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iPath S&P 500 VIX ST Futures ETN Message Board

  • wes_w_weber wes_w_weber Jan 14, 2013 4:08 PM Flag

    My thesis.

    I still can not see the fault although it is obviously losing. It is for one not the best instrument because of its decay BUT:

    If the debt ceiling is resolved and
    1) Obama caves in and cuts all kinds of spending (which is never going to happen), you now have a very fiscally responsible Government and the Dollar rises quickly (albeit temporarily).
    The dollar rise kills American markets and commodities.
    2) The Republicans hold the line and do not raise the debt ceiling and Obama must pay the debts that have been issued in the form of bonds and keep the US's obligations. There he would inadvertently have to cut social spendinig like medicare and medicade and social security as well!
    a) You again have a more sound dollar because the programs get cut this way anyway!.
    The dollar rise kills American markets and commodities.
    b) Fear precipitates because of the unknowable concept of market collapse and again people rush
    into the US Dollar. Like a horse running back into a burning barn for safety.
    AGAIN the dollar rise kills American markets and commodities with some velocity.

    So beside the decay, how do the impending debt talks bring down volatility?

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    • The US dollar can not spike very high. Real value of the dollar is dropping pennies every day because of the 45 billion (or so) monthly being printed by good old Ben. If it spikes the forex guys will take the opportunity to sell more. US dollar will fall an average of 3 percent per year against a basket over the next few years.
      The real plan amongst major currencies is to print money together to gets some free loot to pay towards their debts. Japan, Brazil and Switzerland are on board as is China (as it remains pegged to the US dollar). By making guarantees this past year the European Central Bank seems to be on board as well.
      I don't know what will happen in US politics the next 5 years but I am fairly certain that the US dollar is headed down and inflation is headed up. This can be played by being long commodities.

    • What people FORGET:

      The market did NOT fall because of debt ceiling not getting resolved in Aug 2011.
      It fell AFTER the 'deal' which proved that Govt would NOT fix the long-term problems.
      They got the downgrade because the 'deal' was a pile of &*$&$*(%.
      (Proven 2 weeks ago when the 'cuts' were delayed yet again.)

      If Obama caves - market rises.
      if GOP caves - same as Aug 2011. Not good.
      Thereis no 'risk' of US Govt not paying its bills .... now ... the risk is credit rating downgrade.

    • Here is the flaw in your thesis, the dollar rise and subsequent commodity fall will result in more money in the hands of the consumer driving demand. The entire bull run of the 90's was based on a rising dollar!

 
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