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No Love for US Cash or Debt
The US
Dollar has broken down in the overnight futures session to test its 2009 low.
We’ve now
definitively taken out the 2010 low. If we break the 2009 low (75) there’s only
one line of support left at the 2008 low. After that, the US Dollar is in
uncharted territory and all best are off.
As bad as
the situation in the US Dollar is, the situation for US Debt is even worse. As
ZeroHedge recently noted, the Bond King Bill Gross, who didn’t earn that name
from being stupid, has shifted completely out of US Treasuries.
Gross and
his colleagues at PIMCO no doubt have noticed that the 30-year bull market in
bonds is about to end. Indeed, the long-end of the US Treasury curve, the
30-year Treasury, is dangerously close to taking outs its long-term trendline.
When this
happens, the higher interest rates will come with a vengeance. This in turn
will accelerate the collapse in the US economy and very likely kick off another
round of debt deflation in the markets.
Many
commentators believe that should this occur, Gold and other inflation hedges
will be hit hard. This is partially true: given the level of leverage in the
system liquidations would affect the precious metals to a degree.
However,
unlike stocks, Gold and other inflation hedges are rallying due to increased
demand: central banks were net buyers in 2010. Demand from China has exploded
500%. And yet Gold is largely under-owned by the vast majority of investors (in
online communities this doesn’t appear to be the case as Gold bugs and others
of a similar mindset tend to congregate at the same sites/ forums creating the
impression that everyone owns Gold; ask your average person on the street if
they own Gold and the answer is no. Ditto for Silver).
This is why
I believe Gold is forming a rising bearish wedge pattern: it is predicting a
potential sell off, possibly to $1,100 or even $1,000. However, we have MAJOR
support at these levels which would likely stop any breakdown.
Understand,
I am NOT saying that the bull market in Gold is over. What I AM saying is that
if we enter another 2008-type environment, the precious metal will come under
sell pressure due to liquidations. And I personally would welcome this as a MAJOR
buying opportunity.
The reason
for this is obvious: we are entering an inflationary death spiral. YES, we
might have another round of debt deflation, but the flight from the US Dollar
is already beginning worldwide.
Saudi Arabia
has sent representatives to China and Russia to strengthen trade ties (an
obvious move away from pricing Oil in Dollars). China and Russia have agreed to
begin trading in their own currencies rather than Dollars. And in some emerging
markets people don’t even want to accept Dollars in business transactions
anymore.
The story
here is obvious if you read between the lines: the world is starting to shift
away from the US Dollar. Which is why you need to be preparing for inflation in
a big way, EVEN IF we might have another round of deflation coming.
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oh, and the wedge on the gold chart only touches 2 points with the upper and lower lines. I think I'll disembowel a goat
doesn't look like the 30 y bond trendline is being taken out to me
if gold gets any better we will have to call it antimatter rite
Graham Summers: is this guy Larry's brother? Sounds a bit like Larry, I mean, sounds like a lot of BS with some true caveats, carefully hidden. Will this guy also be the deflation king/expert if his hyperinflation scenario does not pan out? Just ask'n.
This is anecdotal I know, but has bearing. Back when Ho Chi Minh City was called Saigon, the official USD/Piastre exchange rate was at that time 1:500
These days, through an acquaintance that co-owns a little bar in Cho Lon with a couple of "tea girls", you are lucky to find buyers of USDs let alone get a good exchange rate. Everyone wants gold, silver, or Singaporean dollars, Yuan, Yen, Hong Kong dollars, etc. No one wants Dong or the USD.
Another war could change that in the US's favor.
Nope, they would lose it now. No money, no motivated troops. After two wars that have dragged out for nothing!
Make that four (4) wars:
Afghanistan (just shy of 10 years)
Iraq (8 years)
Pakistan (undeclared)
Libya (waging on)
One minor problem: we haven't won one since World War II.
Yes, Korea was a tie, too.
Remember the White House staff in 2007 declaring that they had the best "peace-time" economic numbers in history ... so much about that ... and that ...
No pun intended, I'm sure
wrong to be long your Dong
"This is why I believe Gold is forming a rising bearish wedge pattern: it is predicting a potential sell off, possibly to $1,100 or even $1,000. However, we have MAJOR support at these levels which would likely stop any breakdown."
The dollar is breaking down, yet gold is going to 1100 in dollars?
so as the dollar drops, i can buy more gold?
Sounds like another lame prediction by a research team that is usually more wrong than right and uses common knowledge as authority.
next.
Ok, this is my 1st time to comment here on ZH, so please be gentle, but here's how I see it. The Bernak gives us a head fake in June and announces that QE has ended. The commidity markets along w/ stocks start tanking through the summer. Once Fed Critics of QE become Fed believers and beg, hat in hand, for another round of that Bernak Magic and in late Aug. we get QE3. Bottom line, this summer will be a buying opportunity! So how'd I do?
B+, you forgot that the USD is due for a relief rally to scorch the dollar bears.
Rumor has it that Bernanke has applied for chinese nationality; either to stem the ongoing fall of the dollar OR to precede a further true, free fall to stony rock bottom.
The Russian press agency Pravda has stated from unofficial sources that BB or a look alike, dressed as an Orthodox Priest, was seen boarding an Aeroflot flight to Peking from Moscow; accompanied by a bunch of dour looking Nuns. The local buzz is that they be members of his brain trust in the FED, along with a veiled lady wearing a moslem burqa known as 'the Milady of JPM' to informed circles of the local FSB (ex-KGB) mob.
Members in the team would not comment about the identity of bearded priest. But the insistent, uninterrupted talk amongst them, as to mobile in-dialed friends, acquaintances, was all concentrated about excited, indignant remarks alluding to "betrayal by PDs to their crusade for QE's in infinite numbers".
The russians are adamant that their DNA tests done on quiet prove the man is BB as they managed to pull a hair sample, presumably out of his butt, from a used toilet seat.
The news in now circulating on Twitter and an article should appear on the most up-to-date financial blogs in US circles like ZH.
LMAO. Weekly World News has nothin on those guys.
Who (outside of China and the Chinese) is buying and or holding Yuan? I thought Russia was to a certain extent. Someone please comment on this and where you can actually hold yuan or set up any sort of carry trade. Thanks
If you want to buy Yuan here's how to do it. Order them here: http://www.goldline.com/coins-chinese-gold-panda
Someone please comment on this and where you can actually hold yuan
http://www.bocusa.com/portal/Info?id=649
WHY WOULD YOU WANT THE FIAT OF A CENTRALLY PLANNED CENTRAL BANK? (Chairsatan is only a 5th ringer in that Inferno)
Short Answer: Hong Kong & Macau
The are also a couple US Banks that offer 0% Yuan CDs, but using a US Bank defeats much of the purpose.
There are more options if you have a big company or an account with one of central banks that has a physical border with China. The following is from May 2009, so it doesn't reflect the MANY recent changes, but most of them are just furthering what was being put in place several years ago.
The first policy change was actually announced on Christmas day. The painful nomenclature echoed in the various accounts of China’s announcement that the dollar was being replaced as a medium of exchange with eight foreign countries (on a pilot basis) prompted me to review the wording of the original release. Plotted on a map, the “variable currency exchange zone” extends from the Myanmar border, where China is undertaking massive road and rail projects to facilitate trade with Thailand, Laos and Myanmar, along the border with Vietnam to the sea, and along the coast all the way to Shanghai. This would account for the great majority of physical goods exported from the mainland. The inclusion of Hong Kong and Macau encompasses the two key banking centers outside of this geographic belt. In addition, the agreement with Russia appears to provide protection against future dollar exposure to the pipeline to be built between Russia and China, which should account for the majority of future trade flows along the vast northern border. It should also be noted that it was not a single treaty that was announced on Christmas day. The announcement was of eight bilateral treaties, negotiated discretely, and closely held until released. These agreements have been followed by establishment of swap lines between the central banks involved. When Ahmadinejad and Chavez raved about denominating oil contracts in Euros as opposed to Dollars the financial press largely laughed it off and took the position that at least these weren’t important trading partners, like the Chinese or the Arabs, and they were only talking, not following up with concrete implementation measures.
The second interesting development is the implementation of previously announced Chinese stimulus plan. The stimulus plan has been structured such that one third of the stimulus will result from central government spending of reserves, and two thirds will derive from increased lending by Chinese banks. To facilitate this lending, China has been lowering the reserve requirements for its banks, and mandating increased lending. Lowering the reserve requirements without explicitly raising the USD reserve component implies that Chinese banks must be net sellers of US dollars (either in greenback or Treasury form). In practice, Chinese banks would have two options to divest themselves of dollars, either sell them on the open market, or exchange them with the central bank, thereby increasing the apparent holdings of the central bank. I mention this because, while my quixotic filing system has failed me this afternoon, I recall that buried in one of the Asian newspaper articles about China’s reported Treasury holdings in the last few months, was a brief mention of a change in the accounting of how bank-owned treasuries were accounted for.
On March 13th, the PBOC released Announcement 3. Much like the Christmas announcement, the wording focused on the minutiae, and neglected the practical implications. The change in policy provides both a mechanism and framework for dollar assets previously “locked” in mainland China to be transferred to Hong Kong banks and be readily converted to Euros, Pounds or HKD. Once the Yuan or Dollar assets have exited the mainland, they can be either converted into another paper currency asset or used to acquire more tangible assets in which to store wealth. It is this latter method which has noticeably increased of late, as both the central government and state owned enterprises appear to be on a shopping spree. In addition, China is developing a domestic dollar denominated bond market. This would allow Chinese state owned enterprises to raise cash now and acquire hard assets. Since repayment in the future is fixed in US dollars, firms could borrow funds up to the entire amount of China’s US Treasury holdings before there is any currency risk for the issuer, and the chances of the US dollar markedly appreciating against the Yuan are rather remote. In effect, China is building a silent exit mechanism for its dollar holdings.
All of this tells me that PMs will go to the moon. It seems that the Chinese want to get "creative" (in so much as a China can be creative) with fiat paper. Careful what you wish for; a creative fiat the collapses faster than the dollar? Again, PMs to keep climbing until they are confiscated? Thoughts? thanks for the information.
explains why goldman is badmouthing commodities..
government, the fed, financial institutions now all the same insider entities, keep people out of metals and real assets.
RE: YUAN
CNY is an ETF fro yuan, has done nothing and probably never will.