|
|
Most people just don't get it. They
don't get the fact that nominal pricing of equities within a fiat currency
economy suffering from increasing inflation will rise simply as a function
of the decreasing value of currency units, and that this is exactly why
stocks for example, are able to continue crawling higher despite worsening
fundamentals and news. What's more, because the dollar ($) is the world's
reserve fiat currency,
and still the largest source of hegemony in the world, it's fate affects
equity (including commodities and especially precious metals) prices not just
in $ terms, but also in euros, yen, etc, given the
impact is muted with offsetting differentials. Still though, now that people
around the world realize this is a global affair, commodity and precious
metal prices are rising faster than currency differentials against the $,
netting real gains across the gambit as foreign central banks attempt to both
keep up to the Fed's efforts and inflate away their own troubles (deficits
and debt), all in the supposed interest of keeping economies
running.
So again ladies and gentlemen, and to
reaffirm this understanding, one would do well to understand it's all about
the $ still in the financial markets today; and, that this condition will
become even more acute as the $ loses it's reserve currency
status, possibly as early as this year. The history of fiat currency life
cycles suggest the $ should begin to have increasing trouble
this year being 40 years now since Nixon went off the gold standard. And it's
happening. And as you will see below, it will most likely continue as well,
where on the most profound level, acceleration in this regard will occur when
like periphery economies
within the Western alliance, investors begin to reject sovereign US debt, a
topic that was well covered in our last commentary.
You would never know anything is wrong listening to our self-serving bankers
however - you know - the guys we are supposed to trust with the fate of our
currencies. For the $, all the double talk, ignoring the problem, and pathetic
rationalizations will not help as increasing numbers realize they
are holding a dangerously depreciating asset and attempt to get out of it.
And eventually this will grow into a
panic. You should know and understand this as planning your portfolios effectively
moving forward will depend on proper perspective, where although corrections
will take place, deflation is not in the cards, which will surprise some
pretty heavy thinkers.
No, if anything stagflation
will at a minimum worsen; and then conditions could possibly advance into
shades of hyperinflation
if a real panic out of the $ occurs. Therein, maybe prices will not be
increasing 50% per month, which is the conventional definition of
hyperinflation, but that won't matter because most people would be
financially destroyed at 10% given present debt levels
and what such an outcome would do to the cost of money.
Moving onto the charts now, and as
alluded to above, technicals associated with the $
have now caught up to the fundamentals in this most auspicious year, where as annotations below point out, it's now in a
position to collapse. This first chart gives us a shorter duration snapshot
of the $ that shows the lower degree count, expected price path (down to 74
and then up to 81), and gold / SPX pricing, which is of course the mirror on
the wall as the currency devaluation continues / accelerates. Also, it should
be noted the corrective zigzag (denoted in red) that started in early 2009 is
completed, making way for the $ to continue down to a more profound level.
(See Figure 1)
Figure 1
 
In answering the question - how
profound? - we offer this next chart spanning a much longer duration,
pointing out the Fibonacci resonance related target off a neckline of 80 is
30, which would encapsulate the definition of collapse concerning the $ for
most people. Here to, one should notice the matching a - b - c corrective
zigzag now completed in red, along with the observation the $ has broken
below triangle support, opening the door to those profound loses discussed
above. Again, this is why any weakness in the equity complex in coming days
will not be primary, but only cyclical and corrective in nature. (See Figure
2)
Figure 2
This is why both Dave and I are now
talking about new highs in the stock market next year (believe it or not),
purely as a function of the $. What's more, and evident in recent price
action, even though sentiment conditions will be a factor at times, it should
be understood this makes our put / call ratio analysis far less important
moving forward, where as long as the $ is declining, like now, growing
optimism towards stocks (any equity) will act only as an inhibitor, not a
stopper. Thus, the most important thing to do moving forward will be to pay
attention to the $ -- and hence - the title of our analysis today - it's all
about the dollar.
I published this piece today, even
though it's a month old because it's still timely, and also because it
contains a very important message about the stock market moving into next
year all should heed.
Unfortunately we cannot carry on past
this point, as the remainder of this analysis is reserved for our
subscribers. Of course if the above is the kind of analysis you are looking
for this is easily remedied by visiting our web site to discover more about how our
service can help you in not only this regard, but also in achieving your
financial goals. Along these lines, you should know your subscription to
Treasure Chests would include daily commentary from either the myself or Dave
Petch. As you may know, I cover macro-conditions,
sector timing, and value oriented stock selection, while Dave covers the HUI,
XOI, USD, SPX, and TNX technically each week. Mr. Petch
is a world class Elliott Wave Theory technician.
In addition to this, you would have
access to all archived commentaries, the Chart Room, exhibiting 100 annotated
charts of the precious metals and stock markets, along with stock selection
and sector outlook pages. Here, in addition to improving our advisory
service, our aim is to also provide a resource center, one where you have
access to well presented 'key' information concerning the markets we cover.
And if you are interested in finding
out more about how our advisory service would have kept you on the right side
of the equity and precious metals markets these past years, please take some
time to review a publicly available and extensive archive located here, where you will find our
track record speaks for itself.
Good investing all.
Captain Hook
Treasure Chests.com
Treasure Chests is a market timing
service specializing in value-based position trading in the precious metals
and equity markets with an orientation geared to identifying
intermediate-term swing trading opportunities. Specific opportunities are
identified utilizing a combination of fundamental, technical, and
inter-market analysis. This style of investing has proven very successful for
wealthy and sophisticated investors, as it reduces risk and enhances returns
when the methodology is applied effectively. Those interested in discovering
more about how the strategies described above can enhance your wealth should
visit their web site at Treasure Chests
|
|
