‘Economist’ is at it again. In its latest issue dated November 26, 2011 it has displayed the Euro like a shooting star (or a meteor) that is crashing fast towards the earth. Is it time to close the Euro shorts?
I quickly browsed through a PowePoint file that I had put together in December 2007 for my class at the SP Jain Centre for Management in Singapore in December 2007. I managed to locate it.
Here are the interesting results. These were sourced from www.macro-man.blogspot.com. I think the blog still exists but it is not the same ‘macroman’ that is blogging.
(1) Dec. 2, 2006: Economist cover: ‘The falling dollar’
Next five weeks: EURUSD down 3.8%
(2) December 2004 (date not clearly visible) Economist Cover: ‘The disappearing dollar’
Next two months: EURUSD down by 5%
(3) Feb. 2004 (again, date not clearly visible) Economist Cover: ‘Let the dollar drop’
Next three months: EURUSD drops by 6.5%
To be fair to them, the long-term trend was correct. The dollar slipped a long way by 2007. It is just that, in the short-term, the magazine cover simply confirms that all news must be in the price.
So, should one go long EURUSD now?