What’s going on?

The dollar is getting stronger. This should be expected.

This is what happens when you stop beating your currency like a runaway slave. To be fair the dollar is the Fed’s slave. After all we gave it to them for safe keeping back in 1913. There’s irony here somewhere.

Alright! Enough slavery references. I think I just lost the black vote forever. And that’s bad for the world economy because you elect people like Barack Obama to run your blog posts and it all goes down hill from there.

What is just as bad for the world economy is a strong dollar. Compared to other major economies the US economy is supposedly the cleanest of the dirty shirts. It’s still dirty but she gets the job done. You can still wear her to interviews without being thrown out.  One of the things that has made her passable is a cheap currency. That cheap currency is now rising as the Fed prepares to shut off its printing presses for good (for now?).

Let me tell a little story.

The dollar goes up, commodity prices fall, capital leaves emerging markets,  emerging markets contract, emerging markets buy less US products, the US slows, stocks fall, asset bubbles bursts, and the world enters the 2nd “great” depression.

Of course that scenario doesn’t have to happen but the Fed needs to act quickly and it needs to do more QE, a lot more.

Now I don’t know if the Fed will do more QE until the after the next crisis starts, and it doesn’t matter. Everything is screaming slower growth. Slower growth means yields will continue to fall. Combine that with a strengthening dollar, long term US treasuries look very good.

I’m not holding to maturity. This is also bubble waiting to burst but in my mind it will be the last one to do so and thus will see capital flows into US treasuries as the rest of the bubbles around the world burst. So when the next crisis strikes and treasuries appreciate, then I will sell. Until then I will collect a measly dividend and wait for the inevitable.

If you want to hold US equities and pray the Fed steps in when the shit hits the fan be my guess. Personally, the only US companies I hold are ones that thirty years from now could have a giant robot army and the only thing saving me from pure annihilation is the title of “shareholder”. I’m looking at you GOOG!

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