DEATH OF THE DOLLAR, AGAIN: BEFORE YOU MOURN, SEE THIS CHART
Guest post from Elliott Wave International:
If you want the latest news on the U.S. Dollar Index, try a search under its new ticker symbol, RIP. — as in, “rest in peace.” Let the record show: In the early morning hours of Tuesday, October 6, the mainstream financial community officially declared “The Demise of the Dollar” (The Independent).
The “coroner’s report” cites these details as the causes of death:
- An alleged (and later denied) secret meeting among leaders of certain Arab States, China, Russia, and France which aimed for the immediate discontinuation of oil trading in U.S. dollars.
- And, an open statement from one senior United Nations official that proposed the dollar be replaced as the world’s reserve currency.
In the words of a recent Washington Post story: “The growing international chorus wants the dollar replaced… a move that would end the greenback’s six-decades of global dominance.”
And with that, the line between negative sentiment — AND — “EXTREME” negative sentiment was crossed. It occurs when the beliefs about a market lean so far over in one direction, that the boat investors are sitting in is about to tip over… Just like the last time.
Case in point: Spring 2008. The U.S. dollar stood at an all-time record low against the euro after plunging more than 40% in value. And, according to the usual experts, the greenback was “dead”-set to meet its maker. On this, these news items from early 2008 say plenty:
- “The dollar is a terribly flawed currency and its days are numbered.” (Wall Street Journal quote)
- “It’s basically the end of a 60-year period of continuing credit expansion based on the dollar as the world’s reserve currency.” (George Soros at the World Economic Forum)
- “Greenback is losing Global Appeal… the ‘Almighty’ Dollar is Gone.” (Associated Press)
YET — from its March 2008 bottom, the U.S. dollar came back to life with a vengeance, soaring in a one-year long winning streak to multi-year highs. In the most current Elliott Wave Theorist (published September 15, 2009), Bob Prechter presents the following close-up of the Dollar Index since that trend-turning bottom. (some Elliott wave labels have been removed for this publication)
At a measly 6% bulls, the bearish dollar boat tipped over. The situation today is even more remarkable: The percentage of bulls is lower, at 3-4%, while the dollar’s value is higher than the March 2008 level.
It’s crucial to understand that markets don’t necessarily respond to sentiment extremes immediately. But, such extremes do indicate exhaustion of the trend — which is usually the opposite of what the mainstream expects.
For more information, download Robert Prechter’s free Independent Investor eBook. The 75-page resource teaches investors to think independently by challenging conventional financial market assumptions.
Source: EWI
Once again, I read this site hoping to discern what you think & expect. I’m not particularly interested in reading your site to learn what ideas Prechter’s minions are selling today.
Frankly speaking, when I want their opinion, I’ll read their stuff directly…
Same with Casey & the others who seem to be running product placement ads embedded in “your” material.
vfsvfl,
You’re a regular reader. You should know that I don’t only post my articles on the site, but in fact, post a lot of other people’s stuff here also. If you really think I can generate 10 pertinent articles by myself every day then you’re sorely mistaken. Even the blogging machina, Zero Hedge, posts a ton of other people’s stuff.
Don’t like the ads? Don’t click em. The EWI stuff is 100% useful and informative. I would never post it if I didn’t think so. Your lack of understanding with regards to the site, overhead and the need to generate some income from the site boggle the mind. If you don’t support my efforts then I am sorry, but the site is entirely free and I post info, strategies and research that most of the investing public can’t get for free.
I’m not sure what the problem is with a post like this….
TPC
Plus, as regular readers should well know, I agree almost all of what this article says, so it further confuses me….Does it bother you that there is a FREE link to a great investment thinker’s FREE eBook?
Tpc,
ignore crap like that first comment. People have this impression that blogs are free because it’s no names sitting around posting crap for entertainmet, but the blogosphere is evolving. As far as I’m concerned you’re as good as any research firm and you do it for free. Post ads and whatever you want so long as you don’t charge for your site and spam people. Keep up the great work. Trust me, 99% of us truly appreciate your efforts.
vfsvfl, just so you know, there are others who look at it from a different point of view. I don’t have the time to sort through all the crap out there to find links that are interesting, so I appreciate having some of them aggregated here. That is one reason I come back often. To each his own.
MS – Thanks.
PLT – I think most people would agree with you. I know my work isn’t flawless, but there are more than a few large research outfits that have offered me positions. I kindly turned them down.
Personally, I enjoy posting what I think is most pertinent to the investing day and it helps me decipher and break down what is going on in the world. I think the reason the site has a relatively large following is because they know that some numb skull with no real investment expertise isn’t at the helm. If you think I am trying to spam readers so that I can generate a few hundred bucks every month (ha) you are mistaken. I don’t do this because the site pays well, trust me.
The EWI stuff might have an ad here and there, but I would never post it if it wasn’t entirely relevant – and trust me, I get dozens of emails every day from firms trying to get me to post their crap. I turn down 95% of it because it doesn’t belong on the site.
TPC
I think both TPC and vfsvfl have a point. I don’t mind plagiarized material, but it would be really helpful to get the full story. Bob Prechter is the proverbial broken clock of investment strategists. Eventually he will be right and we will get a dollar rally, but he can’t even pick the year much less the price within a 1000 points. A market timer he is not. I subscribed to his stuff for a while, and it worked in 2003, but he gave it all back and then some. If your good enough to know when to follow his stuff and when to ignore him (like from 1988-1999), my hat is off to you.
You may be correctly bullish on the dollar, but at the moment, the trend is like a freight train, and Gold is telling you it may not be your best idea. Maybe it would be more helpful to readers to get second hand research that at least has a .300 batting average.
First of all, it’s not plagiarized. These companies come to me. And second of all, if you’re looking for research firms with a high batting average I’ll just wish you luck on your search.
I just post stuff so the reader can try to decipher it and come to their own conclusions….Maybe you get what you pay for?
TPC:
I’m curious if you know the anwer/have any thoughts about LIBOR’s impact on aggregate earnings. I’ve looked at a number of companies that were levered 3-4x and paying L+whatever. They’ve all gotten massive EPS benefits because their interest rates are sub 5% pretax. Do you have any idea how sensitive S&P 500 earnings are to LIBOR (ie: 100 bps = $1 S&P profits)?
Thank you.
LIBOR,
I’d have to do some more work on that, but there is no question that the wide spreads are helping the banks to generate huge profits. Even so, I don’t believe these firms can earn their way out of their non-performing asset mess.
For now, there are almost no signs that this earnings season will be weak. I fully expect the banks to post strong numbers.
TPC,
Keep up the great work! Your blog is one of the best and I have learned a lot from it. Thank you.
Jason
Fair enough. Call it free remarketing.
I stopped reading research years ago – it was a crutch for a lazy mind. Everything I do is algorithmic. I just have a lot of time to kill while my models update, so I join conversations I find provocative. Usually in defense of somebody who is getting flamed.
You have an interesting site, but it seems unbalanced towards a “the market is always wrong” side. It’s been my experience that at least 30-40% of the time, the market is actually right and you should just go with it. Being intelligent can be an impediment to making money.
Sherman,
If you were correct, trend followers would rule the world. In some markets it works, in others it doesn’t.
My strategy is a mash-up of many. The site doesn’t even remotely reflect my actual portfolio or returns….
Keep up the good work, TPC!!!
In fact, one of the reasons I come to your blog is the daily articles/research links all in one place..
On a side note: Did you remove the rating’s (stars) from each post and comments or I am just not seeing it on my end??
I’ve been having some problems with the site load time so I removed the rating system for now. Hope to have it back up shortly. Thanks for the compliments!