Tuesday Commentary from Rick Ackerman
Sorry about the incorrect post earlier! This is the correct one.
Click download link to listen on this device: Download Show
isn’t this yesterday’s commentary?
Thanks Nick, I did fix it. Actually, thanks to you as I had no idea.
Good show Al & Rick. I liked the discussion of the insane valuations of the money tied up in the derivatives markets, and the central banks papering over of debt.
Our financial markets are wack!
good entry point at 810usd if it arrives.
I personally don’t think that it will Frank.
OK, thanks guys. That was an interesting show. Rick, I don’t know if you have read any of my comments on the dollar but I feel a high degree of certainty we are turning down right now. Its a contrarian bet. Check some of the charts I put up. Meanwhile that spike in CAD today just adds momentum and conviction to my view because what it is telling me is that the commodities bottom has arrived and has just come back into play in a major way. Its like you yourself often have said in the past….trust the charts and don’t bother with fundamentals in such cases. So its down for the dollar….bullish Euro and a big positive on crude oil going much higher in the near term.
Sorry, but just don’t see 1.20 USD on the horizon anytime soon.
Bird, did you mean 120 on the US Dollar index? I think it will hit it although it could be a year + from now. Perhaps even higher. It will only start going down when there is a loss of confidence and/or a better alternative.
Did you close your gold shorts, Bird?
Yes 1.20 on dollar index. That was what Rick was talking.
About personal trades…I don’t discuss them as a rule either for or against.
Too many people buy the dollar to 110-120 theory. Consensus theory is rarely right. Not sayin it won’t hit it, just saying there could be a lot of surprises to the downside on the dollar that the consensus view cannot see right now. Something like Doc’s Grexit(s) theory might pop up and make everyone look the fool.
I agree. Its like the 30 dollar crude oil calls. Too many saying the same thing. Not that it cannot happen. Just not now by the looks of it. Even I have said in the past I believed the Euro would go to parity. Well, when it went below 1.05 that was close enough for me. After all, it had already fallen since 1.40 so what’s a few pennies give or take.
I never bought into the $20-$30 oil story but have had a target out for $38-42 oil since it’s slide down hit the mid $60s.
At the beginning of this year when the dollar was in the 94 range, I mentioned it would likely go up and hit the 100-102 resistance zone, put in a mid-term top and then turn down for a few weeks. There were few that even believed the dollar would break 96; then they doubted 98; then they laughed at teh 100-102 level. Finally people targeted a fib level and trend-line at 102 when it got much closer, but most in the mainstream media and even in here were not expecting that. Glenfidish discussed it some.
When the dollar tagged 100.39 twice on the 11th and 13th of March, we were pretty sure that was it, and then got confirmation it was. At that point I mentioned that I was expecting the dollar to pull back for a few weeks, then trade sideways, and then start climbing again in late April into May, and saw the top capped around 110. I just posted my thought, and personally wasn’t aware of any 110-120 theory and was looking to join any club. Rick has mentioned 120 (the old highs) may be tested in a 2-4 year window. That is very possible, but I don’t see that happening in the mid-term or even longer term as mentioned yesterday on his blog. Doc has said his charts allow for the dollar to get up in the 110-120 range, but he came about it from a completely different analysis than anyone else did.
While there are a few media pundits that have mentioned the 120 prior USD highs briefly, very few have considered it a near-term target. I wouldn’t say it is consensus theory and 120 is not a hot topic being discussed in the media. I am not aware of any 110 discussion or a 110-120 dollar zone top discussion going on in the media, but maybe it is. There are just 3 different people in here that have put those targets out as probable turning points in the blow-off top in the $. This is a very small audience (albeit well-informed group) in the investing universe, and we are far from a consensus view crowd in my opinion.
Ha! Kind of funny Shad, yes, we here on this site are lonely little rocks in a sea of opinion. What matters is seeking excellence though and making the effort to sort through the clutter and come to the correct conclusions.
I have another great chart for you today. And this one should put the Europe doomers into quiet mode for a change even as the chart depicted solidifies my case for why the Euro itself is about to rise rather strongly for an extended period of time.
It is EZ credit demand growth and its a beauty of a picture!
The article notes, based on the most recent April 2015 bank survey that credit demand has now hit 12 year highs. This is happening even as the ECB adds fresh fuel and liquidity to reduce risks for Europe’s heavily debt laden banks holding toxic mixes of low quality assets.
But the real picture this paints is one of growing confidence inside the EZ and an expansion of credit which will undoubtedly spur an outburst of much needed economic growth.
Meanwhile, Ambrose Evans Pritchard of the Telegraph reports that broad M3 money supply within the US is growing at a frantic annualized pace pace of 8.2% for the last six months indicating a reflation is at hand. And this should draw our attention to the worn idea that all is gloom and deflation still rules in all corners of the world. He worries that the ECB is acting pro-cyclically with its QE program as credit demand ramps up in Europe.
Needless to say, the pressure will now be on the Fed to begin hiking toward rate normalization and we should be prepared for larger than imagined rate changes. The modest .25 increases most assume will probably not cut it in the real world.
Have a look:
Eurozone news still surprising positively
http://moneymovesmarkets.com/journal/2015/4/14/eurozone-news-still-surprising-positively.html
That is an interesting chart, and good thoughts the easy credit demand growth in Europe. I thought this was an intersting comment from Ambrose Evans Pritchard:
“He worries that the ECB is acting pro-cyclically with its QE program as credit demand ramps up in Europe.”
I’ll admit that I am a bit gloomy on the picture in Europe, not just because Cypress was able to rock the world 2 years back, or because Greece is a drama-queen, or because Portugal, Spain and Italy are next. The real problem I see is the lack of innovation, industry, and ideas coming out of Europe, and thus the chronic unemployment problems. Something like 25% of people in Spain are out of work and the only thing saving that from being worse is the renewed interest in Saffron harvesting. When I think new technology, or cars, or stuff I think China, US, Japan, S. Korea, and really just Germany in Europe.
In addition, Europe is very unique in that it doesn’t play nicely with it’s neighbors that is in the EU with. There are many long term grudges, language/cultural differences in very small spaces, and ultimately that is why I feel the European Union in today’s configuration is a doomed experiment.
In the US there 50 different states that do things differently, and I love it and support the States rights issue over the oppressive Federal government that needs to mind its own business in most cases. Regardless of the state’s differences the US works as one unit. In Canada the provinces work as one team. In Australia the provinces work as one team. In Europe, its a dogfight with deep divisions. It is the same human friction, with all the divisions religiously/ideologically, that prevents the Middle East from being able to work as a team in one economic platform.
I see theEU and their currency of the Euro as needing to reinvent itself, and maybe change the lineup on their team. Maybe Greece needs to go. Who knows?
However, nothing in the world is all doom and gloom, there are great people, great ideas, great companies, and great opportunities on every continent.
I can see that Euro could surprise to the upside in the short or mid-term, but overall I expect it to stay weak due to the lack of innovation, ideas, products, and lack of jobs and opportunity for the 20-40 year old demographics. If they decide to get engaged and innovate, then I have high hope for Europe as a whole.
No question they have problems there. Its just that every once in awhile a little shaft of light peeks through the clouds and I wonder if it is my own outlook that needs the adjustment. With the money supply growing at a healthy clip and credit demand at decade highs then something positive is coming.
Could it be growth and the associated inflation? I suspect so.
Yes, they may just have some growth on the way and some inflation. I just don’t expect very much growth.
And where is the money supply coming from, now that its growing at a torrid pace and even as the Fed has pulled back on using its monetary levers? Well the vast majority of money is still created privately as the following chart shows. As they say…money matters where growth is concerned so we had best get this on our radar now.
Public versus privately produced money (M4)
http://object.cato.org/images/hanke-img2-62012-full.jpg
Al, I think you have reposted Ricks show from yesterday.