Marc Faber is usually known for his grim predictions, earning him the moniker “Dr. Doom”; a name he shares with Nouriel Roubini. The doctor has laid out a number of predictions in the past few years with his more recent jabs directed at sluggish growth in major Asian nations like China. But it seems that even Faber gets tired of a curmudgeon-like attitude, as one of his more recent predictions actually benefits the U.S. dollar [for more news and analysis on the dollar subscribe to our free newsletter].
Faber recently touted the near-term future for the greenback, though his reasoning comes handcuffed to a rather gloomy prediction. He feels that the greenback will perform well for the next few months not for any reasons in the U.S., but simply because the euro is likely to weaken. Faber pointed out that Spain and Greece can only print to a certain extent, while the U.S. currently has a plan in place that allows it to print indefinitely. Ben Bernanke has stated that the printing will not have any negative impacts on our economy, but he has managed to convince very few people of that fact.
What It Means For You
Of course, another gloomy prediction means little unless it actually has an impact on you. A rising U.S. dollar will certainly have a marked impact, especially in the commodity world. Because most commodities are tied to the greenback, any kind of movement in that denomination can create huge swings in the hard asset world. A strengthening dollar is bad news for commodities, as it will more than likely put downward pressure on prices [see also Commodities to Profit From Schiff’s Currency Crisis].
With commodities already suffering from a volatile year, this prediction is hardly good news should it come to fruition. At the same time, Faber can be correct, and the outlook can still be positive. Sure, the greenback may see a couple of strong months, but the outlook for the U.S. economy next year is pretty weak. Dollar debasement is actually one of the most talked about issues that many feel will contribute to a possible recession. QE3′s pace of $40 billion per month has a number of famed analysts worried about the future, and with good reason.
For those who fall under Faber’s camp, it may be a good idea to shift around a few holdings for the time being as European weakness is likely to continue. But bear in mind that the approaching fiscal cliff, massive debts, and the rampant money printing spell out a weak future for the dollar; proceed with caution if you are willing to bet on the greenback.
Disclosure: No positions at time of writing.