Rogers: Bail on the dollar and equities
Not to go all bearish on you here, but I do think it is significant that a number of market pros are coming out of hiding and predicting some major turmoil. The latest in this group is Jim Rogers. He thinks we are about to have a serious currency crisis, with the U.S. dollar tanking and equities right along with it. Since I am a long-term dollar bear and I see quantitative easing as inflationary, I like where his head is at!
If you want the cautiously optimistic scenario, try Laszlo Birinyi, who was also on Bloomberg.
I think we are in a similar position to several years ago, before the housing bubble burst. Anyone with a brain could what the figures were saying, but if you said ‘House prices will fall, possibly crash’ you were looked at as some sort of lunatic, with Cassandra tendancies.
The figures (on debt levels, mortage equity withdrawal levels, house price to earnings ratios, etc etc) were right then, and the figures aren’t lying now. Such massive rises in government spending and borrowing, coupled with printing imaginary money can only lead to rising inflation, at levels not seen since the 1970s, possibly worse, and a falling currency.
When this will occur is uncertain – we managed to delude ourselves with house prices long after I thought it obvious that they were too high, so the markets may stick their fingers in their ears and ignore reality for some time yet. But just like the housing and then banking crash, the result will be the same. Eventually events and fact will dispel the illusion of calm, creating a catastropic loss of confidence in the currency, and a spiral of rising inflation, possibly even hyperinflation.
I’m not sure that the dollar is falling due to quantitative easing as much as it by the twin deficits–the federal budget deficit and the trade deficit. Like Mish has said, this quantitative easing is not going to be an inflationary factor until after the banks start lending all this “new” money. But the banks are NOT lending. They’re hoarding. Until they stop hoarding, it would be just like printing a bunch of money and then burying it in your back yard.
The dollar could still fall even in the face of all this deflationary pressure just based purely on the federal and trade deficits.
Rogers is a perma-USD bear. He has vocally negative any and everything US oriented for at least the five or six years. Nothing new here, keep on moving.
the dollar has been in a downtrend for as long as he’s been saying it’s so. timing is anybody’s guess, but the rally from last year makes shorting the dollar worth repeating.