No one can be happy with a collapsing dollar which is what we'll get with fed policy. Has nothing to do with shorts getting killed, we're talking about protecting what's left of our assets and yes, people are now getting worried. If you calculate that the dollar has dropped about 1% in past 3 days, you have had better made 1% on your entire net worth to just break even. You could have made money in the last 3 days and you're actually down. If you were flat last 3 days, you're worth 1% less than you were on Friday.
That's a common perception, and apparently it's wrong. (Depending upon the measure, the $USD has LOST between 94-99% of its buying power since the creation of the Fed.)
If 98% are hurt (just picking a number here.. I don't claim to know the correct percentage), and 2% benefit, we should not be cavalier about it, just because is isn't EVERYBODY who's hurt. Ultimately, everyone who holds assets in $USD... Americans and foreigners, will lose buying power with the decline of the $USD... no differently than if the Gummint simply confiscated your assets. Think about it.
Reasons for dollar weakness. Fiscal policy: 10% Monetary Policy: 20% American Consumer: 70% This ratio can tilt to 40/40/20 very quickly. Look at Japan. In relation to other currencies, in the MACRO, the dollar is merely back to where it was. How do you think Brit's felt when the Pound fell to 1.05 against the Dollar after being pegged at 3.00 in the early 1970's? J.P. Morgan could've amended his quote to "Currency markets will fluctuate." Nothing really new under the FX sun. What IS changing is the markets skepticism of ALL paper currencies. The crisis in Japan is much more acute than the U.S. Selling Toyotas and Sony's will only take you so far. Japan has 2.7x the per capita government debt of the U.S. Hence this isn't an issue exclusive to the States. The REAL issues are socio political. The people suck so their government sux. On balance rich people are less likely to be gun toting, drug abusing, rap music blaring, ass out of their pants wearing citizens. Hence the FUTURE of America-as limited as that may be-lies in the HANDS of the rich. If you think Manuel in San Antonio or Shamikra in Detroit is America's future than I have some Long Bonds I's like to sell you at 14%.
<b>gnome and pabst</b>, great stuff from you two as always. So far this morning I've been short ES 1540 = out 1536 while reading the thread. Day traders don't need to care what happens from a selfish standpoint... equal profits flow up or down. Patriots should care, and non-US citizens will be affected directly or indirectly with whatever happens as well.
As you live and invest throughout your life, it becomes a race to see if you can increase (or even maintain) your buying power against inflation and taxes. The Gummint is morally and criminally WRONG for making this a necessity. Unfortunately, all but a few citizens will lose this race... and with dire consequences. Even if you are successful at trading/investing, you probably still LOSE... it doesn't matter how many $USD's you accumulate if you can't buy anything with them.
You said: "Anyone living in the US is, by definition, long dollars" Then I said: "people in the manufacuring for export sector are not long dollars" because they do better with a weak dollar. In the 1980's with the dollar at about 85 yen the US steel industry was exporting steel to Japan for example.
I want to preface by saying that my day to day trading is not affected by the Fed. I am always flat before announcements and try to follow along where the market takes us. Therefore, I have no axe to grind from a day to day trading perspective. I think what the Fed did is wrong. Artificial "support" seldom works in the longer run, so I would think it is best applied in moderation and only when absolutely required. But for some reason, it now almost always seems to be "required." And for the "greater good." I think that the higher you climb up the artificial ladder of support, the harder will be the eventual fall back to reality. Imagination can only make it real for so long. I think it's ironic that some of the same people who abhor the notion of a "nanny state" also seem to support the idea of a nanny in the Fed. (You just can't make this stuff up!) And perhaps the main reason that baby is quiet at the moment is because nanny stuffed the child's mouth with sugar-rich marshmallows. So baby is too busy chewing to make any noise. But wait until the sugar rush kicks in, and recognize that there are only so many marshmallows that you can feed baby before baby has even more reason to yell and scream. No, it doesn't seem to be a longer-term solution, and certainly not one that should ever be employed more than sparingly, if at all.