By Justice Litle
Dr. Marc Faber is one of the few market wise men whose thoughts are worth pondering. His monthly “Gloom, Boom & Doom Report” is always a good read. He is an active, Asia-based investor with decades of experience, hundreds of millions under management, and many prescient calls under his belt.

Faber has stated firmly and clearly what he thinks of the U.S. dollar. As you might expect, his opinion is not too flattering.

In the long run, Faber assigns the buck a value of “zero.” In the manner of all fiat currencies, America’s scrip is slowly being turned into toilet paper. The present cast of clowns in Washington seems bound anddetermined to accelerate this process as Wall Street cheers them on.

But that’s the long term, mind you. In the shorter term – i.e. for at least the next quarter or so – Faber is bullish on the buck. So bullish, in fact, that he is now on record as a buyer of $USD.

Trading platform that even a 5 year old can trade. Join now

“As of today, I will be long in dollars,” Faber told Bloomberg last week. (Perhaps he is buying from my colleague Adam Lass, who professed on Thursday his intent to remain short. Maybe the dollar has made a turn; it can easily rebound by 10 percent,” Faber further opined. “It may have started already since the asset markets started to go down 10 days ago.”

For, say, a Chinese Internet stock, a 10% move is ho-hum fare. For a major currency, however, 10% would be huge.

So why would Faber, a man who has foreseen and foretold the dollar’s ultimate destruction with as much table-pounding force as anyone – and who still very much believes in his forecast – decide to go long a doomed instrument?

Perhaps because the dollar, at this point, looks like not just a prime short squeeze candidate, but a bad house in an even worse neighborhood. The fiat currency game is all about relative strength, and the dollar’s key competitors are in a ramshackle state.

Mike Shedlock, aka “Mish,” puts it well on his Global Economic Trend Analysis blog:
Might the US dollar blow up? Yes it might. But so could the RMB if China floated it, and so could the British pound. No one seems to see the crisis brewing in Japan with a huge demographic problem, a shrinking population, falling exports, and no way to pay back its national debt.

There is seldom a mention of the problems in European banks who foolishly lent money to the Baltic States in Euros or Swiss Francs and now those Baltic country currencies have collapsed and the loans cannot be paid back. European banks also lent to Latin America and those loans are also suspect. Arguably, European banks are in worse shape than US banks, but no one talks about it, at least in the US...

Ah, but what about the debt-issuing insanity spewing forth from Washington? What about the fact that Bernanke, Geithner et al. are printing like there is no tomorrow? Does this not speak to dollar doom?

In the long run, yes. That is why Faber (and yours truly) see the dollar as well and truly destined for confetti-hood.

Post your comment  (0)

Connect:

Post to Twitter

Post to Facebook