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The Single Most Important Chart of the Last Century

Phoenix Capital Research's picture




 

The single most important story for the investment world is the US Dollar.

 

The US Dollar rally took a breather starting in late February 2015. Since that time, it has corrected a total of 7.2%. Technically this isn’t even a correction (it would need to fall 10%) and it’s far from entering a bear market (it would need to fall 20%).

 

 

In spite of this… the financial media is trumpeting that the bull market in the US Dollar is over. I think they are grossly underestimating what is happening in the US Dollar.

 

First of all, during the last two US Dollar bull markets (the early ‘80s and the late ‘90s) the Dollar had no shortage of 5%+ corrections.

Here’s the Dollar bull market of the early ‘80s.

 

 

Here’s the US Dollar bull market of the late ‘90s. Again there are five corrections of 5% or more.

 

 

My point is that 5%+ corrections are normal during US Dollar bull markets. Remember, the greenback rallied over 25% before starting this cool down period. So it was due for a pull back.

 

Moreover, in the BIG PICTURE, this correction has not violated the larger technical pattern we’ve been following in the US Dollar in any way:

 

 

This is the single most important chart in the investment world. It is the largest bullish falling wedge pattern in fiat money history. And we’ve broken out of it to the upside.

 

If you want to think of this in terms of macro-economics… think of it this way: since the US abandoned the Gold standard via Breton Woods, it has been in an ongoing process of devaluing the US Dollar while issuing paper debt/ credit.

 

When you borrow in US Dollars, you are effectively shorting US Dollars. So the entire Credit Super Cycle of the last forty years has seen the financial system become increasingly leveraged at the expense of the US Dollar.

 

We believe that the above chart is telling us that this Super Cycle of leveraging is ending. This means that we are entering a period of DE-leveraging.

 

This period will be marked by defaults and debt restructurings. Both of those processes reduce the number of US Dollars in circulation. This is especially true when you consider that there are over $9 trillion in the US Dollar carry trade currently (this doesn’t include US Dollar denominated bonds or credit instruments… simply US Dollars that have been borrowed and invested in other financial securities).

 

With that in mind, the hype surrounding the US Dollar’s recent correction is overblown. Being long the US Dollar was the most crowded trade in the world at the beginning of this correction… so it’s not surprising that the correction has been sharp.

 

When the next leg up begins for the US Dollar, we're going to see the REAL fireworks in the markets. What happened in Oil last year was just the first round... the next will hit emerging market stocks, bonds, and even US stocks.

 

If you've yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis "Round Two" Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

 

We are making 1,000 copies available for FREE the general public.

 

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/roundtwo.html

 

Best Regards

 

Phoenix Capital Research

 

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Tue, 06/16/2015 - 02:47 | 6200919 CHX
CHX's picture

De-leveraging means default on outstanding obligations. This will not strengthen the USD IMO, quite the contrary. There are Trillions of dollars that the ROW holds... they will not want them anymore at some point. and the guess what ?

Mon, 06/15/2015 - 20:16 | 6200131 TheRideNeverEnds
TheRideNeverEnds's picture

Sooooo; If you like buying silver @16 you will love it @6!

Mon, 06/15/2015 - 15:15 | 6199021 uncle_disgusting
uncle_disgusting's picture

Got some beefy overhead resistance there... https://imgur.com/wt9QAZL

Mon, 06/15/2015 - 14:09 | 6198651 doctorZH
doctorZH's picture

I think he's right.  Weak Dollar seeds the world for growth (with Debt).  Strong Dollar harvests the world.  QE and ZIRP were designed to weaken the Dollar and to upend the Dollar Bull that began in 2008, and caused the global crash.  But the story has changed.  We're at war now; and our enemies want to overthrow the Dollar as King Currency.  Any more American QE at this time would be traitorous.  So the Dollar goes up; and the global economy crashes. 

 

Foreigners with US Dollar debt are going to be forced to cover that short in the market, driving up the price of the Dollar as they compete for dollars to service their debt.  Defaults are sure to come as they did in 1982 (South America and Mexico), 1998-2001 (Asian Currency Crisis and Russian Default Crisis), 2008 (global markets collapse) -- 2008 was also a strong Dollar driven event. 

 

You asked for proof of this trillion dollar "short the Dollar" borrowing.  From the Economis article below:

 

"On top of this, the dollar’s global role means Ms Yellen has a huge impact abroad, influencing more than $9 trillion in borrowing in dollars by non-financial companies outside America—more than enough to buy all the firms listed on the stock exchanges of Shanghai and Tokyo (see chart 1). As the dollar strengthens both in response to healthier growth in America and in the expectation that the Federal Reserve is getting ready to raise rates, this burden is becoming harder to bear...."

 

See the chart in the article

http://money.cnn.com/2015/03/31/investing/us-dollar-strong-emerging-mark...

http://www.economist.com/news/finance-and-economics/21646803-debt-ridden...

 

Mon, 06/15/2015 - 12:35 | 6198152 Comte d'herblay
Comte d'herblay's picture

How do U know there are $9 trillion dollars in the carry trade?

 

Ur source, please?

 

I think (without naming my source either) there is $15 trillion in the carry trade.

Show me yours, and I'll show U mine.

Mon, 06/15/2015 - 17:27 | 6199632 AbbeBrel
AbbeBrel's picture

-- Show me yours [snip][sorry about that]

Here you go, courtesy of the every-readable Ambrose:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/114654...

N.B.: yeah yeah it isn't "Carry Trade" but really a 9T dollar short. But it is a 9X QE yearlong unwind, good for some dollar upside...

Mon, 06/15/2015 - 12:10 | 6198056 lordbyroniv
lordbyroniv's picture

silver to $1.50 !!!!!!!!!!!

Tue, 06/16/2015 - 02:49 | 6200921 CHX
CHX's picture

silver to $150 !!!!!!!!!!!

 

There, fixed it for ya.

Mon, 06/15/2015 - 12:27 | 6198116 agNau
agNau's picture

$7-8

Mon, 06/15/2015 - 13:01 | 6198276 Baa baa
Baa baa's picture

Perhaps, for a little while.

Mon, 06/15/2015 - 18:28 | 6199886 TheReplacement
TheReplacement's picture

Indeed but that will mean the whole world is crashing hard.  They will likely have miscalculated in this action.  The Brics will exit.  A lot of other countries will follow them.  Dollars will come to our shores on super sized cargo ships (or over the wire).  Investers will flee to hard assets if there isn't a banking holiday.  Hard assets will e$plode and then everything will stop working (economically).  Then it will begin to get interesting.

This is my take.  The interesting part might come before the actual collapse but that is not going to be an act of nature nor of the markets. 

Mon, 06/15/2015 - 17:10 | 6199558 Rakshas
Rakshas's picture

Never say never..... I would be quite happy to see silver at 7 or 8 bum wipes again........ problem is the people who used to produce the metal will all be long distant memories by then,  hell they're emaciated wrecks now...... as many of us shall soon be.... 

Mon, 06/15/2015 - 12:03 | 6198033 Bossman1967
Bossman1967's picture

Let me guess buy gold to keep safe from all this. I have lost so much money holding my metals but I have peace of mind that if anything ever does happen Ill be the smart one rite. Its a real strange world we live in but hey I am not that old that 30 years metals will regain there favor

Mon, 06/15/2015 - 16:20 | 6199338 daveO
daveO's picture

Never fear. The Fox News watchers believe you. I had another discussion, borderline argument, with a relative who gets all of his info from the professional dis-informers of Fox and the MSM. I tried to tell him there are only 2 ways out. Hyperinflation or massive deflation. That the US debt has been doubled in the last 6 years just to keep the inflation illusion alive. That banks will clamp down on withdrawals, if they stay alive at all. I tried to explain we were living in a period similar to 1929-1933 when the banks started going under. That the FED was simply postponing it at dollar holders' expense. His reply was that 'comparisons to the Great Depression were not relevant'!--Apparently, the credit cycle has been repealed!!!/sarc/-- He better not come begging to me for a bailout.

Mon, 06/15/2015 - 12:01 | 6198021 fowlerja
fowlerja's picture

Wow, 

Glad you found and are sharing the most important chart in the last century. I can now make my investment decisions!  :(

 

Mon, 06/15/2015 - 11:54 | 6197999 KnuckleDragger-X
KnuckleDragger-X's picture

Full faith and credit.....whatever THAT means......

Mon, 06/15/2015 - 12:14 | 6198070 Terp
Terp's picture

I think it means "you´ve been had, chump".

Mon, 06/15/2015 - 08:58 | 6197427 Manipulism
Manipulism's picture

Ahhhh, shut up.

Do NOT follow this link or you will be banned from the site!