Dollar thoughts

For those of you that follow my blog, I first made my forecasts that the pound would fall to $1.50 against the dollar back in May when the dollar stood at $1.95 - Dollar forecast

Well, I have some more 'thoughts' that may interest you. The US Government yesterday announced a second $800bn lending programme to supplement the $400bn TARP program. This is a LOT of money. By comparison, the UK pledged £20bn in the pre-budget report this week.

I think the dollar will stay strong, and maybe get even stronger in the very short term, but come the New Year and into 2009 IT WILL TANK.

In the simplest terms, the only way the US can pay for all this spending is by printing a lot of money. Printing money means hyper-inflation and a weaker dollar.

It may not happen tomorrow but a fund manager we own and respect highly is now 45% short the dollar. This is the same manager who was 30% long the dollar as recently as last month and rode a $2.10 sterling/dollar all the way down, getting out at $1.55.

Just a warning...