Don?t Get Sucket In

[Lysglimt]

By Hans LysglimtWhat if Tokyo got flattened tomorrow by an earthquake?Or, what if Paris was vaporized by a rouge nuclear device?What would happen to the dollar?We think it would rise, relatively to other currencies, because it is still seen as a safe harbor, not absolutely speaking but relatively speaking. The dollar is a terrible paper, [...]

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[goldfinger]

I must say I have some doubt about the strength you see in the dollar. The Fed have gone down a dangerous path, the moment the speed of money starts to increase, who knows what will happen. You certainly seems to be right today, so, it's not enough yet, to counter the deflationary forces, the question is how long it takes, before the federal reserve will do what it takes, or if they won't and we will see deflation, 1-2 years from now.

[Lysglimt]

Yes, the dollar is doomed.
But, when "everyone" gets gloomy on the dollar - that is the time to think this over again, and then once more.
I believe a new wave of fear is coming, and then investors will again flock to the dollar - regardless.
Mostly because this is what happened 2007 and 2008. I do not see why this effect has run its course.

[goldfinger]

Yes, the dollar is doomed.
But, when "everyone" gets gloomy on the dollar - that is the time to think this over again, and then once more.
I believe a new wave of fear is coming, and then investors will again flock to the dollar - regardless.
Mostly because this is what happened 2007 and 2008. I do not see why this effect has run its course.


It will be interesting to see, if the dollar rally still have room, it will be more fear, but will that fear boost the dollar as before, when will the fear energy turn in other directions or against the dollar itself? I think a lot depends on Geithners toxic asset solution, it seems every time he does something, the market's hate it. I have never seen someone with so fearful eyes speak. He gives me the association to the Weimar Republic. Bernanke is more braced. I certainly think Bernanke could be the madman, that is his attemt to fight deflation, create hyperinflation, but who knows. Greenspan was better, he would have managed this crisis much better, as he had the magician tough. I don't like the dollar, because the dollar is obviously on the titanic, and it's going down.

[Lysglimt]

I should be very clear;
I do not like the dollar.
I do not "recommend" the dollar as such. I believe it will fall significantly.
But in the short run I see a new wave of fear ripping the markets. And in that wave of fear I see the dollar gaining strength again, very temporarily.
So you should still have some dollars, and some dollar denominated assets. You should hold dollars to the extent that your diversification strategy allocates to dollars, neither over nore under weighted in dollars (perhaps a bit under if you are very conservative).
At most you should have something like 5-10-15% exposure to US dollars (exclude gold, that just happens to be denominated in dollars).

This advice is mostly directed to non-US investors.
Investors in the USA should use every means they have to get out of the dollar any way they can, they will struggle to reach the 5-10-15% level even if they try very very hard.

But an investor based in Norway, Sweden, Germany, Singapore etc, should be diversified also into dollars for the next 3-12 months.