The Markets Do What They Will

I enjoy reading a quick newsletter every morning entitled The Daily Pfennig. It is written by Chuck Butler, the president of EverBank in St. Louis and I read it because it focuses on the world currency markets. It is a free publication and you can subscribe here at www.everbank.com. As a quick aside, if you browse the site, you will find that EverBank offers world currency CDs or certificates of deposit. It is a convenient way to invest in foreign currencies through a domestic bank. I have no affiliation with EverBank but in light of our government's desire to inflate our money supply to the moon, foreign currencies are a good place to park some of your hard earned money. You see, in addition to earning a better interest rate, you can also enjoy capital appreciation when the value of the dollar drops.

Anyway, the reason that I write all of this is because Mr. Butler is always on the warpath when it comes to the dollar. He makes a very good argument for why the dollar must go lower. I will tell you that I agree wholeheartedly with Mr. Butler, but as we have seen lately, the dollar has managed to outsmart everyone and charge ahead to new highs. This strength, I believe is going to be short-lived, but it makes an interesting point that everyone should understand. The markets are not always logical. In fact, the irrational exuberance that we saw in the stock market in the late 1990s proves that when people become passionate about something, they will bid the price into the stratosphere. It makes no sense when looking at the situation from a logical point of view. But that is the markets and no matter how sure we are of our position, the markets will do what they choose. Thus the old rule of investing, Don't fight the trend, the trend is your friend.

As an example, back in 1996, I was sure that the markets were overpriced and headed for a major fall. I went to all cash and watched as the markets continued higher for another 4 years before finally turning south. Which is why now I let the market tell me which way it is going to go, I no longer try to second-guess the direction. It is much less stressful and much more profitable.

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