|
The single most important story for the investment world is the US Dollar.
The US Dollar rally took a breather starting in late February 2015. Since
that time, it has corrected a total of 7.2%. Technically this isn’t even a
correction (it would need to fall 10%) and it’s far from entering a bear
market (it would need to fall 20%).
In spite of this… the financial media is trumpeting that the bull market
in the US Dollar is over. I think they are grossly underestimating what is
happening in the US Dollar.
First of all, during the last two US Dollar bull markets (the early ‘80s
and the late ‘90s) the Dollar had no shortage of 5%+ corrections.
Here’s the Dollar bull market of the early ‘80s.
Here’s the US Dollar bull market of the late ‘90s. Again there are five
corrections of 5% or more.
My point is that 5%+ corrections are normal during US Dollar bull markets.
Remember, the greenback rallied over 25% before starting this cool down
period. So it was due for a pull back.
Moreover, in the BIG PICTURE, this correction has not violated the larger
technical pattern we’ve been following in the US Dollar in any way:
This is the single most important chart in the investment world. It is the
largest bullish falling wedge pattern in fiat money history.
And we’ve broken out of it to the upside.
If you want to think of this in terms of macro-economics… think of it this
way: since the US abandoned the Gold standard via Breton Woods, it has been
in an ongoing process of devaluing the US Dollar while issuing paper debt/
credit.
When you borrow in US Dollars, you are effectively shorting US
Dollars. So the entire Credit Super Cycle of the last forty years has seen
the financial system become increasingly leveraged at the expense of the US
Dollar.
We believe that the above chart is telling us that this Super Cycle of
leveraging is ending. This means that we are entering a period of
DE-leveraging.
This period will be marked by defaults and debt restructurings. Both
of those processes reduce the number of US Dollars in circulation.
This is especially true when you consider that there are over $9 trillion in
the US Dollar carry trade currently (this doesn’t include US Dollar
denominated bonds or credit instruments… simply US Dollars that have been
borrowed and invested in other financial securities).
With that in mind, the hype surrounding the US Dollar’s recent correction
is overblown. Being long the US Dollar was the most crowded trade in the
world at the beginning of this correction… so it’s not surprising that the
correction has been sharp.
When the next leg up begins for the US Dollar, we're going to see the REAL
fireworks in the markets. What happened in Oil last year was just the first
round... the next will hit emerging market stocks, bonds, and even US stocks.
If you've yet to take action to prepare for this, we offer a FREE
investment report called the Financial Crisis "Round Two"
Survival Guide that outlines simple, easy to follow strategies you
can use to not only protect your portfolio from it, but actually produce
profits.
We are making 1,000 copies available for FREE the general public.
To pick up yours, swing by….
http://www.phoenixcapitalmarketing.com/roundtwo.html
|
