Currency

The dollar is going to fall very, very sharply

Posted by Mark DeCambre

on Wednesday, 17 June 2020 9:53

Stephen Roach, Yale University senior fellow and former Morgan Stanley Asia chairman, has a warning for U.S. dollar bulls. The prominent economist says that the era of the U.S. buck may be coming to an end and is forecasting a 35% decline soon in the U.S. currency against its major rivals, citing increases in the nation’s deficit and dwindling savings.

The lecturer said during CNBC’s “Trading Nation” on Monday that the rise of China and the decoupling of the U.S. from its trade partners is setting the stage for a dramatic weakening of the U.S. currency in the next few years that is likely to end the supremacy of the monetary unit as the world’s reserve currency.

“The dollar is going to fall very, very sharply,” he told the business network.

Roach’s comments follow similarly themed op-ed that he wrote in Bloomberg last week, in which he specifically declared that the “era of the U.S. dollar’s ‘exorbitant privilege’ as the world’s primary reserve currency is coming to an end.

Full Story

Central Banks Continue to Buy Gold

Posted by Alex Deluce

on Wednesday, 17 June 2020 6:55

As central banks around the world continue to print endless amounts of money to try to keep financial assets afloat, they also continue to add to their gold position. In April, central banks globally added another 31.6 tons of gold to their reserves.

Even though the net gold purchases by central banks have slowed down when compared to last year, the World Gold Council expects demand continue over the next 12 months. According to the 2020 Central Bank Gold Reserves survey, 20% of central banks intend to increase their gold reserves over the next 12 months, compared to just 8% of respondents in the 2019 survey. The increase is particularly notable as central bank buying has reached record levels in recent years, adding around 650 tons in 2019 alone.

So far during 2020, central banks have added a net 142 tons of gold to their reserves. In 2019, central banks purchased 650.3 tons which represented the second highest level of annual purchases in 50 years, which was only a little bit lower then the record in 2018, which was net purchases of 656.2 tons…CLICK for complete article

Technically Speaking: Bulls & Bears Square Off At The Line

Posted by Lance Roberts

on Tuesday, 16 June 2020 11:39

Bulls & Bears Clash At The Line

On Monday, the bulls and bears fought over the 200-dma. It seemed at the open as if the bears were close to taking control of the market. However, the tide quickly turned. With markets plunging again at the open, and with Jerome Powell’s personal fortune on the line at Blackrock, the Fed took quick action:

Here is the aptly timed press release putting causing bulls to “rush back in:”

The Federal Reserve Board on Monday announced updates to the Secondary Market Corporate Credit Facility (SMCCF), which will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and credit availability for large employers.

As detailed in a revised term sheet and updated FAQs, the SMCCF will purchase corporate bonds to create a corporate bond portfolio based on a broad, diversified market index of U.S. corporate bonds. This index is made up of all the bonds in the secondary market that U.S. companies have issued to satisfy the facility’s minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility’s current purchases of exchange-traded funds.

The Primary Market and Secondary Market Corporate Credit Facilities were established with the Treasury Secretary’s approval and $75 billion in equity provided by the Treasury Department from the CARES Act.”

The Fed’s announcement was unnecessary as it only repeated the original mission of the SMCCF. The made made no changes to the program, but with prices off steeply Monday morning, it seems as if the Fed needed a “quick fix” to prevent a larger downdraft.

The good news is the bulls were able to defend the 200-dma once again successfully. However, the bears aren’t quite ready to give up just yet.

The Bull’s Case

The bullish case for the market is pretty thin.

  1. Hopes are high for a full reopening of the economy
  2. A vaccine
  3. A rapid return to economic normalcy.
  4.  2022 earnings will be sufficiently high enough to justify “current” prices. (Let that sink in – that’s two years of ZERO price growth.)
  5. The Fed.

In actuality, the first four points are rationalizations. It is the Fed’s liquidity driving the market…CLICK for complete article

2020 S&P 500 Recovery Rally ‘Closely Tracking’ 2009 Rebound

Posted by Wayne Duggan

on Tuesday, 16 June 2020 11:32

The historic stock market rally off the 2020 March lows continued on Tuesday, with the SPDR S&P 500 ETF Trust trading higher by 2.3%.

It may seem like the recent market trading action is unprecedented, but DataTrek Research co-founder Nicholas Colas said it’s actually “closely tracking” the market’s 2009 bounce off of the March 9 lows.

In fact, 58 days after the March 23 lows, the S&P 500 is up about 37%, almost perfectly in-line with the 39% index gain 58 days after the March 9, 2009 low. Unfortunately, if the S&P 500 continues to track its 2009 rebound, Colas said investors can anticipate about seven weeks of high volatility and very little overall gains.

Key Differences: Colas warned investors that the S&P 500 index is a lot different than it was back in 2009, and the current economic situation is different as well. First, the S&P 500 is currently trading at around 19.6 times recent peak earnings compared to 10.4 times trailing peak earnings at the same point in 2009…CLICK for complete article

‘They are just doing stupid things, and in my opinion, this will end in tears,’ — Leon Cooperman

on Tuesday, 16 June 2020 6:04

Billionaire Leon Cooperman on Monday said that the emergence of individual investors eagerly scooping up stocks that have been rocked amid the coronavirus-induced downturn will ultimately not end well for those individual investors.

The ‘Robinhood markets are going to end in tears,” said Cooperman during CNBC’s show “Halftime Report” on Monday, referring to the popular online trading platform.

Critics like Cooperman say that a dearth of diversions due to COVID-19 lockdowns and unemployment have created a perfect environment for newly minted day traders to wreak havoc on Wall Street.

Full Story