I was putting air into my bicycle tires the other day just to make sure I’d have a nice smooth ride when I hopped on. Eventually one of the tires became overinflated (or at least that’s what I assume happened since the tube inside sprung a fast leak in the midst of me pumping air into it.) Most of the air escaped the tire within seconds.
Did that signal to me the tube was pretty much useless in its current state? Yes.
What if:
1) The world will be struggling with deflation instead of inflation?
2) US employment and housing experience another leg down?
3) China disappoints?
4) An Eastern European country defaults?
5) The US is on track to at least muddle through better than Europe?
Ladies and gentlemen step right up and place your bets.
It seems a lot is riding on this opportunity for more “green shoots” this morning. Most expect the dollar to tank on better than expected jobs news; but few seem to be thinking the dollar will rally on worse than expected news; that’s because it’s a foregone conclusion the dollar will continue to weaken no matter what. Thus, it seems a sentiment extreme may be in the air.
Though I don’t spend too much time worrying about it, I often wonder where our esteemed leaders – financial and political – have their money hidden away. Where are their investments?
Let’s assume for a moment these folks target the foreign exchange market for capital gains. It’s likely they’re part of a large net short position on the buck. They discuss their decisions to spend, spend, spend ... their need to print, print, print ... or their need to cut, cut, cut.
The Chinese leadership said so yesterday, despite their previous intermittent cat-calls for a new currency. We suspect the cocky little student know-it-alls at Peking University (a common theme at most universities we might add, not just in China) are likely rolling on the floor in uncontrollable laughter at the thought of the US dollar lasting more than a few more months. They can’t wait to run out and sell the dollar and buy euro instead…oh wait, I forgot, they aren’t allowed to do that unless their masters in Beijing approve…so sorry.
