The Dollar and the Bond

“The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world.  I don’t believe that there’s a need for a global currency.”
-Barack Obama
March 28, 2009

In many of my musings here at Trade the Picture, I have written of the dollar being a short and US bonds being a short. I believe this to be true AT SOME POINT. I was not sure when that would be. I have more clarity now. The bond and the dollar are not shorts here and now. It is my thesis that the dollar and the bond will rally fiercely. As this happens, equities will weaken to new lows.

The Bond and the dollar are the same. They move together. Think about who needs the dollar stronger. First, the United States does. We are starting to hear the President stress this fact. Second, China needs the dollar strong. Why? Because their currency is pegged to the dollar. Why else? Because they are the largest holder of US bonds.

The shills on TV keep declaring a bottom in equities. The shills don’t trade. The only thing the shills want are viewers, so they can sell advertising. Why do people even bother watching the propaganda that the television feeds them? I think I know why. History. If history has taught us anything, it’s that history teaches us nothing. Knowing this, the TV shills will continue their game. Meanwhile the cycles that have happened over and over again will play out.

Peace