The Dollar Will Die With a Whimper, Not a Bang

The same force that made the dollar the world’s reserve currency is working to dethrone it.
July 22, 1944, marked the official conclusion of the Bretton Woods Conference in New Hampshire.
It was at Bretton Woods that the dollar was officially designated the world’s leading reserve currency – a position that it still holds today. Under the Bretton Woods system, all major currencies were pegged to the dollar at a fixed exchange rate. The dollar itself was pegged to gold at the rate of $35 per ounce. Indirectly, the other currencies had a fixed gold value because of their peg to the dollar.
Other currencies could devalue against the dollar, and therefore against gold, if they received permission from the International Monetary Fund (IMF). However, the dollar could not devalue, at least in theory. It was the keystone of the entire system – intended to be permanently anchored to gold.
From 1950 – 1970 the Bretton Woods system worked fairly well. Trading partners of the U. S. who earned dollars could cash those dollars into the U. S. Treasury and be paid in gold at the fixed rate.
Trading partners of the U. S. who earned dollars could cash those dollars into the U. S. Treasury and be paid in gold at the fixed rate.
In 1950, the U. S. had about 20,000 tons of gold. By 1970, that amount had been reduced to about 9,000 tons. The 11,000-ton decline went to U. S. trading partners, primarily Germany, France and Italy, who earned dollars and cashed them in for gold.

This post was published at Wall Street Examiner on January 27, 2017.

“Traders Got It Wrong Before The Election, And Continue To Get It Wrong Today”

In light of the only thing that matters for markets (that would be Donald Trump for those who have slept through the past three months), here are some salient thoughts from the latest weekend notes by One River Asset Management’s Eric Peters, whose uncanny ability to put a unique spin on events in third person continues to impress.
Beep Beep: ‘The world got caught in its own trap,’ said Roadrunner, the market’s biggest equity volatility trader. ‘Traders got it wrong before the election, and continue to get it wrong today.’ The VIX touched 10.50. ‘You see the tweets, the media battle, illegal voters, conspiracy theories, Mexican feuds, European taunts, border walls, fake news, and lies,’ said Roadrunner, looking left, right, up. ‘But be careful what you watch. There is only one thing that doesn’t lie, and that’s the price,’ he said. ‘Look where the price is, what it’s telling us.’
‘VIX tells you that there’s someone in charge who’s not a madman,’ continued Roadrunner. ‘He speaks and acts like he’s crazy, but the market is wiser than all of us, it’s smarter than everyone combined.’ He paused, contemplating our new surroundings. ‘Barnum and Bailey closed just ahead of the inauguration. How could they compete with this circus?’ The wall is a show. Our world is now theatre. We’re all extras. ‘Of course at some point vol will explode, but for the moment the market is saying maybe America First will work.’

This post was published at Zero Hedge on Jan 29, 2017.

Another Reason Not To Sell Bonds…Yet

Since the November election of Donald Trump, the investing landscape has gone through a dramatic change of expectations with respect to economic growth, market valuations and particularly inflation. As I noted two weeks ago, there is currently ‘extreme positioning’ in many areas which have historically suggested unhappy endings in the markets. To wit:
‘Much like a ‘rubber band,’ prices can only be stretched so far before having to be relaxed to provide the ability to be stretched again.
The chart below shows the long-term trend in prices has compared to its underlying growth trend. The vertical dashed lines show the points where extreme overbought, extended conditions combined with extreme deviations in prices led to a mean-reverting event.’

This post was published at Zero Hedge on Jan 29, 2017.

Gold Market Charts – January 2017

Gold Market Charts – January 2017 This post features the latest versions of a selection of gold market charts created by the GOLD CHARTS R US website that have been chosen so as to capture gold demand, supply and physical movement data across some of the world’s major gold markets. These include charts of Shanghai Gold Exchange physical gold withdrawals, Swiss gold export and import statistics, and Russian gold reserve changes.
For BullionStar’s gold and silver price charts, go to BullionStar Charts where, for example, you can measure a wide variety of financial assets in terms of gold and other precious metals.

This post was published at Bullion Star on 29 Jan 2017.

What Pitfalls Investors Should Expect From Gold In The First Months Of 2017

Gold had an incredibly interesting year in the year 2016. In the beginning of the year, the precious metal skyrocketed as China started a domino effect of global economic hardships. The run upward in the value of the precious metal continued throughout the first half of the year. However, in July, as economic conditions around the world started improving and opportunities started heating up in the market, the value of gold fell. Now, many are saying that the downward trend will continue throughout the first few months of 2017. So, what pitfalls does gold truly face in the first few months of the year? Today, I’ll do my best to answer that question.
Learn How to Exploit the Gold Frenzy! Improving Sentiment Surrounding Oil
When we think of oil, most of us think about energy. Anything from gasoline to our electric bill. However, the truth is that oil is ultimately ingrained in just about everything. Oil is not only used in energy, it is used in manufacturing of plastics and other important materials. At the end of the day, oil isn’t just a commodity, it’s a signal of economic conditions.
When oil falls in value, it creates a line of reduced income for an incredible amount of companies around the world. Even some entire economies have been built around the commodity. At the moment, sentiment is changing in the sector. With oil production cut agreements from both OPEC and non-OPEC member nations, the overwhelming expectation is that oil will climb in value.
Buy Silver Quarters – In Stock, Ships Fast! Because oil is fully entrenched in several economies around the world, gains in the value of the commodity will likely lead to further improving economic conditions. At the end of the day, this could prove to be bad news for the safe-haven investment that is gold.

This post was published at GoldSilverWorlds on January 27, 2017.

The One Chart That America’s Corporate Elite Don’t Want You To See

The message from America’s ruling elite is, as always – “do as I say, not as I do” – and nowhere is that more evident in the following chart. Simply put, follow the money!
As we detailed last week, as US financial stocks have soared in the post-election Trumphoria, so bankers have been dumping over $100 million in personal stock holdings…

This post was published at Zero Hedge on Jan 28, 2017.

Market Report: Consolidating the rise so far

It has been a week of consolidation for precious metals, with gold and silver hitting their highs on Monday. The timing of the slight pull back is, surprise, surprise, just before futures option expiration, when the takers who have sold options doubtless wish to see calls with strikers at $1200 and less expire worthless. They have their wish, and on the week gold this morning in early European trade stood at $1182.50, down $28, and silver at $16.70, down 38 cents.
It’s time to assess where the vested interests stand. The next chart is of the managed money’s net long gold contracts on Comex.

This post was published at GoldMoney on JANUARY 27, 2017.

Why Unwinding The Fed’s Balance Sheet Could Get Messy

With former Fed chair Ben Bernanke becoming the latest academic to opine on the potential unwind of the Fed’s balance sheet last week (naturally, he was against it realizing the potentially dire implications such a move could have on asset prices), here is the same topic as viewed from the perspective of an actual trader, in this case FX strategist (who writes for Bloomberg) Vincent Cignarella, and who believes that “unwinding the Fed’s balance sheet could get messy.”
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Cignarella explains why the Fed better beware what it wishes for in his analysis below.
The Federal Reserve should watch what it says about its $4.5t balance sheet. With so much uncertainty in the market about how it will be reduced, a few mistimed words could roil markets faster than you can mouth ‘taper tantrum.’
The topic is hot. The Fed’s Bullard and Rosengren have recently said the central bank could use the balance sheet to help tighten policy and other bank presidents have also talked about tapering. Ex-Chairman Bernanke just blogged about it, arguing there’s no need to rush.

This post was published at Zero Hedge on Jan 28, 2017.

The Trump Doctrine

The Inauguration of the billionaire property developer and businessman Donald J. Trump as the 45th President of the United States has ushered in a new era in American politics and international standing. It was a surreal moment due to the fact so many believed it would never happen. Mr. Trump must be credited with the fact he possess unique political and charismatic skills that a man with zero experience of running a political campaign, running for political office or having ever served in government, could have got himself elected President at the outset of his very first political campaign, is quite remarkable.
What is more remarkable is that Mr. Trump largely drove his campaign and success with the capturing of the Republican nomination and subsequently the White House, largely through the sheer force and theatrical, flamboyant personality of his character, a deep understanding of his audience/market and an uncanny ability to utilise and harness mass media to attract attention to himself and his campaign. He did all this in the face of stiff resistance from many within his own party and the Establishment and mainstream media. As a performer he is extremely captivating and this in many ways fuelled his rise to the Presidency.
President Trump’s inaugural address was quite unlike any in recent American Presidential history. He returned to the dark and pessimistic vision of America and the world originally outlined with vigour at the Republican National Convention. President Trump dubbed the state of America in graphic terms as an American carnage, in which the nations elite Establishment in Washington DC had allowed the country to rot as they themselves flourished. It was a full scale onslaught against the members of the DC political Establishment both Republican and Democrat and the ushering in of a so-called new way of getting the best for the American people from their political institutions.
What was must striking in policy and political terms was the overtly nationalist doctrine that President Trump enunciated in his Inaugural Address. It would seem for the first time in decades an American administration will be openly and philosophically Protectionist in its actions, policies, rhetoric and thinking advocating for smart trade not free trade and moving away from free trade type agreements such as NAFTA or the proposed Trans-Pacific Partnership. The nationalism is striking for its isolationism.

This post was published at Zero Hedge on Jan 28, 2017.

John Williams-Dollar Faces Death Knell

The following video was published by Greg Hunter on Jan 28, 2017
Economist John Williams says, ‘We are facing a terrible crisis. . . . In terms of the Fed (getting control) and the long term solvency issues, these are death knells for the dollar. Unless those are addressed, you are going to see massive selling of the dollar, a debasement of the dollar and high inflation that will lead you into hyperinflation. That’s what comes into play. Prior to this administration, I would have given the chances of avoiding that as nil, but with this administration, I have some hope here.’

Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (LOL?)

Wall Street hocus-pocus has done an awesome job. The Dow-20,000 hats have come out of the drawer after an agonizingly long wait that had commenced in early December with the Dow Jones Industrial Average tantalizingly close to the sacred number before the selling started all over again.
What a ride it has been. From the beginning of 2011 through January 27, 2017, so a little more than six years, the DJIA has soared 73%, from 11,577 to 20,094. Glorious!!
But when it comes to revenues of the 30 Dow component companies – a reality that is harder to doctor than ex-bad-items adjusted earnings-per-share hyped by Wall Street – the picture turns morose.
The 30 Dow component companies represent the leaders of their industries. They’re among the largest, most valuable, most iconic American companies. And they’re periodically booted out to accommodate a changed world. For example, in March 2015, AT&T was booted out of the Dow, and Apple was inducted into it, as its ubiquitous iPhone had become the modern face of telecommunications. New blood with booming revenues replaces the stodgy old companies. In aggregate, revenues should therefore rise, right?

This post was published at Wolf Street on Jan 29, 2017.