• 5 minutes Trump vs. MbS
  • 9 minutes Saudis Threaten Retaliation If Sanctions are Imposed
  • 15 minutes Can the World Survive without Saudi Oil?
  • 38 mins WTI @ $75.75, headed for $64 - 67
  • 11 hours The Dirt on Clean Electric Cars
  • 1 hour These are the world’s most competitive economies: US No. 1
  • 38 mins The end of "King Coal" in the Wales
  • 17 hours Uber IPO Proposals Value Company at $120 Billion
  • 1 hour Saudi-Kuwaiti Talks on Shared Oil Stall Over Chevron
  • 7 hours EU to Splash Billions on Battery Factories
  • 8 hours Closing the circle around Saudi Arabia: Where did Khashoggi disappear?
  • 40 mins Coal remains a major source of power in Europe.
  • 21 hours COLORADO FOCUS: Stocks to Watch Prior to Midterms
  • 8 hours Poland signs 20-year deal on U.S. LNG supplies
  • 22 hours Saudis Pull Hyperloop Funding As Branson Temporarily Cuts Ties With The Kingdom
  • 18 hours U.N. About Climate Change: World Must Take 'Unprecedented' Steps To Avert Worst Effects
Alt Text

Green Bonds Are A Huge Boost For Renewables

The growing popularity of ‘green…

Alt Text

Yieldcos Are Back And Better Than Ever

Yieldcos have had a rocky…

Alt Text

World Bank To Cut Off Oil & Gas Funding

In accordance with the Paris…

Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Trending Discussions

The Strong Dollar Leads to a Fall in Commodity Prices

Panic is on deck, to use the baseball terminology that my foreign readers are often attempting to decipher. That is the only conclusion one can reach after getting gob smacked by the price action this morning. Copper got spanked for eight cents, oil burned $2, gold shed another $26, and silver puked 70 cents.

The tantrum like stock behaviour in producing and equipment companies, like Freeport McMoRan (FCX) and Caterpillar (CAT) has been atrocious. How many of you out there know that JP Morgan (JPM) is the largest holder of futures contracts in the silver market and just got hit with a massive margin call? Why is all this happening on the 100 year anniversary of the sinking of the HMS Titanic?

Blame it all on Uncle Buck, whose recent steroid treatments has enabled him to unload the pounds, shed the fat, and adopt a new, more virile attitude towards life. Every other currency now looks like a 98 pound weakling. We now awake each morning to be greeted by the latest disastrous headline from Europe that accelerates the capital flight from the continental currency.

The Euro (FXE), (EUO), is deteriorating from bad to worse, with the foreign exchange community now clearly gunning for the next short term support at $1.26. Look at a €10 note these days and it has recently printed upon it "Abandon hope all ye who enter here."

Traditional diversification currencies, like the Australian (FXA) and Canadian dollars (FXC) are now biting the hands that fed them, dragged down by their export commodities' pitiful performance. Hard as it is to imagine, the Aussie has been the world's worst performing major currency this year, even underperforming the dreadful euro. Australian readers who followed my advice to pay for their summer vacations in advance at the $1.10 that prevailed at the beginning of the year are smiling. Those they didn't are now looking for a discount caravan at a remote, dingo plagued campsite somewhere in the Outback.

The Japanese yen, the currency that everyone loves to hate, has perked up to a flight to safety bid while the rest of the world goes to hell in a hand basket. We are currently in between Bank of Japan quantitative easings there, so don't expect this to last much longer. The tipping point into hyper debt driven, economic Armageddon there creeps ever forwards with each passing day on the calendar.

Take a look at the charts below for the US Dollar Index and it is obvious that things may soon get a whole lot worse. For starters, the dollar has only rallied back to the midpoint of a multiyear range. To get back up to the top of that range it needs to appreciate another 10%. To understand why this is a problem, look at the second chart that proves a tremendous inverse correlation between the dollar and commodities. A strong dollar always leads to falling demand for the hard stuff.

The third chart suggests that the other grotesquely overvalued asset class, US stocks, is also cruising for a bruising. Commodities led equities in this downturn by three months, as they usually do. If they break support here, then they will easily drag the (SPX) down to my medium term target of 1,275, off a heart thumping 10.3% from the recent top. If the economic data continues to worsen on a daily basis, as I have been chronicling on a daily basis for the last two months ad naseum and ad absurdum, then we have a clear shot at the fall, 2011 low at 1,060.

US Dollar Index

US Dollar Index v CRB Index

CRB Index

CAT HYSE

By. The Mad Hedge Fund Trader


x


Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News