Thursday, February 22, 2007

It's Starting to Fall Apart

EUR/USD 1.3103 Hi 1.3146 Low 1.3081
121.35 Hi 121.43 Low 120.81
AUD/USD 0.7893 Hi 0.7920 Low 0.7874
EUR/JPY 159.04 Hi 159.14 Low 158.54

So how are we doing? Well let's see. Dick Cheney made a trip to Japan. What was the official reason for that visit? No idea. Now he's in Australia, where the Australian public are cheering and waving flags. Well no, not exactly. But the Australian Prime Minister, John Howard, does a good grovel. And Dick Cheney loves being grovelled to, so that's all going well. Unfortunately, in the meantime, the BoJ hiked rates. (Bad news for the Carry Trade and U.S. Treasuries but for now the PPT is holding the fort.)

Oh and Tony Blair just announced that because the Anglo-American WAR on Iraq was in such great shape (see Cheney was right) and so obviously POPULAR that the British are withdrawing troops. The Danish are also withdrawing troops. The U.S. is still going with the SURGE because, well, what else would they do with all their billion dollar bases which they purpose built in the middle of the GREEN ZONE in Baghdad and in strategic points all over the country? Seems a shame to waste them.

In Italy the Italian Prime Minister was forced to stand down because he lost a crucial vote in Parliament. On what? Oh nothing really, just foreign relations. Specifically though on keeping Italian troops in Afghanistan and increasing American Military Bases in Northern Italy. The Italian public was not impressed. It seems a pity to lose a guy who knows how to use a Ouija Board in a pinch and who helpfully released a whole lot of dangerous prisoners as one of his first acts of Government, resulting in a Crime Wave. Didn't Saddam Hussein do something similar just before the U.S. invasion? What is going on? Anyway now Italy has lost two sterling public figures: Berlusconi, the well-known member of the P-2 Masonic Lodge, and Prodi, the guy who knows how to work a Ouija Board. If you ever wondered why Italians feel justified in NOT paying taxes EVER, unless it is completely unavoidable, wonder no more. Perhaps they could persuade Cicciolina to run for Parliament again? You never know it just might improve the tone of the place.

So there in a nutshell is why Italians are religiously devoted to withholding their hard earned cash from their Government. Tax Avoidance is a nationally accepted sport which Italians play at a professional level. And that is why the Italian Government has accumulated such a massive level of debt. Otherwise the country is doing just fine. In fact Italy seems to work better when there is no discernible Government. Perhaps Britain should try that. After all Tony Blair hasn't exactly covered himself in glory these past 10 years.

Otherwise everything is going to plan. Well, apart from the U.S. economy which keeps producing bad headlines and worse statistics. But that doesn't matter. Every time some bad data comes out, some bad company report (and they have been pretty bad lately), we get our boys to step in. Which accounts for the bizarre way the market is trading. First the bad number then the sharp sell off and then the rally on the back of nothing at all. How long can they keep this up??? Well the FED prints the money, derivatives are unregulated and Hedge Funds can do whatever they want. The answer then is: probably not much longer.

But then they got a lot on their plate: the USD, Treasuries, Stocks, Gold (which is the only one they really want to see fall). So far the USD is holding. Could be tricky going forward because, unfortunately, the FX MARKET is not a DOMESTIC market. Stocks they are doing better with. (Hedge Funds buying). Treasuries, well, they haven't recovered from the slump but there is no panic selling. YET. And GOLD, well never mind.

OIL 60.06
GOLD 682.00

The PPT gave GOLD its best shot this week. The huge slide in GOLD didn't last long though. And that's even with the timely press and the judicious use of the derivatives market. So here we are and GOLD appears to have broken through its recent high. It's still a long way from making a multi-year high but GOLD bugs can count on a number of favourable factors: Helicopter Ben is in charge at the FED, the U.S. Government is currently planning an attack on Iran and no-one is really comfortable holding the USD any more.

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