Signs of deflation have been popping up all over global asset markets for the past year, ever since the US dollar broke-out on its tear higher. US dollar index – 2 years But this doesn’t even tell the whole story. The US dollar index represents the value of the US dollar against a basket…
Reflections from the Week
It seems like the only thing I hear in the financial media these days is talk about when the Fed will raise interest rates but I think people are missing the forest for the trees. The US dollar continues to surge higher and by letting it rise, effectively the Fed is already tightening. I don’t…
Why the Volatility is only just Beginning
Tomorrow morning the European Central Bank (ECB) will make an announcement on monetary policy and will most likely announce the beginning of their own Quantitative Easing. I was a bit skeptical of this until last week when the European Court of Justice made it now legal for the ECB to engage in Quantitative Easing and…
Welcome to a World of Deflation
Here’s a chart to illustrate what happens during deflationary economic pressures, as we’re seeing right now (click to see a larger image): In order from top to bottom: Long-term Treasury Bonds (orange), US dollar (black), Emerging Markets (brown), Euro (Green), Yen (blue), Energy/oil (purple) – last 9 months Too much debt, not enough demand (poor…
US-Based Multinational Companies & the Dollar
Yesterday Walmart reported a $680 million dollar hit to sales because of currency fluctuations. Walmart doesn’t hedge currency risk, doing business in other countries in their local currency and simply converting it back into US dollars when calculating quarterly earnings. For the last decade plus, it was all about companies that were seeing revenue boosts…