A didfferent perspective to consider ...
ttyl
AIN'T GONNA HAPPEN
Crumbling dollar? What crumbling dollar?
It seems that yet another doom-and-gloom scenario is ending
the way they always do: with a whole lot of nothing.
The dollar is nowhere near heading into anything resembling a
crash or collapse, despite what piles of newsletter gurus and
charlatans might be shoveling your way. In fact, the man who
should know what's going on--US Treasury Secretary John Snow--
outlined quite the opposite: that the world had it all wrong
in thinking the Bush Administration even wanted a weaker US
dollar.
His comments came in a discussion with one of the leading
non-US financial medias, owned by Pearson (London: PSON). He admonished those who took his earlier comments on more
flexible currency exchange rates to be a call for a weaker US dollar. And, he clarified that all he and his team wanted was a discussion for eased currency restrictions in nations around the world that trade with the US.
The result is that traders are dumping euros and yen and
they're buying back US dollars, reversing the relatively
modest rise or recovery in those currencies against the buck.
In the process, the shift in dollar demand should bode well
for the domestic bond markets, from Treasurys to corporates
and even mortgages--all are good to sustain the economic
expansion in the US.
This comes alongside discussions that the US will begin to
back off its heavy-handed calls for China to turn its economy upside down in opening its capital controls and currency market. In return, the Chinese leadership led by Hu Jintao has made a statement that he and his administration will continue
talks over the longer-term prospects for deregulation or other
alternatives for the renminbi.
The dollar, of course, wasn't collapsing after all. In fact, over the past year the core of the currencies for those nations that are the primary US trading partners have had mixed results against the good old buck.
The Chinese renminbi, of course, is flat against the dollar.
Meanwhile, the Canadian dollar has recovered some of its
long-term losses against the US dollar by some 18 percent,
while the other leading trading currency, the Mexican peso, is down by over 10 percent against the greenback.
The dollar index, which used to be based on trade weightings, is now restructured to reflect major dealing currencies of foreign exchange trading desks. This means that it's dominated by euro-related currencies and the Japanese yen. With the shift, the index has shown a rally or recovery in the euro and other related currencies, from their nadir to the upper end of their trading range against the US buck.
But with Snow's comments and the reality of the markets taking hold, the game might well be up for now.
Major financial houses and brokers, eager for trades, are
changing their tune in terms of the dollar and are now telling their clients to take profits. Of course, this should have been done back when the euro was in the upper teens, rather than in the mid-teens. But then again, they were right alongside those doom-and-gloomers peddling the dollar's collapse.
Gold is another market that continues to grab more undeserved attention. Newsletters have been peddling gold like it's the 70s again. And, many of their readers are only too happy to go along with the love-fest over the yellow stuff.
But, it's over. And if you still have the stuff, take what
modest gains you might have and leave. After all, gold really hasn't done much for you in the recent past. Take the year-to-date performance: Gold is up about 8 percent without the cost of bids and offers. Meanwhile, the general S&P 500 is up over double, and it's cheaper to buy and sell, thus amplifying the disparity in returns.
And with the currency sham ending, gold should only see more and more investors and traders throwing in the towel.
In the meantime, the US economy and markets are still
healthier than many others around the globe, helping to
promote educated investments in real companies. So forget the shams and stay with the tried and true.
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