Do These Fed Guys Even Know What They're Doing?

Good day...And a Tremendous Friday to you!

Don't look now, but oil just reached US$135 overnight.

I recently told a radio interviewer, that I believed we could blame 20% of these high prices on oil speculation. That was when oil was around US$122/barrel, so I have to believe that the oil speculation is even higher now.

Meanwhile, the Fed just released the minutes from their last FOMC meeting. That caused quite a stir in the currencies yesterday, let's go to the tape.

The Fed noted that prior rate cuts have helped balance inflation risks and growth, although the risks still point towards downward growth (i.e. the rate cuts didn't help long-term). In addition, the Fed downgraded their growth outlook and pointed toward higher inflation, predicting "much weaker 2008 growth...inflation to remain elevated in 2008...jobless rate to rise significantly."

I don't know about you, but those comments definitely do NOT give me a warm and fuzzy feeling about the economy.


Man, These Fed Boys Are Really Something

So, if that's what they "really" talked about, then why on earth did they go ahead and cut interest rates? The Fed put in print that they believe inflation is going higher. And then they went ahead and cut interest rates anyway! Can you believe that?

By releasing these minutes, the Fed sent a message to traders that said: "With low growth forecast, and higher inflation, the Fed doesn't have a clue what to do!" They also said they basically don't have a strong feeling one way or the other about whether they should cut rates.

Last night, I checked what was going on in the Asian markets. The Fed FOMC minutes printed after Asia and London had gone home for the day, so I wanted to see how the Asians and Europeans took the news. At that time the euro was close to 1.58 again...


A Little Jawboning - and the Euro Slumped a Bit

But something funny happened on the way to the forum for the euro this morning...

It's called jawboning. The dollar was falling too far too fast again, and they had to do something to slow it down. And that "something" turned out to be a report that showed futures traders are betting the Fed will raise interest rates before year-end.

Well, with inflation (in my terms) at 11%, I would think the Fed would raise interest rates well before then.

But, that's just me.

If the Fed does raise the rates, what good will it do if they wait till year-end? By then, inflation will probably be around 14-15% (in my terms) and who knows what oil will cost then.

So, the euro lost about half a cent overnight. Still, the euro has made a nice recovery this week. All those banging the drum for the end of the weak dollar have crawled into the backseat and stopped talking again.


It's About Time They Agreed With Me...

Enough about the Fed and their incompetence!

Moving on...Banks including the Royal Bank of Canada and ABN AMRO Holding NV now believe the Aussie dollar is going to parity with the greenback. It's about time they agreed with me! So, the "parity watch" is on. Chill the champagne bottles and get your party hats ready: The "parity party" is coming.

Too bad these Big Banks with their Big Research Departments don't read my commentaries, they would have known months ago that the Aussie dollar was reaching parity. Just kidding: These guys are great at what they do.

But, how about that Aussie dollar? The Aussie just hit a 25-year high!


Always Great to End with Buffet

Yesterday, Reuters reported that Warren Buffett has this to say about the dollar: "Buffet says the dollar will continue to devalue, polices needed to correct slide have not changed."

Sounds like Warren Buffett has been reading my writing too! Doesn't that all sound familiar? Of course it does, because that's what I keep saying over and over again. The fundamentals remain awful for the buck!

And a confused Federal Reserve is definitely not helping.

Have a Terrific Friday!