globalview99

Has the Dollar Hit a Major Bottom?

It looks like a roll over is starting; as stated by someone above, Prechter was just early as are most market prognosticators. Timing, given all the variables, is probably the hardest thing to get. yeah, he was forecasting this bear market from 2003; not five years too early, but the Bush Administration and Greenspan kept propping up the economy with easy money. The easy money then imploded eventually which was the first wave down. Obama and Bernanke responded with infusions of megamoney to reflate the collapsed financial and real economy. Eventually, there will be a collapse of the recovery under the weight of the megamoney stimulus effects receding which will surpass the March lows. That will usher in the real reform that is needed in the financial and real economy, letting the bankrupt too big to fail companies fail so that they can reform into a efficient and profitable business, massive tax reform including a 10% flat Personal and Corporate Income tax and massive investment in infrastructure which seems to have taken a back seat in the Obama Administration.

How Low Can the Dollar Go?

The so-called fall of the Dollar is a head fake sucking in easy money who think that because of the huge deficits, the US will need to ratchet up interest rates to attract foreign purchases of US debt.

But that's not going to happen because the Japanese CB as well as other export-driven economies CB's (Germany, China, and other Asean Group exporters) upon looking over the precipice of continued falling exports (to the US) and unacceptable high unemployment, will intervene and buy up Treasury notes (thereby increasing exchange rates and strenghtening the USD) just to raise the buying power of US consumers which will raise their level of exports and keep people employed. It's a matter of politics and survival; and you can bet on it.

Just remember, the US consumer generates some 16% of global trade; if the Dollar remains weak and US consumers cut back on their buying (which has already happened) the economies of nations that export to the US are likewise affected. So given the choice of sitting on USD reserves and watching their employment rolls dramatically fall and pople on the streets demanding jobs and bailouts to pay mortgages, foreign governements will buy up US T Bills at low rates to keep the economy humming.

Conversely, the US government is delighted with a weak dollar as a natural barrier for US consumers to buy US goods rather than foreign goods. So the US is really in the catbird seat with a win win scenario going forward.

Friday's Outlook: Stick a Fork in Mr. Market

As usual, Mr Market is irrational (read overdone), and the more irrational the more myopic the street gets. This too shall pass and as the fog lifts, the market will slowly climb out of this morass and I'ld like to see all those analysts eat their recessionary and bear market hats. Its crisis like this in which fortunes are made and lost.