King Dollar Still Rules
Kevin Cook with you one more morning until Steve settles back into reality. Not all of us go cliff diving at Rick's Cafe in Negril for Thanksgiving.
I was on FOX Business channel Friday with Charles Payne talking about the continuing flock to US Treasuries and how soon this bubble had to burst. He noted this has been an issue for a couple of years. Actually it's been a debate for over a decade as China's dollar stockpile grew to over $2 trillion and they finally surpassed Japan as the largest foreign holder of our debt.
As the yield on the 10-year slipped below 2%, I explained that the bubble wasn't bursting anytime soon especially with European debt getting ever colder shoulders from institutional investors. Yes, our Treasuries are "overbought" because the world's reserve currency is so much more plentiful these days. But it's all relative in a global economy of fiat currencies, and betting on the top in debt of the top economy has broken more than a few banks lately.
And the German conundrum may not be as painful as it looks. While they appear to be dragged down by the weight of numerous ball-and-chain Club Med debtors, they actually like the weaker euro. A eurozone divorce that creates a core union of stronger countries could suddenly ignite a much stronger euro than the German economy can stomach right now.
I noted here Friday before the open that this decline will continue until there is a bigger fear-driven dip below S&P 1,150 accompanied by a spike in volatility. All we got in the light trading session was a feeble rally to 1,172 and then a close on the lows at 1,158. I'm looking forward to what surprises our favorite show "Dancing with the PIIGS" brings us this week.
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