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
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Going Long The Euro Could Be The Trade Of 2017

Currencies / Euro Jan 27, 2017 - 06:06 PM GMT

By: John_Mauldin

Currencies

BY JARED DILLIAN : For a long time now I've held the theory that you have to be completely insane to be a successful investor. Like, right out of your tree.

Let me put it this way: Just a few weeks ago we were all sure, 100% positive that the US dollar would continue to appreciate against the euro, because the Fed was more hawkish, and the ECB was going to have negative rates and QE forever.


In this town, your luck can change just that quickly.

Now people are not so sure.

Here’s what changed

Well, there have been a bunch of Fed speakers, and none of them sounded like raising rates was particularly urgent (I was wrong).

There also has been a backlash building in Europe about zero/negative rates and how they are destroying savings.

Plus, inflation is starting to ramp, especially in Germany.

Going long the euro could end up being the trade of the year.

If I had said that three weeks ago, you would have told me I was insane.

So we have to ask ourselves: what really changed, from one month to the next, aside from a few Fed speakers?

Really, not much—in December, everyone believed one thing, and in January, everyone believed the opposite thing.

You see why trading is so hard?

A few thoughts on this:

  1. This is the primary reason why so many people study technical analysis. The fundamentals are no help.
  1. Price is all that matters.
  1. Stocks that stop going down on bad news are a buy. Stocks that stop going up on good news are a sell.
  1. I don’t spend a great deal of time looking at charts, but as I've said before, when sentiment gets a little one-sided, I pay attention.
  1. The bull market story is always most compelling on the highs. The bear market story is always most compelling on the lows.

I have made pretty much zero money doing things that “make sense.” I have made the most money doing things that people have said were insane.

If you bought EURUSD in the 1.03 handle, you were insane. But it would have been the right trade.

The strong-dollar trade depends on Trump

One of the things the market has had a hard time understanding is the idea that we might get tighter monetary policy elsewhere in the world. I've said for a while, the Fed will hike...probably three times.

But what people were not counting on was the ECB hiking. Or the BOC hiking. Or the BOE hiking. Heaven forbid the BOJ gets hawkish.

Last month, we were operating under this model that the US was the most hawkish central bank in the world. And it sure looked like Yellen was going to rip rates on Trump, no matter how strong the dollar got. And then all this happened.

All of this is connected. And it all comes down to Trump and his ability to set inflation expectations higher.

If the market believes that we’ll grow north of 4% on Trumponomics, bonds sell off, the Fed hikes rates, and the dollar gets stronger. Yield curves steepen, the banks rally. I discussed a lot of this back in November in The 10th Man (subscribe here for free).

If the market begins to doubt that will happen (like now), bonds rally, the Fed goes slow, and the dollar gets weaker. Yield curves flatten, the banks sell off.

If Trump doesn’t stick to his campaign promises—cut taxes, cut regulations, and deliver growth—you might as well kiss the strong-dollar trade goodbye. And my personal account.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 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