Here's an interesting tidbit from a paid newsletter I receive. www.adenforecast.com As for me personally...I'm looking forward to profiting from a continued major decline in the dollar over the long term. It's been extremely profitable for the last few years. Let's see how it all plays out. Here's the snippet:
The big news this month was
Greece, and it went on and on. This
weak link in the European Union
pushed the euro down as the financial
crisis fueled on itself over what
might happen next.
The state of Greece’s finances
ultimately reached a frenzy on
speculation that the entire European
Union was likely doomed…
But it was all vastly overblown and
emotional.
Nevertheless, this drove the U.S.
dollar even higher because it’s viewed
as a safe haven currency. But when you think about it, the current sentiment
doesn’t make sense.
Remember, Greece only accounts
for 2% of the Eurozone’s GDP. That’s
practically nothing and it’s certainly
not going to bring the European
Union down. As our dear friend
Chuck Butler points out, California
is also in deep financial trouble and
in comparison, it accounts for about
11% of the U.S. economy.
Even considering the other Euro
countries that have too much debt,
like Portugal, Ireland, and Spain,
it’s the same story. In perspective,
Illinois, New York, Michigan,
Florida and a few other states are
facing financial troubles too and as
a group their total GDP’s are more
than double that of the troubled
European countries.
U.S. DOLLAR: Bear market
ready to take hold
As we’ve seen many times before,
this is a clear case of the fundamentals
not coinciding with the
market action. This happens fairly
often but usually, the two will get
back into synch and that may be
starting now.
As we’ve often discussed, the
dollar’s fundamentals are extremely
bearish. We won’t rehash all of
the reasons why but at the top of
the list is massive deficit spending,
excessive money creation, a
large and growing trade deficit,
huge debt, and the very important
fact that the deficit is near 11% of
GDP, a record held by only four of
the major countries in the world,
including Greece.
Normally, when a deficit hits
around 5% of GDP it’s a red flag that
the currency of that country is headed
lower, yet the U.S dollar has been
rising this year… and that’s what we
mean by being out of synch.
But as you can see on Chart
10A, the dollar index has recently
been resisting at its 65-week moving
average, which identifies the
major trend. This average is currently
at 80.50 and if the dollar
index stays below that level, there’s
a good chance that following this
year’s rebound rise, it’ll resume
its super long-term decline that
started back in the early 1970s.
On the other hand, if the dollar
index breaks clearly above 81, then
it could continue up to its mega
downtrend near 83.80 before it
turns down again.
