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There are many indicators that hint we surely have reached Peak Debt. Not only is there a stupendous total global debt of 217 trillion – see here
but in the Land of the Personal Debt Mountain (aka the USA), here is a telling story that simply demonstrates how far the economy has reached in pushing credit to consumers way down the credit-worthy scale.
Turns out a US car dealer is offering a special discount on a new vehicle – but only if you have a credit score less than 620 (a notably pathetic sub-prime consumer)! Yes folks, customers with good scores will be paying more for the car than those sub-primers. Huh??
Either this is socialism gone mad or there is a cunning plan here. To shift vehicles off the lot (which the manufacturer requires to avoid penalizing the dealer), make it easier for those without much income to get their hands on a shiny new car. Of course, repos will turn out to be high but to the dealer, that’s no problem.
But does this remind you of any other recent period? Of course, the 2007 – 2009 Credit Crunch where sub-prime house buyers helped instigate the collapse of the financial markets! But could an out-of-control car market repeat that little episode? After all, it is much smaller than the real estate market, Hmm.
Update on Wheat
This week, I sent VIP Traders Club members this link to an important non-MSM article (and thereby much more in-depth and relevant) on the weather problems experienced in the US winter wheat-growing states.
There are widespread drought conditions in the northern Plains and this has encouraged buyers to push the price up significantly. But remember, when I identified the Wheat Wedge forming last year on the weekly and daily charts, I could forecast an explosive move provided the market could push above the upper wedge line. I suggested then that a weather event could be the backdrop for such a move – and would be reinforced by the record short interest held by hedge funds.
In fact, that fortuitous combination of factors is behind the massive bull run to the $5.50 level. This is the updated chart from last time
which is also the Fibonacci 50% retrace of the big wave down – and a probably pausing point.
For the Club, we also have positions working in the other grains – corn and the soybean complex.
The Dollar is about to explode
The market is very bearish the dollar for several cited ‘reasons’. The main one is that although US interest rates are rising, overseas rates, especially EU yields, are rising more rapidly and the spread is narrowing. In the background is the uncertainty surrounding the upcoming US budget ceiling wrangles and other internal US uncertainties.
With the dollar in a bear trend since the December high, the herding impulse anti-the dollar has grown so strong that the latest Daily Sentiment Index (DSI) – which is a measure I rely on to provide me with a reading on sentiment – is showing a bullish extreme at 93% in favour of the euro, which is the highest in over four years. The euro trades mainly contra the dollar, of course.
Money managers have flocked to the euro in recent weeks with the COT showing this bias. This is herding par excellence. And we know that when the hedgies get too excited on the long side, a sharp reversal is at hand. I have shown this effect time after time in my blogs.
That means I believe the dollar is about to turn back up with a vengeance. Here is my take on the daily chart
The decline off the December high is a clean A-B-C, which is counter-trend. And wave C sports a five down (green bars) that I believe is complete now that it has hit the lower tramline support. My first target is the upper tramline in the 98 area.
I am starting to advise VIP Club members to accumulate long positions for a campaign that I believe will produce huge returns.
