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The Shape Of Things To Come?


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Why the Fed Will Have to Hike

by Steve Saville

 

In the 22nd October Interim Update we explained why we think the Fed will have to hike official interest rates over the coming 12 months by more than the market is presently anticipating. Then, in the 29th October Interim Update, we predicted that the Fed would begin talking about the risks of rising inflation by the 28th January FOMC Meeting. We are now going to revisit this matter because it is so important and because we perceive a large mismatch between the consensus view and what is actually going to happen . . .

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Nikkei down 3.74%.  Most other markets down 1% to 2.5%.  Treasury yields dropping.  Their has been a very good multi-year correlation of treasury yields and the Nikkei.  Could be coincidence or the deflationary wind coming from the East.

The 30-year T-bone yields 5.03% this morning.

 

A hard smash in the stock market would easily set up a test of the 5.00% round number yield.

 

Speaking of round numbers, the Nikkers dropped below 10,000 on the same day the Honkers fell below 12,000 (employing aussiebear's terminology that the pros use :D ).

 

Meanwhile, the Dow seems to have suffered a failure, in that it reached 9,900 but never even challenged 10,000. Is the Dow Jokes the world's "weakest sister"?

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Some fx research data shows that, if the dollar decline runs true to form, it will fall at least 25% from its peak and take at least three years to do so. Chances are, given central bank meddling, it will take longer and fall further.

The American economy remains uncompetitive globally. The dollar decline of about 12% so far has had little to no impact on our trade balance.

This dollar decline isn't just happening to us. It is a global issue. The imminent failure of the world's reserve currency is the primary driver in the move to gold, in my opinion.

The authorities will let the water out of this bathtub one drop at a time if they can. It's not a matter of making money in gold or commodities, but when to add to positions.

Enter the chart-meisters

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