Jack the Pipper

Quickly, among the reasons we anticipate a multi-year US dollar bull market in the making is interest rate differentials.

Who leads, who follows? Do rising stock prices make Mr. Consumer feel good i.e. wealth effect? Or does the ebb and flow of Mr. Consumer’s confidence blaze the trail for stocks?

Why is this important? It is important because the IMF’s morphing views on this imply emerging markets as a group are still highly dependent on capital flow from the developed world–center to the periphery capital flow (I saw this terminology first utilized by Georges Soros; not sure if he coined this phrase, however.)

Winston Churchill once said: “Nowhere is more nonsense talked than by currency experts about foreign exchange.” We are in total agreement, and unfortunately guilty as charged, even though we do our best to spew a minimum of nonsense.

Let’s just say for example you study very hard an earned a PhD. in economics at a “top” institution. And let’s say, given that you had tenure and time to consider pie in the sky stuff, as opposed to being worried about paying your mortgage next month, you develop a very nice theory about how to create a common currency.

I say nasty because the pound said to us (actually more like screamed), “YOU’RE WRONG!”

We are looking for a little rebound in the euro, despite our longer term view it goes to low 1.20’s this year at least.

Errrrrttt…That was the sound of tightening; if I knew Chinese, I would give you the translation. I guess there’s no need for that, as the markets seem to be translating it just fine this morning.

Jack laid out several items yesterday pointing to potential for a double-dip into recession land, for the US and abroad.

Five reasons favoring a double-dip…deleveraging, deflation, collateral, China, and protectionism