A 'Would-Be' Dollar Devaluation Rally

A short excerpt from the September 5th edition of Notes From the Rabbit Hole, which included extensive analysis of the precious metals breakout, commodities and their relation to gold, and the broad stock rally from technical and sentiment perspectives.

Make no mistake about it, the great stock rally remains nothing more than a dollar devaluation rally; a would-be dollar devaluation story at that.

Why ‘would-be’? Well, since I began writing publicly in 2004 I have been calling the USD (and US Treasuries for that matter) intrinsically worthless garbage. We know this. The dollar denominates a formerly great nation that has long since eaten its productive seed corn and attempts to manipulate its vast resources in paper with the result being that an un-payable black hole of debt has literally been dug… to China.

But just as the inherent value in gold sometimes has little to do with whatever the price action may be at any given time, so too does that dynamic apply to the dollar. The inherent lack of value in a Federal Reserve Note NEVER correlates to the price action. If it did, it would be registering at zero, or some mind boggling negative number. As long as humans persist in their belief in the current debt based paper system however, the price is a thing quite separate.

So, that said, the dollar has so far refused to break down from a symmetrical triangle of its own as the gold sector did recently to the upside. Remember that sym-tri’s are continuation patterns. The dollar should have broken down this week. It did not, and as long as this remains the case it is considered a bearish divergence to the party goers that would celebrate its devaluation in price terms.

For effect, the purple (S&P 500) line shows conclusively that the broad market does not like a strong dollar. Not one little bit.

So, to wrap up we end with the question is this it? Is this the devaluation that lets the cat out of the bag and ignites inflationary fears for real, sending gold and commodities into the stratosphere? Or will we get our next and possibly final (for this cycle) deflation impulse first? Our long held critical level of 78 remains intact.

Therefore, the possibility of severe asset liquidation coming soon remains intact as well. At some point the 2 or 3 bulls left in the dollar might yet have their turn to party.

Comments

[ron_paulite:]

you are right. stocks go up. usd goes down.
i rather they protect the value of the usd.

Sep 07 03:08 AM

[NUCLEAR1929:]

$US can go still lower but not much, because other currencies are not shining as well, it can't be that greenback falls and other currencies only go up, because of globalisation.
Pain in one economy infects all the world.

Sep 07 08:32 AM

[redbaron:]

As a true contrarian, I have to believe that the market acts to confuse the majority of investors. As long as the majority continue to look for inflation in terms of a weaker dollar, and an increase in gold, as continuing comments here on SA seem to imply is where we are,........it ain't gonna happen.

Sep 07 09:28 AM

[highlarche:]

Wake up my friends. Gold is rising against all currencies.

Sep 07 10:42 AM

[y y y:]

Would you comment on this view? China is pegged to the US dollar. China has uncle sam by the balls. What China wants China gets. China is getting a free ride (ultimate short position) on the demise of the USA. Multinational rules have turned the US from a industrial power house of wealth and world dominance into a welfare state. The Yuan peg is the tumor that wants the USD dead. The China manufacturing complex has the capability to supply the globe with cheap goods, so a falling dollar can only make this possibility a greater reality. The USA is on life support while China is growing healthier by the day. If these two countries were conjoined twins sharing vital organs.........

Sep 07 10:53 AM

[Slvrizgold:]

THERE IS A REASON! All other world fiat fake currencies are also worthless pieces of trash! Some are worse than others. Gold is rising and will continue rising against all currencies for a considerable period of time.

Being a gold bug is BEING THE ULTIMATE CONTRARIAN! Why? Because 99% of the world still trusts paper money - somehow overlooking the fact that their managers (govts and central banksters) are incestous reckless criminals and con artists.

Here's a hint for anyone not yet enlightened. Buy silver too! Unlike gold, most of the overhead supply has been consumed in the last few decades. Unlike gold, all the silver that has ever been mined still does not exist in a recoverable above ground form. The fact is silver is still FAR FAR FAR too cheap relative to gold. Knowing gold is very undervalued itself thanks to 2 1/2 decades of govt and bank price suppression schemes, you can do the math and determine a silver target. It has AT LEAST 3 digits in the next decade.

Good luck all precious metals longs. We wil earn our just rewards in due time. Be like the intelligent Chinese capitalist masters and keep accumulating on dips. If you do not have any PM exposure shame on you for being so negligent and gullible. Buy ONLY physical metal as your base. Producers are less risky than explorers and developers. The smaller to midtier ones have more long term upside potential.

There is NO excuse to not own physical. The ETFs are part of the banksters plan to seperate you from REAL METAL. They laugh and snort when you walk into their trap door.

Sep 07 05:27 PM