Dollar Collapse or Commodity Bubble?
This is a question for all you equity analysts. Obviously this isn't a direct equiy research question but should be in the mind of equity analysts because its implications on the direction of the equity markets.
But I was wondering what your opinions are on the supposed dollar collapse? All the infamous investors like Jim Rogers and economists like Peter Schiff keep talking about a dollar collapse. I am wondering if it has already happened? And what are the implications of a dollar collapse? A return to the gold standard? Seems very unlikely to me although historically the gold standard has been reimplemented periodically throughout all socities, including the US. However, unlike ever before, central banks all over the world have abandoned the gold standard and are all using fiat currency regimes, which makes a return to the gold standard seem most improbable.
It seems like the dollar collapse has already happened and that the next bubble is in commodities... because despite the US being a debtor nation, in relative comparison to other countries we seem ok, and the US economy is much more vibrant and dynamic than any other, both from the business side and consumer side. With our Keynesian policies coupled with MTV rap culture, consumer spending and confidence seems healthy and resilient....
Peter Schiff holds great credibility in my mind since hes predicted two bubbles already but I don't know what he's trying to imply with the dollar bubble.... a return to the gold standard?
Peter Schiff has been greatly exaggerating rumors of the US's death for a decade or so. And he's been wrong the whole time. You can't really have a decrease in the USD and equities at the same time- especially when the US has 1/3 of the world's agricultural productivity in a resource-constrained world.
Yes, it's good to be diversified, but I wouldn't short the US- particularly in high density residential real estate, oil, utilities, pharma, mining, and ag.
With the exception of calling the financial crisis two years in advance and saving the hides of anyone who listened.
@OP,
The dollar's actual value is directly and inexorably tied to the world's largest nuclear/military arsenal. Everything else is a bedtime story to help the good kids rest easy.
^^^ This, and our status as the world's reserve currency. Membership has its privileges...
That's the key right there. Look around - it's not like there are a lot of better alternatives out there. We're the best of a bad lot.
Schiff can't have it both ways. In a country that produces much of its own food and natural resources, you can either have a weak economy or a weak dollar. You can't have both. Outside oil, the US is pretty darned self-sufficient, and our economy uses 20% less oil to produce a dollar of GDP today than it did five years ago.
DJIA to 15K, Schiff's fund- long Japan and China, short US- significantly lower.
Actually, no. "The market" as you seem to look at it means nothing. Those who had their lives tied up in financials, RE, REITs, etc lost their shirt and a lot more. Those who listened to Schiff and many other like him (who just didn't have the chance to speak in front of cameras) got out and lived to fight another day. Some of them prospered wonderfully, can introduce you to a dozen+, personally.
You are constantly forgetting that a market recovery means nothing to those who sunk on the way down. Is the Dow being at 12,000 any consolation to those that were forced to sell at 7,000? It's nice to be an armchair quarterback, but your comments about Schiff have more to do with your personal opinions than reality as it has played out.
Maybe Schiff can't, but reality can. Economy=weak, Dollar=weak, Food/Energy prices=Rising.
You may understand number, but you don't understand power. Even though we don't actually need foreign oil and even though the 20% you mentioned can drop to 200% our dependence on oil can/will only grow. This is a seemingly economic argument which has nothing to do with economics. Though perhaps not sophisticated enough for your tastes, the answer is embedded in my earlier comment.
Perhaps. Irrational exuberance is due for a comeback. That having been said, IF you got in at the absolute bottom and IF it hits 15K, you still won't reap the returns Schiff's investors did while we watched America fall towards 2nd world status.
With 6.8 billion people on this planet, the next century will be all about resources, and the US has them while the rest of the world needs them. Barring a literal Chinese invasion and resulting nuclear war that would make all investments moot, that's not going to change. Schiff ignores this at his own peril.
Really? US energy and ag portfolios are up more than threefold over the past six years. Meanwhile, Schiffs leveraged bets on Japan are blowing up. So the right move was really to get out of Schiff's bet in 2008. Since then, betting on China and against the dollar, you've lost money. And with growing unrest in the world and global food prices up with the US as the biggest exporter, things can only get worse from here for a long China/short US bet.We have the food; China doesn't. In a true apocalypse- which I'll admit Peter Schiff is right that we may be heading for- the US with its corn, fresh water, natural gas, and reasonable amounts of traditional and shale oil are probably the place to stay. Or better yet, Canada. You can manufacture stuff anywhere in the world- even Antarctica, but you can't grow stuff quite as well with China's unfavorable climates, weaker topsoils, land use issues, and (perhaps if the winds blow the wrong way) Cesium and Strontium contamination.
High food prices are great news for the US. Worst comes to worst we can stop using ethanol, ban exports, and let the far east's economy implode. Trade balances may trump information economies, but at the end of the day, food balances trump trade balances. The US has always been a resource-based economy, and by placing bets on resource poor economies and shorting a resource-rich economy because the (resource consuming) population is growing in Asia is a really silly trade to make. And that's why Schiff is so desperate to promote this view these days- because the trade is blowing up in his face.
Corn to $10, Yuan to $0.10.
Magni magni quam consequatur. Impedit rerum ut eos reprehenderit.
Praesentium ducimus expedita et ut enim. Alias mollitia nam quo nisi odio aut omnis. Dolor consectetur est iusto placeat. Libero similique omnis rerum nesciunt quod. Vel explicabo eos ut animi.
Enim soluta occaecati tempora consequatur ipsum. Nihil sit facilis consequuntur esse praesentium. Odit reiciendis similique commodi ea cumque. Esse eos quo voluptas consequuntur nihil odit quis fugit. Facere corrupti ut non ab maiores velit. Dolorem repellat alias quas debitis unde quis.
Laboriosam optio assumenda distinctio ullam. Fuga suscipit quidem ab vero voluptatem et ducimus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...