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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who started this subject	4/16/2004 12:11:56 AM
From: gregor_us	Read Replies (8) of 116555

As Much As I Love R. Russells Synthetic Dollar-Short Idea ...being that "all the debt" constitutes a "synthetic dollar short position" which could cause a USD squeeze higher when "the debt has to be covered"--is that in addition to all the debt, there are simply ALOT of dollars. Ya know? I mean all these boffo Foreign Reserves stacking up in Russia, Brazil, Taiwan, Japan, China---alot of that is in 90 days bills. It's essentially cash. There is PLENTY of US cash--plenty to go around. Sheesh. I mean, that's part of the looming problem. So then comes along these guys below--and they don't even credit Richard Russell (Maybe Russell should have credited them??). I still think it's a very, very cool idea--that the aggregate Debt equals a synthetic dollar short position. _______________________________________________________ April 15, 2004 with George J. Paulos and Sol Palha A Day Late and A Dollar Short “Contrarian Round Table” probes the outer limits of Contrarian thought in this essay about the US Dollar. -------------------------------------------------------------------------------- What do stock market bulls, stock market bears, goldbugs, homeowners, and commodity speculators have in common? This is not a trick question. The answer is that all of these people are betting that the dollar will purchase less in the future that it does today. In other words they are all dollar bears. Ask almost any stock, commodity or real estate bull about the future of their favorite asset class and they will invariably say that their assets are appreciating in dollar terms. This is the same thing as saying the dollar is declining relative to that same asset. Goldbugs and stock market bears claim that the dollar is dead and therefore only liquid tangible assets will have value in the future. Cash in the form of US Dollars is possibly the most hated asset class around. Dollar bulls are as rare as dodo birds. Dollar bearishness seems like a reasonable position considering the long history of dollar inflation and the reckless monetary policies of the US government. But we are contrarians and when we see so many people on one side of a trade we must analyze the consequences of such a lopsided market. We feel that the extreme level of US dollar denominated debt is at an inflection point. Dollar debt is functionally similar to a dollar short position. Those who have borrowed money to exchange for another asset with the belief that the other asset will appreciate in dollar value have taken out the equivalent of a short sale of the dollar. cont. financialsense.com

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