This is another perspective on what is happening in US currency markets. The US$ is on an epic roll and has risen by 58pc against a basket of currencies since 2011 and by 28pc since June 2021. What else has been happening over this period. Look at yields on US 10 Year Treasuries. The latest rise almost exactly matches the rise of the dollar. Money is clearly pouring into the US from all over the world seeking a safe haven.
Just as an aside how about that budget. Liz Truss and Kwasi Karteng are something else. The Daily Telegraph and its columnists are in ecstasies and so I am. I wanted somebody to let capitalism rip and just maybe that is what these guys are going to do. Rock on!
Best of all they clearly don’t give a stuff about dreary mainstream establishment thinking. Make the economists howl. You will get my vote every day of the week and many more besides I suspect.
There is some pain coming that is for sure. God knows where interest rates are going and inflation is insane. I am still trying to buy those York Stone flags for a patio for my house and they are like £150 a square metre if you can find any. Ten piddling square metres is £1500 and that is before they have dug the foundations and laid the stones.
I don’t know what is going to happen to house prices but one thing is for sure, the replacement/ rebuild cost of houses is going through the roof.
But Truss and Kwarteng are right and hopefully Andrew Bailey, the Governor of the Bank of England will get with the programme and join the team. We have over 60m people in this country many, probably most of whom are ready to work hard and bursting with talent. Let them keep their money and do their thing and they will soon have this economy humming.
And if we need more overseas workers at all levels to fill the gaps in the labour market that would be cool too. What we don’t need is all these fruitless attempts to micromanage the economy. Nobody knows how to do that or what is going to happen. All we can do is create the best framework, as Deng Tsao Ping, might have said to let 1,000 flowers bloom. Capitalism works. You just have to believe in it.
My hunch is that we are seeing the beginnings of a massive ideological shift after years of failed social democratic rules based bureaucratic meddling. Goodbye Brussels, hello Brexit and bring on a bonfire of all that nanny state c**p.
Even Uruguay, South America where my wife comes from seems to be getting the message that maybe endless attempts to redistribute wealth more fairly just mean less for everybody. Forget about dividing the pie and focus on growing the pie and making sure that England, Uruguay wherever becomes a land of opportunity, where everybody, whatever their background can feel, like in Napoleon’s Grand Armee, that they have a field marshal’s baton in their knapsack.
Half the people I know, especially from my children’s generation are either in business for themselves or working freelance. I know they come from privileged backgrounds but they set the tone for everybody. As I said for years about Brazil. It takes a lot of political meddling to keep this country so poor. Just leave it alone and miracles can and will happen.
And just look at the States. They do leave it alone and the results are wow! The US is like a millionaire/ billionaire production line and they don’t all come out of MIT, Stanford and Harvard.
Below is another of my favourite benchmarks, OGIG, which is full of QV 3G stocks and seems to be breaking down yet again.
The bitcoin chart is hanging by a thread. In this market is it going to turn around and blast higher. I don’t think so. I think it is in great danger of breaking down and falling sharply, which will only add to the fear and loathing being experienced by financial markets, It is a scary time but so it always is with bear markets and the worse it gets now the better it will be later and here on Quentinvest we/ I are very hopeful that we are going to spot that magic moment when the bear becomes a brand new shiny bull.
Below is the chart of Alphabet/ Google. These guys have been walking on water for two glorious decades but not any more. We have a chart breakdown and my guess is that there may be a shock coming when they report on 27 October and if that happens and if other big guns like Microsoft also disappoint this market is going to get hammered.
Strategy
This market is all about the charts. Fundamentals, especially at the company level have become either meaningless or one directional. Bad news and the shares collapse; good news and we get a sharp but short-lived rally. It is death by a thousand cuts, especially for anyone still holding shares funded by borrowed money. I think there is going to be a capitulation moment in the US stock market and we have not had it yet.
