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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: FiveFour who wrote (70)2/16/2004 5:29:42 PM
From: mishedlo  Read Replies (3) of 116555
 
Positioned for USD fall,
however, it is troubling me that I am not hearing much or am selectively filtering out the case for a stronger dollar. Have recently seen mainstream-public news/research that would have been considered "way out there" a year ago... maybe a contrarian signal.
Asside from short term CB intervention noise, what fundamentals would stop the USD from a continued fall in the intermediate term? What is the case for a dollar recovery?

1) trends will continue until they stop
2) What can cause the trend to change?

a) US reduces spending
b) US aggressively raises interest rates
c) more Foreign intervention
d) US reduced budget deficit
e) US jobs growth
f) Rate cuts in Europe
g) US lives within its means
h) US cuts trade deficit

Of all of those only c and f are likely in a short to intermediate timeframe. Others think b is given but I think they are totally nuts.

In fact I think so much f and the exact opposite of b that I have interest rate plays on in 4 currencies and zero currency plays themselves. Furthermore I think c has only a short duration affect.

Oddly enough, the anti-US$ bet seems so one sided but nearly EVERYONE thinks b is going to happen. Those are contradictory and I suggest the trends on BOTH hold.

Perhaps that is the key for you. Everone thinking it is only a matter of time before the US agressively is "forced" to raise rates. If the US does not raise rates and does not do the other things I suggested (fat chance in an election year and besides I think they WANT a lower US$), then why shouldn't the US$ continue dropping?

Mish
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