Rick comments on the U.S. dollar, gold and the conventional markets.
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Kind of funny, Gabriel. Everyone can have a bad day some times. He had a great get out of jail card though when he said he was actually referring to the PPP number.
Gold is in a FUNK…no iit is not in a funk..ok?!!..It is biding its time until ITS TIME…..when is that?….I dont know…Rick do think the US Dollar is the only game in town……geopolitics/economics will greatly mitigatethe dollar and soon…whY? becaue people fail to understand that the PASSING OF HEGEMONY THRONE is rapidly approaching..we are a very very technologically globally inter-related society….this isnt the 1800, 1700 or 1900 it is 2015….we live in a people fail o look at the consequences of technology and global communcations on both SIDES OF THE LEDGER…let me repeat: THE USA IS NOT IN A VACCUM…..ANYMORE…news will be constantly coming out now that gives you a prudent direction on where to hide your wealth…China, Russia, India, Turkety, Iran,, smart money players….etc etc..gold, silver and hard assets…
Sorry about all the typos I dont do much editing…u guys get it….that is good enough for me…:)
All the best to everyone!!
Interesting comment from Rick A. today, and I agree on the dollar still having room to run higher.
Earlier in the year my first target was between 100-102 for daily cycle top, and that came in on the March 11th and March 13th double top in the dollar at 100.39. I stated several months prior that the dollar would roll over from that area (which it did), and give a short term boost to PMs and commodities (which it also did).
Around that same time I mentioned that my intermediate term (and possibly major top) in the USD is targeted at 110 for the mid-term (next 3-4 months). Personally I don’t think we’ll take out the old highs of 120, but certainly wouldn’t rule it out of the possibilities. Rick is using a much longer term time frame for his 120 target, but I think the dollar finally gets it comeuppance after the next blow off top.
One thing that a surging dollar will likely do is put some pressure on the PM and commodity space, and this is why I feel that the major bottom in commodities will happen when the dollar hits those higher levels in the next few months. This will be a “back up the truck” moment in select stocks in many areas within the Commodity and Energy sectors.
At that point, I see the dollar rolling over for a while and running into headwinds, preventing the climb to new all time highs. This is a worn out narrative, but I have not been on the bandwagon of the death of the dollar yet until this year. It seems clear that US policies globally, its debt burden, and the American superpower days are coming to a close. As the US Dollar’s place as the reserve currency comes under pressure for the very first time, people will realize the cheese is moving.
When credit rating agencies and the other countries finally reconcile the crazy debt load of the US, they will see the emperor is wearing no clothes. Another headwind for the USD will be growing frustration at the Petro-Dollar from both OPEC and Non-OPEC countries. Lastly, as the currency wars wage on, it is clear that new alliances are being made and the US is being isolated. With the rise of the AIIB and the huge infrastructure of the developing Eastern world, there will be increasing interest in a new basket of currencies which will now also include the BRICS.
I don’t see how all those factors converging will allow the USD to rise much over 110, and think the dollar party ends around that level. Rick is a very sharp guy and he and many commentators that believe the 120 prior highs in the dollar need to be breached should at least be considered as a potential.
I don’t disagree with Rick too often Shad but this time I think he is going to be wrong because the dollar has already peaked or is within a penny or two of the top.
Lets look at this from a chart perspective and ask ourselves what is factually taking place in the markets right now. From there we may divine where the dollar is going next.
One thing we all know here is that dollar strength is often inverse to commodity weakness. Gold is the perfect example as it reflects the loss in buying power of the dollar over very long periods of time. But oil and the basket of commodities play just as large a role.
So where are we then on that score?
Well let me present a recent version of the Thompson Reuters CRB Commodity index I came across yesterday. Take a hard look at that chart and note that we are just a few point off a MAJOR double bottom that has been more than a decade in the making.
So does that matter to how the dollar is valued? You bet it does. It could be one of the single most important pieces of information that indicate to us what the direction of the dollar will now be. And with that acknowledgement we can also infer the future trend for crude oil, gold, silver, soft commodities and even (gasp!) ores.
There are times (like now) when the obvious seem to elude the best minds. And that chart is telling us unequivocally that a reversal in resource prices is very near at hand while simultaneously a weakening dollar is in our future.
Unfortunately the advent of inflation via dollar devaluation in resource terms is not the kind of inflation most of us will enjoy. In the background the overarching theme remains one of an impending asset deflation. And that deflation will eventually be manifest in falling prices for virtually everything that is currently in a bubble or becoming a bubble.
Bonds, housing, commercial real estate, farmlands, antiques, rare cars, precious stones and stocks will all eventually meet their Waterloo. But that could still be many years in the distant until the effects of an impending inflation in goods, rents, food and fuel begin to manifest themselves with seriousness.
So we are not talking the nice kind of demand push inflation but rather a currency event that, while it withers debt over the long haul, also has a negative impact on fixed assets even as the cost of living rises.
It is because currency induced inflation essentially amounts to a tax on our incomes that is drains discretionary income and therefore puts downward pressure on real estate prices over longer periods of time.
I am anticipating a steady decline in the dollar that will see it lose roughly 35% of its buying power in the coming years. Have a long look at the CRB chart Shad…..can you see it too?
Chart Of The Day: Commodity Crash – April 15, 2015 — Short Side of Long
http://shortsideoflong.com/2015/04/chart-of-the-day-commodity-crash/
That is a good chart Bird, and Yes I absolutely agree the CRB index for commodities is getting ready to double bottom. Now, while it is also quite possible that the Euro will double bottom while the dollar double tops near the 100-101 level, as you have been calling for, I am really expecting the dollar to actually keep going higher over the next 2-3 months, and feel some commodities and the PMs actually may start going up in tandem with the dollar briefly as this happens. I feel the dollar isn’t strong as much as it is the Euro/Yen that are still weak, but do agree that is set to reverse very soon. We’ll have to see where the greenback decides to roll over (100 or 110) but I completely agree that commodities are about to do their final bottoming and start the long climb up.
Kind of funny Shad, I can hardly remember the last time someone posting on this forum agreed with anything I wrote! Your response got a chuckle from me this morning. Anyway, I have another chart. This one is a long term chart of the US dollar index going back a few decades. I posted it once before but a second time cannot hurt.
To me, the picture it paints speaks volumes.
Just a quick cursory glance and you can see that from a technical viewpoint the dollar has probably already seen its peak and completed a blowoff top. Actually, it may have overshot just a little to the upside.
There is always the possibility that it could go higher though. Some pretty bright guys including Rick and yourself are in fact predicting that but I have my doubts and part of the reason is that the commodity index is about to bottom. The CRB reinforces my idea the dollar has hit its peak.
Now the CRB is really a chart of major importance. It is a weighted chart as they say being a little heavy on energy but the idea is that it’s a fairly broad based index of futures prices so it speaks volumes about trends.
The index comprises 19 commodities: These are Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soybeans, Sugar, Unleaded Gas and Wheat. There are four major categories and each has its own weighting.
When I look at that chart in conjunction with the long term dollar chart the conclusion seems straight forward to me. We will see inflation in resource prices (in US dollar terms) and of course a simultaneous decline in the value of the dollar index itself. And it means the final bottom in gold is coming into sight.
And it really must be that way. As I continue to contend, the Fed will be loathe to raise rates into dollar strength but if the major currency pair (USD / Euro) reversal comes into play that I am predicting then they are at their leisure to begin rate normalization into dollar weakness.
So we will indeed see inflation pick up exactly as rates are on the rise.
And as you know that idea is completely at odds with what the mainstream analysts are busy telling us right now. On the contrary they insist that rate hikes will put the brakes on growth, smother inflation and send us spiraling into a recession or worse.
Obviously I think they are wrong. The charts are telling otherwise.
Long Term US Dollar Chart- Courtesy of Jesse’s Americain Cafe’
http://1.bp.blogspot.com/-s4gxzNKSQfg/VKWOVkw688I/AAAAAAAA8P8/rDUIyopghbE/s1600/DXVeryLongTerm0115.PNG
By the way, can you see on that chart of USD that the peak to peak and lows to lows are about 16 to 17 years apart? That aspect suggests you might be right that the dollar needs a little further to go since the current top has not yet run out to the length of time of past peak to peak distances.
Good chart, and I generally agree that the CRB Index is set to bottom soon, but see it taking the next 2 months or so to play out. Whether the dollar has already topped or tops in 2 months is really small potatoes in the overall larger picture, but I do swing trades mostly based on short-term to mid-term indicators, so that is why I curious to see if the dollar double tops or goes a bit higher surprising some, and foiling the Fed’s plans for rate hikes.
Cheers!
I’ve just given this more thought again this morning Birdman, and I think you may be correct about the Fed timing their rate hikes for a falling dollar scenario like are about to witness for the balance of 2015. If the dollar gets down to 92-94 then this would allow for a bigger rate hike in September than some (including myself) have been anticipating. Good thoughts, and it sends me back to the drawing board.
Thanks Shad. You are thinking along the same lines as I am now. There is no doubt at all in my mind that we get the first rate hike in many years in the coming months. The message has been clearly stated and telegraphed already for anyone who is listening closely to what both the voting and non-voting members of the Fed are saying. All that we need to wonder about now is exactly how large that first rate hike might be. I do not think 1/2 percent is out of the question nor do I believe an accelerated schedule is off the table either. But it is not all bad news, The money supply is growing rapidly…inflation is coming. And with it a rise in rates means that we can adjust to the new normalization regime without protest or problems.
There is another consideration too. We should not assume the Federal Reserve is not following the exact same charts as the rest of us. Just like the one I posted. They may indeed be timing rate hikes into a weakening dollar cycle.
Actually, I have little doubt that is the program and it would readily explain why we have been at the zero bound for so long. Just on a simple technical trend basis they had no choice but to wait out the inflation cycle until it came back in their favour.
So fundamental analysis is not going to be really helpful here and that is where conclusions are going to fail based on reasoning around the US economic strength and why that will atract dollar inflows.
We need to consider also that as the Euro rises again that crude oil prices will follow and beaten down European equities will catch a bid. So we are going to see a period of at least a couple years where capital will actually flow back to Europe thus reinforcing a weakening dollar trend.
Of course, what I am saying in this post will seem implausible to most people who have already decided that Europe is a failed idea and must implode under its own debt weight.
But I am only taking a view from a technical outlook without knowing exactly why the dollar and Euro must reverse. I am only saying that based on the many charts I follow that they will.
The Fed never ceases to amaze in their decisions, but yes, everyone is watching the same currencies, bonds, equities, and commodities charts.
Birdman, you are absolutely correct that we don’t follow the same charts as a lot of us. They have access to some of the best chartists on the planet.
Yesterday a special advisor of Abe said USDJPY 105 was “appropriate” and USDJPY 120 was “too weak”… that sent USDJPY tumbling.
We wake up this morning and reuters reports that he has entirely flip-flopped his views saying now that “120 is appropriate,” and that he ” would not oppose further easing.” I suppose he got a phone call …
http://ca.reuters.com/article/businessNews/idCAKBN0N511820150414