Trading the Trend

[ducati916]

I would rather look at the average price of a Big Mac, over the last couple of decades, than use their CPI metric

The FED cash rate will never rise, over a sustained period, from here on. In fact it will be never-ending stimulus now, or the markets crash.

CPI as already indicated, is irrelevant to the Fed and also irrelevant to the market. The only people who look at the CPI are us and we are irrelevant also.

If you look at the chart, it does rise.

jog on
duc

 

[qldfrog]

About PM and why i created the RESET thread.
We have to think about unthinkable happening
Look at this comment:

Gold and silver are the ultimate universal storage of wealth. I can put a few 1 ounce gold/silver coins in my pocket, get on flight to anywhere in the world, and sell my asset with no problems at all.

Can not be truer..or is it?
Look at me: dual citizenship in western world, reasonably wealthy and well travelled yet
Can i actually even take a plane out of here, where to?
Thanks to covid19..or its pretences, not much freedom left
Plenty of regulations,preventing me to actually take that gold wo having it seized at the border.
We are in different times.WWI or WWII was really different but I believe 2020 onward will be different from anything lived since the 1950.
A lot to unlearn...

 

[qldfrog]

My apology Mr Duc for this early morning post i did while you were replying, mixed up the thread a bit.just realised

 

[ducati916]

Hum Mr Duc, that does not fit well with the ETF of US regional banks...
In cases like that, do you lower your bets, take a conservative approach?
Appreciate your different view cf "inflation"

Mr Frog,

It is simply an opinion. It is contrary to my viewpoint, which is why I posted it.

jog on
duc

 

[Chronos-Plutus]

Dunno about perpetuity chronos, but certainly until the pandemic is over.

They've planned two rounds - I betcha there's more

100% there is more stimulus coming from the FED, they have no choice.

 

[ducati916]

Central Banks are supposed to manage inflation to tick all the boxes of these well and wonderful ideals.

To be fair to the Fed. they did not create to virus nor the initial response to it. The resulting jump in unemployment cannot be laid at their door. Unemployment data is also improving. It is not 'good' by any stretch, but it is trending in the right direction. We'll have to wait and see if that trend continues given the increasing numbers in Florida/California/Texas.

jog on
duc

 

[ducati916]

100% there is more stimulus coming from the FED, they have no choice.

The question is: is it inflationary?

The answer is clearly no and Dalio (for all his history gazing) has this issue incredibly wrong.

jog on
duc

 

[Chronos-Plutus]

To be fair to the Fed. they did not create to virus nor the initial response to it. The resulting jump in unemployment cannot be laid at their door. Unemployment data is also improving. It is not 'good' by any stretch, but it is trending in the right direction. We'll have to wait and see if that trend continues given the increasing numbers in Florida/California/Texas.

jog on
duc

I agree: that I have been a bit nasty with my comments towards the FED; it is a difficult task, and these are unprecedented times.

 

[Chronos-Plutus]

The question is: is it inflationary?

The answer is clearly no and Dalio (for all his history gazing) has this issue incredibly wrong.

jog on
duc

We would need to do our own research, build our own metric, to truly know what inflation has been running at over the past couples of decades.

No doubt that there is a significant inflation asymmetry between large cities vs rural/regional areas.

 

[over9k]

Inflation running rampant wouldn't actually be all bad as it would ease the debt burden. It's only if it started slamming interest rates that they'd have real problems.

But the USD being the world's trading/reserve currency means they can abuse it no end and vanishingly little actually happens.

The USD is unique in this aspect.

 

[qldfrog]

We would need to do our own research, build our own metric, to truly know what inflation has been running at over the past couples of decades.

No doubt that there is a significant inflation asymmetry between large cities vs rural/regional areas.

I believe Mr Duc point is there is the split between inflation for peons like us and company corporations:
For corporation, input costs are lower, wages costs are lower, taxation lower,credit cheap this is not inflationary whereas for Mr Frenchman in Australia, while the microwave price has not increased, BC fees have increased, land tax has increased, rates and water price up, medical and education costs up
while income is at best stagnant...
Whatever cpi is, the 99pc has inflation but not the companies, and they are the only ones feds care about

 

[Chronos-Plutus]

Inflation running rampant wouldn't actually be all bad as it would ease the debt burden. It's only if it started slamming interest rates that they'd have real problems.

But the USD being the world's trading/reserve currency means they can abuse it no end and vanishingly little actually happens.

The USD is unique in this aspect.

True; basically the USA can block nations/banks from SWIFT and using the USD. I have heard a few whispers recently that Chinese banks could be targeted if China don't trade in good faith.

 

[over9k]

Even if there is inflation, just park your capital somewhere that won't get devalued by it. You guys are overthinking this.

Or are you more bickering about whether we'll actually see inflation or not? Because we all know what governments do every time a particular metric starts to look bad: Change the way they calculate the metric. This is true of inflation, unemployment, anything. There ARE private intel companies out there which measure the metrics privately/the old way(s) just FYI. And yes, the numbers are always very different

I already posted my thoughts reference just how hard it is to devalue the USD though. The normal rules simply don't apply for the americans. The bounce in gold price is a measure of fear, not actual dollar debasement.

 

[ducati916]

Inflation running rampant wouldn't actually be all bad as it would ease the debt burden. It's only if it started slamming interest rates that they'd have real problems.

But the USD being the world's trading/reserve currency means they can abuse it no end and vanishingly little actually happens.

The USD is unique in this aspect.

Correct.

jog on
duc

 

[ducati916]

I believe Mr Duc point is there is the split between inflation for peons like us and company corporations:
For corporation, input costs are lower, wages costs are lower, taxation lower,credit cheap this is not inflationary whereas for Mr Frenchman in Australia, while the microwave price has not increased, BC fees have increased, land tax has increased, rates and water price up, medical and education costs up
while income is at best stagnant...
Whatever cpi is, the 99pc has inflation but not the companies, and they are the only ones feds care about

Correct.

jog on
duc

 

[ducati916]

True; basically the USA can block nations/banks from SWIFT and using the USD. I have heard a few whispers recently that Chinese banks could be targeted if China don't trade in good faith.

That would be an incredible error if that were the case. The massive advantage of being the 'Reserve' currency could be lost through trying to limit its use.

The US dollar only gained its status through initially being redeemable in gold. Gold was the reserve currency. Of course when Nixon defaulted, somehow the US retained that status.

There is nothing unique about the dollar, any fiat currency theoretically could suffice.

jog on
duc

 

[ducati916]

Even if there is inflation, just park your capital somewhere that won't get devalued by it. You guys are overthinking this.

Or are you more bickering about whether we'll actually see inflation or not? Because we all know what governments do every time a particular metric starts to look bad: Change the way they calculate the metric. This is true of inflation, unemployment, anything. There ARE private intel companies out there which measure the metrics privately/the old way(s) just FYI. And yes, the numbers are always very different

I already posted my thoughts reference just how hard it is to devalue the USD though. The normal rules simply don't apply for the americans. The bounce in gold price is a measure of fear, not actual dollar debasement.

You have missed the point of the discussion. The discussion is re. Dalio's video that Mr CP posted.

jog on
duc

 

[over9k]

That would be an incredible error if that were the case. The massive advantage of being the 'Reserve' currency could be lost through trying to limit its use.

The US dollar only gained its status through initially being redeemable in gold. Gold was the reserve currency. Of course when Nixon defaulted, somehow the US retained that status.

There is nothing unique about the dollar, any fiat currency theoretically could suffice.

jog on
duc

Not just anyone can float a global currency.

The volume of currency must be massive - large enough not just to lubricate trillions of dollars of economic activity that takes place on the other side of the world, but so large that ordinary transactions and business fluctuations do not effect the currency's day-to-day value. Otherwise, instability would scare users away from using it.

The provider's external trade must be so small relative to the size of its home economy that day-to-day changes in the currency's value don't dramatically upset the domestic economy.

As an extension of that, the provider must be so unconcerned about the currency's value that it doesn't (unless there's a really big disruption) intervene in currency markets to push its value up or down. Again, if people are concerned that the currency is going to be manipulated once they start using it (and therefore are reliant on its use), they aren't going to adopt it in the first place. I.e your first paragraph is correct.

The provider must be willing to let the money flow at the whim of everyone else - if they can't get their hands on it when they need it, they're not going to use it.

And last but not least: The provider must be able to secure the very global trade for which the currency is used.


Some 70% of global currency (by volume) is in some way linked to the USD. The USD is used for over 90% of global trade and of that tiny 10% left over, iirc, 90% of it done with the euro in the eurozone.

This is NOT going to change. The whole planet uses the one currency for the same reason everyone within a country uses its currency: Everyone use it, because everyone use it.

I can't remember the exact numbers off the top of my head, but there's several times as much USD in circulation as the U.S actually needs domestically. I'm exaggerating to make my point here but if we were to assume it was 20x as much (i.e that the yanks only had/used 5% of what's out there) then they could print twice what they actually have and only debase the currency by 1/20th.

Hence why they can "quantitatively ease" eye watering amounts of "stimulus" into the system and have absolutely SFA consequence for doing so. Hell, last I checked, the last batch of stimulus was overwhelmingly not even printed - it was mostly borrowed by the U.S government at rock bottom interest rates as everyone were trying to get their money out of the rest of the world anyway and so loaned it to them for peanuts. They don't even need to print most of their (massive) stimulus even now.

That is the degree of penetration & confidence the USD has and it is absolutely unique to it for a reason.

 

[ducati916]

Bank earnings are front and centre next week. The health of the Banks is critical to the S&P500 moving higher (over time) and will be under scrutiny for NPLs/Reserves. Actual earnings will be less of an issue atm.

Banks are just (top chart) signalling a trendline break. It is so minor that it cannot at this point be judged as anything other than a blip. The Fed. has the backs of the Banks. There will be no Bear Stearns/Lehman's moments. The Balance Sheet and Reserve impairment inspections passed the Banks, however, there is still a ? mark re. NPLs. If they pass the test, that blip will accelerate and the Banks will head higher. If the Banks head higher the SPY heads higher.

If the Banks and SPY start to move higher on positive economic news, that MAY trigger a rotation out of Tech and back into other sectors (not least the Banks).

jog on
duc

 

[over9k]

If the Banks and SPY start to move higher on positive economic news, that MAY trigger a rotation out of Tech and back into other sectors (not least the Banks).

jog on
duc

Every other time it's happened it's literally only been that one single day (or even morning) and the virus data has then snuffed it out. The last rally on data release on friday the 3rd lasted quite literally an hour until a new batch of virus data was released.

My work-from-home stocks like zoom have dropped on said positive economic news but etailers have bounced because whatever extra cash is being/can be splashed is all being spent ordering stuff online, not face-to-face. I actually gained on the days of positive economic data but no virus data thanks to a bounce in ebay & amazon more than counteracting the drops I saw in zoom etc.

With the virus data only getting worse by the day, I don't see this changing. We hit yet more U.S and global increase records this weekend.