Coining a new phrase, "the falling dollar bubble."

(c) Dec 3, 2003 by Neil Albala http://FXcoach.com

Dollar Analysis: "the falling dollar bubble"

Here's something that most people have yet to realize. We're just now 
finishing the refinancing boom, where people refinanced their homes, and 
got to take out huge amounts of equity, which they then could then spend. 
During the past two years THIS is what has been driving our economy. Now 
that the low interest party is over, in order to keep the economy going, 
people need more money to spend. Devaluing the dollar is next, and here's 
the part that few people realize. When the dollar loses value, your cash 
assets also lose value. BUT your hard assets gain value. That means most 
companies listed as stock go up. Actually they don't gain or lose value. 
They just stay the same. But because the dollar is worth less, the actual 
dollar number goes up to maintain equity. Thus the stock market can 
continue to climb. This is the obvious plan of the Bush economic team. 
But it's all a house of cards built on credit, and now hedges, and like 
any game of musical chairs, at some point, when the music stops, the pied 
piper has to be paid. You'd think that we would have learned our lesson 
from the stock market bubble. Now we're stuck again on this falling 
dollar bubble. We've painted ourselves into a corner. There is not way 
out. At least as far as the US economy is concerned. But the individual 
investor can easily steer clear. The individual investor, as was the case 
with the first bubble, can avoid this calamity completely, and even 
profit by it, if they just keep on eye on the daily markets.

Subscribe to daily updates at http://FXcoach.com.

Neil Albala
http://FXcoach.com