The prickly pear cactus jelly threat… and TFN’s 2009 prediction for the euro
Today's Financial News - Posted February 17, 2009
The “contrarian” havens… commodities, foreign markets, foreign currencies… are crashing right alongside U.S. equities. Here’ where we see the euro trading by December 2009
by J. Christoph Amberger
Baltimore—TFN: Yesterday morning, I endangered national security.
Catching an early flight out of Albuquerque, New Mexico, where my son had been fencing at the Junior Olympics, I was caught smuggling a suspicious quantity of an equally suspicious substance through security. Latexed fingers pulled the newspaper-wrapped contraband from spare t-shirts and books:
A 5-ounce jar of prickly pear cactus jelly.
I had forgotten about that as I scrambled to get us out the door on time. Two ounces over the limit. But I was given choices. (This is America, after all.) I could go back and check the bag at the ticket counter. Or hand over the jar.
Given the throngs of shoeless penitents getting themselves processed like so many heads of cattle, and the $15 check-in fee per bag, I opted for the TSA confiscating my prickly pear jelly.
We ended up sitting right next to the flight attendant’s fold-out chair. She kept her bag at her feet. When she rummaged through its contents, I couldn’t help but notice a footlong can of hairspray in it. Only the disapproving looks of my teenage son (already embarrassed by his father’s very presence) kept me from converting a small flashlight, a bit of pocket lint and the purloined hairspray into a makeshift flamethrower.
*** Whatever buoyant effect the megaton of pork cracklins signed into law by the President was supposed to have had, the markets wanted none of it. The North American indexes headed straight down right after the morning bell and are remaining in -3% to -4% territory as I write.
But those who tethered their “contrarian” hopes on oil, metals, and foreign markets and currencies are in the same boat as U.S. stock investors.
Crude oil for March delivery once again dropped by a mind-boggling margin today… 7.4%, to $34.72 a barrel, bouncing up from $34.69. Oil prices are down 20% this year already.
The euro, too, fell below $1.26 for the first time since early December. I had predicted this drop three weeks ago… but was a little ahead of my time. But this is not the worst it’s going to be. Look at the desolate state of some major European banks. The merciless dependence of the eurozone economies on exports. The accelerating real estate foreclosure. The collapsed domestic demand.
Given the downward trajectory of the euro from its $1.60 peak… and the example of the British pound sterling… I now peg the downside of the euro at parity with the dollar by December 2009.
*** Dollar demand will spike sharply in the weeks ahead, as Japan’s economic news fully filters through to investors.
Japan just reported that its GDP contracted by an annualized 12.7% in the last quarter. For some perspective: Translated to the U.S. GDP, that’s more than twice the amount of the Obama stimulus package…
The artificially high yen, up 23% against the greenback since last year, has accelerated the collapse in demand for Japanese goods.
(Only U.S. financial newsletter editors believe that a strong currency is a good thing for one’s economy.)
Japans exporters are feeling the pain from the stronger yen. With the pivotal sector of the Japanese economy hit this hard, I believe it’s just a matter of time that the Bank of Japan starts actively intervening in the currency markets again.
They will try to reduce the value of the yen by aggressively buying dollars.
While my colleagues in the dollar bear camp keep crowing about the imminent Demise of the Dollar, I’m going on record with my prediction that until 2012, the greenback will once again be the safe-haven currency of the world—no matter how ludicrous the new debt incurred by the Obama Administration will be.
Next Article: Transocean: Adjusting to change
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