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3 Responses to “The Dollar Is Doomed, Jim Rogers Sells All U.S Dollar”
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3. January 2009 at 6:07 pm
Recently, I’ve become a strong believer and advocate of about anything Jim Rogers has to say concerning the economy. But I’m not convinced that Yen is the currency to have our money in right now. I’m concerned that its rally is nearly over and here’s why: much of the surge in Yen as of recently has been due to the sharp decline in world stocks and Treasury Bond yield rate. This has made carry trading for Japanese investors much less attractive than before…causing it to unwind. Also, this is the reason Jim and some others suggest that the Yen will continue to strengthen in the future because of a continued unwinding of carry trading. Now, much of the reason that the current Treasury Bond is yielding so little is mostly because of excessive demand for them caused by the Fed. But what about when President Obama proposes a new, even larger, “stimulus” plan, which there’s no doubt that he will. Now, there will be a flood in supply of even more Treasury Bonds in the market. Unless the Fed buys all of those up too (which I don’t put past them), the prices of Treasuries will completely collapse due to the excess in supply, which if you follow Jim Rogers, he has already predicted will happen. BUT, here’s the contradiction in buying Yen. If the Treasuries collapse, then they naturally provide a higher yield than before. Won’t this higher yield rate entice more foreign investment again, specifically Japanese investors looking to continue in currency carry trading? If this is the case, then the Yen will strengthen again against the dollar, rather than weaken. I guess, my concern is that I’m almost certain that the Treasury Bond market must collapse at some point, but when this happens, won’t this also strengthen the Yen? Maybe I’m missing something. Although, I guess that I’m assuming that the Japanese would even be willing to invest in us again…I guess that depends on what their perception of the future of the dollar is. Also, if the U.S. stock market loses more value, then that might also offset this problem, since Treasuries will become more attractive to all investors again. At the very least, the Yen will be very volatile in the next 6 months. Regardless, the dollar is going to see ridiculous levels of inflation since the Fed is buying so many of these bonds, so getting out of the dollar is definitely correct. But if we can’t invest in the Yen, then I don’t really see any currency that is a sound play (due to the constant threat of foreign central bank interest rate cuts, whereas Japan’s is already bottomed out at 0.1%). Thanks for any input you might provide.
3. January 2009 at 8:37 pm
I believe the Yen trade is more of a bet against the Dollar. But if that was the case, it would seem that the Euro would be a better trade than the YEN? I also have my questions about the Yen trade, but it seems Jim has more confidence in the U.S dollar falling than anything else. Jim has been all over the media saying the USD will collapse and rarely mentions the YEN. Lets keep an eye out as the story unravels.
As far as markets continuing to fall, no one really knows. But considering the large percentage drop that has already happened, its tough to continue to be bearish when bad news continues to hit us, yet the market continues to rally. For example, yesterday (first trading day of the year) the markets rallied even though U.S manufacturing posted record declines in the last 30 years.
Finally, Jim seems to be more bullish on Ag and Oil. If his top 5 best ideas are still in play, why put any money in his 6th idea.
4. January 2009 at 2:43 am
Japan has been in recession for so long now. Maybe Jim already sees some indication that Japan’s market policy changes to a better side??
In regard to treasuries: they will explode as soon as the FED refrains from buying them. Not before. And that will not happen before the US officials decide to let the recession happen as it should….
There is not only the debt of the people, there is also the official debt that bears interest rates that will bring the US into default at normal rates. So Bernanke HAS TO bring down the bond rates so the US can replace old debt with cheaper debt. Additionally, having bond interest rates at low levels also means the US can inflate them away without destroying the economy. It is just a question whether Bernanke has enough control over the US money supply. In principle he has: he just needs to stop re-issuing the FED’s term auction credit. But that, of course, will cause severe pain again.
We could very well end up switching between deflation and inflation forth and back — until many companies are bankrupt or just don’t have any incent to be productive any more (which is already the case for some decades now).