It put a smile on my face to hear of my least favorite manic media network talking about a “burning buck” today. I wonder where they read about that investment theme…
This is a funny business. If you can’t wake-up to something to laugh at, you probably aren’t awake. The 2009 Global Macro inverse correlation that continues to dominate is that which is anchored on a US Government sponsored Burning Buck. It can make you smile and cry all at once.
Today, despite a Burning Buck becoming consensus, the US Dollar continues to get sold. The chart below outlines the severity of this US Currency Crisis. At down -0.36% today, the US Dollar Index is threatening to crash through the $77.00 line. Crash? Yes. When the world’s said “reserve currency” drops -13.5% in 6 months, by Research Edge’s definition - that’s a crash.
There are actually two charts below – the intermediate term one showing that the US Dollar Index is broken across all 3 of our investment durations (TRADE, TREND and TAIL), and the long term chart showing the US Dollar Index price dating back to the date that matters, 1971, when Nixon abandoned the Gold standard.
The long term chart provides the critical context of our Burning Buck call. On only one occasion in the last 38 years has the US Dollar Index sustainably weakened below the $78 level other than right here and now – that occasion, of course, was one of the leading indicators to our calling the 2008 US stock market crash.
At what point does Burning The Buck hurt US stocks rather than help them? In 2009, after watching the US Dollar crash on the downside and the US hedge fund community seeing their shorts crash to the upside, anything can happen here. At 1041 in the SP500, I have the generational short squeeze in US stocks running out of momentum.
Remember, like calling bottoms, calling tops are processes, not points.
Keith R. McCullough
Chief Executive Officer