Saturday, August 16, 2008

The dollar "surge"

In the

Surge for the dollar as global fears rise

The dollar surged to a two-year high against the pound and a six-month peak against the euro on Friday, as fears about spreading economic gloom triggered a sell-off in commodities.

Against sterling, the US currency notched up its 11th consecutive day of gains – its longest uninterrupted rise in more than 35 years – as markets became increasingly convinced that the US was best-placed to weather the global downturn.

Isn't it nice to know that after 11 straight up days against the euro, a two year high against the pound, and a six month peak against the euro that Goldman Sachs now gives the all clear for the dollar?

Take a look at these weekly charts on the pound and the euro.$XBP-weekly.png$xeu-weekly.png

So Goldman gets the charts and the fundamentals wrong on the dollar, but now get's credit for calling the bottom after it already happened!

Wasn't it also Goldman Sachs that said "speculators" weren't responsible for the rise in oil?

We believe there is a fundamental misperception among many in the oil industry, Wall Street, the media, politicians and the general public that so-called 'speculators' are driving up the oil price to supposedly unjustified levels.

"Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big, bad speculator.

"In fact, commodity investors are helping to solve the energy crisis by speeding up the process of incentivising higher capital spending on a wide range of energy projects, while at the same time encouraging lower levels of demand by energy users."

Maybe it was Goldman's "predictions" that helped boost oil as high as it was. Now OPEC says the world is over-supplied by one million barrels a day and may have to cut output at their next meeting.

And now we see that the non-existent speculator was controlling 48% of the action in oil, a point that I have been belaboring as the gas has been going out of higher oil prices.

But Goldman had plenty of company being bearish on the dollar and bullish on oil. Just take a look at some of these figures from the hedge funds the last couple of months. Yes, those Masters of the Universe that said oil was heading to $200 and our dollar was confetti:

July was the worst month in eight years for the hedge-fund business, according to Hedge Fund Research, a Chicago firm that tracks the business. Funds lost 2.8% on average, worse than the 1% drop in the Standard & Poor's 500, according to the firm. So-called macro hedge funds, which bet on broad trends in the dollar, commodities and other areas, were the biggest losers, dropping 5.5%. The losses appear to be continuing: The funds are down another 3.7% so far in August, bringing the six-week loss to more than 9%.

"Hedge funds have maintained exposure to commodities and global currencies" despite the recent falloff in commodity prices, says Ken Heinz, president of HFR. "Those were a big part of the gains for these funds for the past year, but now it's costing them."

Among the hedge funds losing money lately: New York-based Jana Partners LLC's flagship $5 billion fund, which entered July up more than 4% for the year, fell 9% during the month, hurt in part by falling prices of energy stocks. The Ospraie Fund has declined by more than 20% this year due to commodity bets, dropping 13% in July alone.

Anyone think more than a few of these guys are blowing up again? Unlike Goldman Sachs, these guys don't have the luxury of knowing the positions of everyone that clears through them.

Maybe that's why the hedge funds with the same strategy, suffer worse than Goldman.

Goldman get's the heads up on who panics first!

Remember the daytraders that used to try and scalp a few fractions by trading in front of large orders? Now those orders are all broken up and dispersed throughout the day. Where are the daytraders now?

Why is going public?

Traders want the dark pools!

Why does Goldman offer it's services to so many hedge funds?

If Goldman is going to fish in the dark pools, they'll at least get the benefit of sonar!

But their clients get access to Goldman's calls, research, capital, banking and IPO's. And in the world of Wall Street, that's more than a fair deal.

I just like to get sensational with Goldman.

Which is also why three firms downgraded Goldman this week. Which means, that I'll buy it for a trade under 160.

They're still shooting fish in a barrel.

Even if they've gotten oil and the dollar wrong!

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