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hardnox
Advisor

the dollar

new lows for the DX this morning- isn't supposed to be happening. Thinking was that rising rates would lift the buck.

 

No doubt some sell the fact in there but other things too. BIS cut their forecast for US growth as the Trump legislative agenda looks in question- and he's actually not even talking about a fiscal push any longer. Infrastructure Week amounted to an announcement about privatizing the air traffic control system.

 

Not much hint of any effect on the commodity complex yet though, as money continues to leave passive vehicles and funds are very short across most markets. 

 

Also certainly an element of global sentiment as the rest of the world stands with mouths agape as the HeeHaw Gang settles in on the Potomac. That was demonstrated in SecState Tillerson's recent trip to New Zealand where tens of thousands of our good allies turned out to give him the old USA is #1 salute.

 

Trump said he wanted a lower dollar, looks like he's getting it.

 

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13 Replies
Mizzou_Tiger
Senior Advisor

Re: the dollar

weak dollar and low interest rates. Only way we can survive.
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hardnox
Advisor

Re: the dollar

The dollar can go a fair bit lower and not be anything to be alarmed about in the larger scheme of things.

 

I am curious though, about the absence of "death of the dollar" and "losing reserve currency status" stories and slow sales of armageddon survival kits.

 

The reserve currency thingy is interesting, though. I'm not certain that partial loss of that status means exactly what the alarmists thought it did but could be coming given the unconcealed contempt that this administration holds for all the international financial institutions that we've controlled for 60 years and have maintained that status quo.

 

That actually may be a bit of the background on this move.

 

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BA Deere
Honored Advisor

Re: the dollar

Go on You Tube and type in "Peter Schiff"   "Jim Rickards"  "Jim Rogers" and you`ll get all the dollar crash news you can handle.   They are right of course, but since a more "America first" approach is being attempted, but fought by the socialist party and the media, it may or may not come to fruition.   Truth tellers are still out there though.

 

http://www.theblaze.com/news/2013/06/28/the-fascinating-reason-why-a-wis-restaurant-gives-huge-disco...

 

MANITOWOC, Wis. — It’s the home of many of the big red cranes you see on construction sites. And if you check the ice machine during your next hotel visit, you’ll likely see the name scrawled — along with a snowflake — on the front. It’s even the fictitious hometown of Julia Stiles’ character in the movie “The Prince and Me.” The town is Manitowoc, Wisconsin.

But the town of about 33,000 is also the home of Late’s, a small-town diner just a few hundred yards from Lake Michigan and still lined with a long, winding counter and spinning stools. And there, placed high on the south wall near the ceiling, the restaurant is trying something new to both attract customers and secure its future: It’s offering a huge discount if customers pay with silver change minted before 1965.

 

How big? How about a hamburger for 12 cents, or 10 of them for $1. Like fries? 10 cents. Chicken? 100 pieces for $4.55. And you better believe in a state where fish fries on Fridays are as common as Packers games on Sundays you can nab a Perch sandwich for 20 cents.  

 

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hardnox
Advisor

Re: the dollar

Controlled inflation is the basis for a very large majority of wealth held today- nowhere truer than farming.

 

I've been on the fence for 20 years and still remain there- the question of whether the value of currency (inflation) or assets (deflation) are how the game ends.

 

If you're in farming and it is one or the other you'd better pick inflation. 

 

We have an interesting new wrinkle as far as policy and that debate- the huge deficits from high end tax cuts but the world already has plenty of capital and too little demand.

 

 

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timetippingpt
Honored Advisor

Re: the dollar

Good one BA...we present the purchasing power of the dollar every year at our Peer Meeting. Its one of our 10 core beliefs. "The value of the currency will decline to zero over time".  Thus we own nothing but land, no paper, well and a little metal of sorts  :-)

 

First land the family bought for $4/acre in 1869, so you can tell it has worked out pretty well over time :-)

 

Not sure what you are concerned about hardyone. The dollar is till worth 25% more than it was under Obammer....$index was 75, now 95. That is up 26%. Sure, a little back and fill going on, but it is just testing the .50 of its historic range. Reserve status is pretty hard to loose when all the other alternatives are worse...{China...you prefer the red ponzi to the red/white/blue one...both ponzis.)

Russia in free fall, currency wise. The Euro...that is a laugh...3x the debt/earnings potential as the US.

 

While you are salivating that Trump will fail, he is doing a pretty good job so far, the world hasn't ended, heck they can't even trap him into an email scam like the other choice offered. Just remember that it is we who fail if he does, the nation has always made the leader, not the other way around. As I have stated, he is the designated fall guy for a global house debt driven of cards that due to simple mathematics has to collapse sooner or later. Trying to grow us out of it for 4 more years is a noble, if not only alternative, goal, maybe the dems should ponder that as well. It is THEIR house of cards that will be collapsing. :-)

 

I have enjoyed the hysterical fear of a businessman in charge of the world's largest business. Like Churchill said, "All we have to fear is what the MEDIA tells us we must FEAR"...urrrr...maybe I got that wrong.

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hardnox
Advisor

Re: the dollar

Fake news, Ken.

 

The DX made a light retest to the GWB lows and then rallied to decade highs.

 

But I have the luxury of not having a product to sell to people who want to hear certain things.

 

As per the guys who BA referenced, there's a good living to be made telling people what they want to hear even when they're almost always wrong.

 

http://futures.tradingcharts.com/chart/US/M?anticache=1498656801

 

 

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hardnox
Advisor

Re: the dollar

A couple of things in that to break out further.

 

The buck could go down quite a bit further here without causing any harm and there will be some benefits. The point is that in the orthodox view it really shouldn't be happening on the basis of interest rate differentials and relative economic performance- so it bears a heads up as does the flattening yield curve which shouldn't be happening if the market expects 3% compounded growth well into the future.*

 

The other is about those Death of the Dollar and Loss of Reserve Currency Status guys- usually pundits of washed up politicians pimping gold- who don't appear to be getting many takers right now.

If the simplest conclusion is that the dollar weakness is being driven by the fact that trust and esteem for the US from the rest of the world has plummeted (and it has)- along with clear hostility of the administration toward the post war global financial system we've dominated- that day, whenever it comes, is drawing nearer, not farther.

 

A lot of liberal economists- The Evil Dr. K. prominent among them- don't think that that loss of sole reserve status or a weaker dollar would be catastrophic.

 

*the basis on which Mnuchin claims that the high end tax cuts will pay for themselves. The market is saying either that they won't or they won't get passed.

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illinifarmer
Advisor

Re: the dollar

He is doing a terrible job nothing like splitting into two sides and sending us into free fall. Took 8 years to correct it the last time after the Bush depression
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sw363535
Honored Advisor

Re: the dollar

"the huge deficits from high end tax cuts"

 

Wow how much in denial is that....... falls in there with "We didn't write those checks"  and "somebody stole my credit card" and the infamous "no one told me I'd have to pay back that student loan"   or "No one told me 33K salary was available without an expensive degree"

 

Lets all support mental health.... and accept responsibility for our bad choices...

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