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George Dorgan  

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  • What The Outcome Of The Referendum Means For Gold, CHF And SNB
    Dec. 4, 2014 GLD, EWG, FXF 5 Comments

    Summary

    • Swiss referendums: The Swiss rejected three proposals: An immigration cap ("Ecopop"), an abolishment of tax advantages for rich foreigners and the gold initiative.
    • We explain what the outcome means for gold, the Swiss National Bank and the Swiss franc.
    • The next economic cycle should be driven by stronger wage growth in Germany and in the U.S.
    • The major enemy of the SNB will become inflation caused by rising Swiss asset prices and rents and from inflation spill-overs from Germany and the U.S.
  • Why Was The Gold Price So Low In 1999/2000?
    Dec. 3, 2014 GLD 32 Comments

    Summary

    • To find further explanations as to why the gold price was weak in the late 1990s, we analyze sector balances.
    • Private spending and private debt went in two different directions: heavy debt increases in the U.S. against austerity abroad.
    • This combination fostered GDP growth in the US, but weakened it in other countries. Real interest rates were positive.
    • The markets thought that debt-financed growth could continue for years; they created the dot com bubble on top of it that strengthened technology and the related currency, the dollar.
    • This rare situation led to excessively weak oil and gold prices, but it was only a temporary and irrational movement.
  • Low Income Voters In Favor Of The Swiss Gold Initiative, High-Income Voters Against It
    Nov. 3, 2014 GLD 17 Comments

    Summary

    • According to the latest polls, 38% of voters would support the Swiss gold initiative and 47% are against it.
    • The previous poll,recognized as more reliable, showed 45% pro gold and 38% against.
    • A win for the initiative would most probably imply a breakdown of the EUR/CHF floor.
    • According to the polls, low income groups are in favor. Effectively their purchasing power would increase when the CHF appreciates.
    • High income earners and stock owners are rather against it. If CHF improves Swiss stocks could collapse, and this explains their voting intentions.
  • The Dollar, The ISM, Buy American And Irrational Exuberance
    Sep. 17, 2014 GLD, FXE, UUP Comment!

    Summary

    • In this Cross Asset Global Macro Analysis we list our reasons for the current dollar strength.
    • The main causes are ECB's euro "downtalk," tight monetary policy in Emerging Markets, and rising savings of the aging populations. This leads to weak global spending and growth.
    • With the help of Fed-financed higher asset prices and falling gasoline prices, Americans feel more wealthy and finally "Buy American."
    • Another reason is that FX traders and investors try to imitate the late 1990's irrational exuberance.
  • The Best Contrarian Macro Investment: Russia?
    Aug. 11, 2014 RSX 29 Comments

    Summary

    • We name thirteen macro-economic reasons why Russia is currently the best place for contrarian investments.
    • Russia has maybe the world's best central banker that fights high pay rises with tight monetary policy and potentially with higher unemployment.
    • Even if the current situation could trigger a somewhat harder landing; an end to the credit and housing boom is beneficiary for the country. Russian households are finally saving more.
    • Thanks to oil and gas sales and slower consumer spending, the Russian current account surplus will continue to be highly positive and prevent a stronger hard landing.
    • Russia has low debt and a massive foreign currency reserves that permit to influence the ruble exchange rate.
  • Swiss National Bank Q2 2014 Results: Draghi's Weak Euro Policy A Nice Gift For The Bank, For Now
    Aug. 4, 2014 FXF Comment!

    Summary

    • The ECB commitment to a weak euro and the maintenance of ultra-low interest rates was a nice (temporary?) gift for the Swiss National Bank.
    • The bank earned nearly 12 billion francs in Q2 2014.
    • Positive contributions from all its investments, from currencies, bonds, equities and gold.
    • Sight deposits and total SNB debt, however, have been rising again since June.
  • FX Rates, Contrarian Investment And The Misleading Concept Called GDP
    Editors' Pick • Jul. 24, 2014 EWP, GREK, HAO 10 Comments

    Summary

    • Gross Domestic Product(ion) is (or has become) a measurement of activity and consumption, but not of capital accumulation and production.
    • In many cases, GDP growth is negatively correlated to saving. Higher savings (aka austerity) leads to lower GDP growth today, but to higher GDP in the future.
    • In its worst case, GDP growth could be completely based on credit, eliminating the capital basis of a country (example Greece).
    • FX rates are less driven by GDP but by savings and investments, in particular on the corporate side, by investors and micro-economic indicators.
    • In addition to micro-economic indicators like price to cash flow or price to book ratio, the saving rate is the best macro-economic indicator of the investment style called "contrarian investing.".
  • A Little History Of Wages, Inflation, Treasuries And The Fed - And What We Learn From It
    Jul. 7, 2014 ARGT, EWM, EWY 3 Comments

    Summary

    • Inflation expectations and wages drive the behaviour of the Fed and Treasury bond yields.
    • Excessive wage increases lead to recessions, more or less voluntarily caused by central bank tightening.
    • Central banks pin down the short end of the yield curve, while financial-market participants price longer-dated yields.
    • Some Emerging Markets seem to copy strong wage increases and inflation that we lived in the 1970s.
    • Rising wages in EM may soon narrow their competitive advantage against the U.S. and Europe. Our secular stagnation may be shorter than expected.
  • The Most Important Questions For The Swiss National Bank Meeting
    Jun. 17, 2014 FXF, EWL 6 Comments

    Summary

    • For the upcoming SNB monetary policy assessment meeting we answer the following questions:
    • Why is Swiss inflation so low? Will EUR/CHF appreciate?
    • Why are Swiss short-term money market rates negative? How long will Swiss negative rate pressures continue?
    • Will the SNB set negative rates on banks' excess reserves?
    • Why had the SNB minimum euro exchange rate policy been successful and will it be successful in the future?
  • New ECB Measures: How To Reduce German Competitiveness And Talk Down The Euro
    Jun. 9, 2014 FXE 6 Comments

    Summary

    • In our view, the ECB measures of June 2014 want to increase German lending, spending, salaries and inflation. Finally they target a reduction of German competitiveness.
    • The ECB wanted to talk down the euro, but will not succeed.
    • We explain why the measures are bullish for the euro. We expect EUR/USD of 1.40 in the coming months, once traders forget Draghi's euro down-talk.
    • With EUR/USD 1.40 German competitiveness is reduced via the currency, unfortunately, only at the global scale.
  • The Swiss Franc, Pseudo-Mathematics And Financial Charlatanism
    May. 6, 2014 FXF 2 Comments

    Summary

    • Research from most banks regularly suggests that both euro and dollar will appreciate against the Swiss franc in the future.
    • We think that this research is often based on "pseudo-mathematics" and "financial charlatanism." New academic research confirms our view.
    • The real question as for CHF is "Can the persistent Swiss current account surpluses be neutralized by capital account outflows?"
    • Each argument that CHF must depreciate is often based on a very simplified view on currency drivers, on only one piece of the balance of payments.
  • Yes To A Swiss Referendum Against Mass Immigration Is A Yes To Higher Salaries And Inflation
    Feb. 14, 2014 FXF, EWL, FSZ 11 Comments
  • The Fed Will Remain Gold's Strongest Supporter For Years
    Jan. 2, 2014 SLV, EEM, GLD 39 Comments
  • The Euro Is Poised For A Steady Rise, Expect 1.50 In 2 To 4 Years
    Dec. 14, 2013 FXE 46 Comments
  • GDP Details Compared: Switzerland, U.K., U.S., Germany, Australia And Japan
    Dec. 7, 2013 FXA, FXB, FXE 1 Comment
  • The Great Disinflation Continues, How Wonderful!
    Nov. 11, 2013 SPY, QQQ, SH 9 Comments
  • An Analysis Of Last Week's Chinese Data Dump And Its Global Implications
    Oct. 22, 2013 HAO 1 Comment
  • Why There Won't Be A Strong Dollar Even If The Financial Establishment Thinks So
    Jul. 24, 2013 UUP, FXE, GLD 22 Comments
  • Strong Dollar: The Parallels Between Now, The 1980s And 1998-2002 - Part 1: Austerity
    Jul. 22, 2013 UUP 4 Comments
  • Excessive Money Supply: Switzerland Could Follow In Spain's And Ireland's Footsteps
    Jul. 8, 2013 FXF 5 Comments
  • The End Of Swiss Deflation
    Jul. 6, 2013 FXF 2 Comments
  • Explaining Price Movements In FX Rates Based On Fundamentals
    Editors' Pick • May. 13, 2013 EWG, FXA, FXE Comment!
  • The 5 Main Factors That Determine FX Rates
    Apr. 26, 2013 FXE, FXY, FXF 3 Comments
  • Which Of the 6 Fundamental Factors For Gold And Silver Are Still Positive? Which Are Not?
    Apr. 16, 2013 SLV, GLD 4 Comments
  • The 6 Major Fundamental Factors That Determine Gold And Silver Prices
    Apr. 16, 2013 SLV, GLD 6 Comments
  • Comparing Bank Of Japan's Old And New Monetary Easing Efforts
    Apr. 5, 2013 JGBS, FXY 19 Comments
  • Why The Yen Is Now Fairly Valued, Dollar Back As Preferred Funding Currency
    Apr. 3, 2013 FXY 4 Comments
  • Comparing Trade Balances With FX Rates: Will The European Miracle End?
    Jan. 29, 2013 BNO, EWL, GREK 4 Comments
  • This Is Not The Great American Recovery, But Possibly The Japanese One
    Jan. 7, 2013 ALD, FXY 7 Comments
  • Losses On Gold Positions And Other Economic Data The Swiss National Bank Will Not Like
    Dec. 25, 2012 EWL, GLD, FXF 5 Comments
  • Outlook On SNB Monetary Policy Assessment Meeting
    Dec. 12, 2012 FXF 3 Comments
  • All You Ever Wanted To Know About The Swiss Trade Surplus
    Nov. 29, 2012 FXF 17 Comments