This was a good week for most investments, with all the currencies and bonds higher, all equities except gold stocks higher, and commodities mixed.
Bitcoin was the strongest currency, gaining 4.5% for the week, but this represents a recovery of less than half of last week's loss. The Japanese Yen was the best performing government currency, rising 1.9%, closely followed by the USD and EUR. Even the Canadian Dollar, the weakest of the bunch, rose 1.2%.
Bond values rose, but the short term treasuries outperformed the longer dated issues as SHY climbed 1.9% while TLT gained only 1.5%.
Conventional equities were all up, led by the Nikkei Index. Bolstered by the strong performance of the JPY, the Nikkei gained 3.3% to close at 2.09g. The S&P 500 rose 2% to close at 26.10g. Only the gold stocks declined, with the HUI Gold Bugs Index losing 1.6% to close at 8.76g.
Commodities were mixed, with silver and crude oil higher by 2.6% and 1.1% respectively, while copper, coffee and cotton traded lower. Although cotton dropped more than any other commodity for the week (down 1.1%) coffee's decline was more significant, setting a new all-time low of 27.81g on Thursday before recovering to close at 28.56g, down 0.1% for the week.
Since 2001, the US Dollar has lost half of its value every 4 years. Of course, its actual value dithers about, sometimes more than this theoretical value and sometimes less, but as you can see from the chart below, it tracks very close to this decay line. The chart below also projects this line into the future, giving a reasonable guess at what the continuation of the last decade's policies will do to the USD's value in gold terms.
Will these policies continue? There is no way to be certain; if debasement is pushed too hard, people may lose confidence, leading to a dollar collapse. But to reverse the trend would push interest rates sky high, and result in budgetary and monetary chaos as well. Thus a continued steady devaluation of the dollar is likely the "best case" central bankers can achieve.
I have added this page to the Charts section of the site under the heading Half-Life of the US Dollar so you can follow along and see how this prediction unfolds.
Filed under US Dollar by
Government issued currencies were little changed this week, with the USD strongest, up 1.2%. The USD continues to trade very close to its Half-Life curve, now 2.0% above the projected value. Bitcoin (BTC) however, got slammed, plummeting 11.3% for the week to finish at 186.9 mg. In trading over the weekend the BTC recovered slightly, to 193.7 mg.
While Bitcoin was the weakest asset, long term US treasury bonds were the strongest.. TLT rose 2.0% to 2.22 g, while SHY moved up 1.2% in line with the USD.
Conventional equities were all down, but only slightly; the Nikkei was weakest, off 0.7%. Gold stocks were the only equities in the plus column, with the HUI rising 0.3%..
Commodities were all lower this week, led by cotton, which gave up about half of last week's gains (down 4.6%) and crude oil, which lost 3.0% to close at 1.56 g/bbl.
All of the government currencies were strong again this week, led by the EUR, which rose 3.4%. Bitcoin (BTC) declined slightly, giving up 0.7% for the week to finish at 210.6 mg.
Bonds were mixed. SHY moved up 1.6% (in line with the USD, as usual) but TLT was off 0.1% to 2.18 g.
Equities were all on the plus side of the ledger, led by the Nikkei 225, which rose a whopping 6.0% to close at 2.04 g. This more than made up for last week's drop, but still leaves the Nikkei index about 15% below its 2009 lows. The S&P 500, by contrast, rose 2% to close about 14% above its 2009 lows.
Commodities showed the largest gains and losses this week, with cotton rising 9.6% and silver falling 2.7%. In cotton's case, this is coming off a recent all-time low, but is enough to turn the commodity's price action positive for the last month. Silver closed at 0.579 g/oz, close to the 0.6 level that has been its home for the last year. Copper was unchanged, crude oil was off 0.3%, while coffee rose 1.7% leaving it 2.4% above its recent all-time low.
Another great email this week:
I often hear that Warren Buffet thinks gold is a lousy "investment" when compared to stocks. What I've never seen is a long-term comparison of gold versus BRK-A or other well-known "successful" funds.
Any chance of seeing a chart of BRK-A in gold?
I recently received the following email:
I have the option of taking a lump sum payment of approx. $90,000 now or waiting until I retire and receive a monthly payment of $500. I can expect to live at least 20 to 25 years from the time I can start receiving the monthly payment.If I take the money now, I will be taxed 20% and also get hit with another 10% penalty if I take it now.On paper it would seem that I would get more money by taking the monthly payments but since I won’t start those payments for another 10 to 15 years, I'm really worried about what my money will be worth 15 to 35 years from now.I’m thinking about taking the payment and investing in gold and silver but the investment would have to go up 50% just to make up the 30% I’d lose to taxes and penalty.I could roll it over to an IRA but I’m too close to retirement to take much risk.Any suggestions?
|Lump Sum Now:||$90,000|
|Net Gold gr:||1,126|
|Year||Nominal USD||Gold gr||Today's USD|
All of the government currencies were strong this week, with the CAD up 1.5%, JPY up 1.4%, and even the battered EUR showing a 0.5% gain. Bitcoin (BTC) however, took a beating, dropping 11% early in the week, but recovering some ground to finish the week down 4.6%. Remember my comments from last week: the BTC is a highly volatile young currency. Expect to see it mentioned often as one of the biggest winners or losers!
Bonds were also big winners this week. SHY moved up 1% (in line with the USD, as usual) but TLT was the biggest gainer for the week, rising 3.3% to close at 2.18 grams, more than making up last week's loss.
Equities didn't fare so well: they were all down, led by the HUI gold stocks, down 2.6% and the Nikkei index, off 2.4%. US stocks were also lower, with the S&P 500 closing down 1.3%.
Commodities were a mixed bag, with coffee setting another all-time low of 28.3 mg on Thursday, before recovering 0.7% to close the week down 2.9% at 28.5 mg/lb. Silver declined 2.1%, but remained near the 0.6 gram level that has been it's home for the last year. Cotton and crude oil each gained 3.2% for the week. In spite of this week's gain, Cotton remains very close to it's all time low of 12.1 mg/lb, set at the end of September.
Currencies were weak this week, with the EUR treading water up 0.1%, while the USD and CAD fell 0.4% and 0.6% respectively. The weakest of the bunch was the JPY, down 1.5%. This week I am starting to include coverage of Bitcoin (BTC). As you can see from the chart below, bitcoin has had a meteoric rise over during the last two years since its introduction, though this has been punctuated by sharp declines. This volatility is caused by the currency's youth: it is being adopted by thousands of new users each week, and this rising demand is pushing its value up. But any time there is a rumor of a theft or concern about a government crackdown, the value can tumble sharply. This week, BTC is the only currency to show much strength, and over the last month, and the last year, it outshines all other investment categories. Worth keeping an eye on! Learn more at bitcoin.org.
The biggest losers this week were commodities, coffee and crude oil. Coffee fell 3.5% to 29.3 mg/lb, while crude dropped 2.9% to 1.57 g/bbl. Cotton took a breather this week after big drops in prior weeks, closing up 0.5% at 12.2 mg/lb. Silver also gained slightly for the week, rising 0.1%.
TLT (the long term US Treasury Bond ETF) was the other big loser, off 2.7% to close the week at 2.11 g. The shorter term SHY traded lower in line with the USD, dropping 0.5%.
Stocks were mixed, with US equities up (the S&P 500 rose 1%), while the Japanese Nikkei and the Gold stock index (HUI) were down 1.6% and 0.4% respectively.
The Euro fell again this week to another record low of 22.56 mg, before recovering slightly to close down 0.3% at 22.60 mg. For the YTD, the EUR is down 11.6%. The USD and JPY rose slightly (0.5% and 1.2% respectively), while the CAD was little changed, down 0.1%. The USD remains very close to its Half Life curve, ending the week 2.7% below the predicted value.
Cotton, the biggest loser for the week, continued its slide, setting a new record low of 12.1 mg/lb, down 3.5%. Other weak asset classes include the HUI gold stocks, down 1.8% and the Nikkei index, down 1.4%.
Once again, TLT, representing the long term US treasuries, was the strongest performer for the week, rising 2.7% to 2.18 g. Although TLT has been recovering, it is still far from resuming it's uptrend of the last year, sitting below its 200 day moving average, which suggests resistance at about 2.27 g. If that resistance is tested and holds, it could provide a good opportunity to short the long bonds.
Anxiety over the massive coordinated money printing program continued this week, pushing the EUR and CHF to new all-time lows and the USD to the lowest level since February. For the week, though, the JPY dropped more than either the USD or EUR, losing 1.3% to close at 0.223 mg.
Cotton also continued to drop, hitting another new all-time low of 12.5 mg/lb, down 5%. But the weakest asset of all was Crude Oil, down 6.6% to close the week at 1.62 g/bbl.
Paradoxically, TLT, representing the long term US treasuries, was the strongest performer for the week, up 2.2% to 2.12 g. The only other gainer was the HUI gold stock index, which rose 1%.