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Or you can now use TapaTalk again!Fridays and the funds
- Thread starter Dakota
- Start date
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Generally on Fridays, big account players take money off the table at end of day because ofpotential global events occuringoverthe weekend. They are hot back in Monday morning if there is no crisis.Remember, it is to theiradvantage to drive the market both up and down for them to make money. One canplay in both directions, less us!
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Friday is actually the best day of the week average-wise, with Wednesday close behind. Monday is the worst.
Right now we are in the blue column (> 200 MA) so look at the black and blue bars.
Chart provided courtesy of [url]http://www.sentimentrader.com[/url]
coolhand
Well-known member
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Just read this opinion piece. It's good food for thought concerning the dollar.
http://www.thestreet.com/comment/aaronpressman/10193031.html
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Itwas a bit disurbing that we had great economic news and the dollar fell again. When Warren Buffett said earlier this year that the dollar should continue to fall when the economy was obviously turning around, I thought he lost it. He's a lot smarter than I am because I don't know how this could happen.
coolhand
Well-known member
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If I understand most of what I've read of late, our dollar is being kept low not just by our own economic policy (we are deliberately letting it fall), but by the huge amount of foreign currency (asia) buying our bonds and supporting our national debt. Asia, as I understand it,keeps their currency pegged to ours so that their products continue to be cheaper than ours and we keep buying them.
We have a growing trade deficit because of this and that's why we let the dollar fall. We seem to think we can fix our trade deficit by dropping the dollar, but as long as Asia is pegged to our dollar I don't see how this can happen.
Also, by buying our bonds Asia helps keep our interest rates low and that in turn continues to fuel our spending. Have you noticed how the bond market kept falling in spite of the federal reserve raising interest rates? I think that's part of the equation.
Europe on the other hand is paying a high price in all of this as their currency continues to get stronger, thereby making their products more expensive.
This is why I monitor global economics. It really does affect our internal market. Our currency is the global standard. It's been this way ever since Nixon took our dollar off the gold standard in 1972.
If anyone out there sees a flaw in my analysis, please let me know. I do not pretend to be an expert in this area, but I am trying to understand it.
coolhand
Well-known member
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Pete1 wrote:
That's what I think too.
It seems we are either playing monetary chicken withAsia inorderto reverse our trade deficit bycontinuing to drop our dollarin an effortmake our products more attractive overseas(as long as they are willing to keep buying our bonds it won't work)or it's a case of if you scratch my back I'll scratch yours meaning we can keep spending like crazy (the federal government) as long as Asia keeps buying those bonds andwe keep buying their products.
The problem is this. It gets more risky for Asia to keep buying bonds because as our currency drops they incur increased risk oflosing money. But they may stop buying bonds at some point and in fact there are signs it is already happening. They have dramatically cut back on bond buying of late according to some article I read recently. It is also possible they may want to liquidate their holdings to address their own domestic issues. There is talk of that as well.
If that happens theremay be a mass exodus out of bonds causinginterest ratesto shoot up and the bond yield to increase. That is why I believe ifyou are going to park your money somewhere put it in the "G" fund and not "F". At least you are practically guaranteed to get a return in the "G" fund. Also, if interest rates start rising consumers will begin to curtail spending. That has its own ramifications. Having said al this, I will also say that despite my previous statements the bond market is still not nearly as volatile as "C", "S", or "I", but we need to understand the potential for loss of capital.
I have been watching the bond market for some time and I can tell you that in my opinion it is a very pricey place to be. Itis wound up like a spring and is just waiting to unwind. Some of that occured Friday, but it can go a lot further under the right circumstances.
Understand, this is all speculation at this point. I am not saying anyone should shun the "F" fund ( although I don't like it right now), but we need to be aware of the potential pitfalls inherent in our allocations.
The "I" fund mayalso be affectedin this scenario, but I think that even if Asia pulls back, unless we change our stance on the dollar it may not matter (I think that's what the article is saying, we want to maintain a weak dollar). We want to export more products. A weaker dollar can do that, but carries other risks as described above.
The mechanisms that underpin our economy are complex indeed and subject not only to our own monetary policies, but those of foreign governments as well. You can bet I'll be keeping on eye on it and if anything changes I'll let you know.Similar threads
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