When Should We Get Out of the Dollar?
http://georgewashington2.blogspot.com/2008/12/when-should-we-get-out-of-dollar.html
In "The
New Bubble: Cash", I argued that there was a bubble in
U.S. dollars and treasuries.
Bill Gross, co-chief investment officer of the world’s largest
bond fund, now
says:
“Treasuries have some bubble characteristics . . . . The
government and the Fed cannot continue to talk about trillions of
dollars of financing and expansion of the Fed’s balance sheet
without the dollar going south”.
But how do we know when
the dollar bubble will pop? In other words, when should we get out
of dollars?
An
article in Bloomberg might
provide some insight:
The biggest foreign-exchange strategists and investors say the
best may be over for the dollar after a four-month, 24 percent
rally.***
“The dollar will go to new lows as the U.S. attacks its
currency,” said John Taylor, chairman of New York-based FX Concepts
Inc., which manages about $14.5 billion of currencies.
Citigroup Inc., Goldman Sachs Group Inc., BNP Paribas SA and
Bank of America Corp. predict further weakness. Last week was the
first time in almost a month that consensus estimates for the
dollar against the euro through 2009 fell, according to the median
forecast of 47 strategists surveyed by Bloomberg.
Taylor, whose firm manages the biggest hedge fund focusing on
foreign exchange, said while the dollar may strengthen next year,
it will fall to a record low against the euro in 2010 and to a
13-year low of 80 per yen as soon as 2009.***
“We’re at a turning point in terms of dollar dynamics,” said
Jens Nordvig, a New York-based strategist at Goldman Sachs, the
biggest U.S. securities firm to convert to a bank. “The dollar
shortage has been addressed and we’ll see people start to focus on
other things and those are all dollar negative.”***
As more loans are repaid, there is less need for dollars,
forcing investors to value the currency on metrics such as relative
interest rates, budget deficits and trade balances. By those
measures, the greenback should weaken, according to
Sinche.***
Note: I am not an investment advisor and this
should not be taken as investment advice.