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Wednesday, February 10, 2010 7:33:48 PM
ZH: Surprise! The Dollar Is Rallying... Or Is It?
Submitted by Tyler Durden on 02/10/2010 12:38 -0500
Submitted by Yves Lamoureux of Macquarie Private Wealth
If you have been wondering what is the real reason for the recent upswing in the US dollar, read on. I am very bullish on its future rise. This report follows our early December comments, which were appropriately called “The carry trade now in trouble.” You can review them at http://www.zerohedge.com/article/guest-post-carry-trade-now-trouble.
Very clearly, we stated, “The carry trade as a barometer of things to come will show the unwind at the early stage. From my perspective it is here and now that the carry trade ends.”
My recent enthusiasm is largely based on evidence gathered since 2007 of the loss of velocity in money aggregates. In other words, the money base is contracting or slowing down its expansion phase.
Like anything that matters in the investing world: rarity defines value. It would then be no surprise that the US dollar will appreciate in the medium term. This is what I call the “now mechanics.” Recent movements are still mostly defined as stocks versus bonds and anything else here has been a sideshow. I am still bullish on a number of things—namely, the hard assets category. I do think that timing is critical to temper this bullishness and money contraction will become the overriding factor.
Even when broad-based equity markets rally, I find astonishing that money is not able to gain traction. The focus on M1 is ultimately wrong, since it is not transmitted to other parts of the economy.
However, it should not be underappreciated that falling stocks will have huge repercussions on the money base and will only exacerbate ongoing volatility. The period 1930 to 1940 was a great example of how the dynamics of money velocity impact stocks and the economy.
We are great students of past eras as they provide guidance and insight into present markets.
People focus too much on the day-to-day news as it reveals very little of the markets’ often superb anticipation skills. Contracting money, to us, is now the prime driver of the greenback’s rise and its ascension could definitely surprise us .
Yves Lamoureux, Investment Advisor, Macquarie Private Wealth Inc.
http://www.zerohedge.com/article/guest-post-surprise-dollar-rallying-or-it
COMMENTS:
by 10044
on Wed, 02/10/2010 - 12:59
#225136
Money base is contracting?? WTF?? Has this guy ever seen the [no longer] published M3?
The dollar is up because the fed is buying , that's it
reply
by Anonymous
on Wed, 02/10/2010 - 13:20
#225182
All the estimates for M3 (Shadow Stats, etc) show that it has also decreased in the past year. The dollar is up on some fear and reverse of the carry trade.
reply
by butchee
on Wed, 02/10/2010 - 13:41
#225227
John Williams at SGS reports the M3 is contracting and accelerating in its contraction to 5.2% in Jan.
reply
by butchee
on Wed, 02/10/2010 - 13:42
#225228
John Williams at SGS reports the M3 is contracting and accelerating in its contraction to 5.2% in Jan.
reply
by Anonymous
on Wed, 02/10/2010 - 13:43
#225232
M3, currently dropping like a stone:
http://www.nowandfutures.com/images/m3b_long_term.png
reply
by CONners
on Wed, 02/10/2010 - 13:03
#225148
The banks are not lending. Velocity goes to zero. The credit crunch continues.
reply
by aswipe
on Wed, 02/10/2010 - 13:04
#225150
+1 10044 We are the lesser of currency evils.
by Anonymous
on Wed, 02/10/2010 - 13:15
#225175
You all don't get it!!!
All currencies are gone and not just the Euro or the Dollar..
One of this days we are going to wape-up with an huge headache and discover that all savings are gone...all pensions benefits are gone etc...
At that time you would have Mr. Volcker coming like a Terminator and saying: Let's default on everyhing as this is unsustainable
Never forget that the end of Bretton Woods was done just to leverage the debt portion of every country but who benefited the most was the US.
Now you have no way out of this as until you have 3B Chinese, Indians and Africans working for $200 per month without any social security, the problems are likely to compound.
My take is that not only currencies are already gone accross the board but that free trade is also gone
by Anonymous
on Wed, 02/10/2010 - 14:33
#225333
I ran this chart and superimposed the dxy, there is no relation here, in fact if anything there is a more positive correlation than negative. Run the facts yourself before listening to anyone.
by Anonymous
on Wed, 02/10/2010 - 14:58
#225374
A stronger USD due to global "margin" calls does not affect any of the US gov accounts/outlays, especially if zirp is maintained.
I too was trained in old style accounting....one must get over it. Flows are the only metric, collateral be damned.
Flows are needed ONLY to extract FEES. Bonus time ensues if one can grab collateral for no cost.
Stop the flows and the fees stop. Simple, really, for those not needing another dime. Trouble is, too much of the investing world needs another dime.
40muleteam borax
by Instant Karma
on Wed, 02/10/2010 - 15:45
#225505
I went long USO for Iran's "stunning" surprise tomorrow. Also balances off my smallish short positions in silver and gold.
by Mr Lennon Hendrix
on Wed, 02/10/2010 - 18:26
#225771
(B)arry (S)anders is running things...juke moves! All this talk, juke moves. Ben is looking over his "What to do once re-elected" checklist....
1) Helicopter. Check.
b) Updated "Turbo Deluxe Printing Press". Check.
4) Big tittied hoes. Check.
g) PPT (He looks over his shoulder. His team gives him a thumbs up). Check.
4) Black cape and wizard's cap. Check.
5) Picture of Sarah Palin in running shorts. Check.
7) Picture of Palin naked (a la Dulles' body scanners). Check.
J) Get out of jail free card, signed "From your bestess buddy, W." Check.
13) 6 big phattie spliffs, and a celebration cigar. Check and check.
by Anonymous
on Wed, 02/10/2010 - 19:08
#225863
Money supply is vaporizing. The past few days have been HUGE for gold in relative terms. Nominal values are deceptive. Pay attention to stocks not flows. Dow 1000? Were headed there until the UST cries uncle and then it's Dow back to 5000 along with gold 5000. If not Dow 10k and gold 10k
Submitted by Tyler Durden on 02/10/2010 12:38 -0500
Submitted by Yves Lamoureux of Macquarie Private Wealth
If you have been wondering what is the real reason for the recent upswing in the US dollar, read on. I am very bullish on its future rise. This report follows our early December comments, which were appropriately called “The carry trade now in trouble.” You can review them at http://www.zerohedge.com/article/guest-post-carry-trade-now-trouble.
Very clearly, we stated, “The carry trade as a barometer of things to come will show the unwind at the early stage. From my perspective it is here and now that the carry trade ends.”
My recent enthusiasm is largely based on evidence gathered since 2007 of the loss of velocity in money aggregates. In other words, the money base is contracting or slowing down its expansion phase.
Like anything that matters in the investing world: rarity defines value. It would then be no surprise that the US dollar will appreciate in the medium term. This is what I call the “now mechanics.” Recent movements are still mostly defined as stocks versus bonds and anything else here has been a sideshow. I am still bullish on a number of things—namely, the hard assets category. I do think that timing is critical to temper this bullishness and money contraction will become the overriding factor.
Even when broad-based equity markets rally, I find astonishing that money is not able to gain traction. The focus on M1 is ultimately wrong, since it is not transmitted to other parts of the economy.
However, it should not be underappreciated that falling stocks will have huge repercussions on the money base and will only exacerbate ongoing volatility. The period 1930 to 1940 was a great example of how the dynamics of money velocity impact stocks and the economy.
We are great students of past eras as they provide guidance and insight into present markets.
People focus too much on the day-to-day news as it reveals very little of the markets’ often superb anticipation skills. Contracting money, to us, is now the prime driver of the greenback’s rise and its ascension could definitely surprise us .
Yves Lamoureux, Investment Advisor, Macquarie Private Wealth Inc.
http://www.zerohedge.com/article/guest-post-surprise-dollar-rallying-or-it
COMMENTS:
by 10044
on Wed, 02/10/2010 - 12:59
#225136
Money base is contracting?? WTF?? Has this guy ever seen the [no longer] published M3?
The dollar is up because the fed is buying , that's it
reply
by Anonymous
on Wed, 02/10/2010 - 13:20
#225182
All the estimates for M3 (Shadow Stats, etc) show that it has also decreased in the past year. The dollar is up on some fear and reverse of the carry trade.
reply
by butchee
on Wed, 02/10/2010 - 13:41
#225227
John Williams at SGS reports the M3 is contracting and accelerating in its contraction to 5.2% in Jan.
reply
by butchee
on Wed, 02/10/2010 - 13:42
#225228
John Williams at SGS reports the M3 is contracting and accelerating in its contraction to 5.2% in Jan.
reply
by Anonymous
on Wed, 02/10/2010 - 13:43
#225232
M3, currently dropping like a stone:
http://www.nowandfutures.com/images/m3b_long_term.png
reply
by CONners
on Wed, 02/10/2010 - 13:03
#225148
The banks are not lending. Velocity goes to zero. The credit crunch continues.
reply
by aswipe
on Wed, 02/10/2010 - 13:04
#225150
+1 10044 We are the lesser of currency evils.
by Anonymous
on Wed, 02/10/2010 - 13:15
#225175
You all don't get it!!!
All currencies are gone and not just the Euro or the Dollar..
One of this days we are going to wape-up with an huge headache and discover that all savings are gone...all pensions benefits are gone etc...
At that time you would have Mr. Volcker coming like a Terminator and saying: Let's default on everyhing as this is unsustainable
Never forget that the end of Bretton Woods was done just to leverage the debt portion of every country but who benefited the most was the US.
Now you have no way out of this as until you have 3B Chinese, Indians and Africans working for $200 per month without any social security, the problems are likely to compound.
My take is that not only currencies are already gone accross the board but that free trade is also gone
by Anonymous
on Wed, 02/10/2010 - 14:33
#225333
I ran this chart and superimposed the dxy, there is no relation here, in fact if anything there is a more positive correlation than negative. Run the facts yourself before listening to anyone.
by Anonymous
on Wed, 02/10/2010 - 14:58
#225374
A stronger USD due to global "margin" calls does not affect any of the US gov accounts/outlays, especially if zirp is maintained.
I too was trained in old style accounting....one must get over it. Flows are the only metric, collateral be damned.
Flows are needed ONLY to extract FEES. Bonus time ensues if one can grab collateral for no cost.
Stop the flows and the fees stop. Simple, really, for those not needing another dime. Trouble is, too much of the investing world needs another dime.
40muleteam borax
by Instant Karma
on Wed, 02/10/2010 - 15:45
#225505
I went long USO for Iran's "stunning" surprise tomorrow. Also balances off my smallish short positions in silver and gold.
by Mr Lennon Hendrix
on Wed, 02/10/2010 - 18:26
#225771
(B)arry (S)anders is running things...juke moves! All this talk, juke moves. Ben is looking over his "What to do once re-elected" checklist....
1) Helicopter. Check.
b) Updated "Turbo Deluxe Printing Press". Check.
4) Big tittied hoes. Check.
g) PPT (He looks over his shoulder. His team gives him a thumbs up). Check.
4) Black cape and wizard's cap. Check.
5) Picture of Sarah Palin in running shorts. Check.
7) Picture of Palin naked (a la Dulles' body scanners). Check.
J) Get out of jail free card, signed "From your bestess buddy, W." Check.
13) 6 big phattie spliffs, and a celebration cigar. Check and check.
by Anonymous
on Wed, 02/10/2010 - 19:08
#225863
Money supply is vaporizing. The past few days have been HUGE for gold in relative terms. Nominal values are deceptive. Pay attention to stocks not flows. Dow 1000? Were headed there until the UST cries uncle and then it's Dow back to 5000 along with gold 5000. If not Dow 10k and gold 10k
_______________________________________________________
If you take anything I say as advice, you're crazier than I am.
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