There Is A Winner In The Currency War

Tyler Durden's picture




 

With the G-20 (and G-7) concluding with what appears to be a slap on the wrist and a wink-and-a-nod to Japan, it seems the game of competitive devaluation will continue. Much pixel and ink has been spilled the 'potential' winners and losers in such an evolving game, but as Bloomberg notes, there has been one winner in the last 10 years each time the world has fretted over "currency wars". As fear (and actuality) of currency wars flares, the USD has borne the brunt of the buying. From 2004's JPYtervention to Mantega's 2010 comments and each time in between, when competitive devaluation is on the world's lips, then the USD is implicitly bid as the currency du jour is offered to any and every willing carry trade riderthere is. The trouble is - for the lowly US investor - each time the USD is bid, so the US equity market has hit an FX-translated earnings hump and fallen back. So while talking heads will exaggerate the nominal performance of Japanese and British equity markets as their currencies free-fall, perhaps the US investor should be careful what they wish for.

As the world's reserve currency, the effect of a devaluation of a non-reserve currency (i.e. everything else) is implicitly to put upward buying pressure on the USD...

 

and each time the "currency war" flare has occurred, this USD strength has led to notable US equity weakness...

 

so perhaps, all those 'interventionist' hopers should be a little more nervous about the apparent decoupling of the US market - as its rotation unwinds...

 

Charts: Bloomberg

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Sun, 02/17/2013 - 21:24 | 3252093 edb5s
edb5s's picture

Will be a great opportunity to buy the dip if this proves to be true!

Sun, 02/17/2013 - 21:39 | 3252117 ebworthen
ebworthen's picture

Wait for S&P 400.

Sun, 02/17/2013 - 21:44 | 3252122 philipat
philipat's picture

And here was I thinking that The Fed wanted a weaker Dollar?

Sun, 02/17/2013 - 21:46 | 3252125 Perseid.Rocks
Perseid.Rocks's picture

Indeed. A rising dollar causes GDP to collapse, making our debt/gdp ratio worse. Those g20 nations are actually enemies of our glorious state.

 

Sun, 02/17/2013 - 22:22 | 3252162 MrX
MrX's picture

did anyone find a set of car keys?

Sun, 02/17/2013 - 22:28 | 3252168 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

With the Yen at the bottom of Fukushima?

Sun, 02/17/2013 - 22:58 | 3252201 847328_3527
847328_3527's picture

When the Yen drops to 120 to the dollar, I may don my Fuki suit and gonad shield and head over there for some travel.

Sun, 02/17/2013 - 23:24 | 3252246 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

 

 

 

 

1929 SHOESHINE BOY MOMENT:   "Kennedy later claimed he knew the rampant stock speculation of the late 1920s would lead to a crash. It is said that he knew it was time to get out of the market when he received stock tips from a shoe-shine boy."  http://en.wikipedia.org/wiki/Joseph_P._Kennedy,_Sr.#The_Crash

 

2013 SHOESHINE BOY MOMENT:  http://www.zerohedge.com/news/2013-02-08/friday-farce-16-year-old-outper...

 

 

1929 "Stock prices have reached what looks like a permanently high plateau." MOMENT: http://en.wikipedia.org/wiki/Irving_Fisher#Stock_market_crash_of_1929

 

2013 "Stock prices have reached what looks like a permanently high plateau." MOMENT: http://www.zerohedge.com/news/2013-02-15/greenspan-ignore-economy-only-s...

 

THESE ARE CLEAR SELL SIGNALS; SHIT'S ABOUT TO GO DOWN.

 

Mon, 02/18/2013 - 02:03 | 3252428 ebworthen
ebworthen's picture

(see below)

Mon, 02/18/2013 - 02:02 | 3252430 ebworthen
ebworthen's picture

"Hey, I hear Chipotle and AAPL are hot!"

Jimmy Cramer says buy.

I say sell.

Mon, 02/18/2013 - 14:27 | 3253588 Panafrican Funk...
Panafrican Funktron Robot's picture

They are sell signals in real value terms, but I question the concept of shorting this market given USD dilution.  I think the $85 billion per month is just an appetizer.    

Sun, 02/17/2013 - 23:13 | 3252220 DoChenRollingBearing
DoChenRollingBearing's picture

The Peruvian Sol was a winner this week, up 0.46% vs. the US$.  A poll...  Who is WORSE?  The Odious George Soros or the Loathsome Senator Harry Reid?  YOU tell me!

Review of Barron's -- Dated 18 February 2013

http://tinyurl.com/betzhjf

Sun, 02/17/2013 - 23:33 | 3252261 Capitalist Exploits
Capitalist Exploits's picture

The only reason the USD is a beneficiary is depth of its market. The same is true of the Yen and Euro. When trying to move a $1B rapidly in ccy markets there are little choices. You have to look for the 3 ugly sisters and choose the least ugly at that particular time. On a % basis the small guy has a large advantage as we can allocate to currencies with less depth and or commodities.

Commodities of course don't provide the liquidity that currencies do. The lure of physical gold for example is inversely correlated to the liquidity being supplied by central banks. It takes a bit of time and effort to go through with purchasing physical..not so much with dumping Yen for USD or such.

Worth using the lull in the market and the noise around the edges, because thats all it is, to continue to accumulate.

This article is useful therefore I believe only for short term traders taking pips.

Mon, 02/18/2013 - 00:00 | 3252306 economics9698
economics9698's picture

lol, good luck.

Mon, 02/18/2013 - 08:29 | 3252591 Wilcat Dafoe
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I...  I don't think this actually means anything.

 

Anyone else?

Mon, 02/18/2013 - 00:08 | 3252319 edb5s
edb5s's picture

Thought this was obvious enough that I didn't need to use "/sarc." 

Mon, 02/18/2013 - 00:26 | 3252351 Deo vindice
Deo vindice's picture

Obviously not obvious enough.

Sun, 02/17/2013 - 21:30 | 3252095 knukles
knukles's picture

That famous last word debate regarding off shore investments...
Hedged or Unhedged?

(well what's your fucking currency forecast or do you not do that... shut up and eat your peas)

Sun, 02/17/2013 - 21:27 | 3252096 kliguy38
kliguy38's picture

Yes there is and its the usual suspects. However, they will not be rounded up and when they're through, you'll be flushed six ways to Sunday down the proverbial shit hole. Say thanx to your masters. They've been at this for centuries.

Sun, 02/17/2013 - 21:29 | 3252102 Being Free
Being Free's picture

Yes, precious, false! They will cheat you, hurt you, LIE

Sun, 02/17/2013 - 21:27 | 3252098 edb5s
edb5s's picture

That first chart is really interesting, I'd like to add.  Thanks Tyler.

Sun, 02/17/2013 - 21:28 | 3252100 Yen Cross
Yen Cross's picture

 There's is a winner in evolution... Just ask the dinosaurs?

Sun, 02/17/2013 - 21:32 | 3252103 knukles
knukles's picture

Well they ain't gotta deal with Global Warming or Peak Oil, lucky buggers.

Sun, 02/17/2013 - 22:01 | 3252146 Non Passaran
Non Passaran's picture

It's rather peak warming and global oil. Relax.

Sun, 02/17/2013 - 22:07 | 3252147 Pure Evil
Pure Evil's picture

Only the dead have seen the end of Global Warming and Peak Oil.

In fact, we should squeeze the dead, like olives, for any residual oil that can be extracted. Therefore delaying the inevitable decline in oil reserves by minutes if not by hours.

Mon, 02/18/2013 - 01:48 | 3252416 Lore
Lore's picture

Re: "Only the dead have seen the end of Global Warming..."

Huh?  Global temps have been falling for nearly 20 years.

Timing of the curve for Peak Oil is another plaything for natural born liars and can-kickers. 

"It doesn't matter what is true. It only matters what people believe is true." - Paul Watson, co-founder of Greenpeace (link)

Mon, 02/18/2013 - 07:13 | 3252567 SunRise
SunRise's picture

It matters most whether what you believe is true IS true.

Mon, 02/18/2013 - 08:31 | 3252592 Wilcat Dafoe
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Not really. 

Belief is a tool and it gets people to do all sorts of crazy things - like eating a piece of bread which is really the body of a god who died 2,000 years ago who was his own son and had to die to wash away the sin we are all born with because several thousand years back some slut ate an apple.

But what a racket Xianity is, eh?

Mon, 02/18/2013 - 13:02 | 3253249 Lore
Lore's picture

You're right. Greens don't see their religion as a religion, but that's what it is.

There is no knowledge - only justified belief, and delusions, and programming.

Sun, 02/17/2013 - 21:37 | 3252105 chump666
chump666's picture

The USD will and always be an inflation hedge (FX wars).  Since the whole world now is devaluing like mad. 

Finally we may have a top on equities (Europe and US), with Asia's euphoria trade bringing on the crash, sending us down the toilet.  Just like 1987.

Sun, 02/17/2013 - 21:39 | 3252109 VonManstein
VonManstein's picture

This is obviously the plan all along. Defend the DXY until new system is fixed in place. This is not happenstance..

It wont work. The USD is still pathetically weak with all this going on.. Look at last week, gold and silver, yet still failed to move the DXY over 81.
 
This is the final move for the Dollar, 82 perhaps but i doubt it will go above.

GBP is melting down as mentioned and GBP cross’ are copies of USD cross’ for the most part.

What is going to happen is the USD and Equity markets will top within 2 months of one another and decline together just as they were in 2007 before US/UK internationalised their crisis.

the "FX risk trade" will be desolved this year

 

Sun, 02/17/2013 - 23:41 | 3252271 I think I need ...
I think I need to buy a gun's picture

Your right do you see that little head and shoulders at the end,,,,,get your crash helmets when valued in pms

Sun, 02/17/2013 - 21:37 | 3252113 besnook
besnook's picture

russia and china just made a deal to conduct all business in yuan or rubles, no dollars. that should take some pressure off the dollar. maybe bernank is now counting on the demise of the petrodollar to make the s and p go to the moon.

Sun, 02/17/2013 - 21:38 | 3252115 ebworthen
ebworthen's picture

Crash moth'a fuck'a, CRASH!

Sun, 02/17/2013 - 22:00 | 3252144 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Why does everyone want equity to crash?  Why not want fiat denominated currency to crash?

It is the fiat that backs the MIC controlled corporate system. 

Sun, 02/17/2013 - 22:11 | 3252156 VonManstein
VonManstein's picture

+1

Mon, 02/18/2013 - 01:57 | 3252424 ebworthen
ebworthen's picture

Because the equity markets are the gas gauge for the dumbfuck sheeple and MSM.

No, the tank is not full YOU STUPID MOTHER FUCKERS.

IT IS EMPTY!!!

Mon, 02/18/2013 - 05:04 | 3252532 Acet
Acet's picture

No, no, no - it's filled with unicorn piss.

It says so on the gauge marked S&P 500!

Mon, 02/18/2013 - 07:26 | 3252570 tradewithdave
tradewithdave's picture

Maybe you didn't hear about the War On Currency?  It was in the news at least once recently.  With the medals finally decided on for the drone War on Terror and the War on Drugs finally settled in Washington State, then they came up with this idea for something Currency Wars.  It's not a war between currencies... it's a War on Currencies (i.e. a "currency war"), but not many people are talking about it because of something called "The Storage Wars" which is a Main Street minivan version of your highlighted Wall Street "The Equity Wars."  There was an obscure mention of "Currency Wars" by George Soros in Davos, but you would have to listen closely and be veeeewy veeewy quiet wabbit. 

In unrelated news Jim Rickards won the Guiness Book of World Records coveted prize for "Most stops on a book tour" (The Golden Stork Award) nudging out Nassim Nicholas Taleb's Black Swan in the Anti-Fragile Frequent Flier Over Fifty category. 

 

http://tradewithdave.com/?p=15440

 

 

 

Sun, 02/17/2013 - 21:40 | 3252119 captain whitewater
captain whitewater's picture

The main thing to remember is that according to Benny FED and CNBC et all no inflation exists anywhere on the horizon and precious metals are bad investments because Soros sold his positions...so don't worry about any currency issues.

Sun, 02/17/2013 - 21:48 | 3252129 captain whitewater
captain whitewater's picture

But I did wonder exactly would happen when all that paper money the US printed and shipped overseas for reserve currency trade starts to come back home for a place to be spent?

Sun, 02/17/2013 - 21:59 | 3252141 Non Passaran
Non Passaran's picture

It's not like there are tons of USD banknotes abroad, sitting and wondering where to go next.

Sun, 02/17/2013 - 21:53 | 3252133 Rick64
Rick64's picture

 When the dollar is devaluated and other currencies are trying to counter that ( by devaluing their own currencies) with buying the dollar. Doesn't this create a demand for dollars which gives Bernanke the ability to print more without any immediate negative consequences. Its a balancing act between the debt and creating even more demand for the US dollar. IMO

Sun, 02/17/2013 - 21:55 | 3252138 bigkahuna
bigkahuna's picture

Its all good until...unga bunga

Sun, 02/17/2013 - 22:13 | 3252140 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The 2008 equity crash couldn't even bring forth the highs of 2005 for the dollar and the dollar chart only looks strong when Tyler uses red arrows pointing up around it.

And let's think outside the box for a sec instead of reading charts like a Robotrader.  Maybe the only way to support the ever inflating dollar is to make all of the other fiat devalue faster.

This of course means that as fast as the dollar is devaluing all the others are moving quicker.  This is a worst case scenario however, as all that happens is when reality is shone onto the Fiat Ponzi all fiat currency will be worthless.

Sun, 02/17/2013 - 22:51 | 3252196 disabledvet
disabledvet's picture

Which means "your real winner is Treasuries"...and one look at that tape says "true." So if we are to ask the question "what is the message of that market" the answer better not be "I'm calling the low in interest rates cuz they've never been this low." It should be "what causes the lowest interest rates in history to begin with and does that matter?" I say "more than just QE causes those at or near zero rates" and "yeah what that more is matters a lot" since we are not financing this war with tax revenues but debt." There is something called "the crowding out effect" where basically "after we buy all those treasuries there's no money left over." That would include for example "to buy gold with." And if other prices start deflating as well then you could see a sudden spike in the savings rate...meaning even less money out there. With government now cutting back massively "we have less money there too." And then there's still all those taxes and a crappy recovery. Suddenly "there's a lot less for Mr Equity to play with" as "where are all those profits going to come from again?" The answer clearly is "I need to pay my people more" as Henry Ford found out. "I need someone to buy my product." We'll see what this week brings but it sure doesn't feel like Abbie Hoffman is getting kicked off the stage at Woodstock by The Who here. "These people want war and they mean business." With debt money this available and this valuable...what did The Bearded One say? "Kick the can"? That don't strike me as meaning immigration reform. "Just a major market sell off away"?

Sun, 02/17/2013 - 23:24 | 3252235 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

How are USTs the winner when inflation is giving them a negative real yield and inflation is also blasting their purchasing power?

And when people deposit cash in savings what they are doing is making a loan to the bank.  The bank will lend it out at will.  They will fractionally reserve it and put more cash back out into the system.  That is, if they want to.  If it will "stabolize" prices anyway.

Because that is what the communique from G-20 was based around; the goal is to stabolize prices.  What this means is they need to make it appear that prices are high so people keep wandering around in their PJs and continue spending their IRAs on cars and houses.

Mon, 02/18/2013 - 03:11 | 3252474 Raymond Reason
Raymond Reason's picture

It seems that we tend to look at the Weimar mark, or Yugo dinar, or Hungary's pengo, etc. to understand how the dollar crash will play out.  What if what we're about to go through is a system-wide collapse of fraud and control that's been in place for hundreds of years?  The banking bloodline dynasties aren't going to be able to play this to their advantage.  They won't let this good crisis go to waste, rather this crisis will lay them to waste.  The control freaks have lost control.  We're in uncharted territory, maybe i'm a fool, but i feel good about it.  Them buying a billion bullets for airport security fat slobs, means they're scared shitless, and everybody knows who they are now, thanks to the internet. 

Sun, 02/17/2013 - 22:19 | 3252159 dragoneyes74
dragoneyes74's picture

The price action in siver and gold lately is why they are great to swing trade.  Granted, I don't understand WHY it's trading this way, but once you let that go, they're pretty reliable.  Once the sell-off from December's lackluster QE4EVA spike faded and turned silver into a textbook bottom divergence pattern in early Jan, you could count on it to go to $32, then it had to prove itself.  But it topped just over $32 and took a month to finish carving out a textbook wedge, broke down early last week and followed through exactly how it's supposed to.  It's quite obvious now that the metals are in a huge intermediate bear market that has no reason not to continue, with the only caveat being if the dollar starts to trend down, which I have been expecting, but as of yet to no avail.  I don't get it.  But I respect it.  Maybe it is the currency war thing holding the dollar up.  I have my eye on the lowest the Euro can go before reassessing my bullish bias as 1.32 on a closing basis, or wherever the uptrend line is from last summer when, and if, it gets there.  If that trendline breaks down, this "pullback"in the Euro could morph into a possible trend change.  I'd like for it to hold so the EURUSD can resume it's uptrend, which COULD help the metals fight the downtrend they are in since May and Aug 11, but they would need to break through a downtrend line of their own to change their downward bias.  Silver has a trendline that goes from $49 thru $35 thru $32.  Until that breaks, backtests and holds, silver remains bearish.  I would not be surprised to see $26 silver in the coming months, but it's all about those two trendlines.  

Sun, 02/17/2013 - 22:34 | 3252174 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I like how Master Traders always talk gold and silver in dollar terms.

Gold is at all time highs denominated in Yen.

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