Friday, April 25, 2008

The Dollar is coming home to roost.

All the negative news in the world cannot stop the international flow of dollars back to the United States. This is not a question of earnings for 1st quarter, but for 3q GDP figures and projected earnings RELATIVE to other international financial asset returns going forward.

Again, earnings, news, pundit opinion, and any economic projection based on the former are lagging reality. Reality is a forward looking concept as economic decision makers are deploying capital for FUTURE appreciation and return.

As I have stated multiple times on this blog, once G7 interest rates compressed, the push back into the dollar would be swift. Aggressive governmental intervention in the form of interest rate reductions and fiscal stimulus packages is exacerbating this effect.

Japan and China lead the way last night with the actions in their respective bond markets, and with inflation the major economic danger, bond yields will increase and continue to compress in a bid to stave off the arbitrage creating govenmental funding "imbalances".

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