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Wednesday, August 05, 2009

The era of forced speculation

"The wretched performance of the U.S. dollar and dollar-denominated bonds leaves investors with a simple choice: Speculate on other, riskier assets or watch the value of your dollar-based savings erode.

“So we have the era of forced speculation. It's a kind of dollar exodus. And anything that is not the dollar is a potential promised land. The upside -- if you own oil, base metal and commodity shares -- is that there's a strong tail wind behind your investments.

“The downside is that the speculation may not be based on real sustainable growth. It's just another lending bubble in China piled on the rubble of the real estate lending bubble in America. Bubbles built on rubble aren't stable. That means you may be better off trading the shares, rather than buying and holding and getting whipsawed by volatility. It's worth thinking about.”
-- Dan Denning, quoted by Addison Wiggin and Ian Mathias in "The Worst is Over? College Costs, CRB Bull Market v2.0, Bank Warning and More!"


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