Currencies and 1987 |

Currencies and 1987

Remember the fateful day in 1987? Judging by the profile of most of our readers, probably not, but you may have read about it. So let’s review. Market gyrates. Currencies are exhibiting massive dislocations. Government officials step in (over a weekend) to talk one currency down. Globally, everyone believes that an Asian country will buy up the US (remember the movie Gung Ho?), that US manufacturing is done, and that US workers are fat and lazy. We have the largest housing crisis imaginable looming with the S&L crisis. Yikes! Sounds eerily similar. For those of you who looked into Boom Bust http://www.amazon.com/Boom-Bust-Prices-Banking-Depression/dp/085683243X/ref=sr_1_1?ie=UTF8&s=books&qid=1255459441&sr=8-1 the 18-20 year cycle with mid-cycle slumps should come as no surprise.

And so, while I’m not convinced by this rally in equities at all, I’m equally unconvinced by the decline of the dollar. There is a big disconnect between bonds holding up, declining dollar, rising gold, rising equities, and the macro picture (jobs, real estate, govn’t spending). Some market is sending the wrong signal…I just don’t know which one yet.

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