Why I Still Like Being Short US Bonds and Short the Dollar
Why I like being short US bonds (betting interest rates go up) and short the US Dollar
I see Four possible scenarios:
1. Dollar gets strong because it has the highest interest rates in the developed world (my bond position makes money and this nicely hedges my losses in currency).
2. Dollar gets weaker because of inflation, worsening budget deficit, trade deficit (great for currency position and for bond position because long bonds will get killed in anticipation of greater inflation).
3. Dollar gets weaker while interest rates go up (every thing working here - except sadly the most important thing - the world economy and workers in the US).
4. Dollar gets stronger as interest rates are lowered (sadly, this seems impossible - and I'm not afraid of this scenario unless the war in Iraq ends, the US government starts to become fiscally responsible, and the US consumer starts saving instead of buying TVs).
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