Monday January 25, 2010 - 15:50:18 GMT
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Black Swan Capital - www.blackswantrading.com
Solid consensus still on the yellow metal and the buck
âLiving with the Trilemma: Recent data from emerging and developed markets underscore the diverging outlook for these two economic hemispheres. While Emerging Markets (EM) have continued to show robust growth, data in many Developed Markets (DM) have disappointed, especially in Europe and Japan. Unsurprisingly, recent communication from the major central banks has been dovish, suggesting that an AAA (ample, abundant, augmenting) liquidity regime will remain in place for a considerable period of time. The Asia ex-Japan (AXJ) region, with its economic outperformance and âsoft-pegs' for some currencies, is the natural recipient of global capital flows that result from rising risk appetite and easy monetary conditions. As a response to the Great Recession, central banks the world over acted as one in slashing interest rates. Further down the road, however, the risk is that AXJ central banks might need to raise policy rates faster than others, which could attract even more capital and put upward pressure on their currencies - the Trilemma of a Sudden(ish) Start!â
FX Trading â Solid consensus still on the yellow metal and the buck
Over the weekend I had the opportunity to speak at an excellent conference in Vancouver, British ColumbiaâThe World Outlook Conference. It was a great venue and there were many nice people who attended. Thank you to the excellent team at MoneyTalks.net for inviting Black Swan and putting on yet another great conference.
Overall it was a valuable weekend. Besides having an opportunity to meet with some Black Swan Members and share our views, the presentations by the experts (which were very good for the most part) validated my view that dollar perma bears are alive and well and still loving gold.
I was thinking about the comments on gold and the dollar by the speakers at the conference while travelling back home yesterday. David Newman, Black Swanâs marketing guru, was with me on the trip. I asked David if he had heard anyone suggest there was any way gold might go down in price. He couldnât remember anyone saying it is going down and staying down; a few of the gold analysts did suggest it may trade a bit lower for a short period, but ultimately itâs heading for the ozone layerâthat is a done deal.
Net-net it was a solid gold perma bull and dollar perma bear analytical crowd; and the audience liked what they heard. I am going out on a limb here: but I think most of the guests were long gold.
So this is the conclusion from the experts if you are looking for some type of decision chart on whether or not to buy gold:
- Stocks up â Buy gold
- Stocks down â Buy gold
- Interest rates up â Buy gold
- Interest rates down â Buy gold
- Inflation up â Buy gold (Deflation â âCanât happen seems the consensus; but if it does, buy goldâ)
- China boom â Buy gold (China bust â âCanât happen seems the consensus; but if it does, buy goldâ)
- Dollar down â Buy gold (Dollar up â âCanât happen)
- Economy weakens â Buy gold
- Economy strengthens â Buy gold
Granted, there was a bit more nuance than that and a lot of excellent analysis, and maybe Iâm embellishing just a tad for literary effect, but I think that fairly sums the consensus. I just tend to think there is some set of circumstances in the economic world that may cause gold to fall.
Of course yours truly, who may be dead wrong needless to say but said anyway, sees it another way:
1. The dollar has entered a multi-year bull market
2. China credit bubble will pop, and growth will fall, the only question is when
3. When China breaks we will witness severe global deflation
4. If interest rates go up (and we think they will near-term), gold will likely fall
I also laid out why it would be a very good thing for the global economy if the US dollar were to rise (those that say the dollar must fall for the US to improve have it ass-backward in my most humble opinion): [Chart not available in text format.]
Four reasons why it makes sense for the US dollar to rise- the big macro theme is global rebalancing:
1. Helps US capital formation through foreign direct investment
2. Relieves pressure from the Eurozone economies
3. Spurs real economy through domestic capital spending and job growth
4. Helps relieve China bubble pressure and slows growing protectionist trend
Is there any surprise why Iâm not invited to many places? Thank you Michael, Victor, Grant, and Nina for letting me in and all you do.
Black Swan Capital LLC
David Newman here, fresh from four busy days in Vancouver ...
As Jack alluded to above, he was the odd man out at the conference with his views on the currency market and a lot of other thingsâbut Iâm getting used to that. ď
I think you know as I do, that following the path of everyone else is rarely a way to make money in the investment world over time. One of the core missions of our PositionTrader FX currency service is to deliver to our Members independent ideas and analysis that will help to position ahead of the consensus. Lately, we have been able to achieve that quite well.
Our Members are sitting on a lot of nice open profits in PositionTrader FX, but Jack and JR are busy lining up some fresh new ideas and trading opportunities; you can never rest in this market.
If independent ideas and excellent profit potential over time makes sense to you, then I think you will like our PositionTrader FX.
Itâs our newsletter that targets forex trades with a holding period of several days or weeks, targeting major FX pairs, emerging markets pairs and key cross-rates. Members also receive market updates, price analysis, and position follow-ups to make sure theyâre tuned into our every move. We assist them throughout the trade with information and stop-loss adjustments.
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Please shoot me an email if you have any questions about PositionTrader FX or about signing up and becoming one of our valued Members.
Director of Sales & Marketing
P.S. As always, this newsletter comes with our 30-day money back guarantee if you determine for any reason itâs not right for you.
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