Wall Street Loves Weak Dollar and Weaker Fed

May 3, 2011, 3:00 am EDT

Since early 2009 (when the U.S. stock bull market began), the U.S. dollar has collapsed. The Brazilian real is up 56%, from 41 cents to 64 cents. The Canadian dollar is up 35%, from 78 cents to $1.05. The Swiss franc has also risen 35%, from 85 cents to $1.15. The New Zealand dollar is up 60%, from 50 cents to 80 cents, while the Australian dollar has risen the most, 70%, from 64 cents to $1.09, reaching a 29-year high. Even the relatively weak euro and British pound have risen by 16% and 20%, respectively, since early 2009.

In his widely publicized press conference last Wednesday, Federal Reserve Chairman Ben Bernanke deflected questions about the dollar to Treasury Secretary Tim Geithner, saying the dollar was Treasury’s domain. Theoretically that’s true, but the Fed’s seemingly unconscious attack on the dollar over the last decade has caused more damage to our currency than all of Treasury’s policies combined, or all of the over-spending by Congress and the combined Bush-Obama administrations of the past decade. Consider these four entirely unprecedented actions and policy decisions by the Fed in the last 33 months alone:

1. The Fed doubled its balance sheet in three months during late 2008. Fed borrowing rose from $411 billion on Sept. 10, 2008, to $1.76 trillion on Dec.10. Since then, gold has doubled. Read 

Will Bin Laden’s Death Burst The Commodity Bubble?

May 2, 2011, 1:40 pm EDT
Will Bin Laden’s Death Burst The Commodity Bubble?

News of Osama bin Laden’s death is driving investors to sell commodities like oil and gold. And if it speeds up a political consensus that it’s time to withdraw American troops from Iraq and Afghanistan, it could be the trigger that bursts the commodity bubble.

To profit from that bursting commodity bubble, consider shorting three commodities exchange traded funds (ETFs). Why? With near 16:1 rates of borrowing to buy over-priced commodities, the peace dividend that could result from bin Laden’s death would boost confidence in the dollar and send commodities prices plunging driven by traders who sell to repay all the debt they took on to inflate the bubble.

Commodity prices are trading far above their historical averages. For example, the average price of barrel of oil between 1946 and 2011 was $18.94 a barrel and between 2001 and 2011, oil averaged $57.02 – it now stands at $112 — nearly twice the decade average. And the average price of gold between 1900 and 2010 was $157.07 an ounce — it’s now $1,576, ten times that long-term average. Read 

9 Signs Inflation is Crushing America

May 1, 2011, 5:07 am EDT
9 Signs Inflation is Crushing America

Inflation is far from under control, and it’s time that Americans demand our government officials do something about it.

The Federal Reserve would have you believe that everything is fine, focusing on “core” inflation rates and ignoring broader measures of inflation as they affect food and energy. These commodity-driven prices, as our central banking overlords would have you believe, are naturally more volatile and shouldn’t be overstated.

You would think after Fed bureaucrat William Dudley was castigated for talking up the affordability of iPads while ignoring real family expenses, our Federal Reserve officials would have woken up to reality. But after the publicity stunt by Chairman Ben Bernanke last week, it’s clear that the Fed — and perhaps many Americans as a result — is in denial when it comes to the inflationary trends crippling U.S. households. Read 

5 Economic Issues That Doom Obama to 1 Term

Apr 29, 2011, 11:11 am EDT
5 Economic Issues That Doom Obama to 1 Term

As the old phrase about voter sentiment goes, “it’s the economy, stupid.” And like it or lump it, one of the reasons President Obama rode to victory in 2008 was a foot-in-mouth moment from opponent Sen. John McCain during the height of the market meltdown.

That famous gaffe was a quote from McCain that “the fundamentals of our economy are strong” while the Dow Jones tanked 500-plus points or over 4% in a single day on Sept. 15, 2008.

Whether McCain’s words were taken out of context – the senator claimed he was waxing philosophical about the fundamental strength of the American economy and its workers – is irrelevant. In politics, it’s less about reality and more about what the America people believe and what the media chooses to focus on. Read 

Join the Rich Man’s Hedge Fund Club for Cheap

Apr 28, 2011, 11:10 am EDT

The wave of money coming back into risk-adjusted equity funds is real. In mid-April, it was reported that hedge funds amassed over $2 trillion in capital for the first time ever in the first quarter of 2011.

The global hedge fund industry now controls $2.02 trillion worth of total assets, according to Hedge Fund Research, up $102 billion from the first quarter of 2010. This is more than the industry had in the second quarter of 2008, when assets peaked at $1.93 trillion.

As a reference to the recession, hedge-fund assets dropped to $1.41 trillion in 2008. As of 2010, hedge funds represented 1.3% of the total funds and assets held by financial institutions. Read 

5 Tough Questions for Ben Bernanke

Apr 26, 2011, 5:09 pm EDT
5 Tough Questions for Ben Bernanke

The clock is ticking on “Bubbles” Bernanke. Come June 30, his latest “quantitative easing” program (QE2) is scheduled to end. The big question on everyone’s mind is: what happens after June 30? Will government bond yields explode?

A number of respected commentators, including bond king Bill Gross of PIMCO, are bracing for the worst—and it’s not hard to see why. Certainly, the Federal Reserve’s behavior in the wake of the 2008 financial crisis has exceeded, in sheer recklessness, anything attempted by any senior central bank in history.

First, the Fed stuffed its balance sheet with more than $1 trillion of dodgy mortgages (purchased with money created out of thin air). Then last November, well over a year after the economy supposedly pulled out of recession, Bernanke’s crew voted to buy another $600 billion of Treasury paper. Read 

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