Will the Dollar Crash and Burn?
Howard Davidowitz is one of my favorite interviews. Much like my old favorite Jim Rogers, he's advising you youngsters to drop the pitch books and spreadsheets in favor of plows and pick axes. He also sees very bad things in store for the dollar and the DJIA. Have a look...
So what do you think, boys? Has Davidowitz gone off the deep end? Or will the dollar actually crash and send the Dow spiraling 6,000 points? His points on Treasuries are very interesting and worth the thought.
the trade is started to get very, very crowded....and why would(if) a dollar crash, collapse US equities? Cheap dollar encourages sov. investments in equities. I love to see when people start calling for the collapse of the dollar, more than not, it provides a great contrarian trade.
This trade is starting to get crowded by the smart money only. There is still a ton of dumb money propping up the dollar.
Thing is, a lot of other countries/currencies are facing the same headwinds (mainly Yen, Sterling, Euro), so there will be volatility between them and the Dollar (so it's not as simple as just shorting the Dollar). I would bet on the Dollar, Euro, Yen, and Sterling all devaluing, and would look for the Canadian Dollar, Aussie Dollar, Yuan, Ruble, and Real to do well against them.
This trade is starting to get crowded by the smart money only. There is still a ton of dumb money propping up the dollar. /quote]
disagree. lol smart money has been in from last year(1st week sept). im not giving out any of my opinons sorry.
If there were not a lot of dumb money propping up the dollar, bond yields (not just treasuries, all USD-denominated bonds) would not be where they are now. This dumb money comes from various sources, from the Fed buying up paper, to the pension plans trying to find a "safe" way to reach their 8% target, to soon-to-be retired baby boomers following the wrong financial advice that says bonds are safe and merit a 50% allocation. Are there a lot of hedge funds in this trade? Yes, but HF are a much smaller portion of the AM pie than most people think.
This trade will be truly crowded when people are cashing out their fixed income funds to buy silver eagles. Sure, a few smart retail investors have done that, but they are a very small %. Inflation for this decade will average high single digits if not low double digits, and I'm in rather good company as far as that prediction goes.
someone is missing their medications...
If the dollar goes through its support, the US stands to grab a major share of world trade, especially since EMs and Europe are already raising rates. When looking at the bigger picture however, all this talk of the US being crushed by inflation, blablabla, is vastly overblown. These deficit hawks were nowhere to be found back when we were pouring hundreds of billions into Iraq (not nearly as helpful for our economy as the bailouts). I think Davidowitz is just trying to be noticed/reap the benefits if by some improbable sequence of events he turns out to be right.
inflation overblown? bailouts were helpful to the economy?(maybe you meant to say financial markets?) shit man i guess i missed this
Perhaps you don't remember September '08, but if the govt didn't step in, we were dead in the water. I'm not talking about QE2, just the initial cash infusions and discount window broadening that kept the market from completely tanking. Honestly, anything up until March 09 was probably justified even if it wasn't done appropriately in order to avoid moral hazard. When I say inflation fears are overblown, I'm talking about the whole hyperinflation hysteria and dollar getting smoked talk we are hearing. We are clearly getting into heady territory as far as headline inflation is concerned but I don't think it's too late to take the foot off the gas and slowly back away from ZIRP. Demand destruction will take care of the rest. I'm not saying we are out of the woods, just that some people need to stop freaking out.
I'm thinking he's reacting to market conditions that he doesn't fully understand. I don't either, but I don't have nearly as much at stake.
This is just a glorified infomercial....
alexpasch, that's my bet, that inflation will be lower than high-single digits over the decade. I'm dirt poor per this board's standards so I'm going to have to stick to 100SBs for now.
What's your rationale? High single digits isn't even that high of an inflation rate when you consider just how much debt needs to be monetized. It's simple math, we either will default or inflate the debt away. I don't see how we can grow our way out of debt, not in a world with increasingly scarce natural resources and China gobbling up an ever increasing share of them.
I will be worried when people start keeping their wealth in cigarettes.
lead first....
worst case scenario, we all go back to carrying money pouches full of gold/silver coins
I actually think we can grow our way out of debt, particularly if the dollar declines to the point where we can right our trade imbalances, which should happen if pensions funds move out of dollar assets as you suggest.
We have grown out of debt in the past, but fundamentals are totally different now. You can't compare today to post-WW2. It's not like our competitors are in shambles, instead, they're thriving. And we're starting to see critical shortages in a wide array of natural resources, whereas back then supply of everything was increasing.
At the end of the day, doesn't impact me what you do, but I don't like to see people lose their money...
Midas, you should recommend a book about dollars for next week's NSFW.
Don't worry about my munzos, I don't really want to take that bet anyway since it would be completely illiquid. The thing about low growth is that I believe it would preclude us from seeing high inflation. The current unemployment situation is a huge impediment to high inflation. Also, if we do get to a situation were Asian creditors are reluctant to roll over debts, we could implement austerity programs which wouldn't be inflationary.
People who have not seen inflation in times of high unemployment seem to think it can happen. I have seen (with my own two eyes), inflation of 15+% in countries with unemployment rates of 15+%. If we have low growth (or even negative growth), our ability to pay back our massive debt is essentially zero. It becomes an absolute mathematical certainty that one of two things will happen; we will either monetize the debt, which will be inflationary regardless of unemployment rate, or, we will default, which will also cause a flight from the dollar, which will make imports expensive, and will ripple through as inflation domestically. We may implement austerity plans later, but not until after the currency has devalued and a significant level of inflation has occurred. For example, if Greece had still had its own currency, what do you think would have happened to it BEFORE they instituted those austerity measures? Our debt ratios are not much better than Greece's...
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