Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The U.S. Dollar’s Destruction Apparently Saves the Markets

Stock-Markets / Financial Markets 2011 Apr 21, 2011 - 02:13 AM GMT

By: PhilStockWorld

Stock-Markets

Best Financial Markets Analysis ArticleWheeeee, what a day already!  
The Dollar is down from 76 yesterday to 74.5 this morning, a stunning 2% drop for a currency in a country that didn't have an earthquake or a revolution overnight.  75.63 was our low of last November (a one-day spike and we were back at 81 by the end of the month as the market fell apart) and before that we only touched 74.23 briefly in November of 2009 (it's a bad month for the Dollar) and we flew up from there to 78 in December and 80 in January.  


I already sent out a morning alert to Members pointing out more ways in which the dollar bears circled the wagons yesterday after US currency made a rare showing of strength on Monday, which promptly collapsed the markets.  The BOE voted to hold rates steady this morning yet the Pound STILL rose from $1.616 yesterday to $1.637 this morning (up 1.3%) against our currency - which had no decisions and no official announcements of any kind.  

Does that sound A) Irrational B) Insane or C) Like Wednesday?  As David Fry notes: "Monday’s S&P debt downgrade shocker is quickly old news and steamrolled by freshly minted cash (POMO) with ideas of more to come.  Keeping money printing presses on high was a green light to sell the dollar which always causes commodities to rise. Why is that a good thing The Fed is also rumored to be selling puts on Treasury bonds to keep rates low combined with maintaining the bogus inflationary “core rate” to keep you mesmerized. It’s some Orwellian-speak to keep the masses happy even though they see the disconnect at the pump and check-out counter."  



That disconnect this morning sent gold over $1,500 per ounce and oil touched $110 a barrel where, of course, we are shorting it (very tight stops).  Unfortunately, the hawks may shriek louder, but the doves have the power at the fed and investors tend to overestimate the influence of the hawkish side of the Fed, according to former Fed economist Roberto Perli, who explains why Fed Funds futures consistently predict more and earlier tightening than actually occurs.

Economists at the ECB are now predicting "A Century of Inflation," driven by loose US Monetary policy and rampant Dollar-printing - a genie that already cannot be put back in the bottle as the money is already out there - it's just a question of having a spark that re-ignites the velocity of that money and sends us into an inflationary spiral.  

We took note of one of the major signs we are looking for in Member Chat yesterday, which is the beginning of wage inflation as Poland's Solidarity Union is planning a series of strikes to push for wage hikes in the case of quickening inflation.  This or something like this, could be the "shot heard round the World" as workers of the World begin to unite and demand to at least be paid enough money to be able to drive to work and, perhaps (dare we dream?), have enough money left to buy lunch.  

You watch the above video and think it couldn't happen here but it doesn't have to happen here - it can happen in Poland or it can happen in Greece or Portugal or Italy or --- well who are we kidding - it is happening here.  Gold was $750 an ounce in late 2008, now it's $1,500 an ounce and we're talking about QE3.  Germany's debt to GDP ratio when their country went into crisis in 1920 was 72%, about the same as the US's current debt load and miles less than Japan, the World's #3 economy, which has a 200% debt to GDP ratio.  

Inflation does spread too - in 1920, England had 16% inflation and France had 20% in the early stages of Germany's inflation as they printed money and exported inflation to the rest of the World (sound familiar?).  Keep in mind that, unlike the US - Germany had STOPPED fighting the war it couldn't afford.  

Unlike France, which had imposed a special income tax to pay for WWI, Germany had suspended the gold standard (Nixon did that to pay for Vietnam) and funded their war entirely by borrowing money.  Because the Western theatre of World War I was mostly in France and Belgium, Germany had come out of the war with most of its industrial power intact, a healthy economy, and arguably in a better position to once again become a dominant force in the European continent than its neighbors.  Although reparations accounted for about one third of the German deficit from 1920 to 1923, the government found reparations a convenient scapegoat.  Adolf Hitler rose to power criticizing the national debt and the consequences of Socialism, which he said was destroying the country.  According to Wikipedia: "The inflation also raised doubts about the competence of Liberal Institutions, especially amongst a middle class who had held cash savings and bonds. It also produced resentment of bankers and speculators, whom the government and press blamed for the inflation."

Far be it for us to criticize bankers and speculators!  Of course we're all against Socialism and those damned Liberal Institutions because that's the German American way!  But, unlike Germany - WE know what we're doing when we print money!  We also know how to speculate with the best of them and most of us at PSW already have our island getaways picked out and we'll be long gone before it all hits the fan.  Our speculation this week was JAG yesterday morning and it's already congratulations to Members as our new favorite miner takes off like an undervalued rocket this morning!  

TM should also be popping today so congrats to those put sellers but there is still time to go long on FTR off that $8 line.  UNG was a good pick-up on Monday and we're still waiting for ADBE to pop but AAPL is already off to the races and our bullish put spread is looking good and, of course, our aggressive move on FAS should do well so a very nice day for the bulls as we do our level best to fight inflation (in our own accounts - everyone else is screwed).  Having been so bullish on Monday (we shop when there's a sale!), we watched and waited yesterday other than my call for more CSCO and reiterating our bullish position in INTC.  

I remind you of this to make sure you understand that, with the same logic, we will be looking for short opportunities today.  We are neither bullish nor bearish - we are rangeish and we're going to be looking for nice shorting opportunities this morning as we have no reason to think the Dollar will really break down here and those 100% lines have proven very tough resistance to get over.  

Yesterday we were in the middle of our range and it was time to get technical - today we are nearing the top of our range and it's time to concentrate on the fundamentals - if gold holds $1,500 and oil holds $110 and workers begin getting paid more to cover it - then we can begin looking for the next 10% gain in the markets but, right now - we are living in a weak-dollar fantasy and partying like it's Germany in early 1921 as the Gold Bug Speculators celebrate their wise investments as gold crosses 1,500 an ounce - unfortunately, the value of every other Mark-denominated asset was down 50% by the end of the year. 

Let's be careful out there!  

Phil

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2011 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in