sábado, 10 de outubro de 2009

Why the Dollar Won't Collapse Against the Euro

Why the Dollar Won't Collapse Against the Euro

JAMES ANDERSON OCT 09, 2009 3:20 PM

Why the Dollar Won't Collapse Against the Euro
Their problems are just as bad as America's.

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Editor's Note: This was posted in real-time on our Buzz & Banter. It is being republished here for the benefit of the Minyanville community.


Professor Krueger’s excellent Buzz post yesterday really crystallized some of my concerns about the dollar, so I decided to dig in a little on the Dollar Index (DXY) and trade imbalances.


The Dollar Index was created by the Federal Reserve in 1973 to provide a trade-weighted average of the US dollar as it freely floated against global currencies. In 1973,10 currencies were used, but after the creation of the Euro, West German, French, Italian, Dutch, and Belgian currencies were combined in the Euro. Presently, there are six currencies in the DXY. The weights are as follows:

  • Euro = 57.6%
  • Japanese Yen = 13.6%
  • British Pound = 11.9%
  • Canadian Dollar = 9.1%
  • Swedish Krona = 4.2%
  • Swiss Franc = 3.6%


If you're thinking to yourself that this doesn’t exactly represent your view of the current global economy, welcome to the club. The DXY is calculated every few seconds by the ICE exchange for their Dollar Index futures product. Since the first trading of DXY futures in 1985, it adjusted only once, after the formation of the Euro. Looking in a simplistic way at the six components, there are four in manufacturing, one in hidden bank accounts, one in natural resources, and none in cheap labor.

Let’s look at trade surpluses and deficits. The top-ten trade deficits are listed below:



Analyzing the list: China -- cheap labor; Japan, Germany, Ireland, and Italy -- high-quality manufactured goods, drugs, etc.; everybody else -- energy. China is clearly the 800-pound gorilla in the room, and since it is, it’s not letting its currency strengthen. The dollar is weak against the yen, euro, and Canadian dollar. Anything else on the list doesn’t matter.

This data comes from the Census Bureau. Click here to see it.

Now let’s look at trade surpluses. The top-ten trade surpluses are listed below:



It's a mixture, but what I find interesting is that Australia and Brazil -- with two of the strongest currencies against the dollar this year -- actually run trade deficits with the United States.

Professor Kruger’s point -- that natural resource-rich currencies are the strongest against the dollar and may continue to strengthen -- seems very logical. But with the exception of Canada, we don’t run trade deficits with these countries. Only Canada is a component of DXY, so if the Brazilian and Australian currencies continue to strengthen, there will be no effect on the index.

Other than the natural-resource countries, what currencies can the dollar collapse against?

Not China -- they’re not playing the game. The euro? Look at those nice trade surpluses that Germany, Ireland, and Italy have. Are they willing to let the Euro climb to 2.00 or 2.50, and depress their already-weak economies to give American manufacturers a chance to take market share away from them? I don’t see that happening. How strong can the yen get? That I'm not sure of, but it's only 13.6% of DXY versus 77.3% for all the European currencies combined.

I just can’t see a collapse of the dollar against the euro when their problems are just as bad as ours. My thoughts after doing this analysis are that the weak dollar is too crowded a trade, that DXY is probably close to a bottom, and finally, that I'm going to start looking into Canadian stocks and maybe bank accounts.

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segunda-feira, 5 de outubro de 2009

Foreigner - Waiting for a girl like you




Foreigner - Waiting for a girl like you

So long, I've been looking too hard, I've been waiting too long
Sometimes I don't know what I will find, I only know it's a matter of time
When you love someone, when you love someone
It feels so right, so warm and true, I need to know if you feel it too
Maybe I'm wrong, won't you tell me if I'm coming on too strong
This heart of mine has been hurt before, this time I wanna be sure
I've been waiting for a girl like you to come into my life
I've been waiting for a girl like you, your loving will survive
I've been waiting for someone new to make me feel alive
Yeah, waiting for a girl like you to come into my life
You're so good, when we make love it's understood
It's more than a touch or a word can say
Only in dreams could it be this way
When you love someone, yeah, really love someone
Now I know it's right, from the moment I wake up till deep in the night
There's nowhere on earth that I'd rather be than holding you tenderly
I've been waiting for a girl like you to come into my life
I've been waiting for a girl like you, your loving will survive
I've been waiting for someone new to make me feel alive
Yeah, waiting for a girl like you to come into my life
I've been waiting, waiting for you, ooh, I've been waiting
I've been waiting
(I've been waiting for a girl like you, I've been waiting)
Won't you come into my life?

Foreigner - I Want to Know What Love Is




Foreigner : I Want To Know What Love Is Lyrics

I gotta take a little time
A little time to think things over
I better read between the lines
In case I need it when I'm older

Now this mountain I must climb
Feels like a world upon my shoulders
I through the clouds I see love shine
It keeps me warm as life grows colder

In my life there's been heartache and pain
I don't know if I can face it again
Can't stop now, I've travelled so far
To change this lonely life

I wanna know what love is
I want you to show me
I wanna feel what love is
I know you can show me

I'm gonna take a little time
A little time to look around me
I've got nowhere left to hide
It looks like love has finally found me

In my life there's been heartache and pain
I don't know if I can face it again
I can't stop now, I've travelled so far
To change this lonely life

I wanna know what love is
I want you to show me
I wanna feel what love is
I know you can show me

I wanna know what love is
I want you to show me
And I wanna feel, I want to feel what love is
And I know, I know you can show me

Let's talk about love
I wanna know what love is, the love that you feel inside
I want you to show me, and I'm feeling so much love
I wanna feel what love is, no, you just cannot hide
I know you can show me, yeah

I wanna know what love is, let's talk about love
I want you to show me, I wanna feel it too
I wanna feel what love is, I want to feel it too
And I know and I know, I know you can show me
Show me love is real, yeah
I wanna know what love is...

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