Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Gary Wisdom who wrote (28307)	10/3/1999 10:11:00 PM
From: Benkea	Read Replies (1) \| Respond to of 99985

"Then explain to me why the dollar was higher all year when interest rates were lower and now that interest rates are higher, the dollar is lower." Flight to quality? I suspect we are seeking a flight from folly now. We were at 93% bullish sentiment on the buck on 7/7/99 which was almost hours from the top!

To: Gary Wisdom who wrote (28307)	10/4/1999 11:34:00 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 99985

Then explain to me why the dollar was higher all year when interest rates were lower and now that interest rates are higher, the dollar is lower. If I can step in here a moment... Yes, higher rates yield a more valuable dollar... eventually. However, as rates climb, bonds issued in the past, or currently being issued, are considered less valuable than those which will be issued in the future (at higher rates). The opposite was true last year after the Fed rate cuts. The bonds that were yielding a higher interest rate suddenly were made even more valuable because new debt offerings would yield less interest than the previous debt. And of course, you all are correct in discussing the flight to quality those occurred last year as well helping to boost the bonds. Now, IMHO, what we have here is a DELIBERATE attempt by the Fed to browbeat and suppress the equities market even though inflation is not evident (if anything, it is "reflation"). And given how Japan will be FORCED to monetize its debt eventually, effectively creating a devaluation of its currency in order to straighten out its bad loan portfolios and meet bond redemptions, I believe the yen's strength is temporary. But who knows for how long?? One thing is for sure... when Japan is forced to forcibly inflate its economy from this liquidity trap they are stuck in, the dollar will look good in comparison, and the trade deficits will continue to an even larger degree. Just my opinion. I don't buy this Japanese recovery at all. They complain about the US deficit, but the Japanese deficit per capita is even larger. A theory I have been fooling around with is that the "powers that be" wish the yen to be as strong economically possible (without causing major panics), and the dollar as weak as it can be (again, without causing major panics), so that Japan's forced reflation takes place, the dollar won't be forced to hyper-extreme levels. For the Yen, being forced to devalue 50% from 100 yen will leave them at 150 yen is better than having to devalue when your currency is at 150 yen to the dollar (where some have reckoned fair value is for the Yen) to 225 yen. Anyone else care to comment on my little pet theory? Regards, Ron