September 30, 2008
– Comments (8)
so the y-axis is... what exactly?
correlation is when one thing goes up, the other either goes up (this would be +1) or down (-1) and the strength of the association is measured by this.
It's a statistical thing, look up "pearson-product moment correlation coefficient" or "pearson's r"
"Pearson's correlation reflects the degree of linear relationship between two variables. It ranges from +1 to -1. A correlation of +1 means that there is a perfect positive linear relationship between variables. A correlation of -1 means that there is a perfect negative linear relationship between variables. A correlation of 0 means there is no linear relationship between the two variables. Correlations are rarely if ever 0, 1, or -1. A certain outcome could indicate whether correlations are negative or positive."
Interesting. What happened in May 2007?
Great question. The Fed was raising rates until it reached a peak in June 2007 at 5.25%. I recall the period just before then as a time of immense speculation... where experts were split on whether the next move would be to raise, hold, pat, or even start lowering rates. The reason for the uncertainty was that troubles were beginning to emerge on the housing front, and the very early signs of credit tightening were reasring their head. In that context, I think for the 2 assets to move contrary to historic patterns makes perfect sense.
I am still confused as to the recent strength of the US dollar, except that debts are denominated in dollars and being paid in dollars as delevering occurs. Perhaps I'm guilty of being in the same trade, being long GLD, CEF, FXA, MERKX etc, trying to use metals and currencies as a hideout. Longer term, the twin trade and budget defecits should doom the dollar.
Nothing to be confused about. From late July to early September we had an orchestrated manipulation event with the cooperation of the ECB and other allies to raise the platform from which the next round of dollar selling would begin. Today's remarkable strength in the greenback was simply a product of much more acute trouble today on the European front that here on this particular day. The Euro was hammered, which is the largest component on which the USDX index is based.
why would the dollar rally be over now? The euro economies are trashed, they're bailing out stuff faster than we are. Plus our Congress has balls.
Are you kidding me? The Fed spent or pledged no less than $1.1 trillion on the crisis in September alone!! Yesterday's dollar rally was on the Euro's weakness, but the greenback will dive the fastest and the furthest... mark my words.