Kumbaya

By: Erik Swarts | Wed, Mar 14, 2012
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Kumbaya

As they add another log, this time from the Norwegian central bank (the 65th in six months), to the global easing fire now sweeping the globe, it should come as no surprise that the U.S dollar is the largest benefactor of these equilibrating monetary pressures. Less we forget, Chairman Bernanke was the first to reach for the fire hose way back in the dog days of summer in 2007. And although his beard was darker and his monetary mettle untested at the time - he basically went on to write the playbook that our European counterparts have been running their slowdown defenses from.

And while the equity markets have reacted to easing in a similar fashion, namely they go up every session - gold and silver have exhibited the inverse dynamic to when the FED opened the spigot in 2007. Why?

2007 Silver Euro

2011/2012 Silver Euro

While bull market runs, such as the one found in silver and gold, inevitably come under the influence of various motivators during their reign, I believe the secular shifts in the euro and the U.S. dollar has become it's primary influence today. In 2007, when Bernanke started to ease and introduce extraordinary liquidity measures, the dollar broke down and gold and silver broke out. Today the inverse is true, with the ECB taking the easing and liquidity baton from the FED. These relationships are even more lucid today, considering many correlations have broken down over the past few months in the face of the equity markets exuberance.

With that said, and with the VIX printing briefly below 14 yesterday, it is very likely that the exuberance and discounting window is closing across various markets. History shows us that strange things happen when no one fights the __________(insert favorite central banker here).

 


 

Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

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austrian-money-supply/