Jas Jain on US Dollar

-------- Original Message --------

Subject:	US Dollar
Date:	Mon, 1 Feb 2010 11:18:13 -0800
From:	Jas Jain

Jules (born-and-bred Swiss): "In respect of the USD I can not fully understand your notes. Because the USD is still the most used reference currency in the world, it is essential to have a clear picture. I will be thankful for your explanations, why the USD should rise in the long term. My thoughts are: (1) In the long term the USD is has no value (Marc Faber, Jim Rogers); (2) with a lower USD the debit of the US can be reduced; (3) if the USD has no value, the US debt is 0."
 
Hello Jules,
The fate of the USD is intricately tied to the US Treasuries and inflation. Marc Faber, Dr. Doomed, has been trashing USTs for 6-7 years and Jim Rogers was short USTs before the big run up in 2008 and had to cover at a loss. Another dollar bear, Peter Schiff, is an idiot. People who have lot of following are wrong on some subjects and right on some. One must first determine who understands what and how well. Blind following, very common in the US and the rest of the democratic world, leads to troubles and disappointments. America is full of false prophets in the world of investment.

Regarding your thoughts: (1) Marc Faber and Jim Rogers are morons when it comes to the US Treasuries and the US dollar (if one is wrong on USTs that person is wrong on the USD); (2) All developed countries have deficits and debt issues are not just in the US; (3) USD would have no value only after the world economies and the global economic system have totally collapsed and not before that.
 
My views on USTs and the currencies have a 3-5 years time horizon. I was bullish on Swiss franc for 1999-2008 until my target of parity was reached based on the long-term under-valuation/overvaluation trending that is common, but now I am bearish on Euro and the Swiss franc because my conclusion is that the USD has bottomed and the trend reversal is likely to lead to fair value (1.2), first, and then to 1.4-1.5. The long-term trend lines (please see the attached graph) have lot of variations in policies and sentiments built into them. Once the extremes, based on fundamentals, are reached the reversal follows.
Best regards,


Jas