Anyone Else At The Panic Point On The Dollar?

[maxtower]

If everyone already knows that the dollar is going to get weaker, the price would already be at that weaker level. For every person who sells a dollar, there has to be someone on the other end who is buying. If we all know its going weaker who is going to be buying? In 2005 for example, the US was still the same debt machine that it is today, but the dollar had a pretty good bounce. If that happens in 2008, and you buy today you'll be screwed.

The point is, no one really knows. Its good to stay diversified.

[Mort10]

[ QUOTE ]
If everyone already knows that the dollar is going to get weaker, the price would already be at that weaker level. For every person who sells a dollar, there has to be someone on the other end who is buying. If we all know its going weaker who is going to be buying? In 2005 for example, the US was still the same debt machine that it is today, but the dollar had a pretty good bounce. If that happens in 2008, and you buy today you'll be screwed.

The point is, no one really knows. Its good to stay diversified.

[/ QUOTE ]

Of course this is true however, there are a couple of reasons why I would not hold dollars. First of all, I think the Fed is doing a horrible job and I am pretty sure that the numbers they are providing are not true. In other words I think the situation is worse than they say. Second, the reason the dollar has stayed strong is because of the foreign investments. However, I think partially due to the weakening dollar and partially due to the turmoil in the financial markets foreign investors will invest in what they perceive to be less volatile markets such as the eurozone. All in all I think this will lead to further depreciation in the dollar. At least that's the way I see it.

[Mort10]

By the way, I a pessimist by nature and am almost always bearish to the financial markets. Just so you know...

[maxtower]

[ QUOTE ]
[ QUOTE ]
If everyone already knows that the dollar is going to get weaker, the price would already be at that weaker level. For every person who sells a dollar, there has to be someone on the other end who is buying. If we all know its going weaker who is going to be buying? In 2005 for example, the US was still the same debt machine that it is today, but the dollar had a pretty good bounce. If that happens in 2008, and you buy today you'll be screwed.

The point is, no one really knows. Its good to stay diversified.

[/ QUOTE ]

Of course this is true however, there are a couple of reasons why I would not hold dollars. First of all, I think the Fed is doing a horrible job and I am pretty sure that the numbers they are providing are not true. In other words I think the situation is worse than they say. Second, the reason the dollar has stayed strong is because of the foreign investments. However, I think partially due to the weakening dollar and partially due to the turmoil in the financial markets foreign investors will invest in what they perceive to be less volatile markets such as the eurozone. All in all I think this will lead to further depreciation in the dollar. At least that's the way I see it.

[/ QUOTE ]

Right, but my point is, what do the buyers of the dollars you're selling see? Don't you think they know all this information too. What if the dollar has already been oversold by everyone who was thinking what you are thinking last year? See my point?

[Mort10]

I see your point, and the dollar is probably bound to rally for a little while just due to people reversing their dollar shorts.

I do realize that they have this information too. The difference is that they don't use it They believe the Feds forecasts. They believe that the weak dollar is good for the US. They don't think the current situation is bad for the US economy. I guess it all comes down to how much foreign capital you can attract in the future. If the markets go on a rally than the dollar will probably appreciate. However, I do not think this is the case and that is why I would not hold dollars.

The same would for example stand for the S&P500. If I was American I would have shorted the S&P500 because I see a lot of problems ahead. However, a lot of investors that are a lot smarter than me are long. People are bound to take different positions. Some will be right and some will be wrong. At the end of the day you just have to process the information the best you can and go with your decision.

[lehighguy]

Being a contrarian works when you've got solid analytical reasons why the rest of the market is in a frenzy. By contrast, there is no reason to be buying the dollar. Leaving aside that disaster in the domestic financial markets, my personal opinion is that people haven't fully gotten thier head around the fact that the CPI is being manipulated. That insulting 0.8% CPI in Q3 really woke me up and got me digging on the subject. Eventually people are going to realize it is being systematically understated (some do, hence the last five years).

As for diversification I'm an American citizen who lives hear, gets paid in dollars, etc. I have a HUGE exposure to dollars in my life, this is good diversification. If I'm wrong that would be FANTASTIC. I'll take a 20% decline in my commodities holdings before a hyperinflationary depression.

[Mort10]

[ QUOTE ]
Being a contrarian works when you've got solid analytical reasons why the rest of the market is in a frenzy. By contrast, there is no reason to be buying the dollar. Leaving aside that disaster in the domestic financial markets, my personal opinion is that people haven't fully gotten their head around the fact that the CPI is being manipulated. That insulting 0
.8% CPI in Q3 really woke me up and got me digging on the subject. Eventually people are going to realize it is being systematically understated (some do, hence the last five years).

As for diversification I'm an American citizen who lives hear, gets paid in dollars, etc. I have a HUGE exposure to dollars in my life, this is good diversification. If I'm wrong that would be FANTASTIC. I'll take a 20% decline in my commodities holdings before a hyperinflationary depression.

[/ QUOTE ]

Great post! I also strongly believe that inflation is a huge danger and can't for the life of me understand why the Fed doing anything about it. Still, it's good to see that others are thinking in the same lines and that I'm not delusional... [img]/images/graemlins/smile.gif[/img]

[disjunction]

[ QUOTE ]
That insulting 0.8% CPI in Q3 really woke me up and got me digging on the subject. Eventually people are going to realize it is being systematically understated (some do, hence the last five years).


[/ QUOTE ]

Can you elaborate on this. I agree that the CPI has been understated. What I haven't seen evidence for is the conspiracy-theory aspect. Who has both the motive and the power? Who is putting pressure on whom to understate it? Why has there not been a scandal or even a hint of a whistle-blower?

I know all about the core inflation thing, but that was a long time ago.

[vetiver]

To what extent do Fed rate cuts impact the dollar? Is another rate cut in December priced in?

[lehighguy]

http://www.europac.net/whitepapers/T...bout%20CPI.pdf

Being able to misreport CPI is a HUGE asset to the government and the people who run it. They can get exceedingly rich of this great fraud.