Dollar Carry Trade
Research for Online Investors

by John Dalt

4/21/11

The dollar carry trade is alive and well.  What is the dollar carry trade?  Using dollars, that offer no return, to buy anything (commodities) that is getting more expensive.  Simple deal to quick profits.  Our SwingTrade subscribers made 35% on a one day silver trade this week.  Where will it all end?

Next week the Federal Reserve will meet and we will see the first news conference after the meeting concludes on Wednesday.  What is the Bernank going to say if a reporter asks him if he believes in a strong dollar?

We are close to replacing the pictures on our currency with those of a third world dictator.  Perhaps Zimbabwe’s currency would be a good example.  I like rocks, they look “stable”

After they couldn’t print enough of these, the government decreed that they would take 12 zeros off all the country’s currency.  That is one way to fix inflation.  Of course it didn’t work. In 2009, the government admitted it was impossible to calculate the inflation rate, since no goods were available and most computers “had insufficient number of digits and software.”

What does this have to do with investing?  You are playing the dollar carry trade, you may not know it, but you are.  You are exchanging dollars for something else (stocks) that you believe will be worth more than money in a few days, months or years.

You are doing exactly what the Federal Reserve wants you to do.  This is the purpose of QE2, push down interest rates so low that people will invest their money elsewhere.  QE2 has the one-two punch of inflation.  If you chose to sit on cash, the Federal Reserve is going to take away your purchasing power.  The dollar has lost one cent in value this week!

Parents, it is 11 o’clock at night…do you know what the Federal Reserve is up to?

Congress is in recess this week and next.  Maybe that is one reason we have a bull market.  The good thing is; congress and the executive can’t do anything to hurt us this week.  The bad thing is; most aren’t doing anything good.

Harry Reid is in China visiting with the Chi-Coms.  President Obama is in California visiting with the Cal-Coms, and John Boehner is in Pakistan to meet with the Prime Minister Yousaf Raza Gillani and Army Chief Gen. Ashfaq Kayani to discuss the Afghan war and defense issues.  The Speaker stopped in Baghdad on the way, in a surprise visit.

When all return to Washington in a week, they will have two weeks to raise the debt ceiling.  This will not be accomplished with ease.  The White House and administration officials are adamant that ‘Armageddon’ will occur if the debt ceiling is not raised.  This is not true.

The U.S. can operate on a cash basis.  It has before.  It is up to the administration how the available money is spent.  Surely, the president would pay debt service and social security first, then defense followed by Medicare and Medicaid.  Other expenditures would be a little farther down the food chain.  It would be fun to watch.

Sen. Jim DeMint has vowed to filibuster a bill to raise the debt ceiling if substantial progress is not made to bring spending under control.  Sen. Mark Pryor (D-Ark.) told a hometown audience he will need to see a commitment to control spending before he would vote to raise the debt ceiling.

Have a good weekend.  The markets are closed tomorrow for Good Friday.  Poor atheists, nothing to do but work!  Next week, remember the dollar carry trade…what will Bernanke say?  Make sure your “investments” are not in the way of a reversal of the dollar carry trade.

The Mailbag:
Paul Krugman is a fool.---subscriber F.O.

John’s reply: I am amazed at the drivel he sells as factual.

The rank and file tea-party enthusiasts are puppets of the very rich and Saudi-rich.  They are not economists and often (and will continue to) vote against their own personal interests... What a bunch of maroons—subscriber R.T.

John’s reply:  Is it against my self interest to forgo short term benefit to preserve the country for my children (my long term benefit)?  Didn’t our founders trade immediate security and expose themselves to danger for a greater good?  p.s.  “Moron” is the correct spelling.

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