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Rogers, who is currently long the yen, notes that the dollar has been declining despite events that would normally trigger a global flight to safety.Given that Jim Rogers's putting his solvency at stake here, it might be meaning that he is extremely confident about his bet, and that the size of it is probably quite big.
He says that if the dollar holds here it could rally as much as 20%, but "if it goes down 3% or 4% from here, I would have to sell and get out and hope I'm still solvent."
Rogers sees a decline in the dollar to historic "multi-multi decade new lows" as a long-term inevitability, but says the time frame for a collapse in the greenback may be sooner than previously thought.
"Somewhere along the line we're going to have a tipping point for the dollar, then it's all over," he offered. "I thought it would happen in a few years; maybe it's going to happen in a few weeks."
On November 3, 2010, the Federal Open Market Committee (FOMC) decided to expand the Federal Reserve’s holdings of securities in the System Open Market Account (SOMA) to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. In particular, the FOMC directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to purchase an additional $600 billion of longer-term Treasury securities by the end of the second quarter of 2011.1- What is QE 2?
The FOMC also directed the Desk to continue to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities. Based on current estimates, the Desk expects to reinvest $250 to $300 billion over the same period, though the realized amount of reinvestment will depend on the evolution of actual principal payments.
Taken together, the Desk anticipates conducting $850 to $900 billion of purchases of longer-term Treasury securities through the end of the second quarter. This would result in an average purchase pace of roughly $110 billion per month, representing about $75 billion per month associated with additional purchases and roughly $35 billion per month associated with reinvestment purchases.
Nov. 5 (Bloomberg) -- [...] “Many countries are worried about the impact of the policy on their economies,” Vice Foreign Minister Cui Tiankai said at a press briefing in Beijing today. “It would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt.”4- Where from here?
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“Even some advanced economies are worried and concerned about that policy,” Cui said. “I remember that the finance minister of an advanced economy said that if you print too much money that is an indirect manipulation of the exchange rate.”
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“The Fed owes us some explanation about their recent decision on monetary policy,” Cui said. “We hope that as the main reserve currency-issuing country, that country will adopt a responsible position on this matter.”
Nov. 5 (Bloomberg) -- “Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers, 68, said in a lecture at Oxford University’s Balliol College yesterday. “All he understands is printing money.”
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“It didn’t work the first time, it’s not going to work the second time,” he said in an interview with Bloomberg News. “It’s adding up staggering amounts of debt, staggering amounts of debased currencies. It’s going to cause more distortions, and we’re going to have more currency turmoil.”
The U.S. and U.K. governments’ taxpayer-sponsored bailouts of troubled banks were “unbelievable economics” and “terrible morality,” he said.
Nov. 16 (Bloomberg) -- Republican lawmakers in the U.S. House and Senate said they want to compel the Federal Reserve to focus solely on controlling inflation, upending a congressional mandate that’s shaped monetary policy for more than 30 years.
U.S. Representative Mike Pence, chairman of the House Republican Conference, said he plans to introduce a bill today requiring the Fed to promote price stability while no longer seeking maximum employment. Senator Bob Corker, a member of the Senate Banking Committee, backed a single mandate for the Fed, saying the Fed’s dual roles are “confusing to the market.”
The central bank is currently required by a 1977 amendment to the Federal Reserve Act to promote stable prices and full employment. The Fed’s Nov. 3 decision to buy $600 billion of Treasuries in a bid to reduce unemployment has spawned critics, including officials in China, Germany, and Brazil, and U.S. economists such as John Taylor and Michael Boskin.
Corker, who met with Fed Chairman Ben Bernanke yesterday, said in an interview today that the Fed’s dual role “can create sort of a bipolar mentality,” and that his proposal would not prevent the Fed from addressing any threat of deflation or its program to buy Treasuries.
Congress should consider setting a target for inflation because the Fed’s actions can cause “a lot of confusion for all concerned,” said Corker, from Tennessee.
“The Fed’s dual mandate has failed,” Pence, of Indiana, said in a statement yesterday. He wants the proposed legislation to be considered in Congress’s current lame-duck session, said Matt Lloyd, the conference’s communications director.
Pence joined critics yesterday after an open letter was sent by former Republican government officials and economists, asking Bernanke to halt the expansion of monetary stimulus.
“It’s time for the Fed to be solely focused on price stability and not the recently announced QE2,” said the 51- year-old lawmaker. Pence said the Fed’s second round of quantitative easing will monetize the U.S. government’s debt and ignite inflation. [...]
We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.Insane Fed Should Beware Unquantifiable Outcomes: Mark Gilbert
We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.” In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.
We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.
The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.
Oct. 28 (Bloomberg) -- Albert Einstein defined insanity as doing the same thing repeatedly and expecting different outcomes. The crazy gang at the Federal Reserve should heed those words when debating how much more market manipulation to inflict on the world of fixed income.Fed Risks Its Credibility on a Bowlful of Mush: Caroline Baum
The worrisome thing about so-called quantitative easing -- a concept still novel enough to mean whatever the Humpty-Dumptys in central banking want it to -- is that its consequences remain unquantifiable, and the perceived need for more central-bank purchases of securities should make investors uneasy.
Fed Chairman Ben Bernanke said in an Oct. 15 speech that it’s difficult to work out the “appropriate quantity and pace of purchases and to communicate this policy response to the public.” He also said that “nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.”
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“Nobody understands QE,” says Fred Goodwin, a strategist at Nomura International in London. “We have no idea how inflationary it really is. A patient juiced up on QE wants to party and it does not matter what anyone says. Don’t worry about what central banks are worried about; worry about unintended consequences.”
‘Dangerous Gamble’
Fed skeptic Thomas Hoenig of the U.S. central bank’s Kansas City branch called it “a very dangerous gamble” in a speech this week. “We risk the next crisis four or five years from now.” Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co., said the bond-buying program “will have costs and unintended consequences.”
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Nov. 1 (Bloomberg) -- [...] Either the Fed is operating under a misconception about how QE2 will reduce unemployment and raise inflation, or it has failed to communicate the transmission mechanism to the public. Neither is a plus.
About the best thing anyone can say about the well- advertised and anticipated QE2 is that it won’t do much good. The worst thing is that it will inflate asset prices, which we don’t call inflation.
Because Fed chief Ben Bernanke has been unwilling to admit the role low interest rates played in puffing up the housing bubble, he sees little risk from further easing, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
At the same time, the Fed’s output gap models, which measure the difference between actual and potential growth and were “violently wrong in 2003 and 2004,” reinforce the majority view that deflation is the real threat, Stanley says.
Then there’s the Fed’s stated tactic of raising inflation expectations to lower real interest rates, a flawed concept even though it has succeeded splendidly in the short term.
In the two months since Bernanke first hinted at QE2 in his Jackson Hole, Wyoming, speech, five-year inflation expectations, the Fed’s preferred measure extrapolated from the yield differential between nominal and inflation-indexed Treasuries, have risen from about 2 percent to 3 percent.
So taken is the Fed with the notion that higher inflation expectations are the route to salvation that it has commissioned research on the subject. Last month, three Fed Board economists published a paper claiming that with overnight rates near zero, an oil price shock would be a plus for growth.
The “burst of inflation” from an increase in oil prices stimulates interest-rate sensitive sectors of the economy, the authors claim. (Aren’t higher oil prices a relative price increase unless the Fed prevents other prices from falling?) “In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion,” they write.
Where are the speculators when you need them?
Ten years ago I wrote a column titled, “Fed Chairman Ali Naimi Has a Nice Ring to It,” referring to Saudi Arabia’s oil minister. The piece debunked the idea that oil prices can do the central bank’s job.
Maybe I was wrong. If you believe the research, we should be rooting for one of those old-fashioned oil shocks, circa 1973 and 1979, to fix what ails the U.S. economy!
Raising inflation expectations to lower real long-term rates has two flaws. First, it assumes nominal rates don’t move. (The nominal rate consists of a real rate plus a premium for expected inflation.) Nominal rates could easily rise in sync with inflation expectations, leaving real rates unchanged.
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The good news is he’s got plenty of fuel. The bad news: His only rations are gruel.
This is way back in 1970, when I was still new to markets and the business. I had all my money in puts in January, which people thought was nuts. I sold my puts the day the market hit bottom and tripled my money. Two months later, I sold short several companies — but in the next two months, markets kept rallying, stocks kept going up. I was wiped out and lost everything. Interestingly, the companies I'd short also went bankrupt over the next two years, but I was wiped out first.Contrary to what most pundits believe, timing is critical when investing/trading. By the way, I don't make any difference between the two, I believe those who think they are investing in the markets are fooling themselves, they are just speculating and get stuck in losing trade for too long.
This episode taught me that i didn't know enough about markets and market timing. I thought I was smart but I didn't know better.
"Gold has been going straight up, and most things that go straight up eventually have to rest for a while. So, maybe it will go another few points higher, but I suspect it will rest."
[...] Legendary investor George Soros warned late last week "we have just entered Act II" of the crisis, declaring "the collapse of the financial system as we know it is real, and the crisis is far from over."Soros is a Keynesian Ignorant and needs to educate himself, along with anybody who thinks this way, by reading Rothbard's America's Great Depression
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"we find ourselves in a situation eerily reminiscent of the 1930s," Soros declared. "Keynes has taught us budget deficits are essential for counter-cyclical policies, yet many governments have to reduce them under pressure from financial markets. This is liable to push the global economy into a double-dip."
as well as Benjamin Roth's The Great Depression: A Diary
. These are two critical pieces that everybody should read in order to avoid being brainwashed by governments' and Keynsesian propaganda. I will publish a few posts about this great work that is Benjamin Roth's - eye opening, simple and historical.“Regardless of extent, it should generate feelings of optimism. At its peak, the President’s popularity will be higher, the government will be taking credit for successfully bailing out the economy, the fed will appear to have saved the banking system and investors will be convinced that the bear market is behind us.”
It's just a matter of waiting and holding now...
I am remember a few years ago reading Jim Rogers say that he never buys options because 80 or 90% of them ends worthless. I would disagree with him on this one! I am happy to have bought this options, because they insured my portfolio for about 4 months. If I had shorted the markets instead of buying these options, I would have made major losses on this portfolio instead of making big gains.On cotton:
My opinion on options is the following: Options are very good deals when you are very good at timing (big gains!) and also when you are completely WRONG (limited losses)! This had previously happened to me about 18th months ago, when I had bought options on some European companies, thinking its shares should rise a lot and not be affected by the US subprime collapse. Well, the shares actually collapsed to about 40% less than the strike of my calls! So I couldn't be more WRONG on the short term ! Should I have bought the shares instead of the options, I would have lost about 4 times more money than on the options.
Born in 1942.Finally, here's the excerpt from the Bloomberg interview:
In 1970, Rogers joined Arnhold & S. Bleichroeder, where he met George Soros. That same year, Rogers and Soros founded the Quantum Fund. During the following 10 years the portfolio gained 4200% while the S&P advanced about 47%.
In 1980 [at age 37], Rogers decided to "retire".
“I would urge you to sell any sterling you might have,” Jim Rogers, chairman of Singapore-based Rogers Holdings, said in an interview with Bloomberg Television. “It’s finished. I hate to say it, but I would not put any money in the U.K.”Here's another post worth reading, on the Telegraph this time: Gordon Brown brings Britain to the edge of bankruptcy:
The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.The ridiculous and shameless Gordon was already famous for this "I will not allow house prices to get out of control" quote in 1997 but I hadn't heard about this one, which has been dug by many on the web during the past few days:
"A weak currency arises from a weak economy, which in turn is the result of a weak government" (Gordon Brown in 1992)The GBP has crashed against all major currencies: 30% against the EUR, about 25% against the USD, and about 50% against the JPY! Doesn't that sound like the kind currency move you hear about in developing countries?
US & UK ECONOMIC FAILURE – RUNNING ON SCHEDULE
The death of the AngloSphere is unstoppable and on course. The two nations suffer from imperial over-reach, from corrupted paper markets in everything conceivable (stocks, bonds, housing, commodities). They both suffer from a devastating backlash related to nationwide dependence upon a housing bubble as an economic foundation. What a very sick concept!RECOGNITION OF FAILURE – PAIN OF ISOLATION
The year 2009 will be marred by recognition of the Untied States and United Kingdom as failed states, beyond remedy. My description is for the US-UK to have morphed into crime syndicate control of government bodies in a widespread sense. They have strangled their hosts, and sucked them dry. The nations of the world will embark on a mission to protect themselves from the imploding giants. The natural progression in failed nations is from democracy to fascism, from capitalism to the Fascist Business Model, from free societies to martial law. A tragedy has already begun. It will run its full course.
