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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Umunhum who wrote (36407)7/20/2005 7:55:17 PM
From: futures speculator  Read Replies (1) of 110194
 
I don't want to be argumentative. I've invested heavily into what I believe is going to unfold and I just don't see how your scenario can happen.

Which scenario is that?

Let me add my 2cents:

I think it's quite possible to see a repeat of what happened in the mid 80s, where dollar was depreciated by 50% to "wipe out" debts. Avg US Debt duration is just 4.5yr.

This also correlates with doing nothing, allowing/endorsing the housing bubble. With households going deeply in debt to afford a house, a tangible thing they can hold onto, while purchasing value of paper money fades.

The memory of the huge counter-trend rally of DollarIndex from 80 to 92, without any pullback, over the past 7months will also have its psychological impact with dollar bulls. The talk about "weak dollar" will start when Dollar approaches 80 again.

I think the effects of one-time waterfall tax receipts in 2005 and practically tax-free (5.75% vs 35%) foreign profit re-patriation by corporations (to end Oct-2005) has finished.

Also the media propaganda about "how bad the alternatives are" (Euro, Yen?) will play its role. People still express their Schadefreude: "Look what happened to Buffet and Gates going against the almighty dollar".

In conclusion, I think a -30% (DX to 60) is well within the limits of dollar holders, i.e. they wouldn't dump their dollars in panic and cause a "run on the dollar". And US will pay back a lot of its debt maturing over the next 5yr with a cheaper dollar.
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