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Scary Times



September 07, 2010 – Comments (6) | RELATED TICKERS: DOW

I don't know if most people "get it" but when you wake up and you read 'The euro is presently quoted with a 1.0% loss against the greenback.', it's pretty scary.  We're not talking about the Bot or some other 3rd world currency, but the EURO.  When currency's are moving down 1% a DAY, then 1% UP the next, you have to understand the market is CLUELESS!  These are not small moves and the volatility is sky high (I really don't care what the VIX says). 

I don't know where the market will be in six months, but none of the following numbers would surprise me (DOW 12,000; DOW 10,000; DOW 8,000) - actually DOW 12,000 would surprise me!


6 Comments – Post Your Own

#1) On September 07, 2010 at 9:03 AM, russiangambit (28.89) wrote:

It is scary because dollar up means market down. When dollar is down, the market is up and everything is just peachy as far as most market commentators are concerned.

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#2) On September 07, 2010 at 9:56 AM, dragonLZ (75.26) wrote:

I don't know where the market will be in six months, but none of the following numbers would surprise me (DOW 12,000; DOW 10,000; DOW 8,000) - actually DOW 12,000 would surprise me!

Based on what you say in your posts, I'd say you've been surprised quite a few times lately...

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#3) On September 07, 2010 at 10:23 AM, martynanasi (95.28) wrote:

I agree with you that when market volatility turns to big moves on either side yet seem to cancel each other out daily or weekly people have no clue. Economic numbers published daily now drive the market with negative sentiments and the only thing holding things together are Fed baks comments of support thereafter. Even great corporate earnings don't make a dent. I just wrote about similar issues you discussed on my blog today.


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#4) On September 07, 2010 at 10:52 AM, JakilaTheHun (99.91) wrote:

The Euro is an extremely flawed currency; hence the volatility.

I've said this many times before, but the international currency system is the biggest roadblock to economic recovery.  The Euro, in particular, is a disaster. It's a giant currency peg that redistributes wealth; creating lower interest rates and large current surpluses in Germany, Finland, Netherlands, and Austria; while destroying the trade balance and creating massively high unemployment in Spain, Greece, and Portugal.

I don't think it should be much of a surprise that the Euro ends up being this volatile.  Whether it's 'third world' or not is irrelevant; it's poorly designed --- plain and simple. 

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#5) On September 08, 2010 at 8:37 AM, kaskoosek (30.18) wrote:

I'd like to disagree with Jakila on the Euro is flawed part.


The world used to have one unified currency called the gold standard prior to Breton woods. This did not result in disaster. Why is using the Euro any different???


Countries could not easily devaluate their currencies, but is that such a bad thing?


The malaise in Greece and Spain is more related to high real wages caused by wasteful government spending. Remove that and problem solved. Real wages go down, private sector should theoretically replace the slack.


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#6) On September 09, 2010 at 10:32 AM, JakilaTheHun (99.91) wrote:


Did not result in "disaster"?  Are you serious!? 

It's a well-known fact that the Great Depression was only alleviated once the gold standard was eliminated. China, which was on the silver standard during the Depression, pretty much missed the Depression entirely.  Every nation that eliminated the gold standard immediately saw some economic recovery. If that's not proof that the gold standard was a disaster, then I don't know what would convince you! 


The great irony behind the gold standard is that it's not "free market" in any sense of the word.  It artificially inhibits the supply of money based on arbitrary trends in gold mining.  It's not a coincidence that in the 19th Century, we entered into devastating depressions every time gold became scarce, and then started to recover once a new gold rush took place. 


The gold standard is completely impractical in the modern world. This is not to say that a commodity currency could not work; but gold as a currency is completely dead.  If you want a metal-backed currency, a metals-basket makes a million times more sense than gold. The supply of gold is too low to keep up with the demands in a world with 7 Billion people. 

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