This page has been archived and commenting is disabled.
Could the US Dollar Crash Stocks?
Stocks roared higher last week because it was options expiration week (the Fed pumped $6+ billion to Wall Street to manipulate the markets higher). This is not conspiracy theory. Consider that technically ALL Fed QE programs ended in late October 2014. And yet, since that time, the Fed has made LARGE increases in its balance sheet (swapping liquidity for assets) on every single options expiration week with only one exception.
Weeks in which the Fed’s balance sheet shrunk are red. Weeks in which it expanded are black. And options expiration weeks are highlighted in gray. Note that the largest expansion moves per month occurred in options expiration weeks with the exception of February.
Today stocks are beyond overbought. There are little if any bullish developments to look forward to. After all:
1) The economy is weakening dramatically.
2) Both earnings and sales are rolling over.
3) The Fed FOMC meeting has ended and the Fed has reiterated that higher rates will hit at some point this year (when remains to be seen).
With that in mind, the S&P 500 looks to be putting in a double top. If we do not break through here (stocks would need to explode higher), we’re likely to see a correction down to 2000 or so.
The truth of this recent move is that it largely coincides with the US dollar correction. The Dollar has rallied over 26% since July 2014. Trading algorithms adjusted to this new strength and now associate any US Dollar weakness as a sign to “buy stocks/ risk.”
The fact of the matter is that whatever the markets do in the short-term is largely irrelevant. The REAL problem is the $9 trillion US Dollar carry trade.
Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally than the economies of Germany and Japan COMBINED.
When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.
This is what resulted in the complete carnage in Emerging Market currencies earlier this year. And it’s not over by a long stretch.
Here are the monthly charts for the USD/ Aussie (black line), USD/ Brazilian Real (blue line), USD/South African Rand (red line), and USD/ Mexican Peso (green line) pairs. The carnage over the last nine months has been extreme with double digit moves across the board.
The US Dollar took down Oil, commodities, even emerging market currencies. Stocks will be next. The first REAL sign that the 2008 Crash was coming occurred when the US Dollar began to skyrocket in the summer of 2008.
So while stocks might spike as the US Dollar rally takes a breather, the reality is that we’re in for a REAL crisis later this year.
The time to prepare is now, BEFORE it hits.
If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.
You can pick up a FREE copy at:
http://www.phoenixcapitalmarketing.com/roundtwo.html
Best Regards
Phoenix Capital Research
- advertisements -
Thanks to politicians who take money from every corporation, special interest, foreign government and crazy billionaire, that has their price, America is tanking.
It's a matter of timing and, so far, they have the timing wrong. Sooner or later, they'll be right.
At what point will this fool stop writing these articles. He has been consistently wrong for at least 5 years. Anyone listening to him has lost money.
No.
Black Swan event in Iceland :)
http://grapevine.is/news/2015/03/23/black-swan-couple-settle-in-dyrholaey/
The problem is that most Americans, and nearly all American politicians, think stock market indices are pretty much the start and end of economic strength. I suppose politicians are all paid by the (ever-shrinking) investor class, and most Americans think they're a lucky Lotto ticket away from that status themselves.
So whatever it takes to goose up stock market indices fixes everything. Looks like fake numbers is the favored method, being the easiest.
I left the last job I had 11 years ago. I've been happily making more money, working less, in self-employment. My last boss was so stupid, he thought "Productivity" was the same thing as "Billable Hours." Very much like those who think that all is well if the SPX keeps going up. He was always very favorably impressed by my "Productivity." He set 80% as my benchmark. So, what did I do? I took my 40 hours, wrote off about 7 hours per week as non-billable, and split up the other 33 between whatever projects I was on. Voila. 82.5% "Productivity," as the fool thought it was. When I made up my project budgets, I looked at the calendar, worked backwards from the due date, figured I'd probably be on 3 or 4 projects at once throughout, so my hours estimate was x (numbers of weeks until due)*40 hours in a week * .3 or so. That way my "Productivity" stayed above 80% and I came in under budget.
I still had to do all the work, of course, and I worked hard and did a very good job. I learned stuff on that job (about things other than budgeting) that have enabled my current success. But if I could screw around with the numbers that easily, no numbers should be trusted. It helps to have a profoundly dumb boss. But hey, look at America's "bosses"...
Bullish
Bullish
Bullish
As you can see the market is consolidating for its push to convincingly higher highs.
After all these years, don't you think you need a Pollyanna break??
Why not, just for the hell of it, take a 180 degree contrary stance to your endless outpourings of predictions?
See if you aren't right more often with them than you have been with the ones you've been laying on us all these many years.
When I take the time to read one of your diatribes, I want to go out into the backyard, drag out the Wood Chipper, turn it all the way up to 6" logs and jump in.
http://stumpcutters.com/wp-content/gallery/homepage/04-disc-style-woodch...
Yet another "Stocks are gonna crash" story from the Chicken Littles at ZH. lmfao!
Doubtful that it would crash stocks. Equities and the currency are generally inverses. Any significant drop in the USD should be expected to be met with a rise in equities.
Your assuming honest numbers.......
Not really. The entire market is just a giant pool of money that rotates in and out of different assets. If the dollar crashes, money will move into equities and vice versa. It less about the numbers and more about behavior.
They can and will crash sooner or later, all the Fed is doing is turning what would be a minor disaster into a major one.
Stocks can't crash as long as the Fed scam can print as much as it wants.
I voted u down.
There is a technical limit, what FED can, killing the Government and economy. Not to say, that FED has its own aims, not aligned with "investors" to contrary, they have quite different objectives Therefor they CANNOT print as much as they want.
When Graham Summers speaks...stocks rally
The U.S. Federal Reserve does not appear to have joined in the stock-buying trend. The Fed is not permitted to make direct stock purchases. But there is nothing to prevent it from funding a Special Purpose Vehicle that buys a broad basket of stocks through indexes or Exchange Traded Funds. In the past year, Wall Streeters have speculated the Fed would buy stocks as part of its quantitative-easing programs to stimulate the economy.
Bernake admitted their indirect approach;
http://globaleconomicanalysis.blogspot.com/2010/11/bernanke-admits-targe...
IMO, they will not stop til they own nearly everything or the FED is ended!
Correct, the primary dealers can and do buy equities and they are essentially The Fed.
No doubt they want to keep the balls in the air for 20 more years till a new super power and central bank can be secured.
So let me get this straight, the $135 Billion increase in US Loans last quarter was probably the FED Lending to Primary Dealers to buy Equities.
This explains why the FED can never be Audited, since any Central Bank could do the same thing.