Sunday, April 10, 2011

...and EVERYONE wants to be short the Dollar...

Good luck with that! Especially at these levels.

I have created a chart that demonstrates the position of the dollar and the position of its components. It should be relatively easy to see what the setup is. Additionally, the campaign event currently being abused by politicians to fuel rhetoric and a identifiable difference between Republicans and democrats will likely signal a huge amount of pressure on US debt. Pressure on US debt = shortage of US dollars and therefore, HIGHER USD prices. Credit is simply not available unless you are friends with a friendly central banker. In that case, you use the credit to buy assets that you can sell quickly - such as stocks and commodities. The amount of credit destroyed by banks, derivatives restructuring and asset depreciation in residential and commercial real estate far exceed the credit being injected by the Fed. Moreover, the credit being injected by the Fed has NO VELOCITY and will crash when the bubble markets it has been allocated to collapse. The Credit withdrawn from communities, business and individuals is real for them and the economy. The further deterioration in commerical real-estate and residential real-estate is also real for people - especially those whose largest investment is trapped there. Then there are the poliliticans who never met a budget they could balance and have trouble cutting 1% of 3.8 trillion dollars...

The dollar index is made up of the following components in the following allocation:
  • Euro (EUR), 57.6% weight
  • Pound sterling (GBP), 11.9% weight
  • Canadian dollar (CAD), 9.1% weight
  • Swedish krona (SEK), 4.2% weight and
  • Swiss franc (CHF) 3.6% weight.
  • Japanese Yen (JPY) 13.6% weight.
As usual please click on the chart for a sharp view.
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