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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: sitkapacific who wrote (50565)	5/4/2006 4:05:04 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 116555

quotes.ino.com

To: sitkapacific who wrote (50565)	5/4/2006 4:35:10 PM
From: regli	Read Replies (1) \| Respond to of 116555

I believe that you have to view the dollar rally last year within the context of the American Jobs Creation Act. tax.cchgroup.com It provided the fundamental backdrop for the dollar rally. However, the fundamentals that helped last year are now working to its detriment. For the dollar to rise, you have to have net capital inflows. The U.S. is not a very attractive market to invest in at this point and with profit repatriation pulled forward into 2005, the likelihood of a significant dollar rally IMO is slim at best. Because the Jobs Creation Act expired at the end of 2005, it was relatively easy to predict that the dollar would start to fall in the New Year and I invested accordingly. Message 21995566 The U.S. cannot afford a strong dollar both politically and from the standpoint of the current account deficit. We are already seeing lukewarm demand for treasuries and agencies from the FCBs. From my perspective, one of the few reasons for a strong dollar rally would be if the Fed were to significantly raise rates from here on out. I don't believe they will do that for several reasons: 1. It would kill housing and with it the credit bubble and therefore the U.S. economic underpinnings. 2. I am a firm believer that the Fed is a political body especially today. Larry Kudlow in his article "Righting the court and the Fed" left no questions unanswered about that: Message 22143331 I believe that this "politification" of the Fed is impacting the presidential cycle and I therefore expect very different market behavior this year. The GOP cannot afford to lose the house and senate for several reasons. If polls in a few months look as bad as they are today then I look forward to a very tame Fed. A tame Fed will result in a very weak dollar, likely falling below 80 on the DX. Clearly the Japanese and the Europeans will not be thrilled about that and will scream that things have gotten too far. These screams might result in a few dollar rallies and potentially even in lower interest rates in these economies. However, on the whole I expect a repeat of the dollar performance 2003 and 2004.

To: sitkapacific who wrote (50565)	5/4/2006 9:53:39 PM
From: LLCF	Read Replies (1) \| Respond to of 116555

<I agree there is no shortage of fundamental reasons to be bearish on the dollar, but I have to say how surprised I am at how many people are still under the impression that the dollar is actually falling - it hasn't been the case for over a year now.> It's well documented for dollar followers that last year was an anomoly and due in part to tax incentives to repatriate profits back to the US and into dollars. Smart money is flabbergasted that the dollar is this high. I'd rather bet on a giant crash right now (even though it's oversold) than on some pipedream rally to 104 that has been bandied about. OTOH, opinions are a dime a dozen... and I've been betting (quite profitably) against the dollara for years. :) This trade has just started... and along with it's "flip side" (long gold) is probably the last great Macro trade of my lifetime (I'm 50). DAK