Timing The Exit As Competitve Devaluation Looms; Is The Euro 25% Overvalued? More Thoughts From Albert Edwards

Tyler Durden's picture

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Mr Lennon Hendrix's picture

Comparing one dead duck to another.  The oligarchs think both will make for a lovely dinner, moi! -as in "Geeves, pull the care around.  yes.  Karen, I just love this champaigne.  'moi'."

Euro to spin at $1.33-$1.37 until early April.  DXY to spin at 80-82 until early April as well.

Going Down's picture


"the focus is precisely on the competitive FX devaluation in a fiat world."


The race to the bottom where all winners are losers.


Fritz's picture

Its just a giant game of currency whack-a-mole.

When I see currency-trade product advertising (targeting retail investors) on TV I want to just puke. 

Ripped Chunk's picture

"Competitive Devaluation"

That will be the game now.


Assetman's picture


Anonymous's picture

now, _that's_ devaluation!

rubearish10's picture

So, what you do is deploy a 25% Currency Bond allocation to a USD based portfolio, with 25% for Precious metals, commodity stocks (dry powder) and agra funds. With the other 50%, you deploy a major leveraged short equity position with along with a mix of long dated treasury puts, TBT, TBF. Anything left over you pu some moiney in telecom and utility (defensive equity plays), a defensive hedge fund allocation, some US income funds. Then go play golf every day.


Oh, the other thing you do is play the USD long side as conditions develop via outright FX. Bingo!

dark pools of soros's picture

sounds great but any majored leveraged play will surely get blown up by the house tilting the wheel at their rigged casino


anything played that heavy needs you to sit in the country club hot spot while gaming the market

scriabinop23's picture

Albert Edwards has been so wrong about his calls lately that a monkey playing with darts might have better luck.

His ideas are certainly entertaining though.






B9K9's picture

As Napoleon continued to push eastward during the 1812 Russian campaign, the population of Moscow skyrocketed. Yet when he finally entered Moscow, the entire city was empty except for whores, criminals & lunatics.

The moral of the story? As the fire ring inches ever forward, people will continue to flock to areas of perceived safety before it too is abandoned. First it was a flight from corporates to sovereigns; now weaker sovereigns are falling as each successive firewall is breached.

Some day, perhaps soon, the $USD will be the last instrument standing before a final, mad dash is made into whatever asset class(es) promises to preserve any remaining value.

faustian bargain's picture

I like the Napoleon analogy. I'm imagining the USD as Napoleon's army marching thru Russia.


dark pools of soros's picture

nah its more like the CDS market as the Blitzkrieg 

Anonymous's picture

I agree. The US has had decades of upside by being the reserve currency. Soon we'll see the downside of being the worlds reserve currency. A warehouse of imagined value as others race to the bottom.

Ned Zeppelin's picture

King Dollar - don't bet against it.  But the appearance of invincibility is relative, not absolute.  The only real threat to the dollar is the deficit. If it cannot be funded via debt, it will be funded via the printing press, debasing the currency.

faustian bargain's picture

No, the real threat to the dollar is the day the people realize they've been had. It will be impossible to put that genie back in the bottle.

WaterWings's picture

Thank deity for the Rocky Mountains. Nothing but gun-loving food hoarders and their fat, TV-addled extended family. Wait for the huge heathen die-off once the SHTF. Those attempting to reach this high desert paradise will be wishing they had bigger gas tanks and more sunscreen.  

pslater's picture

Completly correct.  When there's nothing but financial ashes, personally held gold will still be worth somthing.

Gordon_Gekko's picture

You were on the right track but didn't get to the final destination - the final mad dash after the USD will be into PHYSICAL Gold.

Anonymous's picture

How about the gang-sponsored nice "correlation" between SPY and the dollar? If the dollar depreciates the SPY goes higher twice more strongly... If the dollar appreciates the SPY goes up only slightly!!!

Anonymous's picture

The ECRI leading indicator was captured by actions taken during the bail out/stimulus period. It rose from -30 to +30 very quickly.

Those two actions did not in fact do anything but paper over the problems. They created an illusion which the leading indicators reflected.

The leading indicators are not reflecting reality, they are reflecting popular illusions.

Should investors should base their strategy on the reflection of popular illusions?

hedgeless_horseman's picture

Should investors base their strategy on the reflection of popular illusions?


Barack the popular illusionist says, "Yes!" And boy was he right.  The miracle of prestidigiflation!


dark pools of soros's picture

well as fiat is an illusion and that is the current game.. i'd say yes until its not!

Gunther's picture

If all paper-currencies are going to be devalued, over time nobody is going to save any more. Without savings there is no real money to invest and the economy will not grow. That sounds like stagnation, in terms of devalued money stagflation.
Moreover, monetary policy can not cure the mal-investment that happened before. Mc Mansions in the middle of nowhere or unused internet capacity are not worth a lot even if money is easily available. The wealth put in mal-investments is gone, it takes time to realize that.

Devaluation of currency looks like bullish fundamentals for the precious metals. They simply sit around while their currency denominator decays.

Anonymous's picture

You got it! Metal is the only thing left that is real in the age of money printers. And, it's going to get worse as there must be more money printing to get the US out of debt insolvency because of baby-boomer entitlement programs.

Global currency devaluation is not a "if" it is a "when"...and "when" is coming real soon.

Anonymous's picture

Metal's good as long as people think it is. What can I use metal for to survive? You cant easily expand food supply or water as well.

faustian bargain's picture

golly, i dunno, maybe you could use the metal as currency.

WaterWings's picture

Not to be crude, but many will use spouses and daughters as currency when it gets down to it.

dark pools of soros's picture

and slaves as well... and i agree - water would be the new oil AND gold  -  there's just too many god damned people compared to when gold was scarce and fresh water was easily grabbed 

Anonymous's picture

The time to short the Dollar and go long the EUR will be marked when Peter Schiff declares on CNBC that he is "temporarily" bullish on the US Dollar and thinks it can rally a bit further. THAT'S WHEN YOU SHORT THE DOLLAR!!! Not earlier.

dark pools of soros's picture

i can see that being put into the algos already so TBTB can stay on the golf courses

gringo28's picture

the catalyst for growth and stocks in the US in 1941 was not the war but the implementation fo price controls. It was inflation that was out of control at that point in time.

Anonymous's picture

Cheaper labour per unit of mechanization is running out.

Sooner or later, mechanized production will displace human labour to some equilibrium level.

FX will then have only the AG playground, every weather report traded in haste. What a jerk-off world.

40muleteam borax

RossInvestor's picture

I fail to see what difference the Fed's abandonment of MBS QE will make given Geithner's Christmas Eve pledge of unlimited support to Fannie and Freddie.  The Treasury will just buy the MBS's and sell them as UST's to the Fed.  The monetization game will continue.

Anonymous's picture

Words cannot describe how bored I am with the rantings of Albert Edwards. And David Rosenberg to boot. They have both been spectacularly wrong about the reflation, even as they have been right on the economy. They both have Hugh Hendry disease. They are constantly available, exposed, and of course bullish as hell on sovereign debt as it went from the top into the toilet.

Max smirk. And I say that as someone who is *at least* as bearish as they are.

Why do these people have jobs? I see nothing to recommend them.

dark pools of soros's picture

Why do these people have jobs?


..because they are making money for THEIR people...  do you really think you are a part of that?  of course i am going to tell you the coke on the streets is weak if my boys are now selling meth... I'll mix in some bullshit about how shit used to be and maybe even give you some truth on whats coming up but i aint never telling you the truth about NOW

steve from virginia's picture

The Dollar cannot be devalued because the Saudis will not allow it. They have this power because they have spare capacity - nobody else does except for some floating storage wannabes.

The dollar/oil peg is real and cannot be broken. If a serious dollar depreciation attempt is made, oil prices will rise and the economy will crash, destroying petroleum demand. This would drive oil prices lower then bounce to a recovery level where the peg is reestablished. This oil boom/bust peg reestablishment cycle would take about six months ... a period of massive business bankruptcies and millions more unemployed.

The euro is finished. It was created to allow the Eurozone to buy oil without first buying dollars. Now, the European are going to have to buy (ever harder) dollars anyway ... there is no further use for the euro. A diving euro will price fuel much higher in Europe than in America. How non- competitive can you get?

The Fed is irrelevant. US monetary policy is now made in Riyadh. The FOMC raised the discount rate in an effort to acknowledge facts on the ground. The dollar is now a hard currency.

The real game is between Saudia and China ... can Saudia get all of China's dollar reserves?

You betcha! Just watch. Saudia has oil, what does China have? Poisoned dog food! Can the US outmaneuver the dollar/oil peg? Not a chance!

Welcome to 1931. I hope you enjoyed it the last time. I read somewhere that half the banks in the US went out of business. The debacle ran on until all countries went 'off' gold. Our current debacle will go on until we all go 'off' oil.

Sorry auto lovers, there is no other way.

PS, close all your short- dollar positions if you haven't already.

Anonymous's picture

Floating storage is de minimis in the context of global oil flows.

What the Saudis have IMHO been doing is using financial oil leasing


to essentially sell oil in the ground forward via the BFOE market and then buying it back - to help keep the oil price bounded within a suitable range. See also



They, and other producers, have also had almost free money from ETFs to help support the price, in a not dissimilar fashion to the way the International Tin Council used to support the tin price pre 1985.

Hamanaka manipulated the copper market similarly - by borrowing money and lending copper - for five years before David Threlkeld blew the whistle on him, and then for another five years after that.

BS Inc.'s picture

The dollar/oil peg is real and cannot be broken. If a serious dollar depreciation attempt is made, oil prices will rise and the economy will crash, destroying petroleum demand. This would drive oil prices lower then bounce to a recovery level where the peg is reestablished. This oil boom/bust peg reestablishment cycle would take about six months ... a period of massive business bankruptcies and millions more unemployed.

Yep, I think this is the right perspective to have on it.

Miles Kendig's picture

Steve, are you trying to tell me that the value of the dollar US on a trade weighted basis is up over the past decade?

Anonymous's picture

That is right.

To keep oil below $100, the USD will need to strengthen (to compensate for output declining at a rate slightly faster than demand destruction).

So, to keep the Dollar strong, asset prices have to move back in time. But how far? 1980 level prices are baked in the cake in my view (at least in real terms). but how far back do we go? When did the bubble really begin? 1970? 1950? 1913?

Strong Dollar = rampant "asset" destruction and economic collapse. It sounds cruel, but its the only way to keep oil below $100.

Anonymous's picture

Agree on fed s erectile dysfunction, don t know about the EUR, but those Tsys sure look H&Sy here too… Steve, People of China vs the House of Saud already decided? game, set and match now is it?

WaterWings's picture

Unless Putin or Jintao's handlers back Iran in a hot war - how else is WWIII going to fire up? Well, there's always the backdoor biological nemesis.

dark pools of soros's picture

China could invade Saudi -- they can make up some false flag shit too with the eager help of the North K

Anonymous's picture

Today's action in S.E.C. v. BAC in response to Judge Rakoff's request that Cuomo turn over deposition transcripts to look for testimony at odds with proposed settlement agreement (S.E.C. had told Rakoff "I don't think we have any doubt" that the record was complete):

Letter from BAC to Rakoff: "the Bank respectfully objects to the Court seeking, or receiving (particularly ex parte), extrajudicial material from any third party, including specifically the Office of the New York Attorney General ('NYAG')."

Letter from NYAG to Rakoff: "In reponse to this request, enclosed please find:

"Excerpts from the sworn deposition of Timothy J. Mayopoulos, taken on August 25, 2009, as well as the entirety of the sworn testimony taken on October 30, 2009."

NYAG also enclosed excerpts from 4 other transcripts.

Rakoff stated on Wed. that he'd rule by Mon. on the proposed settlement given the 3/1/10 trial date.

Anonymous's picture

Everytime I hear "we are studying the charts" I run away.

How about loading the car and getting out there?
When I first moved to the US I bought an old $500 Toyota and I drove 23,000 miles all over the midwest.

I studied too, and asked a lot of people. Ten years later I knew and "felt" more about the US culture/economics than most of the population.

Back in Greece in 1993 the American guy was showing us graphs - the Greek guy told us during the break "I met with the minister yesterday at that coffee shop - maybe you should buy sugar".
Sugar went up 30% in less than a year.

You can't get a business feel with a computer.

faustian bargain's picture

Stay Thirsty, My Friends.