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Everybody hates the dollar: James Saft
NEW YORK (Reuters) - There is a lot of uncertainty in financial markets, but there is one bet that almost everyone seems to be making: sell the dollar.
I'm not much of a believer in The "Sure" Thing.
"In all the years I've been trading I've never seen such a one-sided position against the dollar," said Dennis Gartman, publisher of the Gartman letter, speaking at a Euromoney foreign exchange conference in New York on Thursday.
"It is absolutely shocking how overtly bearish the world is."
He also reports that classic sign of a market mania, a variation of the shoeshine boy giving stock tips, saying that a doctor had told him on the golf course that he'd opened an account in order to short the dollar.
This should scare the heck out of those shorting the dollar. I certainly wouldn't do it right now. Much of the low lying fruit has probably already been picked. Now people are up on the ladders leveraging themselves out for all that stubborn fruit at the top. Well, maybe. I can say this though. Where was this doctor when the dollar was much stronger?
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10 comments:
Mark, I have been basically shorting the dollar threw my commodity holding since 03, the faith of the dollar although currently oversold and maybe due for a bounce is IMHO going to fall perhaps another 25% from this level over the next couple of years. The FED is probably going to be cutting interest rates farther as they basically follow the bond market which is screaming for more rate cuts. The farther the dollar fall the higher oil prices will go as commodities around the world are priced in dollar terms this puts pressure on forgein CB's to either raise interest rates or let their currency pegs go to fight our currency exported inflation. Rising oil prices will offset any benefit the dollars fall will have on our trade deficit as we import 60% of our oil which will also be a negative for the dollar. Part of the problem as you have mentioned is forgein holders or dollars have to do something with them and with the ABCP market locking up more of these dollars are going into treasuries as a safe haven driving yields down (the Greenspan conundrum) which will cause the dollar to fall father. The last point is China, they are increasingly under pressure to allow their currency to appreciate which would be in their best interest IMOP as it would help control inflation in that country and it will not be very dollar friendly. Risng US protectionism would also put a nail in the coffin. One way or another it will be a wild and interesting ride got a seat belt?
Kevin
Kevin,
One flaw in the dollar shorting plan might be what would happen if China experiences a repeat of our Great Depression. Buffett is cutting his Petro China stake and urging investors to be cautious on Chinese stocks. Greenspan even calls it a bubble (and if HE can see it, good grief).
Part of me doesn't think a billion people are going to reach anywhere near our level of prosperity and should that illusion be broken, well, something else might break too?
How are European exports going to hold up with a "strong euro" policy? In the words of Die Hard's John McClane, "Welcome to the party, pal!"
http://www.rte.ie/business/2007/1009/germany.html
When corrected for seasonal variations, German exports increased by 3.0%, while imports grew by 5.6%.
European exporters are increasingly concerned that the euro's strength against other major currencies will hurt export prospects since it makes their goods more expensive in overseas markets.
Hey, just a thought. As you know I play both sides of the inflation/deflation fence. However, if everyone did that the fence would probably collapse. I think it was made in China and probably can't support the weight of a few billion fence riders. However, for the time being that's where I continue to sit! ;)
This tiny nation of 1,200 islands has long accepted U.S. currency out of convenience for visitors and financial sobriety. The dollar tended to do better in global markets than the local monetary unit, the rufiyaa. That may be changing and it's a bad omen for the world's reserve currency.
"My dollars aren't as popular here as they've been in the past," says Moyez Mahfouz, 51, who has visited the Maldives from Bahrain with his family once or twice a year for a decade. "More and more on this trip, I'm being asked for rufiyaa."
Why does it matter what happens in the Maldives? Its $1 billion economy is worth 1/59th of Microsoft Corp. co-founder Bill Gates's wealth and 1/27th of Sri Lanka's output. While it's an amazingly beautiful place, the Maldives is a rounding error on the global economic pie chart. Yet it may be a microcosm of a tectonic shift in finance: the demise of the dollar.
These things start out slowly, and in recent months I have had similar experiences from Mexico to Vietnam. In markets, restaurants, taxis and tourist shops that long accepted dollars, many are opting for local currency. The reason: concerns the dollar plunge that analysts have predicted for years is afoot and that the u.s. is uninterested in halting it.
http://www.app.com/apps/pbcs.dll/article?AID=/20071104/BUSINESS/711040519/1003
Like I said Mark it will be an interesting. I look for the US dollar to eventually lose it reserve currency status at some point and I'm positioned for that out come but I also could be very wrong.
Kevin
If you are wrong, it could very well just be a timing issue.
The reason: concerns the dollar plunge that analysts have predicted for years is afoot and that the u.s. is uninterested in halting it.
I tend to heckle the analysts overall for what that is worth, so I get a bit nervous if they actually agree with me. ;)
However, I never heckle Warren Buffett and he's still bearish on the dollar long-term. He recommended TIPS a few years ago for those worried about inflation. They are no more expensive now (a bit cheaper if you look simply at the real return offered) than when he offered that advice back then, although they have had quite a run this year.
Like you Buffett also can admit he might be wrong. He's said so many times and it is humility that makes me trust his advice more. For example, he's stated that he was overly worried about inflation for decades and if you read his shareholder letters from the 1970s it is clear why.
The vast majority of us don't seem to fully comprehend what would happen should we actually slip back into the 1970s (or we wouldn't have embraced adjustable rate mortgages!).
The one glimmer of hope I have is that Bernanke "might" just have timed the rate cut well and we just don't know it yet. On the one hand, he seems too late because the housing market is suffering. On the other hand, he seems too early because the price of oil is still rising. Part of it might be that he's cornered, but part of it might also be that he's found the proper point on the tightrope.
I think the results in my poll are interesting. We bears have to choose between a recession disinflation and stagflation. We can't seem to do it! They both look so appealing apparently.
Mark OT but here you go I found this interesting.
Many high school students appear clueless about work ethic, educators and employers say, at a time when globalization has galvanized Asian economies and drawn millions of people out of rural villages eager to study not only English but also calculus, trigonometry and engineering. Many are eager to work in factories for far less than U.S. workers earn, doing manufacturing that used to be done in the United States.
"They're hungry and our kids are not," is how Wichita schools governmental relations director Diane Gjerstad puts it. Educators see appalling numbers of kids who put their heads down on their desks and refuse to turn in assignments.
With a little effort, somebody coming to work here could soon be making $60,000 or $70,000 a year," said Fibert, 45, Brittain's general manager. "They could make 40 grand without overtime. But instead they ask for days off, and our shop foremen can't find anybody to work overtime or a weekend."
Gustaf said one boss from a small company told him he could not get people to show up on time. He worried that if he complained, his employees might quit, leaving him with no one.
About 78 million baby boomers are edging toward retirement, Gustaf said. Many are skilled workers. Generation X, the generation that follows them, contains about 40 million.
That creates huge opportunity but will likely result in only a huge labor shortage, Gustaf said, in part because the younger generation doesn't have the skill -- or often the will -- to learn.
http://www.kansas.com/101/story/218293.html
Kevin
Buffett is cutting his Petro China stake and urging investors to be cautious on Chinese stocks.
PetroChina Ltd (SHA 601857; HK 0857), the country's largest oil and gas producer, opened up 191 pct at 48.60 yuan on its first trading day in Shanghai, against an initial public offering price of 16.7 yuan.
The company raised net proceeds of 66.24 bln yuan from an offer of 4 bln A-shares, the country's biggest IPO to date.
The proceeds will be used to fund the expansion of three oil production facilities and upgrade oil refinery and ethylene plants.
The IPO price was at the top end of the indicated range and implied a multiple of 22.4 times the company's diluted earnings for 2006.
CITIC Securities, UBS Securities and China International Capital Corp Ltd were the main underwriters
http://www.iii.co.uk/news/?type=afxnews&articleid=6371263&action=article
Maybe a little premature on Buffett's part.
Kevin
Kevin,
Many high school students appear clueless about work ethic, educators and employers say, at a time when globalization has galvanized Asian economies and drawn millions of people out of rural villages eager to study not only English but also calculus, trigonometry and engineering.
If you get the chance, you should check out "The World is Flat" by Thomas L. Friedman.
There is an entire chapter devoted to it.
The Quiet Crisis
Dirty Little Secret #1: The Numbers Gap
Dirty Little Secret #2: The Ambition Gap
Dirty Little Secret #3: The Education Gap
Kevin,
Maybe a little premature on Buffett's part.
Buffett is almost always a little premature. His warnings often come years before the problems. That gives the media plenty of time to heckle him! ;)
http://www.thestreet.com/_htmlbtb/funds/supermodels/10228212.html
But a funny thing happened to all those dollar bears. Their contempt for U.S. economic freedoms hasn't amounted to a hill of beans, and their positions have been smoked. The dollar has rallied massively since the start of the year against all other currencies, reflecting a swift, stunning paradigm shift in the way that global political risks are priced. (from 2005)
http://www.mondaymemo.net/010409feature.htm
When the dot-com investing craze was at its craziest, there was one conspicuous hold out.
The U.S. Bureau of Labor Statistics predicts 43 percent of the U.S. labor force will become eligible to retire before 2012.
The skills and institutional knowledge lost when older workers retire won't be easily replaced, Arnone said. Management shortages already are appearing in some sectors that have experienced a number of early retirements, including utilities and hospital nursing staffs, he added.
http://www.chicagotribune.com/business/yourmoney/chi-ym-aging-1104nov04,0,7133332.story
So what's going to happen to assert prices Mark when all these boomer's start selling to fund their retirements? May you live in interesting times.
Kevin
So what's going to happen to assert prices Mark when all these boomer's start selling to fund their retirements? May you live in interesting times.
Assert asset prices? Freudian slip! In other words, asset prices are going to get an attitude. ;)
People keep downplaying the effect of the baby boomers moving their assets to safety. I'm retired (and a baby boomer). I've grown increasingly more cautious over the years. My thinking is that real yields will drop as more people come to join me. There is NOTHING Bernanke can do to get me to spend more money on discretionary items or durable goods. He could scare me into unproductive assets again though, like gold and silver. He can get me to hoard items I'd be buying in the future anyway (like canned goods and sneakers). I don't see how either of those two things are going to help his problem though.
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