Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Monster Reversal In Stocks, Commodities, and the US Dollar in the Works?

Stock-Markets / Stock Markets 2010 Nov 10, 2010 - 12:14 PM GMT

By: Mac_Slavo

Stock-Markets

Best Financial Markets Analysis ArticleThe last couple of weeks have been quite eventful for economists and world leaders. First, Ben Bernanke announced the much anticipated next phase of US strategy to get the economy back on its feet, even though the recession has been over for many months and recovery is purported to be in full swing. The Bernanke Plan, to no one’s surprise, entails more monetization of US debt and further injections of liquidity into the system. To the chagrin of Nobel Prize winning economists like Paul Krugman, the announced $600 billion just isn’t going to be enough.


To world leaders in countries like China, Brazil and Germany, $600 billion is just the next round in what promises to be unfettered monetization of US debt until either the US economy is back to the boom times of exponential expansion and asset price growth , or goes completely bust. President Obama and Ben Bernanke are betting on boom times.

China and the rest of the world, on the other hand, seem to think that the likely outcome is a bust - a bust for the multiple trillions of dollars they hold in US debt. They have put serious pressure on US leaders to reverse their policies, with China implying that it is the US, not them, that are the currency manipulators. They’ve already taken steps to curb inflows of cheap US money into their economies in an attempt to prevent further bubble creation. The Chinese have even gone so far as to say that they and other Asian nations will act in unison to counter the threat of a depreciating US Dollar. The head of the world bank has even proposed that gold, a relic of empires past, be considered as part of a new global reserve currency system.

In a nutshell: The international community is putting massive public pressure on US policy makers. Whether the show being put on by the G20 and other influential organizations and individuals is real or not is yet to be determined.

Let’s assume that the surface level mainstream news is what it is for a moment, meaning that the international community really does want the US to strengthen the dollar and they are prepared to take steps to protect their economies through various means.

Naturally, in an environment like this, we can’t expect Ben Bernanke or President Obama to admit that they made a mistake, or that they intend to take steps to strengthen the dollar. In this global pissing contest, the last thing Earth Idol Barack Obama wants to do is lose face.

Plus, the only way to strengthen the dollar significantly would be to find a funding source for US debt.

The powers that be must come up with a simple solution to strengthen the dollar, fund US debt (at least in the near-term), and make our foreign creditors happy because their dollars aren’t losing purchasing power to wheat, oil and other commodities as they have for the last year.

Enter Europe.

In March of this year we wrote that Europe Goes First, Endgame Will Be Collapse of the Dollar:

For the time being and since March of 2009 the place to put money for growth has been the stock market. With sovereign debt issues in Europe coming to the forefront and the potential for a massive real estate meltdown starting later this year the next phase of the crisis will likely involve a transfer of capital wealth from stock markets (including China) back into the US dollar via the purchase of US debt instruments like bonds, bills and notes. After this short-term dollar pump, the severity of the crisis will set in as US job losses continue to mount, US GDP goes negative, real estate prices spiral downward and US government spending continues to expand unabated. This is where the endgame will take place — when domestic and foreign investors lose all confidence in the US government’s ability to manage the crisis.

Of course, nothing is set in stone, but this scenario is becoming much more plausible given recent events.

The dominoes seem to been lined up, and in the next few days, someone might tip the first one over (if they haven’t already).

According to reports funneling in today and leading the Drudge Headlines:

‘IRELAND MESS: INVESTORS DUMP BONDS, BANK DOOM’

We turn to Karl Denninger for further insight and analysis:

So for those who believe that Europe “avoided” an explosion in Greece by coming up with their “bailout’….. have you looked at Irish Bond Spreads lately?

They blew through 600bps today.

That’s beyond the event horizon.  The singularity is somewhere around 800bps.  At the present rate we’ll get there in another few days, and we might get there at a greatly “accelerated” rate.

I strongly recommend that you pay close attention to this.  The Irish banks were basically carpeted-over much like ours, except that this is a much smaller economy and the lies are harder to maintain.  Now the dead fish has rotted the floor joists, and the creeking noises are getting louder.

Should the ECB intervene, and I expect them to, it will not fix anything.

The possibility of a monster move - southbound in equities, northbound in the dollar, southbound in the Euro - is definitely on the table here.

In coming days and weeks this is going to play out in full swing (unless, of course, the mainstream can distract us with another random missile launch off the US coast or a printer cartridge scare from Yemen) and we may see a total reversal of recent trends, or in Denninger’s words, a “monster move.”

If Ireland blows up, and investors get scared, it could cause a sell-first-ask-questions-later style sell off panic, forcing lots of capital to safety assets.

The prevailing wisdom will quickly become that the US dollar is, once again, the safe haven asset of choice. As the dollar strengthens, we may experience a repeat, or close to it, of what we saw in late 2008, with an appreciating dollar driving prices in stocks, commodities and perhaps even precious metals to new lows for the year.

To sum up our current view of what may be possible in the very near term, we turn to SHTF Plan regular contributor Rick Blaine, who had this to say in an email correspondence:

I am now “officially” calling/predicting that a asset bubble is forming and/or has formed.

“Near” term prediction - dollar reversal…and significant pull backs in all commodities…except maybe gold.  Stocks will get hit too…eventually.

I say this because EVERYONE is talking about inflation/devaluation of the dollar right now. I’ll go contrarian.

If for the last couple of months we’ve been played by the grand strategists of the global chess board, then everything we think will happen will happen exactly the opposite of how we’ve imagined it.

As we suggested in the aforementioned article, the scenario described above, if it were to occur, is nothing more than a detour to an eventual collapse of the US dollar. As Europe falls apart, the US may be looked to for safety temporarily, but when our fundamental economic problems become apparent to everyone on the planet (again) the same thing that may cause inflows into the US dollar in the near term, will cause them to expatriate as quickly as possible. Our long term trend forecast for eventual destruction of the US dollar remains intact and is best summed up by Rick Blaine:

Long term - all fiat currencies will eventually fail…not because there is anything inherently wrong with fiat currencies…but because the world’s central banks are run by jackasses

By Mac Slavo
http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com

© 2010 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules