Nobody believes that tech stocks can do well in 2010, correct? This comes from 2 fears – US recovery will not be too great and that the dollar may weaken.
Let us look at the dollar – it looks like the dotcom boom – when we were all sure that the tech stocks can only go up. Or the real estate boom of 2007 when we were all sure that Indian real estate can only go up – and then we know what happened. Now let us see something about the dollar:
– it has been beaten, battered and bruised. It could be very close to the bottom if not the bottom.
– US has a massive deficit, very close to zero interest rates (Ok not zero your money will double in 7200 years if you invest in it!!)
– huge social security deficit – social security may default in 2020 if not in 2019?
-countries like India dumped dollars (to acquire gold) – poor signaling for the big holders
– Bernanke grilled at the recent hearings – he got butchered by the senators.
Wait…how can the dollar go up? All that I have said are against the dollar..have I not?
Well read ahead:
the dollar’s bad news is already priced in? Perhaps the market has overdone the pessimism in hammering down the price. The bad news is really over done?
– Asian companies will pick up distressed assets and create some demand for the dollar – apart from Asian tourists finding it cheaper to travel to and tour US.
– the demand for American dollars will slow down in Afghanistan and Iraq
– Japan, Eurozone, and UK are not doing too great either – and the world does not trust the balance sheets from those companies at all compared to the US.
All this could see the dollar strengthening – remember Citibank, Pepsi, Coke, McDonalds are big beneficiaries of the Asia growth stories – and they all remit huge profits back home…
so a strong dollar in 2010 …and the tech doing well…possible, correct? Well, it is at least a view!
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