"The Buck Stops Here…” - September 2, 2009

The market lived up to history yesterday as it convincingly stumbled into September…which is typically a rough month in the stock market anyway.

This time, though, the plunge has more to do with the conviction that the market has raced ahead of the economic recovery…than pure calendar prophecy. Momentum based on speculation lasts only so long…and can’t make up for the lack of convincing evidence that the economic recovery is really here.

What the market needs at times like this are some points of certainty. One piece of speculation being talked about a lot that we can put to bed is that the dollar will not be replaced as the world currency any time in the near future.

Many world leaders are calling for the dollar to be replaced by a basket of world currencies…because what Wall Street caused in US financial markets had such a quick and colossal impact on economies around the world.

Despite the frustrations, though, and the fact that the dollar has lost some glitter, it won’t be removed from center stage:

· It would take an immense toll on many world economies that are closely tied to the dollar;
· It would devalue China’s immense dollar holdings; and
· It would raise US borrowing costs when the world cannot afford the implications.

Besides, it has been the currency of greatest political stability for 150 years. If you hold a note printed in 1934 or 1864, it’s still legal tender. That can’t be said even for the British pound. When in doubt, the world flocks to the dollar

The world will not pass the buck. The buck will stop here…and it will stay here as the world currency in the near future. No speculation!