"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, February 23, 2011

Safe Haven Dollar - What Safe Haven?

Dear friends:
I mentioned yesterday in my comments that the Dollar was very weak even in the midst of what was most certainly a day in which risk trades were being pulled off and a rush to safety was underway.

Normally during such events, the Dollar along with the Japanese Yen, tend to be the beneficiaries of such activity. All that the Dollar could do was to end up a few points after spiking initially almost 100 points higher. That sort of activity was very telling and indicates that the safe haven bid for the Dollar was practically non-existent.

Today, with crude oil soaring, the broad equity markets, particulary the Nasdaq, getting slammed, and increasing unrest in the middle East as fear grows about the stability of Saudi Arabia, the Dollar is actually getting sold off. That is most remarkable.

I am thinking that the market is looking at the fragile state of the US economy and voting that rising oil prices are going to hit the US harder than most others. Keep in mind, that this is an "economic recovery" built almost completely around the Fed's massive liquidity injections through its QE program. That liquidty is being eaten up by rising crude oil prices as if by a munching PacMan.

It is as if the Fed is pouring water into a container full of holes punched in it by a awl with the words "crude oil" engraved on the handle.

As I am writing this, I am also noticing that the long bond is fading quite dramatically from its best level of the session. That too will bear watching.


  1. Indeed, safe haven dollar to the rescue. Add the blows to the dollar detailed in your earlier post with the sell off today, alongside oil starting to gush and then wallpaper the whole thing with continuous, blatant Bernanke Panky and the giant sucking sound in America intensifies.

    Unfortunately for the majority of people, the giant sucking sound is not heard and probably won’t be until it’s too late for them to protect their savings, their homes and their relatively independent way of life.

    This is no dollar tree falling in the woods with nobody around to hear it or be affected by it. This is a giant Oak that was planted in 1776.

    After reading your posts on US dollars, Bonds and oil I’m once again reminded of how so few can do so much harm to so many. Just as precious metal investing has not become mainstream in America, the devaluation of the dollar is not even on the radar of the majority of people in the US.

    While it is very nice to see our investments rise in value, it’s easy to become frustrated and riled at how stupid the general public is to not even be aware of any of the issues discussed here and on sites such as this. In this country we spend time focused on saving pennies while our dollars are being stolen and flushed.

    We continue to elect politicians on both sides of the aisle that will do nothing but ignore the fire in the building while positioning themselves comfortably on the fence. They campaign to retain their elected office and promise more handouts while they kick the inflation can down the road to future generations.

    But, that frustration is usually a fleeting moment these days. Most folks don’t want to hear the “gloom and doom”, and are simply unaware of what is happening. Most live beyond their means and most spend all discretionary funds on stuff they don’t need. Most don’t spend nearly enough time educating themselves.

    Sadly, so many have been prepared so well to be complacent about losing their freedom, bits at a time, through generations of adopting situational ethics (moral decline), subject to government indoctrination (public schools), receiving or subsidizing entitlements (socialism), living beyond means (spend more than earn), buying into the rhetoric of many popular opinion leaders (useful idiots) and trusting the motivations of most political leaders (ill informed or lying opportunists).

    While we are all ultimately responsible for our own education or lack thereof, I can’t help but cringe when I think of the events that will take most people by complete surprise. So many good, honest but careless, unwise or foolish people in this country are not paying attention… or are just too busy working, raising family, buying groceries, paying mortgages, utilities and rent to have the time and wherewithal to be aware of the financial tsunami on the way.

    Thanks to market savvy, straight-shooting folks like you who give their time to educate and illuminate, many more people will hear the falling dollar tree and protect themselves before its too late.

    Thank you, Dan.

  2. Larry,

    Well said my friend. And Trader Dan is the man!

    Bay of Pigs

  3. In a big picture sense, the spreading unrest among U.S. clients in the Middle East is an indication that some pretty large cracks are developing in the U.S. empire. Since the dollar is essentially a common share in the empire, it is natural that its value would decline in this sort of scenario.


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