A reader asked my opinion here.
Specifically he asked about the consequence of Iran selling oil in euros.
I have touched on this before and while there are many angles to this I have had the same opinion for several years now.
I view the dollar being on a long, slow road to being less important, globally, than it is now or has been in the past. The dollar is the world reserve currency. I think it will soon have to share that designation with another currency or two; the euro and the yuan seem the most logical candidates.
Because every commodity trades in US dollars there is a certain level of constant demand to transact certain kinds of commerce. Foreign countries need dollars to buy some of the things they consume. If those things become available in other currencies there will be less demand for dollars leaving the dollar weaker.
The consequence would be higher interest rates and generally less demand for US assets. As I mentioned the other day I generally expect lower equity market returns and higher interest rates and this is why.
I do not view this as death blow or a tipping point for Financial Armageddon but more of a hindrance for accelerating growth.
This is also why I was (and still am) a big fan of the currency ETFs early on. The easy thing, and you can read easy all over the MSM, would be to ignore currency products because they are so "risky" or you can realize that markets and investing do evolve over time and while currency exposure may not be for everyone there is no reason not to explore the subject to make to informed decision about whether to own currencies or not.
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16 comments:
Roger,
Forgive my ignorance, but I'm not getting it - what is "MSM"?
Roger,
You watching CNBC again for trading ideas today? Great thinking. You will certainly have access to info that the rest of us don't have.
Please tell me how oil being priced in dolars helps a dollar valuation?? Why would a country want to hold declining dollars, if that is what u think they do, to pay for commodities? Can't they simply sell their currency, buy dollars, and buy the oil? And why do you think saudi arabia and the other oil exporters would not take dollars as payment, particularly as u say the dollar to reduce alot? Makes no sense.. Are these countries just stupid?
Thanks Roger.
The USD has been the world's reserve currency since the collapse of Bretton Woods. In a world of fiat paper, market participants look to transact in the most liquid, most stable currencies. The dollar has been greatly mismanged by the FED, and thus market participants are looking for other currencies. This, in my opinion, is the reason for the dollar weakness, more than the development of the Euro or the possible development of an Asian currency block. However, if the oil producers seriously shift to Euros (they will continue to take USD, but they used to take ONLY USD), then I think the demand for USD will be meaningfully less.
hippodrome, MSM stands for main stream media.
6:09 Anon, The issue has more moving parts sorry if that implication was not clearer. There is obviously more trade between countries than in commodities.
To the heart of your question I don;t think other countries are stupid but I have never thought the the dollar was going to crash either. Generally weaker is not crashing, IMO.
What do you think of using Fidelity's or Vanguard's foreign developed market mutual funds as a substitue for ETFs such as EFA. They both have smaller fees than many of the ETFS and have essentially no transaction fees. Thanks
ROGER, IS THERE A WAY TO INVEST IN VIETNAM? AND, YOUR THOUGHTS.
Closed end fund:
http://finance.yahoo.com/q?s=vtopf.pk
Forbes article:
http://www.forbes.com/2006/08/24/vietnam-merrill-lynch-in_cd_0824soapbox_inl.html?partner=yahootix
A Viet Nam ETF may be in the works. It is rumored to be called the Fonda Traitor Hog Fund. In lieu of a rigorous financial accounting program, Jane will be hired to pitch the ETF along with Rosie O'Donnell, who insisted her name be placed on the ETF.
Bubbling up a comment from a prior thread:
The FED, a private FOR PROFIT organization controls the capital markets.
That ought to be CLEARLY ILLEGAL and TOTALLY UNACCEPTABLE to anyone with a clue as to how the world markets operate.
I doubled down on SLV today. A highly overweighted position. There's too much risk in the individual miners, but once it's out of the ground, game on.
"Can't trust the SLV vs physical Silver". IMHO, BS. If not, my attorney will sort that out.
The largest short position of all commodities is in Silver. How short is short enough?
http://www.investmentrarities.com/4-17-07.html
Trees grow to the sky!!! I've selected my branch and am currently the branch manager. Safe haven is attainable below.
DB back from Palm Desert. Nothing exotic like Roger. ;)
You will remember, Dave B ,as the long time haunt, as stating "this was it".
Well, .... this is it.
Pack in your sorry arses, and GO HOME.
Next 7-15 years, sit back with the double short and double short indexes.
Like I will. Finally IRA rerlief.
You bastards previously offered no refuge in teh major bear downturn.
Now you do and the ignorance is in the public.
Shport the hell out of this fore 7 years IMHO. And kick my arse then if I'm wrong!
We're done!!! We're toast maybe one more rally for the suckers.
DB Out. In Austin!!!
Your post a comment won't work.
Sorry. I have a comment, and nmany more.
Ask your ISP why random posters encounter BS.
The thought is lost at the BS, as the focus is changed.
No more BS and lack of service!! I Hope.
Otherwise I show NO MERCY. You are out for good. And all your other amateur wannabees. OUT!!!. CXNBC is TOTALLY USELESS for invesytment advice IMHO. Same for Uncle Ben!!!
roger, is this still your blog? can you offer a context for what DB is trying to say, if not just for the purpose of entertainment?
roger, is this still your blog? can you offer a context for what DB is trying to say, if not just for the purpose of entertainment?
I think the park ranger said "don't feed the bears".
Only the first comment by 'DB' appears reasonably consistent with his previous posts in content and style as well as I can judge such things so I'd guess the last two posts are not in fact from DB; possibly someones attempt at satire? (shrug)
Since it's as easy to fake identity as it is to post anonymously here (as it is in most blogs) your guess is as good as mine. In any case, AFAIK, Roger usually leaves comments alone ...it's his blog and he makes the rules.
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