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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (57087)3/29/2006 3:14:56 PM
From: GST  Read Replies (2) of 110194
 
If its the dollar bubble that bursts, holding dollars is not going to help. For many, it is impossible to imagine the dollar dropping. Instead they think that interest rates will drop and prices will come down. The deflation crowd think we will continue to have a strong dollar. if you shift your gaze from housing prices to the price of the dollar, then you arrive at the opposite conclusion. The dollar looks wildly overpriced, and it is priced in markets that can savagely discount risk when that risk is grasped and about to be priced into the market. If the dollar is your concern, then you would expect rates to continue to rise -- no matter what the fed does. And if rates rise the economy stalls and the vicious cycle becomes self reinforcing, much as the strong dollar was self reinforcing for so long a time. If the dollar goes down the drain, it won't matter which of several dollar denominated assets you own. And holding cash will do you no better.
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