One assets loss is another assets gain
Especially when that latter asset is priced in the former.
That is exactly the case with the US dollar and stocks gold and bitcoin.
The dollar is seeing it's worst month in a decade, but stocks gold and bitcoin are seeing a solid month of returns.
As the economy has grinded to a halt due to the coronavirus pandemic, and interest rates slashed to zero, governments around the world have fired up the printing presses.
However, Americans aren't happy just holding those dollars anymore...
According to a report out in Bloomberg this morning, Americans are fleeing high yield bank accounts (yes that does sound like an oxymoron these days) in lieu of stocks gold and bitcoin.
Check out how interest rates have faired at the highest yeilding banks over the last couple months:
In a few words, not good.
Lack of yield pushing investors into stocks, gold, and bitcoin...
Since this time last year the yield being offered by these banks has been more than cut in half.
And some, like 28 year old Brian Harrington of California, simply aren't going to sit back and take it any longer.
He told Bloomberg that he is moving his $15k in savings he had parked at Ally Bank and moving that over into bitcoin.
The reason being?
He can't simply hold onto dollars at the present time with things priced in dollars going up and basically being able to earn no interest on his holdings.
He followed that up with saying that he thinks we are going to see a long period of very little economic growth and very little increase in rates.
For those reasons he likes bitcoin in the near term.
I don't blame him.
Do you see an inverse relationship here?
(Source: https://tradingeconomics.com/united-states/currency)
The dollar's pain has been bitcoin's gain
Brian must read my blog because his rational is very similar to the one I have put forth many times in the past on here. :)
What's really interesting is that even though people are currently struggling to earn money, the national savings rate is pretty close to all time highs.
In the month of June the personal savings rate sat at 19%, which is a bit down from the record high 32% seen in April, but still well above what we had been seeing for years in terms of savings.
According to Bloomberg, they saw a 16% increase in deposits from April through June compared to the same time period a year ago.
So, while people can't hold onto jobs they have been stockpiling cash.
Some of that cash is making its way into stocks, gold, and bitcoin.
With another round of stimulus on the way and end in sight to the global pandemic, this is a trend that is likely to continue.
Stay informed my friends.
-Doc
Dollar is in trouble for sure!
2 year lows as we speak...
The death of the petrodollar can't come soon enough. With harbors banking up with crude oil that nobody wants anymore because it costs money to hold onto it, it's not just the USD that people are ditching, it's oil and oil stocks as well, and likewise, mining, warehousing of PMs, and other deflationary assets are being bought at the expense of the dollar (and all fiats, by extension).
The printers at the fed are going BRRRRR non stop. Anyone who isn't getting out of cash and into relatively liquid deflationary assets is gonna be living on the streets soon.
Usually if the dollar is going down, like it is, assets priced in the dollar (like oil) will be going up... unless there such an extreme demand drop that the dollar weakness can't offset the demand weakness.
You don't remember crude futures going negative for the first time back in March?
Of course I do, but that was an unusual one time event. The price of oil wasn't really negative per say, it was just in the way the contracts were structured that showed it that way for a very short period of time. Oil is currently trading hands at $40 and $43 for WTI and Brent respectively.
Regardless, an economic slowdown caused by inflation driven misallocation causes a drop in all human activity which means a collapse in demand for resources we don't use. It is the most fundamental factor of production in the vast majority of industry, alongside coal. No buyers = no transport required. If we are headed for further cooling then coal will not crater as much. Crude has been ~40 for decades now. So it is going where the dollar goes. And on top of this it is at serious risk of not being the standard counter token for oil trades.