WestPacific: In the Event of Your RE Collapse
...why would the dollar be strengthening during such a development? The dollar is already discounting the debt, deficit growth, and weak economic growth. It's already trading off these facts in a fairly clear, trading relationship.
In the event of your RE collapse, the stock market and economic numbers would also be spiraling downwards. Why would these conditions not repel dollar buying? Why would dollar strength occur at that point?
My view is that the dollar has only begun to discount the precarious debt, the further growth in the deficits, and a weaker economy in 2005. I would say the index needs to fall much further to create a margin of safety for any new, future Dollar Holders. Probably something towards 70.00 on the USDX.
I would also argue the USDX does not fully reflect yet the additional War Spending Bush will ask from Congress in 2005, nor the massive new borrowings for his SS Reform Plan. Even if the SS reform plan goes DOA in late 2005, what market participants can afford to go long dollar positions in the face of such madness? How will the pension fund manager in Europe and Asia explain to his boss USD exposure, as 2005 proceeds into the face of all that I describe, and in addition, your RE collapse?
The dollar is imo in a correction process after a period of serious over-valuation. It has only just begun to reflect present conditions, let alone what's coming. All dollar short positions as represented by bets made at the various exchanges are insignificant compared to the money supply. Heck, even compared to debt held by foreigners they are insignificant. When we read that "everyone is betting against the dollar" I would say hardly anyone is betting against the dollar.
The world is long dollars. Massively so.
That said, Gold may do some wierd stuff in the face of the coming, further decline of the dollar. You may be right to avoid gold.
But the CAD, AUD, NZD, EUR, CHF and EUR will not be doing anything unexpected at all.
Regards,
LP |
