A fall in the US dollar, and or higher domestic interest rates, would put an end to this party very quickly. No exporter to the US, not even Japan can afford to let this happen. This is why they send all the US dollars back as investments, and or purchases of capital goods, so the dollar won't fall. Think of what would happen if every net exporter exchanged their US$ for something else. The problem is that at some point things will get so far out of kilter that the "masters of the universe will step in" as they have in other countries, and give US a dose of reality. Warren Buffet I guess thinks that the result will be deflation sooner than later, given his purported purchases of bonds, (I wonder what maturity his zero coupons have?), I'm not sure that every govt. won't try to prolong the party as long as they can, making the crash more severe in the end. Personally I'm very comfortable being very long gold, and I hope the party lasts until I sell some of my real estate and other investments.
Sincerely,
Al Cern
PS Buying gold mining stocks, with low production costs, or juniors with economical reserves is a very very very attractive proposition. There are so many beat up companies in this sector, you can pick them over and drool. |
