Guest views are now limited to 12 pages. If you get an "Error" message, just sign in! If you need to create an account, click here.

Jump to content
  • CRYPTO REWARDS!

    Full endorsement on this opportunity - but it's limited, so get in while you can!

Bill Gross : Oil Determines Currency Movements


Recommended Posts

backdoc » December 15th, 2014, 5:18 pm   IMO

I LOVE THE INTERVIEW TODAY WITH BILL GROSS "THE BOND KING”.

HE SAID, “ OIL DETERMINES CURRENCY MOVEMENTS, CURRENCY MOVEMENTS DETERMINE THE SPREAD MARKETS, RISK MARKETS, HIGH YIELD MARKETS, THE POTENTIAL FOR BANKRUPTCY OR SOLVENCY NOT ONLY WITH COMPANIES BUT COUNTRIES !

ONCE YOU HAVE A MAJOR COMMODITY LIKE OIL THAT AFFECTS NOT JUST THE REAL ECONOMY BUT THE FINANCIAL ECONOMY IN MOTION LIKE IT HAS BEEN MOVING DOWN RAPIDLY THEN FINANCIAL MARKETS TRY TO RE-ADJUST”!


IF YOU HAD ANY DOUBTS THAT OIL IN FREE FALL CAN BE AN ISOLATED INCIDENT, THINK AGAIN!

SO JUST AS BILL SAYS, OIL AFFECTS CURRENCY MOVEMENTS. GOSH DO YOU THINK OZ HAS A CURRENCY MOVEMENT PLAN? MMMMM

CURRENCY MOVEMENTS THEN AFFECT THE SPREAD RATES THAT BANKS ARE CHARGED OR CHARGE! MMMMM

NEXT, ARE THE RISK MARKETS, MMMMM OHH, WELL THAT’S THE STOCK MARKET!

THEN WE GO TO THE HIGH YIELD MARKET, AHHH THE BOND MARKET! FOR GOODNESS SAKES, WHAT HIGH YIELD? WE ARE SEEING THE BOND YIELDS SHRINK! COULD THAT BE PARTLY WHY THE BOND KING WANTED TO LEAVE PIMCO IN AN ABRUPT MANNER? MMMM

AS EQUITY HOLDERS FLEE THE STOCK MARKET FOR SECURITY IN THE BOND MARKET, ARE THEY HEADED FOR A TRAP? MMMMM

WITH BOND YIELD CURVES FLATTENING OUT DUE TO THE SHRINKING OF YIELD, WHEN WILL THE BIG PLAYERS BEGIN TO EXIT THE BONDS?

A FEW MONTHS BACK THE FED. ANNOUNCED THAT THE MAY CHARGE PENALTY FEES IF TOO MANY WANT TO SELL THEIR BONDS! MMMM

THE OIL CURRENCY WAR IS BEING ORCHESTRATED LIKE A SYMPHONY! FIRST THE BRASS PLAY, THEN THE STRINGS, THEN THE WOODWINDS.

HIS FINAL STATEMENT IS THAT MARKETS TRY TO ADJUST!!

ONE IS THE LONELIEST NUMBER !

 

FYI : Bill Gross used to be with PIMCO and left to work for Janus Financial on September 24, 2014.  PIMCO is the largest bond company.



 

I say the bottom is about to fall.  I watched the interview this afternoon on CNBC.  Oil = black gold = currency :)  

 

I thought they were going to keep it at $65-70/barrel and drive it down after rv.. looking at this, rv no rv, oil is going down to $50 and possibly $40/barrel.. back to the old days.  Market is dizzy 

Edited by Nadita
  • Upvote 4
Link to comment
Share on other sites

http://www.cnbc.com/id/102266409

 

The real silver lining of falling oil pricesSaturday, 13 Dec 2014 | 11:33 AM ETCNBC.com
 
  
136
COMMENTSJoin the Discussion

We all know that the American energy revolution, led by the new technologies of hydraulic fracturing and horizontal drilling, has created a flood of new shale-oil and natural-gas production that has overwhelmed world markets and driven prices down by roughly 40 percent. End-of-week crude oil closed near $57 a barrel, and the national average gasoline price finished at $2.60 a gallon.


 
102229921-514344365.530x298.jpg?v=141750
Nikodash | iStock/Getty Images Plus

No matter what the naysayers are trying to sell, the new energy reality is unambiguously good for the U.S. and global economies. There may be some dislocations among countries, sectors, or companies, but the overwhelming impact is positive.

Read MoreThe stealth factor behind oil's decline: Ablin

In fact, the U.S. economy is already getting better. Recent numbers on jobs, retail sales, consumer confidence, small-business confidence, ISMs, and business investment point to a 3-percent growth rate rather than the tepid 2 percent pace of the prior five years. 

And it's likely that oil prices will stay low or drop a bit lower. 

The International Energy Agency's new forecast for 2015 shows a global reduction in demand growth of 900,000 barrels a day versus a previous projection of an increase of 1.1 million barrels a day. But U.S. production is expected to increase by 685,000 barrels a day next year. So besides American technological breakthroughs, this oil-price-drop story is a triumph of the free-market forces of supply overwhelming demand — all while the OPEC cartel dissolves before our eyes. 

As economist John Ryding puts it, "The oil supply curve is shifting outward at a faster pace than the oil demand curve, which argues against a rebound in oil prices in 2015."

But there is another important angle to this story: Looming behind the falling price of oil is the return of King Dollar. 

Since the middle of 2011, the dollar has appreciated by over 20 percent. Year-to-date it has gained 10 percent. Meanwhile, gold has fallen nearly 40 percent since 2011 and oil has dropped 40 percent in the past six months.

Read More$60 oil for the next five years: Economist

Since the U.S. dollar is the world's reserve currency, commodities are priced in dollars. Hence a strong greenback generates lower commodity prices — oil, gold, and everything else. This was the case during the Reagan 1980s and the Clinton 1990s. But when the dollar collapsed during the Bush 2000s, gold, oil, and other hard assets like housing exploded upward to the detriment of the economy.

Now, however, as King Dollar seems to be on the mend, commodity prices are falling and the purchasing power of money for consumers and businesses is going up. Those greenbacks in your wallet or bank account are worth more and can buy more on the open market. Inflation stays low. Global capital flows to America. 

Regrettably, neither the Bush nor Obama administrations particularly cared about the plight of the dollar. However, at a recent conference at the Federal Reserve Bank of Philadelphia, Paul Volcker, the greatest American central banker since World War II, argued that the main goal of the Federal Reserve is to defend the dollar's stability. He also said he doesn't understand why the Fed has adopted a 2-percent inflation target. He asked, "Do we want prices to double every generation?"

(It's important to note that, while the Fed can print excess money, the U.S. Treasury Department has statutory authority over dollar buying-and-selling operations. But then again, it's crucial to note that the U.S. Congress has constitutional authority over the value of our money.)

When Volcker was undersecretary of the Treasury during the Nixon years, he argued against the inflationary dollar devaluation that occurred when the U.S. broke the Bretton Woods link to gold. Though he never publically said it, there is ample evidence that when Volcker ran the Fed, he was targeting (or carefully watching) the movement of gold, broad commodity indexes, and the dollar as he restrained the money supply to conquer inflation.

Read MoreEnergy sector could surprise in 2015: Lee

Alan Greenspan often talked publicly about the significance of gold as an inflation proxy during his first three terms as Fed chair. But unfortunately, he gave up the discipline in his last years at the Fed. 

And today, no one in U.S. officialdom is talking gold, commodities, or the dollar. But the Fed has actually been tighter than people think, because only a small fraction of its quantitative easing bond buying and reserve creating circulated through the economy. And now it's given up QE altogether. And next year, it will begin to cautiously raise its target rate on the long road to normalization. This all helps King Dollar.

And with a new Republican Congress, there's the enhanced prospect of lower business taxes, which would grow the economy faster. More support for the dollar.

So I will argue simply that a strong dollar and lower oil prices are unambiguously good for the economy. Naysayers be gone. 

Commentary by Larry Kudlow, a senior contributor at CNBC and economics editor of the National Review. Follow him on Twitter @Larry_Kudlow.

Edited by Nadita
  • Upvote 1
Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.