I think it’s fantastic that I’ve “managed to wrangle” a number of intelligent readers here at Pot Stock Watch, and that these guys also offer their opinions / beliefs / suggestions and projections.
You can surf around the net for a “looooooong time” searching for some of the “nuggets” that turn up in the comments section here at the site, with a large portion of these insights coming from a “small handful” of some mighty intelligent people.
Yesterday’s post on “the proposed downward slide of the U.S Dollar” brought about a couple of fantastic “alternate views” which I appreciate in that – we enter the world of “speculation” when we start looking out over longer periods of time – where in theory “it’s impossible” for anyone to “actually know” how things will play out.
Throwing the ball around with others allows for a better perspective, an acceptance of alternate views and an “opening of the mind” should you be so closed as to only consider your own ideas, as correct.
The future path for the U.S Dollar (having such impact on all else) seems like as good a place to start as any so…..I welcome “any and all” to weigh in on this post ( as I will leave the comments section open for eternity ) as to provide a lasting resource for readers in the future.
USD bullish or bearish? You tell me?
Well if you take the Euro alone there is still a great deal of work to be done politically to actually embark on a serious easing program so the Euro’s impact on the dollar will be limited or range bound.
Yuan – question mark.
There is no doubt the yen will depreciate but it terms of it alone making the DX rage on upward it is unlikely.
The only thing that would make the US dollar sustain a trend rally would be real growth of household and corporate incomes so that the US can pay down its debt and actually taper. That would require housing and consumer spending to do very well also.
So far the US is not seeing real income growth and likely won’t given that we are 5 or so years in since the last ebb in the business cycle. Now with higher debt and pretty wack unemployment numbers (given that these are the times we should be celebrating), said ebb in business cycle will wreak havoc on the system. Enter more easing…..bearish dollar.
If real income growth takes off and the US can start to pay down debt I will change my tune immediately.
Another thing to look at is global population growth rate decreases, top heavy population curve in developed nations, total debt (govt, household, corp) of developed nations….none of the these factors contribute to real growth that will help actually pay down debt never mind just slowing its rate of increase.
Man! You just rattled that off the top of your head?
Great stuff Jay man.
Another good link for those seeking a better understanding of the “IMF’s SDR’s” I’ve spoke of several times.
I am nowhere near as experienced as you guys are as to understanding the markets, economic policies, ramifications of X country taking Y decision. That’s why i don’t participate a lot although i do read (multiple times often) your views, kong’s and the commentators’ (especially you JSkogs), trying to wrap my head around all this. Sometimes the nuances are hard to distinguish. English is not my native tongue and sometimes your wording doesn’t really help to determine wether you’re sarcastic or not. Anyway, it’s part of the learning process.
What i want to ask is this. It is my understanding that USD is still until proven otherwise a risk off currency. Meaning if a war in some (not so) random country in the middle east were to start, money would fly back to USD. Please correct me if i’m wrong. Could the USA be so evil as to, knowing that their currency backed by (worthless) debt is therefore… worthless, could they, on purpose, start some war/bombing, either on US Soil (making it look like a foiregn thing) or on foreign soil, to “save” the currency? Is this total fiction or this seems to be “plausible” to you guys?
I’m trying to “stay out this” until we get a couple more people weighing in but Bros!
You’ve touched on a very interesting point / question. Would the U.S essentially “create war” in order to preserve the “reserve status” of USD?
I don’t think alot of people truly understand what “being the reserve currency” means in general – let alone to the U.S specifically and hopefully we can “fill the void” here and get this straight for everyone.
The fact that the USD “is” the world’s reserve” ALLOWS the U.S to continue to print, and continue to borrow from others. This privilege is now being abused.
A link for some more reading / background: http://mises.ca/posts/articles/the-importance-of-the-dollar-as-a-reserve-currency/
You ask me…..what do you think the “real story” behind Syria is/was? Humanitarian? Pffff..
I feel that it’s 100% likely that the U.S will/would go to war to save this status – in particular trade of the “petrodollar”.
Wanted to reply to this one as well here Kong and Brohsbos….I am an Iraq war veteran (turned full time trader lol) and I have seen first hand exactly “how and why” the US goes to war, on the brunt end of it.
I can say from my view that the US has gone to war for FAR LESS than its currency in the past, so I for one, agree with you here, it would not be out of the question for the US to go to war to maintain it’s reserve status – In fact it is highly plausible.
on a truly reality level, Kong’s earlier article here on China as well…..Just look now how this status is being threatened by China who may even start to price the single most important commodity in the world (oil) in Yuan.
And don’t even get me started on the B-52’s flying through Chinese airspace right now. lol.
It certainly appears that China’s new government isn’t just “sitting back” and taking the slow road, as we’ve seen China to do in the past.
These moves are outwardly “unorthodox” for the usually “self contained” China.
Some feel that the Chinese have been bolstered by the “gong show” that played out over Syria, and that perhaps “now” is a reasonable time to “flex a little muscle” considering the current state of affairs in the U.S.
The Yuan pricing / trading of Oil has far reaching implications yes…and now this “show of military force”??
I’ve written about it since the very first ramblings here at Pot Stock Watch – when the Chinese finally “do decide” to start pushing……it will be something to see.
Kong, I just love the open mindedness here, compared to the knobs at FF. Great idea with this post.
Ok, my humble two cents worth on the USD: Short term (to end of Dec) bearish, medium term (to say end of 2014) bullish, long term (2020) bearish. Why: for now the “taper” confusion and fed dovishness keeps a lid on the USD. 2014: the Euro has its next crisis (zombie banks and French / Italian economies) and the Yen weakens a lot further based another dose of QE – everybody runs to the USD, plus as the taper commences the rush to exit equities boosts the dollar. Long term, much harder to perceive but suppose the US economy rolls over again without its stimulus and deflation takes hold – more QE? Also, the Govt process becomes so fractured that nothing at all can get done and the debt blows up as interest rates rise. Plus the Yuan arrives as an alternative reserve currency.
Lots of details between the lines in these comments but possible I think.
Hey Deano – I was hoping you’d pop into this thread and “repost” your views.
Hey something to consider……Japans trade deficit is looking bleak here as of Oct as – no matter how much they print (and improve exports) – the cost of “imports” still smacks em in the face. I think it’s like 16 months of straight deficit.
I’m of the mindset that “In the end” we’ll all see that “QE” just doesn’t and “won’t work period. With Nikkei banging at the double top 16,000 and “still in large downtrend on a 25 year chart…I can’t help but consider this a “spike” and not a reversal.
I’m getting a post together…not sure if this warrants any consideration in your “mid term / long term” view.
Good point Kong. The counterpoint may be that this Trade deficit is a relatively new concept for the Japanese and is based on their dumb idea of closing all their nuclear reactors and moving to fossil fuels, which requires imports of lots of dirty brown coal. My view is that as they change governments more often than most people eat hot dinners, a new govt will arrive and wake up to this fact, realise their overreaction to Fukushima and move back to new clean safer reactors, which goes a long way to fixing their deficits and generates an infrastructure boom to stimulate the economy. But this doesn’t alter the much bigger problem around their poor demographics and the lowest worker to dependent ratio in the world.
Hence the Nikkei is probably over valued and can’t last up here for long even if they continue to goose their markets with increasing QE. So what happens? I don’t have a clue but for me the idea the Nikkei falls as the Keratsu’s falter but the Yen continues to drift/fall until their terms of trade turn positive from cheaper exports is a possibility.
Ya….I’ve seen how quickly prior BOJ interventions where simply “eaten up in a matter of hours” – having no lasting effect.
Now…..with this “massive shot at it” and it “still seamingly doing very little” I wouldn’t be at all surprised to see them “eat some serious pips” should risk come off hard.
As well you might consider….as I’ve waffled a bit over the past months – the amount of Yen exchanged to USD as both USD and U.S equities have at times climbed higher together. This money “coming from Japanese money printing”. I feel it has contributed to a considerable number of SP points while Ben has been “trying his best” in the bond arena.
SP / Risk comes off….and I’m of the mindset that USD will also fall and it will be JPY that takes the safe haven flow, as yes..stocks sold then converted to USD BUT then USD converted / repatriate back home to JPY.
It’s an idea – as this is offically “speculation”.
Don’t know about the poster but interesting article
Hey Dr. Kong…. gotta be bearish here on the DXY – now relative to other pairs that could be another story……. looking for most commodities to get a left here mostly the Diggers & the PM’s sector….
That’s where I’m at on usd, but unfortunately a little less excited about the miners n gold as……we STILL can’t get a read on how they’ll trade with qe still on full gear.
Will be watching them close.
Ya I think if I were to take a commod trade in the very near term it would be oil. I do own a GC that I got lucky with on the last dip that is still profitable – barely! I won’t hesitate to bail on it if it gets worse. According to some, the velocity of money readings are a great lagging indicator…meaning that when the number finally starts to turn up its too late. I would expect gold maybe to get a boot in le ass once this starts to happen. Right now the velocity of money reading trend is down.
I agree that oil ( as suggested some days ago ) has as much as bottomed here around 91.70.
So…….rising oil / inverse falling dollar?
Deano! – Can we see rising oil and rising dollar here?
Hi Kong, Yeah I agree with ur analysis on sp/risk off = usd down and yen up.. only question is will they allow a risk off to occur? They are using all sort of methods to prop the s&p up, miracle saves when it show signs of possible selling… why would they stop now?
I hear you Robert….but I’ve seen this type of “stubborn” market behavior before.
It can be so very frustrating (especially if you’ve got cash at stake) and unfortunately there’s nothing we can do about it…but slug it out.
All markets “ebb n flow” – and this will be no different.
The markets are “bigger” than Both Ben and Abe so…..perhaps it needs to be some kind of “black swan” event to tip the scales, as.. they certainly aren’t budging with the “QE Bliss” are they?
Let’s watch that 16,000 restest on Nikkei – as it should happen tomorrow or Monday. I’ll be very curious to see how things react there as it was the “high” back in May.
Can the QE blitz push risk even higher in Japan? Lets see.
16k will probably be gone in a flash as many will be looking to short there.. and you know what happens when it is too obvious..
Stay positive man!
hahaha kong. tough to stay positive when one is going against the CB
Very big long-term fib area at 168.10 on GBP/JPY cross. We’re just about there now, I see a massive unwind coming around this level.
Maybe we momentarily blast passed it and take out stops or we just go shy of reaching it before “greedy” longs cash out. We have record YEN shorts as I pointed out before, my prediction (just having fun here by “predicting), the catalyst for a 500 pip+ unwind will be some news about the whole “Chinese air space” that’s starting to make the rounds with Korea and Japan, the US and China involved. What better excuse than to say “longs booked profits” off of this type of “event”.
I’m adding a decent sized position here from my earlier nibbles at shorting this pair.
Bang on David…..lining up quite well with the restest of 16,000 in Nikkei, where I’m expecting resistance and the possible turn lower.
It’s funny…as fundamentals go…then slide in those technicals, and of course “the news” of the moment – it almost starts to look “silly” spotting some of these things.
Mind you trading them , and having the patience to “wait for them” a different story for many but ya…..throw out a news story on “things heating up between Japan and China” right around a solid area of well known resistance – BAM!
Let’s light this candle!
Hmmm Ain’t the china japan airspace news out today already? I don’t see any reaction to that news.
See zerohedge’s latest commentary on Europe’s zombie banks. Here comes there peculiar version of QE, so get ready to get short EURUSD.
Ya I read that Deano.
It’s only my opinion but…I don’t see it as an immediate factor as….. we know this.
With so many factors converging here – man! “something” is certainly gonna make a move here pronto!
I’d love to see a bearish USD, along with a rising yen and rising gold. I’m kind of what they call a gold bug, I like to buy gold coins and accumulate for the next big change (gold standard?). I also think that Zero Hedge would be right if the dice weren’t loaded, but…
My 2 cents are: on the fundamental side, every single crisis (political, economic) is being counter-attacked by central bankers with massive asset purchases and monetary easing, so investors are fleeing from risk-off assets such as swiss franc, yen and gold. So, unless this central-bank bubble bursts, the worse the economy, the more risk-on investors are. And quite frankly, I don’t know how this bubble could burst any time soon. I was expecting major troubles in 2011/2012 with PIGS yields skyrocketting and Grece’s default that should have been a credit event triggering loads of CDS, but nothing happened. Institutional investors lost 70% of their investments, but there was no panic. Is is because of all the BS and marketing blurb about the ESM? I don’t know, but the fact is that no major crisis, even Cyprus, triggered a “Lehman effect”.
On the technical side: long and medium term, I can’t tell. Short term, the USD index, both weekly and daily, just bounced on the senkou span of the ichimoku cloud and on the 50 period SMA. On a daily chart it is also back above its 200 period SMA. The RSI is also supported by a rising trendline. I’m not ready to look for selling opportunities on this one.
My only “hope” for some change in this, or at least a pullback in market indices, is that the Nikkei is approaching a resistance it has respected since 1996, which also happens to be the 76% fibo retracement of its fall in 2008, with monthly RSI almost reaching 80…
In order of immediate importance / direction – I’m watching the markets direction with Nikkei running into this 16,000 area.
This should provide “some idea” of the risk rally in equities “pulling back” or raging forward.
It’s only a day er two away so…..for me that’s on deck, and can show us alot.
Risk assets, JPY , USD as well possible and “continued slide” in commod currencies.
The news has been trickling out a little over the last couple of days, what I mean by “Event” is something on the order of a Chinese or Japanese plane being shot at, or something of that magnitude that can really get the Yen moving.
IT looks like eveyone agrees that Japan is the key to any correction..
Just spent the last hour divulging all these comments here since Kong’s post yesterday. Lots to absorb and some great points for thought!
I have to say that my views (short term) at least are well in line with Deano’s comments. Until this “Tapering” situation is resolved, there could be a pretty heavy lid on the USD. Or at least a lot of sideways action. We are nearing year end here and I think neutral to bearish until the “tapering” is out of the closet one way or another.
I also have a medium term bullish bias as I think that the Fed will in some way spew some rubbish about cutting 10-20 billion off the “current QE.” in which case we may see a surge in the USD early next year (March for example as they have mentioned in the past for possible taper).
In this case I can see USD/JPY making new yearly highs next year. Obviously as well due to more than likely another round of easing from BOJ.
And even if the US increases QE again or creates a new acronym for QE and prints more, I don’t think it can keep up with Japan’s program. I also think there could be some flight to safety action at play as well as money flows into the dollar from top heavy US equities.
Regarding the EUR, I can’t see any ground for a significant push above the current ranges (1.33 to 1.38), although no matter what the ECB does it still seems to gain ground lol!
My personal favourite trade set – up for near to medium term is the Sterling, against almost everything. I think it has made the most significant moves higher here and with the housing bubble forming in the UK, an interest rate hike could possibly be forming on the horizon.
Fantastic breakdown CB – absolutely great look at things moving forward.
I too believe that Japan will continue to lead / win the “race for the bottom”, but certainly feel we need a “correction” in JPY before it gets much lower.
I as well as many others would love a chance to buy USD/JPY at much lower levels for an “actual buy n hold” type trade moving into 2014-15.
Great trade long GBP (as I have been for several weeks now ) being the biggest winner here in Nov vs AUD and NZD. I’ve moved to cash here now, as the move has been fantastic – but with the fundamentals / potencial interest rate hike on deck GBP looks to be a strong performer moving forward.
Range in EUR 133 – to even 1.41 doesn’t look / looks pretty normal / expected here too!
Feel free to get in here and comment / chat more often!
Ya I can see the technical argument for a pop out of the current DX consolidation for a short while and then perhaps down we go again.
Not read a post like this anywhere. Great stuff and my head hurts thinking about it. After reading it start to finish I came to 2 conclusions.
1. Until the US debt / QE / credit / kicking the can down the road etc ends we just don’t know what the dollar do. Posts like this are a brilliant way of passing time till we find out tho. I love it.
2. I’m way out of my depth and absolutely haven’t a bloody clue (yet). After only 6 wks of live trading and coming up on 6% I’ll stick to my trading plan and TRADE WHAT I SEE.
My sincerest thanks to everyone who gave their views, captivating stuff. Nothing has captured my interest like this – ever!
Have a good weekend all and best wishes from the UK.
Thanks Andy – I too am very pleased that others have taken the time to contribute here as well. Thanks everyone!
I’m confident we’ll get even deeper into this as things progress.
It will be very interesting to see if “I eat habanero” as I’m not for tapering of any kind, short of a stunt to support further easing.
Regardless – I’m doing exactly the same as you in that I will continue to “trade what I see”. We can all have fun with the “speculation” but it won’t be paying for beers this weekend!