We experienced another manic day in the financial markets. The indices cannot hold an overnight bid and the one flight to quality market which lagged well behind…the 30-year U.S. Treasury bond is now maintaining a solid bid. The money is coming out of stocks and into the bond market.
As these equity markets continue to unravel, I think about our dovish Fed. I think about their next move with regard to preserving some sense of sanity in the marketplace. I think about the great economic engine called the U.S. economy. I think about what could give that economic engine a boost. A weaker dollar would definitely be beneficial.
I also think about the crowded trades out there; being short the euro and/or long the dollar are crowded trades. If the Fed decides it is time to join the currency wars and start manipulating the dollar lower, the move lower could be hard and fast. Uncertainty will continue to reign.
Increased volatility in the financial markets will create credibility issues for all central banks. At some point we will not know who to trust.
Which brings me to what is wrote on the back of a US dollar. IN GOD WE TRUST…or do I really mean…IN GOLD WE TRUST???