We live in a world full of perception. One analyst calls it the biggest danger and another analyst calls it the opportunity of a lifetime. And both can be right at the same time, it all depends on perception. Of course, how do you know which one is closest to the truth?
One perception could end up losing everything while the other perception could mean a big gain. The financial markets are full of threats but also full of opportunities. So can the US Dollar rise and fall at the same time?
First, let’s take China for example.
China appears to be in a massive financial crisis thanks to a bursting credit bubble that has the potential to drag most of Asia, and possibly the world, into an era of massively depressed trade and asset prices.
On the other hand, China has already become the world’s second largest economy (and by some measurements the largest), and has accumulated more savings than every other nation on the planet. Plus the Chinese renminbi’s acceptance in foreign reserves, global payments, and international trade settlement is growing rapidly, and it even looks likely that the renminbi will be be anointed soon by the IMF.
Two different perceptions, yet they’re both correct.
So how about the American dollar?
On one hand the US dollar is strong. The labor market has recovered to its pre-crisis levels and stock and bond markets are near all-time high.
But however, the dollar is astonishingly overvalued based on nearly every objective metric that exists, the Federal Reserve is nearly insolvent on a mark-to-market basis and the labor market has been completely hollowed out as the US work force now constitutes the lowest percentage of the American population since decades.
Again, two completely opposite views that are both correct. And there are more examples everywhere.
So it’s important you know the risks and be guided by objective data. Don’t be misled by panic or negativity. Wait until the right opportunity comes along.
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