Monday, March 07, 2011

If at First You Don't Succeed

EUR/USD 1.3985 Hi 1.4035 Low 1.3955
USD/JPY 82.09 Hi 82.38 Low 81.94
AUD/USD 1.0119 Hi 1.0184 Low 1.0116
EUR/JPY 114.80 Hi 115.25 Low 114.54

Moody's downgraded Greece again today. By a lot, I think. But I can't be bothered to look it up. Why would you? It's not like it actually matters or had much market impact. They got a couple of headlines on some U.S. based financial newswires but otherwise the markets didn't react. I think a Greek official dutifully expressed outrage or something. Because like Moody's is important. Ha. Ha. Well some of these Greek officials certainly like to play-up the issue, make a big deal, bang on about things and try to create a crisis. So you know, they got a few half-line headlines and maybe the Financial Tabloids will carry a story tomorrow. Not that it will matter.

The U.S. based rating agencies are playing a dangerous game. It's not looking stupid or biased or incompetent that's the problem. The real problem is that they become merely irrelevant. And then the game is up. No-one will care if they rate anything anywhere. Already this year they downgraded Japan. The net result? Well, embarrassing really.... for the ratings agency. The Japanese Yen fell for half a day or so. It was a minor fall, a half day correction really. And then? Well nothing. The Japanese Yen recovered and remains strong and the world went back to trying to figure out what is really going on.

Today the EUR/USD started out slightly weaker and then.... continued to climb. There was nary a sign of any USD safe haven buying. Not that there has been since all these supposed revolutions got going in North Africa. In fact the USD and the U.S. Treasuries just keep getting sold. I'm not sure what Plan B is? Do they think that maybe WWIII will trigger a rush into USDs? Maybe more downgrades? Lots of them? How many more can they do?

They could have another shot at it I suppose. They could downgrade every country, with the exception of the U.S. and the U.K. and other favoured nations, whoever they are, the only problem is that no-one will care. Which is nice really. Do a bad enough job for long enough and you become just another screaming loony confined to the edge of the markets. We have lots of those.... nutters with one theory or other that doesn't add up but sounds scary or interesting for a while. But markets are markets and if you lose people money often enough then you lose following/relevance..... whatever. You become just another nutter at the edge of the market. So nice work guys. Now you just look sort of boring and silly.

What really needs watching is stocks. The stock markets have all their ducks lined up: the end of fiscal stimulus, tighter monetary policy just around the corner pretty much everywhere, or at least no likelihood of easier monetary policy or further fiscal stimulus, the end of Ben Bernanke's little experiment with money printing, slowing world economic growth, higher oil prices, ongoing problems in the U.S. job market and a still collapsing U.S. housing market.... well find me some good news (and please don't bang on about mergers and acquisitions). So the next shoe to fall is, er, maybe already falling. It was nice while it lasted.

OIL 105.75
GOLD 1,434.40

The Middle East and North African unrest is giving the speculators an excuse to take OIL higher.
So expect more record profits from Exxon and their kind. It's nice to know that some people make money no matter how much trouble there is in the world, or rather precisely because there is so much trouble in the world.

And GOLD, the anti-USD, the new global reserve currency, or rather the oldest global reserve currency ever.... keeps seeing safe haven buying. And this is a surprise? I think not.

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