Bo Peng

U.S. Dollar Can and Will Drop

Everybody has her own investment philosophy. Mine is not to try to pick the top/bottom, but follow the trend.

I think USD will drop once the world economy stabilizes. In the interim it depends on the timing of events. The current rally is based on the premise that US economy will rebound ahead of Europe/Japan. But even if this turns out to be true, USD will drop once the cloud clears over Europe/Japan, which could easily be a year away.

That said, I'll let the market tell me what to do. Everybody knows about the Turtles by now. Even idiots can use it. But I'm not sure how many people really get it AND have the capacity to follow it.

Good luck!


On May 01 02:36 PM Just Say Whoa! wrote:

> >But I'll be ready to flip USD in short order going forward.
>
> What's the "BUY" indication?
>

U.S. Dollar Can and Will Drop

Not sure about supply destruction, Mashuri. The capacity in Germany, Japan, China, and Korea has been reduced, but not damaged, not unless the depression lasts a few more years. If inflation does surge as expected, it'd be due to pure monetary factors rather than supply and demand of goods/services.

U.S. Dollar Can and Will Drop

I'd like to add one point: as a commenter pointed out, USD devaluing is not all negative. It could stimulate jobs and export. But such a transition would require a fundamental transformation of global finance and trade, as well as the economic structure in the US. Abrupt changes would be disruptive and even destructive. After Fed's QE, the chance of abrupt USD devaluation some time within the next year or so has increased dramatically.

U.S. Dollar Can and Will Drop

Excellent analysis, Stephen. The race to the cliff -- competitive QE -- is just waiting for the sound of next shoe dropping.

In a way it's unfair to US. UK and Japan started it way earlier. But once Fed did it, now the moral inhibition against QE has disappeared. Instead of being the last resort, the world will consider QE the first choice when the next crisis trigger event hits, if only to protect their self-interest. A classic example of Prisoner's Dilemma.

The UN, China Want to Ditch the Dollar

The next shoe to drop is China & Russia settling a trade with IMF SDR, even if it's a small trade. This could be the last snowflake that starts an avalanche.

The upcoming G20 may actually be interesting, judging by the posturing and positioning so far.

When Will the USD Carry Trade Unwind?

Thanks for your insight, user355414.

I agree that both devaluing of USD externally and inflation internally are certainty in our future. Even if it's not the gov/fed's explicit policy, it's at least implicit policy in the sense that they would try to stay out of the way if it goes that direction. Devaluing USD is the cheapest way to reduce external debt, as is inflation for internal debt. It's a scam as far as debtors are concerned. But banks, bond holders, and Asia are hard-pressed to find much sympathy nowadays. "We need to get through this so screw'em."

There's another possible factor for the recent strength in USD: US foreign investment have been pulling back.

But I just don't understand the "perceived safety" argument. How can anyone perceive any safety advantage in USD assets today?

We're living in a surreal world. Everybody seems to agree USD will be devalued yet USD keeps going up. Everybody seems to agree inflation will pick up and treasury will collapse under its own weight yet treasury has been holding up very well. Are these bubbles? I think so, especially if the "stealth bidder" for treasuries is the Fed.

When Will the USD Carry Trade Unwind?

MarvinMBA, yours is the "safety" or "risk aversion" argument. But it most certainly cannot explain the recent behavior. How do you explain yesterday, when the stock market tanked ~5%, everybody hated the non-plan Plan, no significant bad economic news from the rest of the world, yet USD rallied? Look up some historical graphs.

This Recession Will Be Anything but Deep

Today's market has been somewhat puzzling. No reports of damage from Lehman settlement, which may mean the daily hedge and collateral adjustment may have worked better than many (me included) had expected or feared. Or it could mean just a delay -- the public won't see it until the next quarterly report.

The Fed's decision yesterday to inject $630B into money market funds was also puzzling, after reports showing a sizable inflow into them. Why did they decide it was necessary, ineptitude of the Fed or factors unseen by the public?

Synthetic CDOs are definitely affected by this settlement. But I don't understand why the big fuzz all of a sudden as if it's a huge surprise. Synthetic CDOs based on ABS certainly have taken their losses a long time (months) ago. Those involving Lehman may have their equity or mezzanine tranches wiped out or severely damaged. But these tranches are very narrow. And CDO issuers (big banks) usually hedge them, though may not perfectly. The ultimate losers in synthetic CDOs are the CDO investors in equity and mezzanine tranches, of which there aren't that many.

Regardless, I think we can say by now that the government bailouts have worked. Chain reaction has been stopped, at least for now. I expect Libor to continue dropping and the money pipes to continue opening up.

This Recession Will Be Anything but Deep

Pretzel Logic, I agree with most of what you said. But I also say the destruction of credit is close to an end -- some hedge funds, perhaps even another regional bank or two.

In addition, it's hard to argue what the gov has done to Fannie and Freddie, no matter how flawed, is not helping the housing market. And there'll be more and more such "help homeowner" legislation and policies going forward. Politicians will feel obliged to dish out handouts until the deflation is over. So housing market will be help by two sides: easy credit and homeowner support.

As to the psychological aversion to "easy credit", I don' think it'll last. We may have learned a lesson now. But we also forget. Instant gratification and greed triumphs over long-term discipline every time.

This Recession Will Be Anything but Deep

Talin, what we're witnessing is nothing less than the tragic failure of private capitalism AND democracy. This is a sad chapter in human history.

This Recession Will Be Anything but Deep

Deflation in the short term is expected, as banks and hedge funds deleverage and/or unwind. I was talking about inflation in the longer term, starting from at least a few months out, when money flows down the pipe and reaches Main St and takes effect in consumer credit, hiring, etc.

Dollar's Fall Could Be Limited as Fed Signals Rate Pause

One word: dollar carry trade.