*** More comical dollar bearishness and why New York is infested with Europeans...
*** Back to the future: We go back to 1974 to find out what's in store for stocks this year...
*** Doug Casey...Kurt Richebächer...old stooges...and why it's hard to make money on the short side, even when you know what's going to happen...!
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THE 7-YEAR SLIDE By Tom Dyson
The dollar is in a bear market. We've said it so many times, we're starting to feel like a stick in the mud.
Far-sighted observers like Kurt Richebächer have been predicting the dollar's demise even longer and although they saw the writing on the wall well before anyone else, in retrospect it was obvious the dollar had to fall. Why? Well, frankly, dear reader, you already know why...the argument has been bandied about so much recently, even the mainstream press are getting tired of it.
Suffice to say that Washington's policies of the last few years, among other things, have all but assured the dollar's long-term decline. We call it the '7-year slide' due to the dollar's tendency to move in massive multi-year cycles.
But markets are fickle creatures...and even though the dollar's exchange rate is moving lower just as we said it would, we must never stop questioning our position. We've made good money buying gold and shorting dollars recently but a sudden trend change could wipe it all away. Mr. Market delights in punishing complacency.
It was in this vein that we wrote to you several weeks ago, making the case for a dollar bounce. We couldn't help but notice that the financial media - old stooges like the Journal and the Economist - had started covering the same themes we've been banging on about for years in the Daily Reckoning.
We called it 'comical dollar bearishness' and we argued that the dollar has fallen too far too fast and is now ready for a bounce.
Here's some more anecdotal evidence in support of a bounce...this from a British newspaper:
A two-night trip to New York from Manchester, England, to do Christmas shopping was cheaper than taking the train to London for a weekend to buy the same items, said the Independent. They added up the cost of a round-trip flight to New York, two nights at the Roosevelt Hotel and the purchase of an ipod, Nike sneakers, Gap jacket, Seven Mankind jeans, Nintendo Gameboy and five top-selling CDs. Total cost: $1,863, a saving of nearly $300 when compared to the cost of taking a similar trip to London.
When New York seems cheap, something must be awry. Luckily we're not the only ones to notice...
Doug Casey, long-time hard money proponent and savvy gold stock trader, has joined the chorus. We received the January issue his newsletter, International Speculator, yesterday. To our great surprise, the issue was titled, 'The Dollar Bounce.'
"But now," Doug writes, "not despite the dollar being all over the world's media as a disaster, but because of it, it's probably time for a bear market rally. By definition, the masses are trend followers, not contrarians. Regardless of what the long-term fundamentals of a currency may be, in the short-term its price is set by the psychology of buyers and sellers. Right now, everybody knows how badly it's done and they're all sellers."
And capturing the Rude Awakening's position perfectly - at least that of your junior editor in Baltimore, Doug reminds his readers, "despite my contrarian instinct that gold might have a rough month or two, nothing is changed about my mid- to long-term views on gold (it's going to the moon) or the U.S. dollar (it's going down the drain)."
Make sure you catch Doug's complete essay, which we're publishing in tomorrow's edition of the Daily Reckoning...
In the meantime, we'll leave you in the capable hands of Dr. Richebächer, a man who certainly isn't interested in short-term market sentiment...
"As a matter of fact, we are sure there will be no chance to sell stocks, houses or bonds in the future above or even at the present inflated prices," writes the Good Doctor in his latest issue. "As explained, these prices are manifestly not based on a high level of saving; they are a temporary artifact of artificially low interest rates and a credit explosion. The obvious true name of this game is asset inflation, systematically and recklessly engineered by the Greenspan Fed."
"We explained that the United States has two very different kinds of inflation: moderate consumer and producer price inflation being suppressed by soaring imports, and unbridled runaway asset price inflation engulfing bonds, stocks, housing and the dollar, driven by rampant credit excess.
"Now, the easiest thing to see is that all these credit- driven asset bubbles are sure to go bust. For us, their crash is a mere question of time - actually, of relatively short time. Let us say sometime next year..."
As you'll see in the 'Did You Notice' section below, timing is everything. And no matter what happens - come bounce or crash - we'll be prepared for it when it does.
[Ed. Note: Even though he's made tones of money shorting the dollar in recent years, Dr. Richebächer still thinks it has much further to fall. As least as low as $1.50 versus the euro, he predicts...and perhaps even further!
Find out how this will happen, and what you can do to profit from it or protect against it.
The Richebächer Letter http://www.agora-inc.com/reports/RCH/WRCHEC01
