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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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  • A 35% crash in the dollar is absurd. A major downward adjustment would bring about
    a huge export boom.
  • edited June 16
    Couldn't view @rono's CNBC article. Seems they wanted me to download the CNBC app. I did, however, read a pretty good account of Stephen Roach's prediction on Bloomberg. (Linked at the end.)

    My quick take-always:

    - "Dollar decline" has relevance only if measured against something else. That might be against another currency like the Euro or CAD. Or, it might be against a basket of different currencies. It might also be against an ounce of gold or barrel of oil. Most commonly, I think, "value of dollar" is measured against a basket of goods and services (cost of living).

    - Stephen Roach, from what I can tell, is a respected economist with good academic and business credentials.

    - Roach hedges a bit, using qualifiers like "could", "might", "possibly." So it isn't intended as much as a concrete forecast as a dire warning (splitting hairs here).

    - Roach doesn't specify a specific time-line for this predicted drop in Dollar value, meaning it might occur over a period of years.

    - There's been low inflation (and a conversely high Dollar) now for decades. Many factors have contributed. Here's my top 3: (1) Baby Boomers coming of age, (2) Weakening of labor unions (and worker bargaining power), (3) Technological advances which have made production of goods and many services less expensive.

    - Human tendancy is to expect things to go on unchanged. So, it's hard to get our heads around a sudden reversal in the Dollar's long dominant position among global currencies.

    - Roach makes a good case - whether one chooses to accept his reasoning or not.

    - Wouldn't the "all season portfolio", often mentioned here on the board, include investments expected to perform well during a period of higher inflation / weakening dollar?


    Bloomberg Story https://www.bloomberg.com/opinion/articles/2020-06-08/a-crash-in-the-dollar-is-coming?utm_medium=deeplink
  • Howdy folks,

    I have always thought of Roach as being a bit dour. That said, I watch the Fed buying corporate bonds, backstopping zombie companies and industries. The Gov't passing out a few Trillion$ here, there and everywhere. The market making new highs almost daily.

    I see stocks as the only game in town and they have zero risk due to the Fed. How in Gods name is this supposed to end well? Let me repeat, please cover your asses. By all means, play the market and make a few bucks and have fun, but cover your ass.





    and so it goes,

    peace,

    rono


  • @rono Is that like "duck and cover" in the 50s? You can duck all you want but there really doesn't seem to be a fallout cover anywhere but your school desk.
  • Yup. And the government advised us that we'd be better off, scrunching down, under kindling. (---Lewis Black.)
  • Never, ever do anything based on predictions. Below are several predictions by "experts".

    1) Interest rates can only go up by many "experts".

    2) The 10 year treasury rate will be at 6% (link) by Gundluch, the bond "king".

    3) EM stocks must outperform US stock this year for years now.

    4) GMO forecasted years ago what stocks will do in the next several years and were so wrong.

    5) Arnott another "expert" was wrong and his model fund PAUIX had below-average performance. PAUIX ranks at 75 and up for 1-3-5-10-15 years.

    6) Bogle forecasts were off

    7) PE, PE10, inverted yield are off by years.

    8) Value investing must be good this year and it still lags for years, after all, growth has been better for so long.
  • Hi Anna,

    Hope this finds you safe and well.

    You, my dear, are aging ME. Duck and cover?!?

    How about "bombs over Tokyo" ?

    Teehehd,

    Take care of yourself,

    Rono
  • Here’s another version of Roach’s views on the dollar.
    https://www.project-syndicate.org/commentary/european-rescue-fund-weakens-dollar-hegemony-by-stephen-s-roach-2020-07#comments

    “ An overvalued US dollar is ripe for a sharp decline, owing to America’s rapidly worsening macroeconomic imbalances and a government that is abdicating all semblance of global – or even domestic – leadership. And the European Union's approval of a joint rescue fund is likely to accelerate the euro's rise.”

    “ My prediction of a 35% drop in the broad dollar index is premised on the belief that this is just the beginning of a long-overdue realignment between the world’s two major currencies.”

    “ Whereas the International Monetary Fund expects the US current-account deficit to hit 2.6% of GDP in 2020, the EU is expected to run a current-account surplus of 2.7% of GDP – a differential of 5.3 percentage points. ”

    Note - also check out the comment..Quite a few make the case that the EU euro will not be the new reserve Currency.
  • I different Roche...Cullen Roche Interview:

    The main advantage of centralized currencies
    Why the risk of inflation is more likely to come from the Treasury than from the Federal Reserve
    Why growth stocks typically perform better in a low inflation environment and value stocks perform better in a high inflation environment
    Where to find value in international equities
    How should investors navigate the current market conditions?
    Ask The Investors: What is the relationship between inflation, interest rates, and house prices?
    equities-inflation-and-covid-19-impacts-w-cullen-roche
  • Another view:
    So far, the Fed has done a decent job in fighting the crisis. Massive liquidity injections as well as lending backstops fueled the confidence of markets. It seems that the strategy of acting aggressively was right. One reason for the decisive action may well be that the Fed is acutely aware of the diminishing marginal utility of Quantitative Easing. There-fore, we believe LSAP purchases will go on for quite some time as they support the recovery by providing favorable financial condition.

    Staying with fiscal policy –another round of support for households as well as state and local governments may ultimately be required. In such a scenario, Fed liquidity would keep businesses running and fiscal money would keep households consuming. And both would hopefully stay in place long enough for the Covid-19 pandemic to be fully contained throughout the count
    BIG NUMBERS ALONE MAKE NO PROPER MONETARY POLICY
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