On the US stock markets, "insiders" have been selling ever since the rally began in March and are now increasing their sales as the markets have faltered over the past two weeks. Now, the global financial "insiders", the ECB and the US Fed, are making preparations in advance for what they surely see as the NEXT phase of the global financial crisis. For all the talk of "exit strategies" from the present global round of unprecedented government deficit spending once the economy "gets back on its feet", there has been absolutely no move to actually start to rein in the deficits. If anything, the opposite is the case.
The trade-weighted US Dollar index, the USDX, is once again hovering around the vital 80.00 level, having traded below it intraday on June 26. From the inception of the USDX in 1973 at the dawn of the global fiat currency era up until September 2007, the USDX had never been below the 80 level for more than a few days at a time. It spent just over a year below 80.00 between September 2007 and October 2008. Another prolonged sojourn below 80.00 for the USDX would tax the "patience" of global holders of US Dollar denominated "reserves" to and quite possibly past the breaking point.
The best thing that the global financial powers that be, especially those in the US, can hope for now is that the traditional "summer doldrums" lessen the pressure on global markets and the global financial system, at least between now and US Labor Day at the beginning of September. Judging by the actions being taken by the stock market and global financial system "insiders", they are not at all confident that the present situation can last that long.
From: "The Global Market Report"
©2009 - The Privateer market letter
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