It feels like 2002 again
Looking back through the past few years it seems now that we’re exactly where we began seven years ago. The stock markets were tanking, one bubble was ending and another beginning. Then it was the tech industry and after that the real estate boom, today its real estate bubble bursting and the treasury bubble beginning (and soon ending.)
But mostly it feels like 2002 again because the same trade is available. The dollar recently surged in value against both the Pound and the Euro and is finding values that haven’t been seen in years. As of now it seems the best opportunity comes knocking in the same trades that should have been taken in 2002.
Short the dollar, long everything else.
Looking back to 2003 the dollar was expensive against competing currencies and gold traded as low as $280 an ounce. Today the dollar is again expensive against other currencies due to the idea of deflation and gold is $840 an ounce. The dollar has been corrected and gained value but gold has lost very little value, these are the future bottoms and tops of this cycle.
The bull run in stocks from 2003-2007 was largely dependent on an expansion of credit and cheap credit. Back then Greenspan was pushing rates to their low of 1%, today we’re pushing zero.
Monetary policy seems the same as just 7 years ago but then again we have to think about the bailouts, two stimulus packages that will rival George Bush’s trillion dollar tax cut and rates that are so low money might as well be free.
We’re back to where we started and doing the exact same things that wronged us last time. This time though, we know that history is soon to repeat.
