Weak $, many say risk on, I say self defense

Relying little on the regenerative powers of the American economy if left to its own devices and instead on US$ debasement and artificially low interest rates to try to boost economic activity, one thing has usually been sure from the actions of the Fed, asset prices rise in nominal terms. I say nominal because in gold terms, the S&P 500 yesterday fell 1.4%. The euro heavy DXY is falling to a 7 week low and the US$ is falling to the lowest level since late Oct vs the AUD, CAD, Won and Taiwan and Singapore $’s to name a few and the lowest since Sept against the Mexican peso. Those that own assets (outside of a home) can protect themselves vs a decline in the value of the US$ while those that don’t get hurt by a rise in inflation. No one seems to blame the Fed however for an exaggeration in income inequality. With this said, the RSI in the front month S&P futures is now at the highest since Feb which at the time was the top tick for a few months as markets consolidated. In Europe, the goings on there still can’t dent the confidence of the Germans where consumer sentiment rose to the best level since April. French consumer confidence rose 1 pt off its lowest since Feb ’09. Italian consumer confidence held at the lowest since at least ’96 (record low for this survey). Italy sold two debt issues and the maximum amount they wanted to sell and yields are lower in response. Spanish yields are down too with the 2 yr in particular at the lowest since Nov ’10. Also, the cost of swapping euros for US$’s is falling to the cheapest since Aug. Yields however are spiking in Portugal as they will likely be next after Greece. In Asia, South Korea’s economy had the slowest q/o/q gain since Q4 ’09 at .4%.

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