Thursday, June 21, 2007

Tony's Second Life

EUR/USD 1.3384 Hi 1.3410 Low 1.3371
USD/JPY 123.66 Hi 123.78 Low 123.41
AUD/USD 0.8463 Hi 0.8468 Low 0.8428
EUR/JPY 165.43 Hi 165.47 Low 165.36

Tony Blair is casting around for job openings now that his political career is coming to an inglorious end. The feral British Public, like the feral British Press, doesn't seem to know just what a treasure they are losing and some career suggestions for Tony have been extremely ungracious. While there was once talk of Blair being offered a post on the Board of News Corp by his old mate and mentor, Rupert Murdoch, there have been no recent noises in that regard. But George W. seems to have stepped into the breach. After all what are old (war-mongering) friends for?

Ooooh the delicious irony of it. Tony Blair, apologist for the unprovoked attack and invasion of Iraq is to be "appointed" PEACE ENVOY. Well I guess if you are going to have one it may as well be someone who faces the possibility at some point of being tried at the Hague for War Crimes.

But back to the markets. U.S. Treasuries are not doing well. Pundits everywhere are falling all over themselves, as expected, trying to explain why this is really good news. Or at least not bad news. Or anyway nothing to worry about.

The break above 5.0% in 30 Year Treasury Yields led to a spectacular sell off last week which saw 30 Year Yields rise as high as 5.40%. It was mayhem on the markets. Expect news on just how much damage has been done in Hedge Fund Land shortly.

NOW, after a little short covering rally in Treasuries, the sellers are back. Oh the joy, the joy. The prospects for the U.S. economy are obviously so much better than we first imagined!! Ah yes.

Only maybe not. Maybe this is just the result of the absence of some very annoyed foreign buyers who are, after all, the guys with the dough. China, Russia and potentially a lot of Oil-Producing Arab nations don't seem to see the current GEOPOLITICAL situation in quite the same light that George W. does. And they certainly don't see why they should be providing the funding for his attempt to take over the world with bigger and better guns. So they don't appear to be rocking up to buy more Treasuries.

What happens when they start actually dumping the Treasuries they already hold? You don't want to know. And George W. doesn't know and doesn't care. Eventually these divergent points of view (between George W. and everybody else) about how the world should be run and by whom will lead to a confrontation. If we are lucky the confrontation will take place on financial markets. If we are unlucky quite a lot more people could end up dead.

For now the pain is being contained. Treasuries have taken a hit but the U.S. Stock Market hasn't seen much damage and the USD looks steady. With ECB rates now on hold while Trichet examines the tea leaves (that is M-3 data) and Japan not expected to HIKE until August, the immediate risks to the BUCK look limited. That doesn't mean we are going to see a huge USD rally. But the market needs new news. And the news recently has been that the European economy is taking some hits. Despite the bragging from Trichet, the recent data hasn't been quite as exciting as most would hope. Good news for the BUCK? Not likely. More like a temporary reprieve.

As for the U.S. Stock Market that seems nothing more like a very big accident waiting to happen. And when it does the echo will be heard around the world.

OIL 68.90
GOLD 658.00

Well the GOLD rally has fizzled which is weird considering the fraught GEOPOLITICAL scenario (Lebanon, Gaza, Syria, Putin, Iraq, Iran, George W.), the very sad performance of the U.S. Treasury market (could it be it's inflation they're worried about?) and the idea making the rounds that it might be a good idea to reduce risk right now.

But the fizzle in the GOLD market, it seems, is not entirely spontaneous. Forces are at work. Those big guns standing by to help George W. dig himself out of a hole are indeed lurking. Not that they are advertising their actions. And they haven't engineered a collapse in the price of GOLD either. The market has so far failed to break above USD 700 but it hasn't exactly fallen into a black hole. So here we are waiting and wondering. Just how much money, or leverage, or chutzpah do these guys have anyway? And does it really matter? For the long term player this attempt to stop the price of GOLD breaking to the upside may just provide another, and cheaper, buying opportunity. Provided, of course, that the somewhat unappreciated IMF doesn't decide to offload its GOLD holdings. Market manipulation? Why never. It's just necessary and intelligent way to manage reserves.

I wonder what happened to the geniuses at the Reserve Bank of Australia who started the ball rolling in 1996 by offloading a substantial proportion of Australia's Central Bank GOLD reserves when the price was around USD 400?

Well nothing beats Gordon Brown's move to sell massive amounts of GOLD at the bottom of the market. And he's up to be the U.K.'s next Prime Minister. So in some rarefied circles, it seems, there is simply no accountability. Which is why Tony Blair just might be able to find himself a second career.

Meanwhile the price of OIL is reacting to the unfortunate situation in the Middle East.

OIL bulls beware Tony Blair may well be "appointed" (the man is unlikely to ever get himself legitimately "elected" to anything anywhere in the world ever again so an "appointment" is his only hope) the new Middle East Peace Envoy. All these entrenched Middle East problems may well be swiftly solved. On second thoughts, perhaps not. No, there is nothing much beyond the possibility of a U.S. economic collapse keeping the price of OIL from rising.

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basically what you say is: get rid of politicians
i agree
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