E.D. Hart

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  • Dollar Doldrums Will Soon Be History - Barron's
    This comment is interesting:
    "Despite concerns about the dollar losing its coveted "global currency" status, the IMF noted that dollar reserves were steady at 64% even after its recent plunge, suggesting central banks are in no rush to dump the dollar."

    I would like to point out that the reason for this is the "flight to safety trade" and the fact that the market has been looking for a port in the storm. When the worlds investors wake up to the real inflation rate much north of 4%, treasuries will not look so appealing.

    Currently, 10 year bond holders get 3.86% to guarantee liquidity, and the loss of purchasing power over the next decade. Investors typically overpay for liquidity, and stability--and this is one example.

    Moreover, the 64% figure is actually a substantial decline in relative reserve percentage over the last decade. Look for this long term trend to continue--reserve banks holding lower and lower percentage of us dollar as reserves, as percentage of overall reserves.

    Its not necessary for banks to stop buying us bonds and bills, they merely need to slow the purchase of these assets--and this is what we have seen over the last decade. The bullish case for the dollar is short to medium term--the long term trend is still down.
    May 05 20:15 pm |Rating: 0 0 |Link to Comment |View article
  • Dollar Doldrums Will Soon Be History - Barron's
    Eventually, oil will be prices in Euros, or a basket of currencies--as a widespread practice. This is just a matter of time.

    When this happens, look for the dollar to drop. Several serious proposals are in the works for this very change.

    There will be less of a reason for foreign governments to hold dollars. This will increase dollar supply, as foreign central banks hold fewer dollars as a percent of overall reserves, and these dollars will be turned into other currencies, or commodities.

    Currently, over half of the dollars in existence in the world today are held overseas, much of it for reserve currency purposes. Some of these dollars are coming back to the US in a tsunami called inflation.

    The biggest bubble in the world today is not real estate, it is US treasuries. Global dollar surpluses have sought out the "safety trade" of treasuries as a way to find port in the storm from recent increases in market volatility.

    Look for inflation to increase, yields to rise, and bonds to fall.

    Those treasuries, prices in dollars, will be converted into other assets--including commodities, and currencies. As foreign governments hold a huge chunk of treasuries, they will continue to diversify away from US bills and bonds to protect their capital. This is already occurring.

    The "flight to safety" bond trade will come to an end, and be replaced by the "inflation trade". This is already occurring.

    Its not that the Europeans, or Chinese, or Brazilians have a stronger economy--(although that helps)--it is far more important that the dollar's role as the world reserve currency is declining, relatively speaking.

    The inevitable decline of US dollar hegemony will take place over a decade or two. Your protection is be long commodities, long high quality dividend paying foreign equities, and short treasuries.
    May 05 20:03 pm |Rating: 0 0 |Link to Comment |View article
  • Copper Proves the Commodities Bull Isn't Over - Yet
    Markets in backwardation are a bullish sign in commodities, generally speaking. Commodities are also very volatile over the short term, so copper may very well fall 40% from here. But that should not be taken as a bearish sign. The bull case for Cu is that the demand is increasing, and the supply yoy is relatively flat. Similar to the case for oil, and other commodities. Buy companies such as AUY and FXC, and add as prices decline. The secular trend is up. I am long AUY.
    May 05 19:41 pm |Rating: 0 0 |Link to Comment |View article

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