Exiting the Exit Strategy

Ashraf. There is no doubt that there will be a diversification out of dollar in longer term what is not clear is where we go short to medium term. So much depends on 10 yr treasuries yields which if continue to rise (yes of course I expect US govt to step in and buy treasuries ) BUT corporate earnings that surprise on the downside (i think better earnings are priced in ) could be very negative for stocks and consequently negative for your gbp/usd your aus/usd and nzd/usd and your euro/USD and euro/jpy and if we break below 880 we go down a long way but this picture could take some weeks to play out so I think it is risky at the moment to be in this choppy market until we break 880 or 950 on Standard and Poors. On Fri I agree there was dollar selling despite stock market falling and there was USD buying on better US economic news (more classical econmic theory earlier in the week) but this to me is reflective of uncertainty and VIX needs to be watched as it is rising, so it is unwise to make predictions. We both know that stock market gains have driven this gbp, euro and aussie rally since March.

Ashraf, forward looking as you know can mean 5,10 or even 20 yrs what is not clear is what is going to happen in the next year or 2. If you sell the dollar you have to buy something else ..I don't think anyone would argue that Germany is driving force of eurozone and their economy is looking every bit as sickly as Japan's and their fall in GDP is worse than US. Is this simplistic? So where is their recovery going to come from when they have no domestic demand? It makes me laugh when people justify GBP/USD rise on UK improving sentiment indicators with manipulated retail sales and rising unemployment . Pound rose because it was oversold and worse performiong currency of 2008. The simplisting assumption is decoupling of the world economies.

Hi Ashraf . What we are at is clearly an inflection point with higher yields on 10 yr Treasuries curbing stock market gains. It is likely that US govt will above else attempt to curb these yields as they reflect higher long term mortgage rates and a big brake on a very delicate housing "recovery". This will nominally have a very dollar negative effect but when you look at what you buy with your dollars euro and gbp , aud, nzd.These are in even worse condition than US (UK and eurozone ) where at least the US is the world's reserve currency and everywhere else is also indulging in quantitative easing so if the US fails, they do too as well. Underpinning the recovery is a bottom in house prices which has NOT been reached and likely to be derailed by higher long term interest rates. China's growth is all export based, they have been stockpiling commodities with no increase in domestic demand ..so if they have no one to sell to they are not going to do too well either and that disposes of aussie and NZD.It's really interesting some of my friends are now looking to buy in good areas of London as if they think now is bargain of the century but it ain't no bargain if we head back to 1997 prices like Japan did!

Hey, Arshaf
Goldman said oil will go to 92??? Last time they said 85......Where did you find the news??

Best regards
Qin