The Dollar is Toast
September 17, 2012
Sell the dollar, and buy everything else. Follow this simple advice, and it’s very likely you will make money in the next few weeks.
A couple of months ago, I did not think the Fed would implement QE III because the market was already booming. We all know that QE doesn’t really help the economy, but it’s great for financial assets. So I thought there was really no need for more money-printing.
But last month, the Fed started to send signals that it would print more money. And last week, it delivered.
I never actually thought Bernanke would be crazy enough to implement another round of money-printing with the market already trading at 52-week highs. I guess I underestimated his level of insanity.
This round of money-printing is a little different than the previous two rounds. This time nobody really knows the size of QE III. With QE II, the Fed bought $600 billion worth of securities.
The Fed will start with $40 billion a month this time, with the flexibility of increasing the size of purchases if the economy weakens. If the Fed keeps that pace, it will take a little more than a year for QE III to match the size of QE II.
In the long-term, I have no doubt his policies will cause major capital misallocations that will result in other crises and bubbles around the world. In the short-term, we shouldn’t fight the Fed. It’s time to trash the dollar and buy pretty much everything else.