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Toppy Tuesday - Can the Dollar Fall Faster than our Indexes?
Toppy Tuesday - Can the Dollar Fall Faster than our Indexes?
It's a race to the bottom!
While we may have thought we were flat-lining yesterday near our breakout, Europe and Asia had a different view of our markets as we pulled back -0.5% to -1.73% when priced in other currencies. While you may not care what happens in other countries, there are 6.5Bn people who would disagree with you there and the US is not the World leader anymore (despite what the citizens of the US may think) - we can no longer afford to ignore things like how exchange rates affect us. Here's the chart for the Dow, S&P and Nasdaq priced in Dollars, Euros and Yen for the past two months:
Fortunately for the bulls (especially the commodity ones), the dollar has resumed it's pathetic decline as Obama and The Bernank have combined to dilute our currency by another $2Tn over the next 48 months, from about $14Tn to $16Tn (+14%) plus, possibly, the $110Bn of new $100Bills the Treasury is trying to run off. This has sent the dollar back down from it's Thanksgiving high and now it's going to be all about whether or not we can hold that 78.5 line as our Congress finalizes their vote on the Obama Tax Cuts and another $1,000Bn of US debt taken by our citizens in order to hand another $650Bn to the top 1%.
When $100Bills are being printed faster than rolls of Charmin are being made, your currency is probably on it's way to a crisis. You reach a certain point at which it's cheaper to just wipe your butt with dollar bills than to go to the store and buy toilet paper and, of course, we've all seen pictures of Germans in the 1920's, fueling their fireplaces by burning bills, which were cheaper than wood. Of course stocks and commodities are going up when priced in dollars - they are making more dollars every day, even Disney now has cartoons trying to explain to kids why this is a bad idea.
On top of the relentless devaluation of our dollar-denominated assets, we also have wild rumors driving up demand for commodities by speculators, who are generally those same top 1% who are being handed money by our Government at a rate of $2Bn per day. If you had to put away $2Bn a day, where would you put it? Well they've made Treasuries very unattractive with historically low yields and low deposit rates and a declining dollar have made saving the money look like suicide. Bonds are getting crazy too so that leaves stocks and commodities and, since the top 1% are every bit as stupid as the bottom 99% - the best game in town is to start rumors to drive their money in and out of "the next big thing" like dot coms, oil, natural gas, housing, mortgage-backed securities and now oil (again), gold (again), copper (again) and silver.
At least sliver hasn't been used since the Hunt Brothers crashed the market back in 1979 but that was long enough ago that we have an entirely new generation of suckers who are willing to believe that JPM has been foolish enough to be short 3.3Bn ounces worth of silver ($99Bn) to the point where if everyone in America bought an ounce (300M ounces for $10Bn) it would bankrupt them. Aside from the fact that the math doesn't work in the first place (10% isn't going to blow out JPM), what are the odds you could get more than 2% of the people in this country to do something so stupid as to buy silver for about 100% above it's 5-year average based on some idiotic rumor.
Surely Americans can't be that stupid again, can they? LOL, just kidding - of course they can! These are the same Americans that think oil can go back to $100/barrel without destroying the economy and plunging it back to $45, these are the same Americans that are buying NFLX for $200 (we shorted last week), PCLN for $412 (we will be shorting), CMG for $262 (we shorted already) along with $89 oil (our short entry) and $1,406 gold (our hedged long at the moment). Kid Dynamite did an excellent job of deconstructing silver and I really don't have time or space here for the rest but I would urge you to seriously consider all of your runaway investments in light of Kid's logic as there are people pushing all of these stocks and commodities at you every day - no different than silver except in scale.
Rather than listen to the blather of the MSM to tell us how great the economy is, we tend to rely on actual reports - like the very depressing December "Rail Time Indicators" report, which shows a very steep drop-off in the actual delivery of commodities (pg 2), indicating demand has NOTHING to do with prices right now. Average Weekly Carloads excluding coal and grain (pg 11) are closer to 2008 lows (+20K) than 2007,8 highs (-30K) with petroleum shipments (pg 12) similarly depressed while auto shipments (also on 12) have actually crossed below the lowest trends.
Another report we pay attention to is the PSW Holiday Shopping Survey where our Members, many of whom are or have been successful captains of industry themselves, head out to the Malls and report their ground level observations. Last year's survey led us to go short on the markets into January earnings and this year, we're already seeing a fairly sharp pullback since Black Friday's early excitement.
That has led us to stick to our guns on the above short plays as well as our repeated success on oil shorts. Just yesterday, in the morning post, I mentioned we'd be shorting oil at $89 (we did in the futures for a very nice .75 gain) as well as picking a USO put. It took only as long as 9:32 for my Morning Alert to go out to Members with a trade idea for the USO Dec $38 puts at .41. We took .60 and ran at 1:23 (up 46%) as well as a too early exit on those NFLX Jan $155 puts at $2.25 (up 40%) that I had mentioned we'd be getting back into in Friday morning's post, when they opened at $1.50.
Well, as my Dad always said: "You can lead a horse to water but you can't make him think." We choose every day to listen to one media source or another and I simply try to introduce a healthy level of skepticism that, on occasion, enables us to find nice investing opportunities - often as we play on the opposite side of "The Beautiful Sheeple." What's scary is I can tell 250,000 people that a trade's going to work in the morning and it still does - that is one MoFo of a rigged market when we can pile in the opposite side of a trade and it fails to affect the outcome!
Speaking of data - BBY missed by .07 with just .54 of Q3 EPS and that is in-line with our observations as we were simply not seeing a lot of big-ticket items going out the doors at the stores (watch out WHR!). ICSC Retail Sales were up 0.8% this week so that's trending up and November Retail Sales were also up a strong 0.8% but this one has a breakdown and, as you can see from the tables, it's pretty much all Gasoline sales, which are up 16.6% due to inflation and on-line sales, which are up 13.3%.
Meanwhile, we have a PPI report that, coincidentally, also shows a 0.8% increase, which is DOUBLE the last reading of 0.4% and, ex-autos (which are being heavily discounted to move inventory), the November PPI is up 1.2% vs 0.4% in October. We'll have to wait for tomorrow's CPI report but raise you hand if you think that the Producers will have trouble passing that 1.2% increase along to the unemployed masses (Best Buy sure did!).
You should be rooting for runaway inflation if you are a bull as we need that Dollar to die so we can keep pretending how great things are in the economy. UK inflation shot up to 3.3% in November, 65% over the BOE's 2% target rate and the EU, not wanting to be out-inflated by their island neighbor, is looking to increase their own bailout fund beyond it's current $1Tn level even while trying to tell bond investors that they will have no need of the first Trillion. As I said over the weekend, when you are peddling a fiat currency, trust is about the only thing you have going for you.
Small businesses trust our government with a 1.5% increase in the NFIB Optimism Index since October but that's slowed considerably into the holiday's from October's 2.7-point increase and, let's not kid ourselves, we're still deeply into recessionary numbers. This is like when we get excited about home building going from 400,000 to 410,000 when the high was 2M.
As usual, you don't want to look too deeply into the data or you'll notice that Earning Trends had a -24% impact on the survey and Current Inventories also knocked 24% off the gains. So how could the index be going up? Well EXPECTATIONS are up 47% on the overall economy and up 29% on sales expectations with 24% of small business owners planning to increase inventories. That means the summary is, inventories are building out of control and the margins on things that are selling are contracting but The Bernank says things are getting better so I'm going to put on my 3D glasses and watch the cool charts on Fox news while I wait for customers to come through the door.
OK America - good luck with that plan. Meanwhile, we will wait to see if they can finally break 11,500 on the Dow and force us to get more bullish but, until then, it's a different kind of BS I'm worried about.
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300 million oz of silver, if every american /did/ buy an oz, would indeed drive up the price, such that the cost to cover would be more than $10 billion. next, i agree that you cant get americans to do anything, but i and others have over 1000x more than the one oz. minimum, so you dont need every american to do it... just the ones smart enough to see what is coming, but poor enough to never be in the elite class.. which is another point, keiser came up with the idea during a radio show with alex jones, where he was describing how we are completely and utterly fucked by the coordinated fiat disaster that is coming, where protesting in the streets does nothing, and where perhaps the only viable method of civil disobedience that can do anything at all is the act of financial disobedience of buying silver..
I prefer to play the wave! I am an ignorant fool with financial matters but after being sick and tired of this "system" that pays the bankers to screw us I decided to figure out what was going on. I am still ignorant and reluctant to play the games but thanks to this site at least I bought some gold and silver and am seeing some return on my money. Also with the knowledge from ZH I made a few grands in just days buying leveraged inverse treasury ETF's after the POMO knocks then down and selling after the trip back up. Riding the wave!
If you’re tired of being robbed by Bankster’s and Politicians that line their pockets at the expense of the PEOPLE, then watch the YouTube video “Join the WAVE” at (http://www.youtube.com/watch?v=6HMnI8X6rvk).
Fight tyranny and help the movement to go viral!! It’s time to take OUR COUNTRY BACK!!
by Anonymous
Inspiring. It is true that a class losing it's wealth due to fraud, it is wise for them to stand up when you still? have the ability to, before the strife.
Wow.
I come to ZH for reasoned insight, so when I read an article like this I'm confused. How can expanding the money supply do anything other than drive up the price of equities or commodities? It seems you make the case that we should only be shorting equities because they will eventually crash.
I think people have been burned too many times in the market to go long or short. That's why long term-oriented people are going into PMs, myself included. Hell, even if they lost half their value overnight, I'm still ahead. And they also have this incredible ability to ALWAYS be worth something.
But what about leverage? Cuz that's what happens to each new dollar that hits the market; it's multiplied into a few more. But Bernanke isn't a miracle worker, the real world still has bearing on financial markets because at some point or another those (leveraged) liabilities have a tie to a real asset. There isn't a dollar-for-dollar increase in the markets from QE, it's multiplied through the PD's and by momos trading on margin but that still springs from a base of tangible assets. If the real economy is shrinking there will be a point where it can no longer support the current price level of those assets and the trades get unwound.
For a consumption economy like the US that point is when input prices can't be passed along to the consumer. It doesn't matter how much your merchandise is "worth" if it's just sitting on your shelves costing you money because your customers's can't afford it. THEN you've got to work through that backlog before you can replenish your stock at a higher cost. So, what exactly is supposed to sustain demand in the face of perpetually rising prices?
That's a fine point, but I'm not arguing theory. Theoretically, the moron Bernank could print to infinity and sustain whatever he thinks is worth sustaining, but at that point I think the world and even some of the American citizenry would have abandoned his losing game.
Which brings us to your point that eventually tangible assets will need to be revalued. It's perfectly reasonable they will be, but in relation to what? Toilet paper FRNs? If I have to take a haircut, I've decided to cast my lot with cold hard cash. (My bathroom cupboard is already overflowing with toilet tissue).
FRN's aren't the end of the road though. One way or the other it's all debt tied to a real asset (for now).
Also, I'm not arguing against gold, I'm very bullish on Gold long term,but that doesn't mean it won't test the bottom of its channel.
"Expectations", that's hilarious.
Toilet Paper Money is sooooooooo 20th Century. It's gonna be pixel trillions folks. The Fed hyperinflates the money supply every night, and sends to each citizen's smart phone their share of the pixel trillions for that day. Bar scanning apps allow each peon err person to buy their daily bread. No wheelbarrows - so as long as the data networks can transmit an infinite number of zeroes there is nothing that could go wrong - right ;-)
Re- the Hunt Bros.
Those guys didn't crash the silver market!!! They were trying to corner the silver market when the rules of the game were changed on them. It was new regulations that caused silver to crash. How soon we forget or rewrite history.
Now the whole country is screwed because, A. Existing laws are not enforced, and
B. A barage of new regulations thrown at everyone causes turmoil.
A + B= SNAFU
Realistic overview
I would think equities would tank before silver.
Besides, as you noted with the deteriorating dollar, many in the rest of the world don't see the U.S. as the world leader anymore; and China, India, and others are buying a great deal of physical silver, gold, copper, and other commodities.
I don't care, I'm in precious metals because I don't want to give Wall Street any casino chips to play with and blow on the roulette wheel (been there, done that - "Buy and hold a diversified portfolio long term" - yeah...right...do you want a hamburger too?).
I see the whiplash of inflation coming about, and I believe ultimately this is what the FED wants, so precious metals should do just fine as long as you get out at the right inflection point.
physical holdings are different from what the report is stating. basically if everything plays out....holders of SLV and GLD could be 100% right about their thesis and 100% wrong about the trade b/c those holding companies may go under...interestingly though the original poster never mentioned what percentage of assets they have held in $ which is probably the most hyped wall street entity of all time!
Binny wants everyone to spend that dollar before it goes down even more. Binny!!! Only you and your friends have those dollars to spend.
So.... your bearish.... LoL... and we've got a hot moon coming up on Monday night over the North American Continent.... and on the solstice. I think something would give.