About the only thing he got wrong was his prediction that the financial collapse would be inflationary, but of course he called gold correctly (it was about $300 at the time).
Remember when Iran started pricing its oil in euros instead of dollars? It was April 2008, a few months after supermodel Gisele Bunchen refused payment in dollars. The euro touched $1.60 that month and had nowhere to go but down:
Having missed out on the dollar’s spectacular comeback, the expert timers in Iran are switching again:
The Central Bank of Iran (CBI) intends on converting about €45 million of its reserves into dollars and gold, Tehran’s media reported.
According to reports, the new monetary policy will be carried out in three phases, with the first phase – converting euro reserves into dollars – already underway.
CBI Chief Mohammad Bahmani hinted of the move in April, saying the Islamic Republic will turn to dollars in view of the euro’s poor performance.
Iran has been converting its currency reserve into euros since 2006 – a move meant to meet both Iranian President Mahmoud Ahmadinejad’s anti-US policies, and the American currency’s weakness.
The recent change stems from the financial crisis which hit the eurozone bloc following Greece’s financial struggles.
The euro-dollar rates have devalued by 20% since the beginning of 2010. Iran’s foreign currency reserves, which are estimated at $100 billion – half of which are in euros – had to sustain the loss.
I’m bullish on the euro, CHF and pound in the short term, but long-term bullish on the dollar. Here’s a nearly 30-year historical chart of the dollar index, showing that it has miles of room to run:
Last Thursday, news arrived that US client state Georgia had invaded the predominantly Russian breakaway region of South Ossetia, and we also learned that two more carrier groups were headed for the Persian Gulf.
You might think that open warfare in the petroleum-rich and strategically important (think pipelines) Caucasus and additional preparation for a potential bombing of Iran would put an end to the slide in oil prices. But you would be wrong. Oil lost $10 on the week and closed at a 4 month low.
Does this tell us that the odds of war with Iran did not actually increase last week? Or that the conflict has already been priced in for more than a year? It is remarkable that even these heady developments could not make up for the shift in trader psychology as demand slacks with the global economy sputtering towards stall speed.
It just goes to show that there is no money in buying the news and no sense in trying to explain away day-to-day price movements by the headlines or changes in ‘fundamentals’.