Counter Punch: Fidelity Out With a Positive Piece on the Dollar

“Fidelity Investments, the Boston-based fund company that oversees $1.64 trillion, is bullish on the U.S. currency just as Pacific Investment Management Co. and Goldman Sachs Group Inc. are warning investors against buying.

“The value of the dollar is close to a bottom,” John Carlson, manager of the Fidelity New Markets Income Fund, wrote in a report yesterday on the company’s website. “I’ve never been more optimistic on the long-term prospects of the U.S. dollar and U.S. economy.”

America’s currency will strengthen over the next 18 months to three years because of competitive advantages in the U.S. including the rule of law, a strong education system and labor mobility, Carlson wrote. The greenback is cheap now, according to the report.

The dollar has dropped 13 percent in the past year against a trade-weighted basket of six currencies, even after rallying more than 3 percent from a 33-month low set May 4. Pimco and Goldman Sachs argue that overseas markets will lure money managers in the coming years with faster economic growth, higher interest rates and stronger government finances.

The U.S. currency slid 0.5 percent against the euro today to $1.4151 as of 12:50 p.m. in Tokyo.

Alternatives to Treasurys…”

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“Federal Reserve Bank of Minneapolis President Narayana Kocherlakota trimmed his forecast for U.S. economic growth and raised his outlook for unemployment slightly while calling for a tightening of monetary policy this year.

Unemployment will be “close to 8.5 percent” at year’s end, Kocherlakota said in a speech in Rochester, Minnesota, an estimate contrasting with “between 8 percent and 8.5 percent” in a May 11 speech. Economic growth will be “around 3 percent,” compared with “between 3 percent and 3.5 percent.”

“Given the depth of the recession that we experienced, this rate of growth is disappointing,” Kocherlakota said.

Central bank officials are discussing how quickly to begin tightening policy after completing the purchase of $600 billion in U.S. Treasurys by the end of June. They are also considering a strategy for how to remove stimulus, with a majority favoring ending the policy of reinvesting proceeds from maturing securities first before raising interest rates or selling assets, minutes of their April 26-27 meeting showed last week.”

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“(Reuters) – Gold eased on Thursday after a sharp sell-off in the silver market, but still remained within sight of three-week highs, supported by investors seeking perceived havens from the worsening euro zone debt crisis.

Europe’s policy options to avert a Greek debt default appeared to be dwindling, sparking fears of a chain reaction affecting other heavily indebted countries in the 17-nation currency bloc.

The euro rose to one-week highs against the dollar after a report thatChina was interested in buying “bailout bonds” for Portugal, although ongoing concern about the lasting impact of the crisis pulled the currency off session highs.

This in turn helped the dollar pare gains and stripped as much as 4 percent off the silver price, denting gold.

Spot silver fell to a low of $36.30 an ounce before recovering to trade down 2 percent at $37.12 by 5:43 a.m. EDT, while spot gold was down 0.1 percent at $1,520.89 an ounce, after hitting $1,532.00 on Wednesday, its strongest since May 4.”

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“Danske Bank has a nice piece of research out that provides the other side of the bearish view on all the recent economic data.   They actually believe the data in the near-term will continue to be very weak.  Specifically, they say the ISM data is likely to mean revert (something I wholeheartedly agree with).  But they think it’s incorrect to get overly bearish because of this.  In fact, they say it will result in a “false growth scare”:

“We believe that  we are going to see more signs of weaker activity from different indicators in the coming months. For example, the US ISM manufacturing index is expected to decline in coming months as indicated by the Philadelphia Fed survey. Declines in PMI in other countries such as Euro Flash PMI for May point to a slowing global industrial cycle, which should become visible in the US as well.

Supporting the case for a stronger decline in the ISM manufacturing index is also that hard data have been much weaker than suggested by the ISM index. Firstly, GDP growth was actually below trend in Q1 rising 1.8% q/q annualised. Last time there was such a large divergence between GDP growth and ISM was in 2004 and subsequently we saw a quite fast decline in the ISM index (see chart on page 1). Secondly, industrial production has already slowed. The three-month annualised growth rate was only 1.8% in April, down from the strong levels in mid 2010 of 9.5%. “

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“Nomura’s top economist Richard Koo appeared on Bloomberg this morning, talking about his new bearish line on China.

The key points are these:

• China is serious about trying to prick the housing bubble. The government realizes that apartments in the city are way too expensive.
• Developers have already seen their access to funds cut off domestically, and so they’re racing around the world looking for more money. Still, some will go bankrupt, and banks will be left holding the bag with bad debt.
• BUT, since China can’t afford to see the economy go bust, fiscal stimulus will be ramped up (more roads, bridges, railroads, etc.).

In a nutshell: Beijing is trying to prick one bubble (real estate) and continue a boom in infrastructure.

Good luck.”

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“Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) andRoyal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.

The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.

Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.

“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”

The Federal Reserve Bank of New York, which oversaw ST OMO, posted aggregate data about the program on its website after each auction, said Jeffrey V. Smith, a New York Fed spokesman. By increasing the availability of short-term financing when private lenders were under pressure, “this program helped alleviate strains in financial markets and support the flow of credit to U.S. households and businesses,” he said.”

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“Oil dropped from a two-week high on speculation that the earlier price increase wasn’t supported by the pace of economic recovery.

Futures reached their highest since May 11 earlier today after a U.S. Energy Department report yesterday showed supplies of diesel and heating oil fell to their lowest since April 2009. The data also showed inventories of gasoline increased by the most since February. U.S. durable goods orders fell more than forecast in April, a Commerce Department report showed.

“Yesterday’s data was more bullish for products than for crude, but still not bullish enough to say that fundamentals are tight,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “In the last weeks we’ve seen macroeconomic data worse than expected. The oil demand-supply situation is relaxed, and there’s no danger of any shortage.”

Crude for July delivery on the New York Mercantile Exchange was down 47 cents, or 0.5 percent, at $100.85 a barrel at 10:39 a.m. London time, after gaining as much as 58 cents to $101.90. Brent crude for July settlement fell 68 cents to $114.25 a barrel on the ICE Futures Europe exchange in London. The contract yesterday climbed $2.40, or 2.1 percent, to $114.93, the highest settlement since May 10.”

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The white tiger night to the rescue.

“The euro rose against the dollar and the yen on speculation China will increase its purchases of European bonds, easing concern that the region’s sovereign-debt crisis will spread.

The single currency snapped four days of losses against the Swiss franc, climbing from a record low. The Financial Times reported that European Financial Stability Facility Chief Executive Officer Klaus Regling said Asian investors, including China, may buy Portuguese bailout bonds when the EFSF sells them in June. Sweden’s krona gained against the dollar and euro as a report showed consumer and business confidence rose more than economists predicted this month.

“We may have moved, with this Asian support, a little back to reality, which is not quite as imminently gloomy as a lot of people wanted to believe,” said Beat Siegenthaler, a strategist in Zurich at UBS AG, rated as the world’s third-largest currency trader by Euromoney Institutional Investor Plc.

The euro rose 0.6 percent to $1.4165 at 10:44 a.m. in London. It weakened to $1.3970 on May 23, the least since March 17. The common currency advanced 0.3 percent to 115.85 yen. The dollar traded little changed at 81.79 yen. Against the Swiss franc, the euro rose 0.4 percent to 1.2339, after yesterday dropping to a record low of 1.2271.”

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So perhaps there is too much worry over Greece….we will have to see.

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Why should you be interested? Well if this continues then perhaps Bernanke is right about transitory inflation….

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(Reuters) – The day after bringing its biggest case of oil market manipulation ever, a U.S. regulator warned those trying to rig the commodities markets that they will be hunted down.

“We’re watching and we’ll come and get you,” warned Bart Chilton, a commissioner for the U.S. Commodity Futures Trading Commission.

Chilton’s comments came after Arcadia, one of two firms sued on Tuesday for allegedly reaping $50 million by illegally manipulating oil markets in 2008, pledged to fight the CFTC.

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It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.

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It is no secret that Zero Hedge follows every utterance by Goldman Sachs (Morgan Stanley, not so much – it is sad just how irrelevant MS has become when it comes to swaying any opinion at all) as pertains to the firm’s outlook on various commodities, simply because by the very nature of the firm’s trading operations, whereby its prop desk (yes, Goldman’s prop desk is alive and well) controls a substantial amount of the actual commodity outstanding (in either paper or physical form) and then advises clients to do the opposite of what the firm itself is doing. In essence: using its economy of scale (or monopoly, however one wishes to define it), Goldman can sway the market this way and that with one simple “client” note. The recent fiasco whereby Goldman downgraded Brent on April 12 only to upgrade it two days ago, using the very same assumptions, is nothing more than just the latest example of what we have claimed over and over is outright market manipulation. Today, we find we are not alone after Oppenheimer’s Fadel Gheit accused the firm of precisely the same thing on Bloomberg TV: “Unfortunately, without repeating the names of the brokers, everybody knows who the usual suspects are. These are the people in 2008 that were making a bet on $200 oil. This is another form of market manipulation in my view. Whether or not they are influencing the market and manipulation could be a stronger word, but they are influencing the market. They are doing things that could be beneficial to them but harmful to the rest of us. That is where government comes in and says stop, enough. You have a Ferrari or a Maserati and can go 120 mph, but guess what? Those of us who can only go 60 miles per hour will be pulverized. That is where the government has to come in and say there is a speed limit here, but that is not happening.” Of course, if Oppenheimer was large enough and influential enough to do what Goldman does, we are 105% confident Fadel would be singing a totally different tune.

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Down 0.5% as you read this.

As a result, futs are up 4.

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No. Ticker % Change
1 AGQ 6.56
2 PSLV 4.67
3 ERX 4.28
4 BDD 4.15
5 CTNN 3.96
6 SGG 3.71
7 LD 3.67
8 UCD 3.61
9 DYY 3.48
10 UYM 3.45
11 PXJ 3.44
12 UCO 3.27
13 SLV 3.27
14 GAZ 3.23
15 DBS 3.14
16 XES 3.13
17 DIG 3.11
18 NIB 3.03
19 TNA 2.98
20 DAG 2.86
21 XIV 2.82
22 SOXL 2.79
23 EGPT 2.66
24 IEZ 2.56
25 EPU 2.53

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Get this gent’ a pint stat !

[youtube:http://www.youtube.com/watch?v=P95MstGurYU 450 300]

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“(Reuters) – Asian stocks rose on Thursday, led by commodity and consumer related sectors, with steadier commodity markets and the euro’s rally above $1.41 bringing some investors back into the markets in search of bargains.

The risks surrounding the euro have not eased much, with Greece fighting to avoid a debt restructuring that could have a big ripple effect across other high risk-European countries struggling with gaping fiscal deficits.

Worries about Europe along with fallout from a spike in volatility in precious metals and crude prices have made investors scamper back and forth between shunning risky assets to scooping them back up, albeit in reduced trading volumes.

Japan’s Nikkei share average climbed 1.1 percent .N225 in early trade, with camera maker Canon Inc (7751.T) leading the charge. The stock was up 5 percent after it said on Wednesday that would buy back 50 billion yen ($610 million) of its own shares.”

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“WASHINGTON—U.S. regulators soon may extend their reach overseas and impose restrictions on foreign governments engaging in some financial transactions in the U.S.

Foreign central banks, sovereign-wealth funds and international organizations like the World Bank could be subject to U.S. rules intended to reduce risk in the financial system. As part of last year’s financial-regulatory overhaul, regulators gained power to scrutinize and regulate market participants engaging in swap transactions, including those backed by foreign governments.

Swaps are a type of derivative used to hedge risk and essentially are agreements between two parties for payments pegged to the performance of stocks, bonds, commodities or indexes. The proposed regulations would require foreign entities to conduct swaps trades on an exchange, potentially post margin and hold enough capital to absorb losses if the trade goes sour.

The prospect of such requirements is triggering a backlash from government-backed foreign institutions, including the European Central Bank, Bank of France and China’s sovereign-wealth fund, China Investment Corp. They argue the U.S. is overstepping its authority and should exclude them from oversight.

“It would be inappropriate to be subject to supervisory requirements by a non-EU authority,” the ECB wrote in a May 6 letter to regulators that was reviewed by The Wall Street Journal. “We are concerned that external control of our activities might not be sufficiently sensitive to the practice of managing foreign reserves and could thus frustrate the ECB’s performance of the mandate that it has been given.” A spokeswoman for the ECB declined to comment.

The Commodity Futures Trading Commission and Securities and Exchange Commission, which are writing the swaps rules, are grappling with the issue and have reached out to the Federal Reserve for guidance, according to government officials. Regulators could exclude some entities depending on how well-regulated and well-capitalized the entities are, these officials said, but added no decisions have been made.”

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