“The eye has never seen, nor the hand touched a dollar.”
-Alfred Mitchell-Innes
Like a lot of things you read these days, the aforementioned quote is not universally true. It sounds romantic though. So does picking an ideal stock price that will determine your net worth.
Mitchell-Innes was a 19th century British Diplomat who wrote something about “What Is Money?” His quote was used by Paul Vigna and Michael Casey in a chapter of The Age of Cryptocurrency that they titled “From Babylon To Bitcoin.” That sounds so romantic too.
On this I do agree with the two WSJ journalists : “For any currency to be viable… it must win the trust of the community using it” (pg 14). I don’t always trust the US Dollar. That’s why I’m not perpetually long of it. Trust is earned, not allocated.
Back to the Global Macro Grind…
Until proven otherwise by the cryptocurreny experts who haven’t proven to have a credible track record risk managing Global Currencies, currencies will continue to go up and down as their respective countries growth, inflation, and monetary policy trends do.
While I continue to do all the research I can on Crypto, Bitcoin, Blockchain, etc., my independent Research Team and I are also engaging with machine learning algorithms like Random Forrest, Gradient Boost, etc. to support pioneering, big data modeling innovations in core programming languages like Python.
What will the best path forward be? I don’t know. That’s why we do the research. Heck, maybe the Chinese move towards a government regulated crypto currency so the communists can see every single transaction in their centrally planned economy.
Maybe they don’t.
A big difference between what I do and what a lot of people trying to become famous writing books about what “money should be” do, is I’m not trying to promote any of their books, investments, or asset management strategies.
I’m simply trying to get to the answer on what market is going to move where and why next.
Has the US Dollar’s +7.6% ramp in the last 6 months impacted the value of the British Pound? Has the #Strong Dollar move had anything to do with crashes in certain EM (Emerging Market) currencies? How about Bitcoins crashing, in US Dollar terms?
Old Wall Media is actually picking up on the #crash in the Turkish Lira this morning. I know, thanks for coming out. But when will either our profession or its establishment media figure out what’s been most causal in this massive Phase Transition in currency markets?
To review today’s Chart of The Day (slide 26 of our current Q3 Macro Themes deck):
- Quad 4 is US Dollar Bullish using a local US Growth, Inflation, Policy (GIP) model back-test
- Quad 4 is US Dollar Bullish using a global Growth, Inflation, Policy (GIP) model back-test
For those of you who are new to our apolitical, dispassionate, and data-driven Global Macro Risk Management #process, our GIP model is proprietarily measuring and mapping the rates of change in both local and global growth and inflation data, dynamically and daily.
Quad 4 is when both GROWTH and INFLATION are slowing, at the same time.
The Top 2 major asset allocations to prep for as the USA moves into Quad 4 in Q4 are:
- US Dollars
- Long-term US Treasuries
In other words, the expected values of US Dollars and Long-term Treasuries is highest when in Quad 4. This isn’t an opinion. It’s a historicaly back-tested fact going as far back as the economic data does.
Essentially, that’s one of the big problems I have left to solve for with something “new” like a cryptocurrency. I need more time and space to back-test how it performs under the economic regimes of our 4 Quadrant (Quads) model.
If I only use a spurious short-term time-series like Bitcoin has, I can see plainly that Bitcoin acts great (in USD) when the entire world is in Quad 1 and/or Quad 2. That’s no surprise though. That’s when you fund all currency speculation with the world’s reserve currency.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.90-3.01% (neutral)
SPX 2 (bullish)
VIX 10.14-14.45 (neutral)
USD 93.95-95.50 (bullish)
EUR/USD 1.14-1.16 (bearish)
YEN 110.41-112.10 (bearish)
GBP/USD 1.28-1.31 (bearish)
Oil (WTI) 66.07-69.05 (bearish)
Gold 1 (bearish)
TSLA 265-389 (neutral)
Bitcoin 6 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
