Dollar Daze

I’m back to pondering the dollar and our place in the world. The dollar is down 4% since 7/17 and looks like it could be heading down another 5%, which I can virtually guarantee if the Fed pauses. http://stockcharts.com/gallery/?%24usd Perhaps this is what’s keeping oil alive as it has dropped 6% during that same time and the little bounce it took this week off a 10% dollar-adjusted correction makes sense in that light. So had the dollar not died, we would have been looking at $71 oil right now, well on the way to testing the adjusted 200dma of $70. http://stockcharts.com/gallery/?%24wtic I know it makes your head spin but think of it like this: If the dollar is 4.5% off it’s 200 dma then you need to move the ma of global commodities up 4.5% or value the commodity down 4.5% (same thing in a chart) to get a true idea of where you are. One of the first things I will do when I start a fund is get a nice computer model of this sort of thing as no one else seems to look at things this way. You can also, to a lesser extent, use the same logic to apply to the price of global stocks like Toyota, Total, Exxon or Google as they are widely enough held to have the net effect of costing US purchasers more on a weak dollar. So with oil stocks we have the double whammy of the commodity being held up by the declining dollar along with the stock becoming more expensive for the same reason. In that light, we have oil down 10% since the 17th, when it and the dollar peaked and has taken a Fibonacci 36% bounce before heading back down to retest 10% ($72.50) next week. As oil was at $69 mid June when the dollar was 4% higher, we can reasonably assume that $74 represents a 50/50 mix of dollar decline and the additional impact of the newest war (#3 on the charts with a bullet, already zooming past Chad and Nigeria in the international news and possibly on the way to passing Afghanistan). With the Fed Funds predictors at 80% on pause I’m looking for a surprise hike to boost the dollar, kill the markets and send oil back below $70 but that’s only going to work if we don’t get another hurricane alert, something that tends to happen during hurricane season… Why the Fed shouldn’t pause: Job growth is generally strong and unemployment is well below 5% There is accelerating wage pressure Q3 forecasts are generally still showing 12% corporate growth Commodity prices are obscene The S&P is up 30% since they started tightening. Inflation is real We need to borrow money! Why the Fed should pause: They may have already collapsed the housing market There is a 6-9 month lag on data, that’s 1.5% ago! Jobs growth may be slowing faster than expected After 17 consecutive hikes, a pause really wouldn’t hurt. The markets are begging for mercy! I think its 60:40 to tighten and the only reason they may pause is to avoid a real problem in real estate but, as I have said before, that problem for millions of homeowners is an opportunity for thousands of rich folks to double their fortunes in a good old fashioned land grab so it all comes down to who has Bernanke’s ear.