Strong Like Bull... in China’s Shop

De-Dollarization continues, but not for why you think… [The Rude Awakening] November 03, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Strong Like Bull… in China’s Shop [Sean Ring] SEAN RING Oh, the hilarity of it all. “The Federal Reserve prints so many dollars, it may as well be toilet paper!” WRONG! The baffling truth is the Fed can’t print enough dollars to satisfy global demand. Once again, Jim Rickards, Paradigm’s Oracle of OhMyGod, was spot on. When Jim and I were in Vegas for the Paradigm Shift Summit 2023, we sat down for a chat. I asked him if the USD was strong because the world was disappointed BRICS didn’t come up with an alternative currency at their August meeting in Johannesburg. “Sean, this has nothing to do with BRICS. There’s a dollar shortage out there.” It’s a supreme irony - especially to economists of the Austrian School - that it won’t be a weak dollar that brings the financial system down… it’ll be a strong one. But before I continue, a quick word: Naval aviator, Harvard grad, and ace rock kicker Byron King is on [Rickards Uncensored]( today! Join Matt Insley and Byron at 10 a.m. ET for their discussion on gold, oil, and the Middle East. Byron’s stories and analyses are always informative and entertaining. [Click here to get your seat.]( Let’s dig into the news. The Dollar’s Explicable Strength No matter how often I say it, it doesn’t sink in. The dollar index is a basket of currencies traded against the dollar. 81% of that basket is made up of the euro, pound, and yen. Can you think of a single reason to own euros, pounds, or yen? Me, neither. Charlie Munger recently called Berkshire’s Japanese trade “awfully easy money.” Does Charlie mean to tell us when a country’s central bank (The Bank of Japan) purposely destroys its currency (the Japanese yen), its stock market (the Nikkei) goes up? Wow, then it works just like ours! From [Markets Insider]( Warren Buffett's surprise bet on Japan during the pandemic was a once-in-a-lifetime chance to make a boatload of money with virtually zero risk attached, Charlie Munger says. Buffett's Berkshire Hathaway disclosed stakes worth a combined $6 billion in five Japanese trading houses in the summer of 2020. The bets stood out because the investor and his team famously favor American companies like Apple and Coca-Cola. Munger, Buffett's right-hand man and Berkshire's vice-chairman, said the opportunity was too juicy to resist. "If you're as smart as Warren Buffett, maybe two, three times a century, you get an idea like that," he told the Acquired podcast in an interview released this week. "The interest rates in Japan were 0.5% a year for 10 years, and these trading companies were really entrenched old companies," Munger said. "They had all these cheap copper mines and rubber plantations, and so you could borrow for 10 years ahead all the money and you could buy the stocks, and the stocks made 5% dividends, so there's a huge flow of cash with no investment, no thought, no anything." I’ve got news for you: the European Central Bank and the Bank of England do the same thing. If they do that, how can you be anything but a dollar index bull? [SJN] That’s part of why we’ve had this big rally since July. The other huge reason is that the world needs dollars and is sucking up as many as it possibly can. But they resent having to acquire those dollars and are sick of it. Here’s why. [URGENT: Before You Buy Another A.I. Stock…]( James Altucher has been pounding the table on A.I. all year, urging investors to get in… Today, he’s changing his tune. [Whatever you do, he warns, don’t buy another A.I. stock until you see this video.]( Because there’s a much bigger opportunity involving A.I. – one which the mainstream media ISN’T reporting on. [Click here now for the urgent details.]( [Click Here To Learn More]( Why a Strong Dollar Hurts Foreign Countries Debt Service Costs: Many countries and foreign companies borrow in U.S. dollars to take advantage of lower interest rates than those available in their home countries. When the USD strengthens, the cost of servicing these debts rises significantly in local currency terms, leading to financial strain or defaults. Trade Dynamics: Countries with weaker currencies relative to the USD find it more expensive to import goods and services priced in dollars. This leads to a trade imbalance and exacerbates current account deficits. On the flip side, a strong dollar makes U.S. exports more expensive, impacting countries with strong trade ties to the U.S. Commodity Prices: Most global commodities are priced in USD. A stronger dollar increases the price of commodities in local currency terms, which leads to higher costs for countries and companies reliant on importing commodities. Conversely, commodity-exporting countries benefit from higher revenue in local currency terms. Capital Flows: A strong USD influences global capital flows. Investors often seek assets denominated in strong currencies, leading to capital flowing into the U.S. at the expense of emerging markets. This puts pressure on emerging market currencies and increases interest rates as countries try to attract investment. Competitiveness: Companies exporting goods to the U.S. find it more challenging to compete on price if their home currencies strengthen against the dollar. Similarly, U.S. companies may find it easier to compete abroad when the dollar is strong. Foreign Exchange Reserves and Exchange Rates: Countries holding significant reserves in USD see the local currency value of those reserves increase when the dollar is strong. On the other hand, countries might need to intervene in foreign exchange markets to stabilize their currencies, which depletes reserves (see: Asian Currency Crisis of 1997) and leads to a vicious cycle of weakening currency and dwindling reserves. Investment: Foreign investments from the U.S. may decrease as a strong dollar increases the relative cost of investments abroad. Additionally, the returns on existing foreign investments may be lower when converted back to a stronger USD. Southeast Asia Has Had Enough From BNN Network: The Bank of Thailand has sparked a potential global financial trend with its proposal to replace the US dollar with local currencies in international trade. This move is a strategic response to the 8-9% fluctuation in the US dollar, aimed at mitigating currency risks and providing Thai businesses with a more stable means of paying for goods and services. A Wave of De-dollarization The bank’s initiative, championed by deputy governor for monetary stability, Alisara Mahasantana, comes on the heels of a tripartite agreement signed in August between Indonesia, Malaysia, and Thailand. The agreement sought to promote the use of local currencies in bilateral transactions, embodying a larger trend of de-dollarization in international trade. The Association of Southeast Asian Nations (ASEAN) is reportedly contemplating a similar shift, considering dropping the US dollar, euro, yen, and pound sterling from transactions. I don’t think the Bank of Thailand was the first to consider this. But that’s beside the point. The dollar’s volatility messes up local businesses. The benefits of abandoning the dollar are clear: cancel out dollar volatility and strengthen any negotiating position with the U.S. But the challenges are suddenly thrown into sharp relief. These countries have to build an infrastructure to support this ambition. This is precisely the challenge BRICS embarked on. Wrap Up It’s not a weak dollar that’s hurting world commerce. It’s a strong, albeit volatile, one. There’s no reason to use the dollar in Southeast Asia unless its benefits exceed its costs. These countries think the costs are too much to bear. De-dollarization is picking up not because the Fed is printing too much money. It’s because there aren’t enough dollars to go around the world. Have a wonderful weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… Ten Glittering Reasons to Buy Gold Right Now [Sean Ring] SEAN RING If you read yesterday’s [Monthly Asset Class Report]( you could feel my anger at the gold price action that ended the month. We were so close to closing over $2,000 on the monthly charts for the first time. But something - we can’t say what (even if we know) - clubbed gold over the head right before the close. I suspect it was the Fed’s minions on Wall Street who dutifully sold to keep the world under the delusion - for just a bit longer - that the USG hasn’t lost control of its budget, money supply, or senses. But as my good friend and colleague Alan Knuckman said, “The longer you hold something down, the more furious the breakout will be.” And he’s absolutely right. But before I elaborate, a quick heads-up for you: Tomorrow, my friend and frequent Rude contributor Byron King will be on [Rickards Uncensored](. No one knows the intersection of the military, energy, and mining like Byron. Join Byron and Paradigm Press Executive Publisher Matt Insley for an in-depth session on gold, oil, and the situation in the Middle East. [We hope to see you at 10 a.m. ET tomorrow!]( Now, I will give you ten great reasons to buy gold right now if you haven’t already. Then, I will show you some charts that will strengthen your gold resolve. Ten Great Reasons to Buy Gold Right Now - Wealth Preservation: Gold has been a long-standing store of value that retains its purchasing power over time. It can be a safety net against inflation and currency devaluation. - Hedge Against Crisis: Gold often performs well during inflationary periods but not perfectly. It’s more of a “crisis hedge” than an inflation hedge. When investors anticipate the value of money decreasing rapidly, gold often increases. And while Jay Powell’s monetary policy has tightened considerably, Congress’ ludicrous fiscal policy has not. How much more money is going to Ukraine, Israel, and Taiwan? When will war games turn into war? - Diversification: You don’t have to back up the truck and put everything into gold. Just adding gold to a portfolio provides diversification, which reduces risk. It often has a negative correlation to stocks and other financial instruments. - Safe Haven: During geopolitical tension or economic uncertainty, investors often flock to gold as a safe haven asset. Ukraine was already a messy situation, but Israel and Hamas have taken that messiness to a whole new level. - Liquidity: Everyone loves gold and is a buyer. It’s a highly liquid asset that can be sold quickly and easily if needed, which can be beneficial in an emergency. - Capital Appreciation: While gold is often viewed as a wealth preservation tool, there's also the potential for capital appreciation, especially during market conditions like high inflation or geopolitical unrest. And with the technical outlook I’ll explain later, this is the perfect moment to make your first purchase—or additional purchases. - Tangible Asset: Unlike stocks and bonds, gold is a tangible asset that some investors find appealing. Dig a hole in your backyard and throw your gold in it. Just don’t tell anyone you’ve done that. - Central Bank Buying: Central banks worldwide hold gold as part of their reserves, which can provide security and confidence in gold's value. And they’ve been buying a lot lately. I’ll elaborate below. - Historical Performance: Gold has a long history of holding value and has been a sought-after asset for millennia. - Low Volatility: Unlike many other assets - Bitcoin comes to mind - gold often has lower volatility, providing a steadier investment over the long term. Let’s elaborate on some of these points. [James Altucher: THIS is my top AI investment pick]( I’ve been called a “genius investor” by my fans… And an “eccentric millionaire” by some others. I think it’s because I make big predictions that [tend to come true.]( Today, I’m making my boldest prediction ever. Revealing the AI stocks I believe… Could turn as little as $10,000… Into $1 MILLION over the next few years. To show you I’m serious about helping you get in on this opportunity, I’m giving away one of my top 5 AI 2.0 stock picks – free. [See my top 5 pick here now.]( [Click Here To Learn More]( Central Banks Are Buying According to [State Street Global Advisors]( Global central banks posted their largest-ever annual purchase of gold in 2022 — an estimated 1,083 metric tons. And the buying spree has continued, with 387 metric tons of net gold purchased in the first half of 2023. And that’s continued into Q3, according to the World Gold Council: Central bank demand for gold saw no let-up in Q3, building on the record-breaking first half of the year. Global official gold reserves rose by 337t, 120% higher q/q, and the second highest third quarter total following Q3 2022. On a y-t-d basis,central banks have bought an astonishing net 800t, 14% higher than the same period last year. [Central bank demands] If the CBs are buying, shouldn’t you be? Retail Buying My friend and colleague Dan Amoss posted this in our editorial channel yesterday. This chart is from Michael Hartnett of Bank of America: [First Flow To Gold] Dan wrote: I've often noted that when the RIA/financial advisor channel wants in on the bandwagon, they buy GLD and chase momentum. When GLD outpaces gold futures on an intraday trading basis, the authorized participants create "new" GLD shares and buy the underlying gold for delivery to GLD custodian vaults… I expect these flows to be more frequent and long-lasting as stocks are choppier in a higher interest environment. This month saw the first inflows since May 2023. It could be the start of a new trend. Now, let’s quickly look at the technical picture Monthly Gold [Monthly Gold] We’re so close! We didn’t close above $2,000 for reasons you’ll soon see. But as my good friend and colleague Zach Scheidt says, “There’s no such thing as a triple top.” He’s right. Think of this as a three-year consolidation pattern. It’ll break up, and when it does, it’ll be glorious. Daily Gold [Daily Gold] After a staggering hit on the monthly close (below), gold has had a rough few days. The 50-day MA will rally above the 200-day MA, following the next upward thrust in price. The next stop will be $2,150. Then $2,350. And then the inflation-adjusted highs of $3,000. After that, the sky - or government and central bank incompetence - is the limit. And quite frankly, those two things seem unlimited lately. Five Minute Gold Dave “Resourceful” Gonigam of Paradigm Pressroom’s Five Bullets fame posted this yesterday, as well. It shows what happened near the close as gold headed over $2,000—dirty, dirty bastards. [5 min gold] Wrap Up God loves you. Wanna know how I know that? He’s giving you yet another opportunity to buy gold if you haven’t already. Three times, gold has bumped its head on $2,000 and relented, giving you a chance to get in. Be brave and make the move now. There probably won’t be a fourth chance. You don’t have to spend everything. Just enough to protect you and yours. Instead of “Good luck,” I’ll say, “Bon courage!” You don’t need the subtitles for that one. Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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