Prechter: Commodities, Stocks Topping - USD Set for Rally
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November 6th, 2009 by AdvisorAnalyst
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Robert Prechter tells Yahoo TechTicker that the USD is set for a rally, and Commodities and Stocks are topping.
Prechter also makes the seemingly counterintuitive argument that the dollar will rally because there’s so much debt, rather than being doomed because of it. If the economy turns sour again in 2010, as he predicts, Prechter says the dollar will benefit as more dollar-denominated IOUs get called by creditors seeking to shore up their own balance sheets, as was the case in 2008.
This goes hand in hand with Hugh Hendry’s (and others) call that because there is so much deleveraging yet to be accomplished, the dollar will be in high demand as big borrowers retire debt, and creditors end up long cash for the sake of balance sheets. A strengthening dollar will mean falling prices relative to the rise, and is therefore deflationary, by definition, as we have experienced in Canada with the strengthening loonie. If Prechter, Hendry and others are right, the CAD will pull back from its recent highs.
Read more from the author/contributor here.
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