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“And what would you do, if you could rule the world for a day? I suppose I would have no choice but to abolish reality.”

–Robert Musil

Commentary & Analysis


Janet & Company just couldn’t do the deed.

Given that Janet & Company sounded so “hawkish” when they were sipping wine and eating cheese in Jackson Hole, reporters at the recent Fed press conference asked if waiting till after the election to hike rates might be politically motivated. “Oh no”, she said. “We never discuss politics.” I take Janet at her word. Why would the Reserve Board need to “talk” politics? I think most of them are big government-loving leftists anyway. Has anyone else got the feeling the Fed’s credibility has lurched even deeper into the laughable zone thanks to the last press conference? Dot-plot anyone…what the heck is that mess anyway…

Dollar bull market or will the dollar disappear?

My son asked yesterday, with his tongue firmly planted in his cheek, if I was able to sleep at night knowing “world money” was about to replace the US dollar by the end of next week?

Given the global macro backdrop and the potential for:

  1. A significant mark-down in Chinese growth prospects as both banking and real estate concerns loom.
  2. Real potential for a significant risk-driven fall in the euro as:
    • Germany weakens politically (Mrs. Merkel disastrous refugee policy coming home to roost) and economically (big decline in German exports on falling global demand)
    • An Italian referendum looming
    • The US economic demand globally still weak despite some bright spots
    • Emerging market debt in the ozone with hair trigger international investors ready to dump EM bonds on the first sign of trouble…

…all usually bullish for the reserve currency, I told my number one son: Yes, I am able to sleep just fine. But even if am wrong on the direction of the dollar, I still suspect it will act as the global reserve currency well past the end of the month.

If you are confused here, let me bring you up to speed on this: A major newsletter house currency charlatan guru is guaranteeing the dollar is doomed and will “in fact” be replaced by “world money” at the end of this month. [I am not kidding. Promos and videos galore are supporting this hallucination.]

But despite said charlatan’s guru’s warning, I am sticking with my call for another leg up in the US dollar bull market before it is over. But, with this caveat: If those overseas dollars are being gathered up by the secret “world money” administrators (I guess they go door-to-door to collect these things, but not sure) and start showing up packed in tractor trailer trucks at our ports, I will change my mind.

George Orwell said: “Advertising is the rattling of a stick inside a swill bucket.” In this case, I think he nailed it.

New Zealand Dollar: Finally? Maybe?

I have been trying to short the New Zealand dollar off and on for a while now; with very little success, and mostly failure. But just maybe something is clicking this time. And if something interesting happens with risk assets (i.e. a big dump in the stock market) I think the New Zealand dollar can tumble.

I shared these three rationales for reasons to go short Kiwi with our Black Swan Forex subscribers:

  1. NZD is tightly correlated with price action in emerging stock markets
  2. NZ$ vs. US$ relative yield spread has been falling
  3. Our Elliott Wave chart analysis

You can view the full report here…

Kiwi breaking a bit today…fingers crossed.