John Mauldin letter shows change in tone this week
his Muddle Thru Economy now looks more like a stall
(I had disagreed for weeks with him on this, expecting recesion)
this spring he expected the USDollar to weaken
but not as much or as quickly as it did this spring/summer
(I had disagreed for weeks with him on this, expecting hard decline, but I often too extreme)
it is very scarey for me to disagree with Mauldin
for most of the spring I expected my view to be mitigated,
with Mauldin's prevailing
this is both a boost to my confidence and ego
but disconcerting that a real pro could be underestimating the damage
NOW FOR OUR NEXT DISAGREEMENT
and believe me, I bow to Mauldin left & right
I just think the dollar situation is far more untenable for the entire US economy and bond market
he has a great grasp of many details, but might be underestimating the Dollar issue
I think it is the story of the year, bar none
it might be the story of the decade
a steadily declining dollar could breed an endless recession
Mauldin does NOT expect the USdollar to decline much more
"VERSUS WHAT?" he asks
when the Japanese are actively trying to weaken the Yen
when the European economy aint in great shape either
I maintain my disagreement with Mauldin
he is very practical, and that could be his weakness
when the Europeans see increasing evidence of US economic recession, they will sell the dollar in large numbers
they will protect their capital
when the Japanese see their large USTBond holdings at risk, more than just from dollar risk, but from rate risk, they will sell the dollar in large numbers
they will protect their capital
I yield to Jim Puplava
the dollar is soon to experience a worldwide crisis
it will fall versus everything, and that eludes Mauldin
it wont fall versus then yen specifically
it wont fall versus then euro specifically
THE USDOLLAR WILL DECLINE VERSUS EVERYTHING
foreigners funded our entire for over a decade
but they are realizing we consume 75% of the world's savings!!!
and our corporate leaders are often corrupt
and our profligate spending on military is overdone
and our federal deficits might get out of control
this is a momentum issue
a falling dollar breeds more effects that lead it to fall further
like imported inflation
like foreign selling of TBonds, raising rates and choking stocks and the recovery
I have yet to see Mauldin mention a significant historical effect pushing up gold
when Real Rates of Shorterm TBills are zero, which means they dont overcome inflation, or remain near zero, for a long stretch of months, this sets off a departure of conservative bondholders from Treasurys into GOLD
we have had a Zero Real Return on TBills for a year now
so the GOLD complex might rise even more than from just the USdollar decline!!!
THIS IS THE BIG POINT I HAVE MADE FOR MONTHS
THE DECLINING USDOLLAR IS THE TRIGGER OF A VICIOUS CYCLE
I dont believe Mauldin fully grasps its horror
he is far more successful than this lowly analyst
but I might drive a better car
/ jim |
