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The End of the World Will Not Be Broadcast

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This week's issue (Dec 4th) of The Economist has a picture of the United States dollar on it; hanging from a twig as if it is a leaf, with some sort of leaf cutter moth eating away at it. The title is: "The Disappearing Dollar".

Here's the lead-in: "The dollar has been the leading international currency for as long as most people can remember. But its dominant role can no longer be taken for granted. If America keeps on spending and borrowing at its present pace, the dollar will eventually lose its mighty status in international finance..."

I don't know when the USD is going to bottom, though as I have argued for the last two weeks, it is probably not far from here and in fact as I write this the DXY is having its best day in weeks and may be near a minor degree "5" wave move up which could be the start of a real trend change. But I do know that the editors at The Economist aren't going to be making the call. You see, editors and large scale publications are in the business of selling magazines. Which means they are in the business of identifying and explaining the ideas that the most number of potential readers (customers) are interested in. That's their fiduciary duty to the stakeholders: make money by having the most readers, have the most readers by talking about the most obvious trends.

That last part is the most important: obvious trends. If there are two more crowded trades in asset markets I don't know them: short the dollar and long stocks is about as fully developed - as obvious - a trend as one gets. No matter what the fundamentals of the USD are - and they are admittedly horrible long term - markets do not move in one direction. Markets progress and egress around a larger trend: for every 5 steps forward or back, there are 3 steps back or forward (respectively). And with the USD the clear trend has been down (more than 30% down in fact) from the peaks in 2001 for the USD. The Economist, with its cover on "The Disappearing Dollar", is fully embracing this trend.

When it's time to sell your dollars, that advice isn't going to be on the cover of The Economist.
No positions in stocks mentioned.

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