Our most successful and accurate futurist George Orwell in the 1940s authoured two of the most widely-read dystopian allegories of all time – 1984 and Animal Farm.  I read both when about 13 or 14 and they made quite an impression.

1984 is set in what was the future (!) but it took a while for reality to catch up with his vision of totally subservient citizens kowtowing to the state and obeying Big Brother’s edicts without question. War is Peace. Ignorance is Strength.

But is 40 years after – is that too late for this scenario to be realised (see below)?

And Animal Farm is a critique of Stalin (and all -isms) where the farm animals take over the farm, kick out the humans and run it on communist principles with predictably disastrous results.   Naturally, one powerful animal becomes the ‘leader’ (not too subtly a pig named ‘Napoleon’)  and all must obey him.

With overseas travel now in total chaos, I ask – are both visions becoming a reality?

A nagging thought has been on my mind since the March lockdown.  What if Covid-19 really has been overblown as such a threat to humanity that it justifies vast swathes of economies to collapse by decrees of the state?  I noted the sheep-like response of the British population early on with self-imposed house arrest being strictly observed.

And every time I now visit a supermarket, I studiously note I am about the only one not wearing a blue mask as the vast majority of shoppers are ‘following the science/leaders’ – and behave like the sheep in my photo. Actually, with all of that protection, I feel totally safe from their oral emissions!  So no need for me to wear one, then.  And it confirms yours truly as a true card-carrying contrarian.

I bring all this up because it is yet another manifestation of the herding principle I write about in financial markets. It is as if very few of us are prepared to think for ourselves – most are willing to follow an authority figure and leave their critical faculties at the door.

Mine is not a political blog, but party politics in any so-called democracy is a leading example of how personalities with an urgent enough speech can sway audiences with impossible promises of better times ahead – if they vote for me.  Much like the siren call of the ever-advancing FAANGS.

But the crucial observation I can make to the compliant sheep-like behaviour of citizens in the face of the pandemic is this: whether the threat is massive or not, the fact that the public are willing to go overboard on protection demonstrates we are in a collective fearful state.

And when we fear, we are not in an expansive mood that supports the economy.  We are gradually turning more conservative and  protectively cautious. All the while, shares reach up into new ATHs in the Nasdaq.  This disconnect will resolve in a big way.

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The dollar has bottomed – look out below for stocks and bonds

I have been following the dollar’s collapse here for some time and odds are high it has now reversed.  The short dollar trade is a very over-crowded one.  And no wonder – the belief that the Fed controls financial markets is a deep-seated one held by the vast majority.  But it is false.

Consider this:  It is no secret that the Fed is creating dollars on a vast scale as it buys much of the Treasury and Corporate bonds being issued in this pandemic-affected economy.

And the story goes that these dollars are not flowing into the real economy but into assets.  Even so, many believe inflation is abut to take off as too many dollars chasing fewer goods produces inflation – right?  With PMs surging, they appear to be confirming this inflation story.

But if inflation were real, why are bonds trading at pathetically low yields?  I recall the 1970s and 1980s when consumer price inflation was a big problem – and bond yields were high then at well over 15%.  But not now. Even junk bonds (High Yield) are paying less than 3% – that, for the riskiest company bonds on the planet.  And remember, bond traders are said to be a lot smarter than share traders!

So with a massive supply  of dollars and a convincing Fed story,  all are lined up against the dollar such that DSI bulls have dropped below 10% for days on end – an historic extreme. 

So with sentiment max bearish, by my reckoning it has only one way to go – up.  And the current reversal is very sharp as I forecast.  Here is the long term picture showing the dollar is actually in a strong bull market – and has been for over nine years.  Maybe all those dollar bears haven’t seen this chart?

Here is one dollar bear quote by a herding analyst that is typical of the type: The dollar has been overvalued for a long time, and this might finally be a catalyst for a multi-year downtrend,” said Brandywine Global Investment Management’s Jack McIntyre. “As we’ve seen before when valuations have been stretched, a policy or economic shock can quickly change the currency’s trajectory and that’s what seems to be happening thanks to the Fed’s swelling balance sheet, a surge in debt, and the way we handled the pandemic.”

What the bears fail to see is that when bond yields start to rise as credit is withdrawn, the mad dash for the dollar will be on since most global debt is denominated in dollars. And there is a lot of debt to be liquidated. The dollar will soar – and the trend has already started.

I have positioned VIP Traders Club members long the dollar.

 

It’s all about Apple-mania

I have been early in calling the end to Apple-mania. Apple, along with several other big name Tech companies are back to buying their own shares – and they are price-insensitive.  That is why current extreme valuations of P/E of 40 are being seen.

Also, Apple’s over $2 Trillion market cap matches that of the entire Russell 2000 index.  Imagine – one stock equals 2000! This is nuts. Yes, I know Apple dominates several tech sectors, but in the fast-changing tech world, how much longer can that persist without some serious disruption to its operations emerging?

We know the US Feds (as well as the EU) are looking into breaking up the tech giants and there are push-backs against Apple’s high fees on their app store.

The Apple bubble is waiting for the pin.

We are in the final wave 5 of 5 and the pin is hovering. When it strikes, I am looking at a rapid decline from the current $500 region to $350.

 

Wheat makes unusual chart pattern

One of our recent winners is Wheat and it is forming a multi-year Saucer Bottom

We in the VIP Traders Club have ongoing campaigns in Wheat, Corn and Soybeans but it is the Wheat chart that is unusual.  Historically, wheat prices are very low and recently reached ten=year lows.  They spiked to over $13 in 2008 as crop supply was hit by droughts around the world.

Try as I might, I cannot make head or tail of the wave patterns within the saucer but since the 2016 low at 380, the market has been in a bull trend with higher highs and higher lows.  I have been buying the dips in this trend.

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