2Bull Forex Blog

Evidently, Obama has more extensive resume than I previously thought. Heck, I just thought he was the President. Oh no! He doesn’t stop there.

If fact, he’s one of the few Presidents in our nation’s history that is comfortable being a stock analyst. (He recently said stocks were a good buy back on March 3rd).

But now his resume expands even further. That’s right! He’s not just President and “Stock Analyst” but he’s also a Currency Analyst too now.

(Yeah, I guess CNBC just needs to give him his own show. In fact, we don’t even need economists anymore now that we’ve got Obama. We can save lots of money there by firing all of the economists that the government hires!)

In last night’s address, Obama said that the “dollar is extraordinarily strong because investors are confident in the ability of the U.S. to lead a worldwide recovery”…and he went on to reject calls for a global currency.

This latter comment was directed at China. You’ll remember that Geithner said that “Obama thinks China is a currency manipulator” (referring to their yuan)….that was Round 1 of Obama vs. China. Now we’re in Round 2.

China’s calling for a “super reserve currency” as the Fed and Treasury stack on trillions of dollars in U.S. debt and prepare to buy $300 billion of long term U.S. treasuries, thus driving the yields down artificially low.

Well, since China sees that we’re driving down the yield on the instrument that they hold the most of, and they see us stacking on debt and wonder if we have the ability to honor our obligations…can you blame them for considering the thought of “wanting another currency” that isn’t laden with debt as the “world’s reserve currency”?

Don’t get me wrong…I’m a red blooded American and love the fact that we hold the spot in the world to where we are the world’s reserve currency. However, the latest moves from the Fed and Treasury are bent on debasing our currency and not strengthening it.

So it’s a pathetic thing when Obama says our dollar is strong and gives that lame excuse of a reason when he knows that at the same time, the Fed and Treasury are about to make an “all out assault” on the dollar in order to artificially prop up stocks.

But don’t just take my word for it. You see, he knows most Americans never look at a chart of the dollar.

Upon looking at the chart, I think you can see why China is worried and why Obama isn’t as good of a currency analyst as he thinks he is.

I see uptrend line after uptrend line broken (blue lines) and lower highs which shows less conviction in buying and more conviction in selling the dollar at this point. Amazingly, he’s probably “spouted off” just in time for a top to form!

Many Obama should stick to his “day job” since it seems like it should keep him busy enough.

China may not get its wishes, but their comments certainly put “another dent” in the dollar!

While I don’t think that China will get their wish for a new global reserve currency, I do see where they are coming from and feel their pain.

Unfortunately, our country makes such bad decisions at the government level, that there will probably come a day where we “go the way of Rome”. It is possible that we may see us lose the “world’s reserve currency” status in our lifetime.

A country can never prosper long term by debasing its currency. And if you look at a 30 year chart of the dollar, you can only come to the conclusion that our government is bent on devaluing the dollar long term. This will only drive up inflation for “Main Street” and eventually cause a lack of confidence in all of the foreigners that we are dependent upon to buy our debt (Treasuries).

Once that implodes, we’re in big trouble! I only hope that comes later rather than sooner!

You know, when an economy does start to recover, it’s not widely known at the time. In fact, the news will still be as full of “gloom and doom” as ever even when it starts.

So you won’t know when the economy is turning by listening to the nightly news. So what can you look to?

Well, here is one widely watched economic barometer that institutional investors have used throughout the years. What is it? Copper

Now you may think, “What in the world does the price of copper tell us about the economy?”

Here’s why. Institutions say that “Copper has a PhD in Economics. Why? Because this commodity is so broadly used (in the building of homes and offices for plumbing and wiring to the building of computers and automobiles). You can literally see the broad demand put upon this commodity as the demand starts to “tick up” for these goods.

With other leading indicators “ticking up” today such as Housing Starts and Building Permits, I took a new look at copper as well to see what I saw.

Copper breaks its downtrend and heads higher for the first time in almost a year!

As you can see from the chart above, copper has not only broken its downtrend but also its sideways range and is preparing to head higher. Now how can that happen if there’s not more “copper buying” going on around the world.

On top of this, it seems that crude oil prices have finally stabilized too, and once oil prices finally hold above $50 a barrel again, it should be another “confirming sign” that the global economy has BEGUN the process of turning around.

I say “begun” because it takes time for the U.S. and global economy to be in “full bloom” once again. Therefore, the news will continue to be dire for a while longer.

But what does this mean for you? It means that if you are a long term stock investor, these could be better times to be a buyer (with cash, no margin buying) of ETFs and mutual funds if you have at least a 5-10 year time horizon for the investment.

For the currency investor, it means that you need to be on guard for the “dollar party” to come to an end once the world finally does realize that the global economy is turning. This could help the AUD/USD, NZD/USD and EUR/USD for instance as dollars are sold and commodities and inflation bloom once again.

The former two pairs do best when commodities stabilize and boom once again…and the latter does good simply when the U.S. dollar does not do good since it acts as the best “anti-dollar” out there.

Key bank to bank long term lending rates in Europe jumped to their highest since 1995 from 5.142 to 5.237 a move sure to reverberate through Interbank Forex markets. The six month rate also jumped to 5.315 from a former rate of 5.290. European rates are fixed by the European Central Bank. (Euribor) It is becoming painfully obvious that the financial crisis is not limited to the US.

The US financial crisis has become contagious, spreading to European banks and financial institutions and Interbank Forex markets worldwide. In the UK mortgage giant Bradford and Bingley had to be rescued by the government. Shares of French bank Dexia tumbled more than 20% because of a newspaper report that the bank may launch an emergency capital increase. On Sunday the governments of Belgium, Luxembourg, and the Netherlands announced an 11.2 Euro bailout of one of Europe’s largest banks.

Markets, including the Interbank Forex, have been in a state of disarray with global money markets waiting for the details of the proposed US bailout. The US congress is set to vote on the compromise bailout package on Monday, September 29th. After almost a week of political haggling Democrats and Republicans have reached an agreement. Highlights of the bailout plan include;

* The government would have broad powers to buy billions in mortgage related assets.

* The plan lets congress block half the money. The government can access 250 billion immediately, 100 billion more if the president certified it was necessary, and 350 billion more with a separate certification.

* Executives of companies who benefit from the bailout will see limited compensation.

* The plan requires the government to try to renegotiate bad mortgages with the intention of lowering monthly payments.

* The government would receive stock warrants in return for assistance, giving American taxpayers the opportunity to share in future profits.

* After five years the government would submit a plan to congress on how to recover any losses from companies receiving assistance.

Financial analysts are hoping that the passage of the US bailout plan will bring a semblance of stability to global markets. With the crisis spreading well beyond the borders of the United States passage of the compromise bailout plan is seen by many as a way to stem the tide of bank failures in Europe. Credit markets and interbank lending have all been virtually frozen by the US financial crisis and it is hoped that the infusion of billions of dollars will cause credit to flow freely again.

In a move sure to reverberate throughout the financial world the US House of Representatives failed to pass the US bailout by a vote of 228 to 205. Stock markets
reacted quickly and violently with the Dow falling 700 points. Political bickering was blamed for the defeat but several Republican legislators refused to support the bailout plan proposed by the Bush administration.

Democrats said the bill does not do enough to protect average Americans. In an excerpt from Speaker of the House Pelosi’s speech she stated, “Democrats insisted that legislation responding to this crisis must protect the American people and Main Street from the meltdown on Wall Street. The American people did not decide to dangerously weaken our regulatory and oversight policies. They did not make unwise and risky financial deals. They did not jeopardize the economic security of the nation. And they must not pay the cost of this emergency recovery and stabilization bill.” Representative John Culberson, a Republican from Texas, said the measure would leave a huge burden on taxpayers. “This legislation is giving us a choice between bankrupting our children and bankrupting a few of these big financial institutions on Wall Street that made bad decisions.”

Credit markets remain frozen and the crisis has spread to Europe. Several banks have been taken over recently and in the UK the government had to bail out mortgage giant Bradford and Bingley. Banks and financial firms in both the US and Europe have essentially ceased loaning money to each other in recent weeks creating a serious credit crisis. Forex markets
also reacted and the future of the US dollar remains uncertain. The crisis stems from mortgage backed securities which saw their value plunge as home prices have gone into their worst slide since the Great Depression. In turn the market for these toxic securities evaporated leaving many banks holding greatly devalued securities which could cause the failure of firms holding these securities.

The failure of the bailout plan follows weeks of sobering news from the US banking sector. Monday morning, the Federal Deposit Insurance Corp. arranged for the sale of the banking assets of Wachovia, the nations fourth largest bank to CitiGroup for 2.2 billion dollars in stock. In other news, the Fed bailed out insurance giant American International Group, loaning it $85 billion in return for a nearly 80% ownership, and Washington Mutual became the biggest bank failure in US history.

Both the White House and Congressional representatives and Senators have indicated that the plan is not dead and that a compromise can be worked out. Markets around the world including Interbank Forex will be watching with intense interest.

Over the past six months it seems like almost every major finance magazine has published an article related to the weakness of the dollar. If you are a currency trader like I am then this topic is particularly relevant to you because you need to know what the long-term trends of each currency are so that you can make profitable trades.

What you probably have not been reading about in the news are some of the events that have been happening behind the scenes or that will be happening in the near future, and why the American economy will ultimately regain its strength.

The single most significant factor affecting the American dollar is the trade balance, and the biggest portion of this problem is related to our war in the Middle East that should never have been authorized, yet is still costing us billions of dollars every single day. I will not spend a lot of time talking about the horrendous actions of the Bush administration (namely that they defrauded their way into office in order to wage a cultural genocide for the sake of gaining control over oil), but there are truly good things that have been happening behind the scenes and that will be happening in the near future.

You will not hear about many of these things in the mass media news outlets in America such as CNN and ABC, and there is an exceedingly simple reason why these manipulated news networks try to convince the American people that there is a threat of danger when really none exists at all: War is profitable. There are powerful groups in our world today whose agendas are motivated by greed and control, and these people engage in heartless wartime profiteering so that they may satisfy their lust for power. But it is not all bad: I will discuss some of the wondrous events that are causing these groups to rapidly lose their power, and what all of this information means for the currency markets.

The Bush Administration has dropped to single-digit approval ratings, and millions of Americans have gone to websites such as Impeach Bush and spoken out about their opinions of why this man is no longer our leader. Dennis Kucinich, a representative from my home state of Ohio that I have had the pleasure of meeting, is leading the way for the eventual impeachment and forcible removal from office of Bush and his war-mongering cronies.

The Bush Administration has inadvertently caused a global recession with their desire to wage a heartless war, and the signs are strong that the global community has finally come together and told these warmongers “Enough!” They are rapidly losing power as people are becoming more conscious and aware of the fact that they have been lied to by the controlled mass media outlets.

If you are looking for really good forex trading opportunities, I would be willing to bet that when the news releases come out stating things such as Bush’s impeachment or other things that peace-loving people the world over are working to create, there will be a large jump in the value of the dollar in the window of a day or two.

The really good news for the dollar and for the American people is coming from Japan. The Japanese are the largest holders of foreign dollar reserves (around $5 trillion dollars), and they have openly declared that they will no longer fund the American war effort.

The reason why I remain optimistic about the future of the American economy is because of the two main presidential candidates that have come forward to lead our country. In my mind (and in accordance with recent political data), the two main candidates in the 2008 presidential election will be Barack Obama and Ron Paul. Both of these men are benevolent leaders and are sufficiently equipped to rectify the errors of the Bush Administration, and Ron Paul has openly stated that he will abolish the Federal Reserve and the IRS to create a more prosperous America.

In the last paragraph, notice that I said the “American economy” and not the dollar. This is an important point, because many benevolent and powerful leaders are discussing new potential monetary systems for the United States that can lead to greater prosperity. The Federal Reserve system is based upon perpetual debt, and it is not sustainable because it steals wealth from the American people and puts it into the pockets of a few. This is all very good news, and so you may be wondering how this plays into your forex trading.

The dollar will continue to go down so long as our war is not stopped, and so for the next few months until the Bush Administration is forcibly removed from office or until they simply fade away to be replaced by a new leader, there will still be a downwards trend for the USD.

After our war ends due to internal political pressure from our benevolent leaders as well as financial pressure from the Japanese, many Japanese leaders are discussing the possibility of using their foreign dollar reserves to create a global humanitarian mission where they can bring knowledge and modern telecommunications access to countries that have not been able to provide it for themselves.

As this happens the American economy will regain strength because our trade balance will become much more sustainable. So ultimately for your forex trading, the downwards trend for the dollar will continue until these big benevolent changes occur, afterwards the American economy (as well as the global economy as a whole) will regain its stability.