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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (22834)	12/4/2004 1:27:19 PM
From: Carlos Blanco	Read Replies (1) of 110194

I believe the trader/fund community is large and quite loonie, and much more dominant in leveraged paper trading than you seem to suggest. i don't necessarily disagree w/you there...everything i said was more of a long-term view (5 minutes = 5 months). and i'm certainly not qualified to quantify/predict the impact of hedge fund activities vs. slower monetary flows--people like LTCM were certainly able to leverage themselves into gigantic amounts. so that plus govt. intervention can certainly cause trend distortions. but i view those things (e.g. the wild action of the past few days) as waves on top of a deep ocean. if anything, the complexity of trying to understand what all the different players are doing and how they will behave is enough for me to just give up and just stick to the obvious trend without trying to time the ups and downs. my intent was to be very blunt that if there ever was a story which is clear how it's gonna end, it's the dollar, and i'd hate for people to get shaken out of their dollar hedges and lose their hard-earned purchasing power by confusing near term gyrations for a reversal of a trend. as you point out, things are likely to get volatile and short-term movements will be exacerbated, but the dollar's fundamentals and their historical parallels are strikingly obvious. the next few years will be a time when fortunes will be made and lost with great ease depending on how one is positioned and the strength of one's convictions. people have been calling for a dollar rally since DXY at 85, and now 80 looks like support, but who really knows what's gonna happen? in a bear market, surprises tend to be the downside, and it seems that a bunch of speculative positions were unwound prior to friday's job report (a good example of a downside surprise!). i first saw the "dollar short" story on richard russell's column and felt he was doing his readers a disservice by not thinking through its axioms on a global basis and taking a view that seemed a lot more near-term than his usual focus. he hasn't mentioned it in a very long time--so i assume he's reversed course there. as he pointed out, within the USA, dollars will always have some use (if only as legal tender), but when viewed globally, one quickly realizes that there's a ton of existing dollars outside the USA that could be sold instantly and never be bought back.

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