I thought it of interest to see what surveys of forecasters indicate about two questions being asked: Is a dollar collapse imminent -- Martin Wolf is skeptical, while others [0] are convinced the end is nigh -- and is a double dip recession likely? I take a look at the messages conveyed by FX4casts.com and the WSJ October survey of forecasters.

The Dollar

First, let's take a look at what a survey of approximately 50 banks and financial firms indicates, for the value of the dollar (Fed broad index) and the euro/dollar exchange rate.

Figure 1: Log dollar index (broad) (blue), mean forecast (red squares), high and low forecasts (95% bounds) (teal +). Forecast dates typically pertain to 4th Thursday in each month. NBER defined recessions shaded gray, assumes last recession ends 09Q2. Source: Federal Reserve via St. Louis Fed FRED II, FX4casts.com, NBER, ...

The Milken Institute recently hosted a conference exploring the current crisis in the credit markets and a host of possible solutions to solve it. A summary of the discussion is provided in the paragraphs below, with the video clip at the end.

“David Malpass of Encima Global opened with a basic rundown of the importance of credit as the underpinning of any healthy economy, stressing the importance of proper valuations and accurate ratings. Without well-functioning credit markets and proper credit allocation, he warned, expansion will be limited.

“According to James Walker of Fir Tree Partners, the core of the crisis came from off-balance-sheet securitizations in mortgages; cars and credit cards; and securitization of securitization (i.e. CDOs). This securitization phenomenon was driven over the past 15 years by a combination of financial institutions, investment management firms and rating agencies with little skin in the

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If it were not so serious, it would be amusing.  So many who generally believe in free markets and small government are suddenly unhappy whenever there is no government intervention.  Whenever we hear a criticism like this, we try to look back at the history for that pundit.  Did the criticism appear before or after a problem was evident? At "A Dash" our focus is on interpreting actions and helping investors, but  a summary assessment will prove helpful. The Mission and the Players The Congress has done a good job.  Anyone who does not understand this has no grasp of the legislative process -- especially the passage of completely new ideas.  A bi-partisan stimulus bill was passed in record time.  Congress also passed the requested Treasury authority to intervene with Fannie and Freddie and a mandate to do more for housing.  This legislation ...

The fundamental question in buying stocks is the expected earnings (or cash flow, depending upon the sector) compared to the stock price. One compares this to alternative choices like bonds or real estate or foreign markets. On a risk-adjusted basis, one’s asset allocation should favor the undervalued asset classes.

At “A Dash” we believe that U.S. equities, despite a multi-year, double-digit profit expansion, and some market reaction, still reflect intense investor skepticism about future earnings. The biggest cloud over the earnings picture is the continuing (and so far incorrect) forecast of a recession by bearish pundits, mostly non-economists.

A current theme at “A Dash” is how people can use various sources of information in “doing their homework”.  Inevitably, we must all make choices about what to read and how to use the information.  We are working on some general criteria for this purpose.