Investors are pushing the US dollar down and commodities up as a consequence
of the Federal Reserve's strategy of printing money and levering its balance
sheet.
Currencies
Australian Dollar (NYSE: USO)
Euro (NYSE: FXE)
Commodities
Oil (NYSE: USO)
Agriculture (NYSE: DBA)
The negative side-effects on the US economy that result from monetary inflation
are well-known by economists - primarily, an increase in the cost of living
and rising interest rates. However, a less obvious side-effect of Dollar printing
is that Americans are able to accumulate commodities and foreign assets at
the expense of countries with undervalued currencies such as in Asia, specifically
China.
For years the Chinese have been working for Americans in factories and on
farms in exchange for Dollars and Treasuries. Now that the Fed is diluting
the Dollar, it is arguable that the Chinese have been exploited. However, since
the US is struggling to repay its debts, as a creditor, the Chinese should
be accumulating US assets at discount prices. Currency pegs, though, are encouraging
the opposite effect to take place. Whereas the Dollar's purchasing power should
be in freefall, fixed exchange rates are incentivizing US investors to go on
a buying spree abroad, which is why commodities are rising and foreign equities
(especially Asian property stocks) are increasing faster than US equities.
In an ironic twist, the United States is bidding up and acquiring its creditors'
assets rather than having to answer to its creditors.
The printing of new money usually allows first movers to get wealthy at the
expense of others. While a small number of financiers get wealthy, the whole
country gets poorer relative to the rest of the world. Typically this scenario
only happens within the country that devalues its currency. Yet in today's
current situation, currency pegs are allowing the first movers in the US to
acquire global assets with a virtually worthless piece of paper. If this artificial
currency regime persists indefinitely, hyperinflation will take hold of the
entire global economy. With the possibility of such an adverse outcome for
society, foreign governments eventually will realize that the US is once again
stealing from everyone - before it was labor, now it is equities and assets.
When the world decides that enough is enough, currency pegs at today's levels
will be a distant memory. As a result, foreign stocks and commodities, which
are extremely cheap today, will no longer be for sale in US Dollars.
Continental Capital Advisors, LLC was formed to offset the destruction of
wealth caused by the global devaluation of currencies by central banks. The
name Continental Capital symbolizes the 1775 US Currency, "the Continental",
which was backed by nothing and quickly became devalued.
Disclaimer: The above is a matter of opinion and is not intended as
investment advice. Comments within the text should not be construed as specific
recommendations to buy or sell securities. Individuals should consult with
their broker and personal financial advisors before engaging in any trading
activities. Certain statements included herein may constitute "forward-looking
statements" with the meaning of certain securities legislative measures. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the above mentioned companies, and / or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Any action taken as a result of
reading this is solely the responsibility of the reader.
Continental Capital Advisors, LLC was formed to offset the destruction of
wealth caused by the global devaluation of currencies by central banks. The
name Continental Capital symbolizes the 1775 US Currency, "the Continental",
which was backed by nothing and quickly became devalued.
Disclaimer: The above is a matter of opinion and is not intended as
investment advice. Comments within the text should not be construed as specific
recommendations to buy or sell securities. Individuals should consult with
their broker and personal financial advisors before engaging in any trading
activities. Certain statements included herein may constitute "forward-looking
statements" with the meaning of certain securities legislative measures. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the above mentioned companies, and / or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Any action taken as a result of
reading this is solely the responsibility of the reader.
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