality.
We tend to take the G-7 at its word (not necessarily a smart thing to do, we know, but being the trusting typeâ€¦well). We think their objective is to pressure China to act and by proxy, drive the pack of Asian currencies higher in value relative to the dollar AND other currenciesâ€”itâ€™s the global imbalance game they are trying to play.
Despite what seems blundering at times, the G-7 finance ministers are likely a very bright group of individuals. And they do have some institutional memory, one would expect.
They should know the danger that comes with ushering in a weak dollar policy. The last time that game was played they called it the Plaza Accordâ€”September of 1985. Many believe it was a major catalyst for the stock market crash in October 1987.
US $Index vs. Dow Jones Industrial Index:
Four questions and four answersâ€”thatâ€™s a darn good day for us.
However, weâ€™re still not sure about the one answer that will make us any money: Whereâ€™s the dollar headed at 2:15:01 p.m. EST this afternoon? Oh well, four out of five ainâ€™t bad.
Jack Crooks, Black Swan Capital
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