Concur with Beast1 with the following points.
With Fed Interest Rates, I will disagree, not because of the fundamental analysis as that is solid, but because of manipulations. I think that this was a smoke screen and no liquidity has been added to the market and the cards are being passed under the table from the ESF (Exchange Stabilization Fund) in the Department of Treasury to large banks and institutions as well the bond market through the reverse repo (repurchase) window (RRP´s) at Open Market Trading Desk at the Federal Reserve (Bank of New York).
Consider understanding how capital flows, not just in Europe. Most debt is denominated in dollars, but it has been (and will continue) changing to other currencies since the inception of the SCO (Shanghai Cooperative Agreement) and bilateral deals between countries in their own currencies. This has been further expanded with the creation of the AIIB (Asian Infrastructure Investment Bank) and the NDB (New Development Bank). Debt denominated in dollars is causing a (temporary) demand for dollars and hence the FOREX is getting jacked up. Look at countries with a greater commodity orientation. They are getting squeezed now and it will accelerate in 2016 as they need more dollars to pay their increasing debt.
The U.S. Dollar (USD) is the cleanest shirt in the pile of dirty laundry, but countries are exiting the USD left and right, most of this news is not proliferated in the US. China alone exchanged almost 250 Billion in bonds in about 9 months in 2015 and the rate did not move from 2% as it should have moved to 4-4.5%. This is without mentioning the sale of bonds from Russia or some of the Middle-Eastern Sovereign Wealth funds.
Currencies will begin de-pegging and break from the dollar. The key will be in how they manage debt write offs. Therefore there will be some type of re-order or reset so that a political storm is not set off. Or maybe a storm will be set off. What a great distraction as everyone is taken to the cleaners. I concur that the first pop will be the equity market and I will add, then the bond market. The system in 2007-2008 was never cleansed and the risk is no longer priced into the system. Maybe there will be a new domestic (and depreciated) dollar to exist in parallel to the current (international) dollar.
The oil market is the prime example as they are unable to profitably hedge with these prices and without the profit they are unable to pay the debt. As the oil market continues to tank and the various oil companies default (more than 40 in 2016), the system will slide. Recall that that the basis of US economic power (through the USD) was at one time based on the large gold hoard of the US after WWII and then after the closing of the gold window in 1971, it was tied primarily to oil (and other commodities). This was the Petro-Dollar.
Bottom line, enjoy the USD strength while it lasts because when it declines, although it may be stronger than the Venezuelan Bolivar, it will no longer be the cleanest shirt in the pile.
Although the US never technically cancelled it currency, it did fail two time with the Continental Dollar during the Revolutionary War and then with the Greenbacks after the Civil War. The dollar is legally defined as 371.25 grains of silver according to the monetary act of 1792.
I am in fact under 7.5% of total assets (other than retirement income) in USD.
With Fed Interest Rates, I will disagree, not because of the fundamental analysis as that is solid, but because of manipulations. I think that this was a smoke screen and no liquidity has been added to the market and the cards are being passed under the table from the ESF (Exchange Stabilization Fund) in the Department of Treasury to large banks and institutions as well the bond market through the reverse repo (repurchase) window (RRP´s) at Open Market Trading Desk at the Federal Reserve (Bank of New York).
Consider understanding how capital flows, not just in Europe. Most debt is denominated in dollars, but it has been (and will continue) changing to other currencies since the inception of the SCO (Shanghai Cooperative Agreement) and bilateral deals between countries in their own currencies. This has been further expanded with the creation of the AIIB (Asian Infrastructure Investment Bank) and the NDB (New Development Bank). Debt denominated in dollars is causing a (temporary) demand for dollars and hence the FOREX is getting jacked up. Look at countries with a greater commodity orientation. They are getting squeezed now and it will accelerate in 2016 as they need more dollars to pay their increasing debt.
The U.S. Dollar (USD) is the cleanest shirt in the pile of dirty laundry, but countries are exiting the USD left and right, most of this news is not proliferated in the US. China alone exchanged almost 250 Billion in bonds in about 9 months in 2015 and the rate did not move from 2% as it should have moved to 4-4.5%. This is without mentioning the sale of bonds from Russia or some of the Middle-Eastern Sovereign Wealth funds.
Currencies will begin de-pegging and break from the dollar. The key will be in how they manage debt write offs. Therefore there will be some type of re-order or reset so that a political storm is not set off. Or maybe a storm will be set off. What a great distraction as everyone is taken to the cleaners. I concur that the first pop will be the equity market and I will add, then the bond market. The system in 2007-2008 was never cleansed and the risk is no longer priced into the system. Maybe there will be a new domestic (and depreciated) dollar to exist in parallel to the current (international) dollar.
The oil market is the prime example as they are unable to profitably hedge with these prices and without the profit they are unable to pay the debt. As the oil market continues to tank and the various oil companies default (more than 40 in 2016), the system will slide. Recall that that the basis of US economic power (through the USD) was at one time based on the large gold hoard of the US after WWII and then after the closing of the gold window in 1971, it was tied primarily to oil (and other commodities). This was the Petro-Dollar.
Bottom line, enjoy the USD strength while it lasts because when it declines, although it may be stronger than the Venezuelan Bolivar, it will no longer be the cleanest shirt in the pile.
Although the US never technically cancelled it currency, it did fail two time with the Continental Dollar during the Revolutionary War and then with the Greenbacks after the Civil War. The dollar is legally defined as 371.25 grains of silver according to the monetary act of 1792.
I am in fact under 7.5% of total assets (other than retirement income) in USD.