Dec 27 2006
The Dollar: Abused and Losing Respect. Is it too fast?
We are always worried when any side of a trade gets too popular. That holds for the weakening dollar trade. It seems as if more and more articles are hitting the mainstream about the changing of the guard. Is this a contrarian argument for a strengthening dollar? Feel free to read these two articles on the Financial Times today:
Perhaps in the short run the dollar might get some legs. You be the judge. But long term, the dollar is in deep trouble. Credit bubbles and insurmountable entitlement costs will force other nations to become more defensive. $4.6 trillion short in 2006, the U.S. government will only run higher and higher GAAP NPV deficits in the coming years since not politically viable alternative exists to the real cuts required to keep the train on the rails. If you are in denial, you need only adjust your DOW & S&P 500 returns since 2000 in terms of CPI, the Euro, Oil and Gold. New record highs? Care to buy a bridge?
