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Is The Fed Being Forced To Hike Rates To Defend The Dollar?
Submitted by Christian Gustafson via Deflation Land blog,
At the moment, the strength of the $USD correlates very strongly to equities. When King Dollar is torpedoed like it was yesterday, stocks plummet.
So does this mean that a rate hike next week will be tremendously bullish for stocks?
The argument runs like so:
- Fed tightening will shoot the $USD through the roof
- Beaten-down currencies like the JPY will crumble again with respect to the Dollar
- The Yen carry trade and everyone riding on it will launch equities to new highs
When the market falls off its highs in January, the Fed can then rally equities by ... adding another 25 bps.
And so on, until the correlation shifts again between USDJPY and equities.
This of course begs the question -- is the Dollar actually on the brink of collapsing today, with the Fed now forced to defend it with a series of rate hikes?
The conventional wisdom of "one and done" or "no hikes at all, ever", may be completely wrong.
2016 may be about the Fed scrambling to regain control of the monster they have created, where the market bounces at each FOMC (against the overall decline) because they continue to tighten. Between hikes the market sells off again with increased severity as the market comes to grips with what is happening.
The Fed hand may be forced.
The new game may be for each nation to export deflation to the rest of the world.
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What i find interesting is that with the king dolla being "torpedoed" yesterday, commodities didnt jump and barely even budged!
Now would be a great time to learn how to use Bitcoin!
http://www.BitcoinTeaching.com
B...B....B....booyaaaa - i mean bullshit!
Everyone should have at least 1% of their assets in Bitcoin. It makes good sense!
But but... what about potcoin?
What, are you Racisss?
"Is The Fed Being Forced To Hike Rates To Defend The Dollar?"
Finally ZH gets it.
Who fucking knows what it means with this highly rigged market.
err...effect & cause... USD down maybe because foreign money pulled from over-valued stock market... interest rate hike could also exacerbate this...
who knows...
No matter if they do or they don't they're screwed. They've been forced into a corner, trapped, the can has been kicked to the edge of a cliff and there are no escape routes.
America will fall, the playing field will be leveled, and a world wide cabal will ATTEMPT to rule the world.
The whole damn thing will blow up in their face and the People will be left to die in the streets.
Only GOD can save us now, and yet we will curse him for our own damn folly!
"Is The Fed Being Forced To Hike Rates To Defend The Dollar?"
100% yes
"So does this mean that a rate hike next week will be tremendously bullish for stocks?"
100% yes
I mentioned this a couple weeks ago; the narrative has been cleverly changed to "rate hike bullish"......at least between 12/16/2015 and 12/31/2015
They're being forced in opposing directions with nearly equal force,
They must defend Debt "Money"
They must service the Debt
Damned if you do, Damned if you don't
Yes, but only if their assets are in the three-figure range.
Bitcoin was meanth to be used. Not as a speculative piggybank.
That's why it's insane to think that it's an investment.
And then there are the other 500 reasons why it's crazy to put a penny in it.
How long have you been working for the Fed?
Smells like... distribution.
Now would be a great time to learn about physical Gold and Silver!
It seems more like the Euro jumped and the dollars value against commodities hasent changed
I thought the same exact thing. But then today the opposite seems to be the same case. So like I said before. I have no idea what's going on anymore. And I'm done trying to figure it out. I just wait now for the collapse. By Deflation. Or hyperinflation.
or both
Absolutely. plus the Venezuelan opposition looks to keep the country solvent for a while, unless....errr, there's a socialist coup as bus-driver Maduro promises (....then they'll be fucked up enough to dollarize)
Obvious to the average engineer weeks ago, first time I thought about the issue.
https://thinkpatriot.wordpress.com/2015/11/10/a-measure-of-propagandas-p...
9/11 was a False Flag operation by the Israeli-Neocons in the US Government
Why would the dollar need defending? It's currently the most beautiful tranny in the pageant.
It's not defending, it's propping the dollar up. We can't allow cheap dollars in our brave new world.......
Or as Max K. puts it, the leper with the most fingers
We have now officially entered the twilight zone. Enjoy your stay.
I hope Rod Serling is bringing lots of popcorn......
If you watch the old series, it's amazing how pro God and pro America it is. Shows how far we have fallen.
Yes, unfortunately ALL fiat will die. It has indeed been a global market for quite a while. Next up, global Weimar.
hedge accordingly.
Buy our custom money wheelbarrow now and we'll throw in our awesome dollar bonfire kit for free!!!
Mini Wiemars until the big enchilada Wiemar. Would you like hot sauce with yours?
At least we have time to prepare and stock up on TP, unlike Venezuela and others. I have a sensitive bungholio.
Prior to hyperinflation in Weimar, people were hoarding money. In contrast, the average American has less than $1,000 to their name. There would have to be a big deflation first.
whatever the fed does it will be bullish for usa equities
I think the opposite; anything they do will be seen as bad. Tightening (raising rates) into looming global deflation will nuke EM equities and spill over quickly into major markets. But maintaining low rates will send a capitulation signal, The Fed will be saying they are not holding the rudder anymore. Even though in the short run easing has meant a rally in equities, capitulation cannot be good news. I think equities will sell off as everyone runs to be first out of the burning theater (heading for cash).
The only question in my mind is, which is worse.
I have said for 5 years The Fed will not raise rates. Everyone is saying Dec is the month, but I'm going to go with fundamentals (as I understand these) and claim The Fed will not tighten in December or if they do then it will be with the promise to ease again at the first sign of trouble, with a promise of negative rates. And we'll see negative rates regardless sometime in H1-16.
There are not two ways to play this. The global economy is imploding, it will continue to implode for a decade at least. It may implode until the "global" aspect simply evaporates at which point what the Fed did or did not do won't matter in the least.
Mmmmmmmmm.... no. Don't buy the premise.
ditto .... junk bonds are the joker in the deck.
That sell off over the past few weeks in 3M bills has reversed over the last couple days... could be a precursor to no hike which will bring down DXY as people lose confidence -- which brings down equities based on this guy's argument (I would argue that not hiking results in complete loss of confidence in the "recovery" as I think buybacks are toast due to leverage and not hikes)... we shall see.
They are taking the USD down because it is too high. Even the Fed can see how badly it screwed up letting the USD appreciate almost 20% it ripped the guts out of the economy. Stocks will be propped no matter what. Rate hikes don't matter. The banking system gets all the free money it wants just by asking. And it will need a lot when any intertest rate derivatives trades end.
The real issue is that there is no reason to hike rates at all in the current broken system. It doesn't translate to the economy. The Fed should just STFU at this point and stop talking about it. It doesn't help them or anyone else to be hanging shruken heads on their lawn as a threat or a promise.
They want the guts ripped out of the economy.
Nope. Not true.
Fed not interested in defending USD here. They just want to maintain their credibilty as an independent CB.
Yeah, hike rate and see how those buyback shares big corps cope.
Short term the dollar is not in trouble, if anything not hiking will bring some steam out of the massive over valuation of the USD.
the FFR is fucking irrelevant now, remember, the velocity of a dead currency is in fact zero...
They'll probably just downgrade the banks,,, or both...
The FED is going to be ordered to do whatever is bullish for their bosses.
The premise in this article is the Fed will raise rates, that it is a foregone conclusion. I am not so sure.
What about the US DEBT...what about the impact on the debt based US consumer...what about housing...etc...so many reasons they can't really raise but if they did it would only be an effort to save face and not look like the liars and crooks they really are...
How much dollar debt is there?
How will that dollar debt be paid?
Defalt is an event, with actors that can be punished.
Devaluation is a process with no punishment.
How do you think that dollar debt will be paid?
Ugly truth there, bro.
Hi Tylers!
Not labeled on the chart is that the current structure forms an ending-diagonal, composed of wave triplets, which quickly retraces itself once completed.
That's my take on January -- but the sharp market drop is halted by ... another 25 bps!
Thanks for posting my ideas! GLTA
cg
This Doesn't make sense to me. But nothing much makes sense to me anymore. So maybe that makes the most sense.
PS. I still believe this has Gold price written all over it.
Plato's allagory of the cave, 2500 years of the same. During that time gold has been as constant as gravity.
If you want sense you need to walk out of the cave, and see the world as other lifeforms see it.
If so, they might be threason why the dollar is high and commodity is low.
Needs more MS Paint.
Who knew you could qualify to be a financial blogger by copying a drawing found on the back of a box of matches...
The Fed. is boxed in. The correlation with a stronger $usd and the equity markets is destructive to exports, and emerging markets.
When QE was going on, the weaker dollar actually supported the equity markets, because they were being financialized by the money printing. In order for the Fed. to give the impression of a strengthing U.S. economy they need to lift rates, but it's just so that they can ultimately lower them, or start printing money again.
I'll put my 'money' on what happens after Dec. 20th when Porko finds a reason not to pay Putin his $3B due, while simultaneously the Chinese make another geo-strategic move somewhere (as they are wont to do), as to the ultimate fate of the $USD, over what Yellen & friends do or don't do. We're getting very close to something geopolitically that will likely have immediate ramifications for the $USD.
Nipped some long NUGT earlier below 28. Projection is for gold to rocket off of this bounce off the wedge and megaphone and perhaps touch 1200ish within weeks. if the hike was gonna bury gold and create that final flush would already be in motion. Bounce from 1050 to 1080ish and then retrace tells an idiot like me something . . . . . . or I'll be terribly wrong. After this countertrend move were it to occur may come the final flush.
So ZERO "rates" were the fuel to push the SPX to 20X plus p/e. it will BE rising rates that will be the FUEL to push the SPX to HIGHER valuations.
REALLY!!!!! REALLY!!!!!! ARE YOU KIDDING ME!!! SO RISING RATES "MAGNIFIES" THE CARRY TRADE - SO "NO" UNWIND IN JPY/USD WHATSO EVER????
REALLY!!! SO DRAINING 800 BILLION FROM THE MARKETS [800 BILLION WHICH OF COUSE HAS BEEN LEVERED] HAS NO F*CKIN IMPACT ON THE MARKETS OTHER THAN TO MAKE EVERYONE "LONG" THAT MUCH "LONGER-ER"
R-E-A-L-L-Y!!! AHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!
SO IN AUGUST WE "CRASHED" WITH THE "THOUGHT OF AN INTEREST RATE RISE IN SEPTEMBER, BUT NOW - 'NOW" - WE WILL RALLY BECAUSE "ahhh"" THE MARKETS WERE "OVER-REACTING" IN AUGUST AND NOW THEY SEE THE BULLISH LIGHT"
OH - AND THERE THERE IS THE "QUANT" GUYS FROM JPM THAT HAS CALLED THE MARKET TO 100% THAT SAYS 680 BILLION IN OPEX PUTS WITH A STRIKE AT AROUND SPX 1800 COULD TRIGGER "STOP LOSS" DROP IN MARKET IN AN AUGUST REPLAY. WHAT DOES THAT DO TO YOUR WAVE COUNT THEN.
THERE IS ONLY ONE QUESTION TO BE ANSWERED - EITHER I AM "BRAIN-DEAD" OR THIS CHART MAKER IS!!!!
I'm sorry but anyone who thinks the Fed is hiking this month has shit for brains! Everyone in manufacturing is talking about the major slowdown occuring right now. I know the Fed doesn't give a shit about the real world but they sure as hell aren't going to risk starting a Great Depression just to avoid losing credibility for which they already have none.
The Fed strategy is to strengthen the $ by importing savings. Since the other currencies, once converted to $s, can only be spent here or converted to another curency, they hope to have some of it dribble into our economy and raise inflation/consumer spending. It most likely won't work very well and if it winds up doing the opposite - tanking our stock market, e.g. - they will revert to QE-ing us to negative rates. They are trapped, like the croniest rats they are.
The Fed strategy is to strengthen the $ by importing savings. Since the other currencies, once converted to $s, can only be spent here or converted to another curency, they hope to have some of it dribble into our economy and raise inflation/consumer spending. It most likely won't work very well and if it winds up doing the opposite - tanking our stock market, e.g. - they will revert to QE-ing us to negative rates. They are trapped, like the croniest rats they are.
If the market goes up, PE will go crazy and make it even more unlogical.
How do you defend this any longer?
And with earnings dropping, it simply doesn't make sense!
So a bunch of Christ Killers are getting ready to ruin the Gentile’s Christmas? Let the Fed Audits begin!
looking at the dxy/spx chart says the market leads the dollar, not the other way around. the spx dumps before the dollar peaks. so any dump in the market will lead to a dump in dollars until some equilibrium is reached(85-+) and all is right in the world. a rise in interest rates now will just jumpstart the process.
Currency lower means assets higher, including stocks. Check out the Zimbabwe market when it entered hyperinflation.
if a rate hike strengthens the dollar asset prices on average should drop.
Unless the markets are just one, big, giant, fiction ...
(and then it's just the FED stepping in and buying stocks)
I'm afraid that they may have 1 more "screw-the-shorts" rope-a-dope left in them.
If so, it means "Santa Clause Rally!" -> they might buy the market (the FED) just to make it look like the rate increase was "no big deal". Or, they might just back away from the rate increase completely.
(we shall see)
Aw come on....Like the firing order of spark plugs in a V8 engine, every central bank, has been taking turns devaluing their currency, in a race to the bottom, printing money to save their individual welfare states.....
You really believe the school marm wants to develop an engine missfire on Obama`s legacy watch?.....
Is The Fed Being Forced To Hike Rates To Defend The Dollar?
Not yet.
After Malaysia, Russia (only partially succeeded), Brazil, and now South Africa, they still have a few competing currencies to throw into turmoil, first.