What’s Up With Gold?

Amidst a backdrop of raging consumer price inflation something strange and unexpected is going on.  The U.S. dollar has become more valuable.  Not against goods and services.  But against foreign currencies.

For example, the U.S. dollar index, which is a measure of the value of the dollar relative to a basket of foreign currencies, recently crossed the 105 level.  This marks its highest level since December 2002.  Not since tech stocks were in full meltdown in 2002 has the dollar been so strong.

Without questions, the dollar’s had quite a run.  The dollar index increased over 6 percent in 2021.  So far in 2022, it has already gained over 7 percent.  And, for the time being, and despite shortsighted dollar weaponization policies, the dollar is preserving its reserve currency status.

This week, the dollar index did retreat slightly…at market close Thursday (May 19) it stood at 102.91.  Maybe the dollar has peaked.  Or maybe this is just a period of consolidation before its springs upward. Continue reading

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Finding Opportunities in a Bear Market

“I can calculate the motion of heavenly bodies, but not the madness of people.”

The remark was made by Sir Isaac Newton in 1720 upon losing £20,000 – a substantial sum at the time – speculating on South Sea Company stock.

The madness of people, as Newton painfully found, is incalculable.  It defies logic.  Runs on emotion.  And is best observed from a safe distance.

Newton may have been a brilliant mathematician and physicist.  But he was still an animal, just like the rest of us.  When it came to matters of money his actions were not governed by logic and calculation.  They were governed by fear and greed.

The madness of people – or crowds – may not be calculable.  However, it is most certainly measurable and observable…especially in the hindsight view of a stock price chart.

The South Sea bubble of 1720, like all good bubbles, was a fabrication of government.  Where an act of British parliament granted the South Sea Company a monopoly on new world trade so that, in return, it could finance the national debt…and at low interest rates to boot. Continue reading

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Settling Wreckage from the Past

Settling wreckage from the past with realities of the present can be difficult and painful.  If you do the crime.  You must do the time.

When it comes to financial markets and the economy, this can take many forms.  Some of the most common include bankruptcy, shuttered businesses, and collapsing share prices.

This week Federal Reserve Chair Jay Powell and his cohorts at the Federal Open Market Committee Meeting (FOMC) raised the federal funds rate 50 basis points.  This marked the first 50 basis point rate hike since 2000.  It is part of the Fed’s initial efforts to settle up on wreckage from the past.

The world has changed markedly over the last 22 years.  Certainly, the economy and financial markets have become twisted and warped.  Without the proper perspective everything from the price of a gallon of gas to the price of a house is muddled and confused. Continue reading

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The Ugly Transformation of Netflix

Human progress and upset, both real and imagined, is a wide ranging subject.  It can logically weave from discussions of indoor plumbing, agronomy and penicillin to thermonuclear weapons, corporate welfare and the ever present consequences of artificially low interest rates.

One of the great advancements of the early 21st century was the dawn of digital streaming.  Humans, with nothing better to do, could now scroll through a library of digital media and instantly stream it to a television or handheld tablet.  The sport of binge watching was born.

Cable TV was now an expensive dinosaur.  Many budget-conscious consumers cut the cord.  Maybe you did too.  The rationale was simple enough…

Consumers were granted a mobile, handheld idiot box.  For a fraction of the cost, you could watch programs whenever and wherever you wanted.

The ability to stream a movie to your phone while riding the train to work was simultaneously a mind blower and a life changer.  Surly a zenith of civilization had been reached. Continue reading

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