Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Strong Dollar Means Investor Opportunity

Stock-Markets / Financial Markets 2011 Sep 26, 2011 - 12:19 PM GMT

By: Richard_Mills

Stock-Markets

Best Financial Markets Analysis ArticleThe Fed has been dumping billions of dollars into the US markets each and every trading day since late 2010. Because of this massive money creation the dollar became much weaker.

Movements in the dollar influence commodity prices, commodity prices influence bonds, which then influence stocks:


  • A falling weaker dollar pushes up the price of commodities, rising commodity prices tend to push bond prices lower. A falling dollar is bearish for bonds and stocks because it is inflationary
  • A rising dollar is noninflationary so the rising dollar produces lower commodity prices. Lower commodity prices lead to lower interest rates and higher bond prices. Higher bond prices are bullish for stocks
  • Commodity markets move in the same direction as Treasury bond yields and in the opposite direction of bond prices - bond prices and bond yields move in opposite directions

Today's strange market conditions (the dollar up, markets down) are temporary and are providing a huge buying opportunity. Here's why…As soon as the QE program, part 1 & 2, ended in June, the markets had to get by on a lot less money and liquidity - the effects of QE x 2 have worn off. The stock market and commodities are tanking while bond yields are making new lows - the dollar is getting stronger.

Today the dollar is up because the EU, and the world, have an acute shortage of dollars for the necessary bailouts and needed liquidity, the markets have already priced in a Western recession but do not know how the Greek situation is going to be resolved.

If Greece is allowed to default markets would plunge.

But, massive central bank bond buying will keep both the Italian and Spanish bond markets afloat. This would be perceived as the double threats of a systemic breakdown and a return to the 2008 global crisis significantly receding.

"We are in a fresh cyclical downturn within a structural slump/depression. We need global co-ordinated monetary action and the ECB must cut rates by 50 points. It made a terrible mistake by raising rates in July." ~ Andrew Roberts, credit chief at RBS

The EU will use its bailout fund, the European Financial Stability Facility (EFSF), to purchase bonds and recapitalize banks. French Finance Minister François Baroin and Olli Rehn, the European Union's head of monetary affairs, signalled that they were open to using "leverage" to expand the scope of the €440-billion ($611-billion) EFSF. The US Federal Reserve, Bank of England, Bank of Japan and the Swiss National Bank are all going to provide dollars to European banks - this will be very inflationary.

The US will also end its leading up to election time partisan politics, it's this author's belief the US will return to Quantitative Easing (QE) early in 2012, if not before, and initiate a massive stimulus program via an infrastructure maintenance and build program, the European Union will follow suit. All of this would be very positive for commodities

China, even if growth slows, is still predicted to grow at nine percent and the urbanization of both China and India and the astounding prospects of Africa are far from over.

"In terms of long-term structural trends, demand is now driven by an urbanization process that is far more structural than consensus generally believes. On our analysis, China is only 20 to 25 per cent along the path towards being a mature materials market and it may take at least six to nine years before demand intensity peaks." ~ Andrew Keen, Thorsten Zimmermann and Lourina Pretorius, analysts at HSBC

As an aside the business section of the China Daily newspaper had a lead story on the front page about 20 Lamborghini dealerships opening in China. Lamborghini sold 28 cars in 2007 and believe they will sell 300 in 2011 - they expect China to be their largest market in 2012. Ferrari expects to sell 600 vehicles and Porsche expects to sell more than 20,000 vehicles this year.

Conclusion

The sheer size of the European bailouts would be inflationary - a weaker US dollar - and a market return to "normal" would resolve the current uncertainty.

Today the dollar is up and commodities are down but more money creation, on a massive scale, an unprecedented level, is both necessary and coming. Inflation is "baked into the cake" for the foreseeable future. In today's fiat money driven economies deflation is simply unacceptable. When a government wants inflation they will get it.

This is bullish for commodities, the world's future supply of commodities are controlled by junior resource companies, they should be on every investors radar screen. Are resource juniors on your radar screen?

If not, maybe they should be.

If not, maybe it should be.

By Richard (Rick) Mills

www.aheadoftheherd.com

rick@aheadoftheherd.com

If you're interested in learning more about specific lithium juniors and the junior resource market in general please come and visit us at www.aheadoftheherd.com. Membership is free, no credit card or personal information is asked for.

Copyright © 2011 Richard (Rick) Mills - All Rights Reserved

Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.


© 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