We Shall See a Bear Market
That Lasts a Number of Years
The world’s best macroeconomic investor of all time, Stanley Druckenmiller, is certain the dollar is about to tank by 25% over the course of the next 4-5 years.
Who are we to argue?
A billionaire claiming the dollar is going down is nothing new, and many have been wrong or way early in their forecast, so as to even be called out on their prediction. However, the chart is in favor of a 15% drop over the course of the next year or two and that is significant for gold and silver.
You know what, let me show this gorgeous and bearish head and shoulders formation, implying a big move down for the almighty buck:
Courtesy: Incrementum AG chartbook 2023
We can talk semantics all day long, but the truth is that the dollar has been defiantly strong compared with other fiat currencies, which have not ceased to fail us over the course of the past two decades.
One by one, the governments of Japan, China, the European Union, and large developing nations like India have shown inherent volatility and weakness, and the dollar has reigned supreme.
Still, the dollar’s strength happened at a time when big tech and ZIRP (Zero Interest Rate Policies) attracted investors to the dollar, as it offered both higher bond yields and the best profile of any sector.
Big Tech is not growing like before:
AMZN is up 40% in the past five years.
META is up 30% in the past five years.
NFLX is DOWN 0.3% in the past five years.
In other words, Big Tech is essentially just Apple, Microsoft and Google.
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Google is dealing with its first major competitive threat to both its search engine and ads monopoly and Apple is facing a supply chains revamp, while Microsoft just keeps being Microsoft.
The point is that with globalization unwinding, the complexity of running a global business grows bigger.
Gold remains one of the only truly universal asset classes that isn’t challenged by any competitor.
Courtesy: Incrementum AG Chartbook
I want to stress that Druckenmiller is saying that all of the stimulus created in the past decade was not trickling into the general economy, but now it is, because normal interest rates make it so that savers are rewarded, as well as workers (salaries rising).
The FED has admitted that it has been surprised to a large degree with record-low unemployment trends and they continue to talk about high interest rates for longer.
The problem is that Germany just entered into recession, which means that while America’s economy shows resilience in general, with regional banking being the weak link, Europe is officially in crisis.
If June will be the last rate hike, then this environment should draw a flood of income investors to dollar debt, because of this incredible yield, but the dollar is down already 10% since October!
The market is calling the bluff and stating unequivocally that the best dollar days are behind us!
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