Thursday, September 11, 2014

U.S. Dollar Bull Market Update

I have always maintained, ever since I started this blog in the Fall of 2009, that the U.S. Dollar has been in a long-term basing process (see "Dollar doomed? Not so fast"   and Very exciting Juncture in the U.S. Dollar posts) and all risk markets, including equities, commodities, bonds and even Gold and Silver, were all topping out on a long-term basis. While the topping process, most notably in equities, has taken a lot longer than I anticipated, it has still been a topping process nonetheless, and NOT a "new bull market" as many so-called "analysts" claim. While risk markets are set up to fall a long way down, with most well on their way already, there is one market that is setting up for a super bull market and that is the U.S. Dollar. The Dollar has been the most hated market for many years now, with calls for hyperinflation based on "money printing", which is in and of itself based on a misnomer. The central bank has not been printing money, it has been expanding the stock of reserves in the banking system, and thereby increasing liquidity in the financial system. The massive reflation in risk markets has been a direct result of banks leveraging up the available money in the system to speculate in asset markets, thereby bidding them up. Yet, even with all the unprecedented measures taken by central banks around the world, commodities in general have remained below their 2008 all-time highs, gold and silver topped in 2011, and bonds for the most part, with the exception of some corporate issues, topped in 2012. This has all been part of the Grand Supercycle topping process that has been underway since the 2000 Secular Bull Market Top. Even amidst the greatest FED balance sheet expansion in history, and verbal pummeling of the U.S. Dollar, it has still held above the March 2008 low of 70.70. Further, the two significant lows it has made since that time, in May 2011 and May 2014, have each been at a higher low, a bullish indication. Additionally, at the most recent low of 78.91 in May 2014, the monthly MACD found support at the zero level, and has now turned up and triggered a buy signal. Often times before starting long term uptrends, markets go through a basing process. It is my estimation that this basing process has just ended in the U.S. Dollar, and ended on May 8, 2014 at a level of 78.91 on the U.S. Dollar index. Since that time, The U.S. Dollar Index has staged a very strong rally and hit a recent high of 84.52. A pullback can occur at any time, but this rally should be just the very beginning of a long Bull Market in the U.S. Dollar that continues far higher, and far longer than anyone expects. While there are no definitive targets available, I would not be surprised to see the U.S. Dollar Index above 300 by the time the bull market in cash tops out. Bond prices across the board, including U.S. Government Bonds, should fall for many years, while the U.S. Dollar should rise strongly in value during this period, as debt is repudiated and defaulted upon, wiping out debtors and creditors alike in the midst of the most severe deflationary crash in centuries. 



    Above is a link to the dollar index since it became a true free floating fiat currency.

    The Fed's Treasury portfolio is now 77 percent higher than the national debt was less than 30 years ago.

    The Fed can just unwind its treasury portfolio to keep “King Dollar” down. Since 1913 their main policy has been throwing Uncle Buck under the bus. Ain't gonna change. Buy some PM miners while their low prices are subsidized by the bankstas like Goldman, etc. Pretty soon China will be setting the gold price just like FDR did during the 1930s. Oh the humanity!!

    1. You are making my point exactly without realizing it. The dollar has ALREADY LOST all of it's value. The hyperinflation has already happened, except it's been hyperinflation in CREDIT, not paper notes as most believe. Credit can disappear and so can phony wealth. The FED "can" do anything it wants. Whether it will work is another matter entirely. Saying the FED's inflationary policy will not change is like saying it's winter time, but spring will never come. Things change. This Ponzi inflation levitation act by the FED will not last. It will either end or fail, and deflation will win out.

  2. I agree with much of what you say and will add that the Fed has only one playbook, like most central banks. Changes will be outside of their control. JP Morgan once said gold is money and everything else is credit. In good time we will find out that he who controls the gold makes the rules. Miners control most of the new sources of gold and other precious metals in the world and until the end of last year were ranked exactly LAST on a list of financial investments in terms of performance. In order to sell high, first you must buy low--nuff said from me.