Yes thank you Julian. This cools my emotions on the dollar trade. This should help me fade my emotions somewhat and trade this better, whatever direction we go.

Oh he'll live and in style too!

Extended hours mkt ...

You are right. The portfolio document needs to be update whenever it changes. Will discuss with colleagues.

Hi Joseph No I'm not considering the election element. As for long term vs short term. It might turn out that it simply ends up being a trade ie short term, before the longer term trend in $ strength reasserts its. However I'm not looking at it from that perspective. At this stage I'm playing for a weaker dollar its that simple. Sorry, re silver. We did put it in the portfolio but stuff is moving really quickly these days so by the time that was updated the price was utterly different.

My understanding is bullish GDX and SLV. SLV "cheaper". I need to look up GDXJ

yes and on gold as well...appreciate an update

As an old FX hand I always talk spot not ETFs. But UUP is pretty close to the DXY

There's also the UDN ETF which is basically inverse UUP. They supply a schedule K-1 however if you don't like that type of thing (messier when filing taxes in the USA).

Not sure how UUP compares to DXY but I think it's similar ratio of currencies. Look into it. You could just short UUP but he may be doing it through futures. Vol is still kinda high and I can't imagine a dollar move down being rapid so UUP puts prob aren't the way to do it... I like gold miners honestly. Kinda a put option on fiat that doesn't expire.

EWW is pesos and mex stock exposure. And JB has remained bullish Gold. Its just that silver was likely to outperform. A reasonable investor would probably have both.

I think it's something to do with it being priced in the Mexican Peso, Julian mentions it in the update i think. Not that i full understand it.

Not all of it. But there will be bleed through. Really the Fed just directed its lending to Ford etc. Cheap fallen angel bonds.

Sell the USD vs CNH, yes you could. Personally, I don't like the fact that its manipulated and prefer USDMXN, AUD or DXY

Yes, I really think so.

I also wondering if the EUR and JPY will start to devalue faster than the dollar in this environment, perhaps it just takes a little time.

Isn’t there the possibility of Europe and the Euro being flushed down the toilet (literally)?

I assume you could potentially short UUP too. It provides inverse exposure to an index of USDX futures

I'd say so. If you do a overlay of inverted DXY and EURUSD then you'll see they track pretty closely. You could make a synthetic DXY position by trading a couple of the biggest proportional components of the DXY, if you were super paranoid: DXY weights: Euro (EUR), 57.6% weight Japanese yen (JPY) 13.6% weight Pound sterling (GBP), 11.9% weight Canadian dollar (CAD), 9.1% weight Swedish krona (SEK), 4.2% weight Swiss franc (CHF) 3.6% weight

It's a strength that Raoul and Julian think independently.

Agreed.

Lol! I wonder if there is scope to have an "FOMC" brand of kitchen sink?

Yes, FXA

check FXA

I think there are some but when I looked into it they tend to have low trading volume, I just opened an FX account.

Sorry Sean, I don't have a view beyond the obvious. Ideally, for CAD to join the counter dollar trade, would like to see Oil stabilize. To my mind thats just a matter of time. But thats an investment time horizon not a trading time horizon.

Hi per Harry's comment, timelines are in the eye of the beholder. As I said below It might turn out selling the $ simply ends up being a short term, before we get new information and the longer term trend in $ strength reasserts its. However I'm not looking at it from that perspective. At this stage, I believe the steps the Fed and IMF have taken to cap $ strength are sufficiently powerful and I want to sell the $. Its that simple.

I think the pivot in terms of time horizon is more like the next 2 months. I think any optimism regarding the CV19 situation will be re-evaluated in August as people consider whether kids are going back to school etc. Similarly traders often re-evaluate their positions in the autumn. If the situation is more negative that the current optimism and Fed liquidity induced bounce, then we will see price action turn down in 6-8 weeks. Right now, we are flirting with the 50% retracement line on the S&P (2800?) If it breaks above that level I would suspect a run to the neckline (2940). But thats very much my 2cents. JB may disagree. But timelines are in the eye of the beholder.

Hi Elena, I use Saxo Bank too. You can short DXY on it. Type in US Dollar Index or DXM0 in the search bar and you will find it with June futures. You just sell the amount you want to go short.

Harry has summed up my views well. But let me add the following. A LOT has changed in the last two weeks and some of that may account for the difference between Raoul and myself. 1) The Fed opened up swap lines to developed market central banks 2) The currencies of the countries included have started to respond ie GBP is up so is AUD etc. 3) They expanded $ repo lines to ALL global central banks. A step we have never seen before. 4) The IMF has also announced they too are willing to lend $. Bottom line it is clear that global authorities do not want a stronger $ and understand the inherent risks. Will their policies work? We will see. But I don't want to fight them and so I have suggested some trades that will work well in a weak $ environment (they aren't all FX plays) with measured risk reward.

Apologies. But the best I can suggest is to listen to both arguments and then think through which makes more sense to you, and which one works better in the relevant time frame. David makes the point that a Deep Dive talk may be required. I think that's right. From my point of view, the Fed did add to the information set by extending its very aggressive actions again. I suspect much of the divergence in views reflects trading time horizons. I also suspect that the Covid story cycle plays an important role. If you think Covid stories are gonna turn more negative in the short term, then a lot of Julian's argument is weaker. But markets dont care what our positions are. They will move anyway. Reading down, I think Steve S nails it. I wouldn't marry these trades. Date them for the next few weeks and then see if the Fed keeps the honeymoon alive. But re-evaluate constantly.

@Matthew. One trade I'm pondering is to be Long SLV June 30th calls $15 Strike at 0.87 as a hedge as I expect Silver to outperform. GDX, GDXJ calls are quite pricey whilst the SLV are still quite cheap.

In am in the same boat as you Steve S. I am thinking that Julian's trades here could become the hedge we need to recoup these positions if we do end up fully out of the money. I am also wondering how long to hold Raoul's trades and if trying to roll them to a later expiry is worth doing at this point (any advice welcome).

We don't pay them to hold our hands. It's up to you to make choices based on all the information you can take in, of which there is a lot at the moment. Things are changing quickly. You need to be more mentally flexible and independent here or you'll get left in the dust....

I think I get Julian and Raouls views on the dollar. Short Term - Julian thinks Dollar goes down (1-3months) Long Term - Raoul thinks Dollar goes up (over 18 months) After Raoul's suggestion on going all in Dollar I bought June 28 Call Strikes on UUP. Down a whopping 76%. Ouch. I also went Short Euros and GBP and got crushed as they rallied since then especially the GBP

Quite the contrary. They're not gurus. Groupthink is not the point here. If they always had the same view, what would be the point? You can (should) consider their arguments, and then come to your own conclusion.

Julian's update is hot-off the press!!

I totally agree.... I'd give you 10 thumbs up if I could

Yeah, agree, I think Raoul and Julian need to do a deep dive talk on their opposite views of the dollar. A LOT hinges on getting the direction of this right. If I understand it correctly it comes down to time-frames. I believe Raoul thinks the dollar gets squeezed higher over the medium term, then sells off hard (and is uncertain on the short-term). Whereas Julian seems to think it just sells off now due to fed action. But hey, it's confusing and I may have interpreted all of that wrong...

Agreed. I often prefer to hear opposite views but in this situation it makes it confusing if Raoul says "buy the dollar" and Julian says "sell the dollar", both with legitimate reason. I hope Raoul can comment on this tonight in 'ask me anything'.

Put call parity would suggest that short DXY vs long DXY calls is effectively a DXY put. But I would argue that JB believes the floor might be in for the dollar. Dollar strength at this point can be viewed as the Fed re-levering its balance sheet faster than the dollar markets can de-lever theirs. I think there is a strong case for that. And I am pretty sure the Fed will accelerate the supply of dollars way faster than the ECB will accelerate the supply of EURs.

Stefan I would add the following. The US requires foreigners to finance our personal and governmental over consumption. To do that they buy Treasuries, US stocks etc. The net result is that they have trillions invested in US assets. As i touched upon in the last video, while it isn't my base case, what happens if unemployment explodes to 25% ie far worse than other countries because of lax labour laws? Do foreigners still want to buy those assets? Treasuries which thanks to YCC have a 1% yield, in country whose economy is in tatters and whose debt to GDP is exploding? Or growth stocks, where there is no growth? We'd better hope they do because, if they don't the $ won't just slide, it will implode. We will end up looking like Weimar Germany. As I said, thats not my base case, which is for a gradual reduction of market weakness, a normalisation of $ funding pressures and at least a bit of market relief.

I would argue that JB is trading medium term perception rather than the ultimate end game. In the medium term, we will not know whether CV19 marks a complete change to our way of life for a long time. We are still debating this. News cycles and story cycles are still at a particular phase. It may well be that the ultimate end game is very bad. However for the next few months there is scope for the story to shift to the positive, and the Fed has certainly acted decisively. Which means that certain assets are very cheap. If you will, one might argue that the Fed has guaranteed US consumption at some minimum level while being unable to do anything to restore current US production. That means that for the next few months, a range of key components of production can trade back from the worst disaster scenario to one which discounts a relatively benign end game. That discounting of a more benign outcome might well turn out to be totally wrong. We will know in a 6-8weeks

Thanks for the recommendation!

I beg to differ. I think we saw the Fed was committed to the first wave of triage, but the second wave which is coming now is qualitatively different. The life boat is taking in more victims. They are underwriting more. If they remain on this path, and the virus optimism remains intact risk assets can rally. Right to the point when one of those apparent situations changes. Either the Fed backs off. Or the optimism regarding how serious the virus situation is for the economy (and any eventual bill) shifts. It could be that JB and Raoul have different trading philosophies regarding which time frame to trade. Me personally, I remain very very bearish concerning risk into the late summer. But capital preservation is paramount, and losing money in the next few months may make it very difficult for me to make money in the late summer.

Thanks for the replies. @Julian Obviously, it´s not the base case, but the question is how to prepare for it. When it goes, it´ll go quite quickly. So, what do you think the implications are and how to position in a case like that? Or will there be plenty of time to think about it once it´s in motion?

Per Harry's comment below there are lots of hoops to jump through before we get to hyper inflation. But one personal observation re bitcoin. It could be a great trade but I feel very uncomfortable suggesting it MI clients. Why? My fear is that if we enter a hyper inflationary situation and people are piling into bitcoin at the expense of the $ it will simply be banned by governments. I think the odds of that happening in precious metals or resource stocks is much lower.

There are many steps on the path to a hyperinflationary situation. One of them, is when you have a deflationary situation and you make sure that the left tail, towards a deflationary spiral, is cut off. At the moment the Fed seems to be doing that, and with a fair measure of commitment. JB suggested they would need a bigger boat. He was right. They might need an even bigger boat, but it looks like they will not have a problem doing that either. To get to hyper-inflation they would need to keep doing the same thing, and then when we pass the deflation risk into the inflation risk, show insufficient resolve in that direction. Its too soon to say whether that will happen but so far they have stayed on that path.

Thanks for your thoughts on this. I have gotten some physical Gold lately, luckily just in time when it had a dip and before the markups on physical increased. On Bitcoin I´m torn, I work in tech and always thought it´s quite stupid and we´ve seen this bubble before*. However, in a world where central banks go nuts and 100 year cycles come to an end, anything is possible. I think the Ray Dalio quote "Cash is trash" is often wrongly mocked as him saying people should stay in stocks - as he was referring to the possibility of cash not being the safest store of wealth it was. That kinda leaves me with Gold currently and I´m torn there, too. I´ve been waiting for a big selloff in stocks dragging the price down again, but that seems to take it´s time... The question on how to trade a market like this is harder: Stocks in the US seem incredibly overvalued for recession, however the market rallies on the worst economic data possible because of the Fed... Long term it´s even harder: The system is breaking and It´s clear that something has to give, but the question is what will give. 1929 didn´t have the printing press as there was the gold standard with it´s own dynamics (much of the worlds gold being shipped to the US). * It seems so similar to the P2P (Napster/BitTorrent) craze in the early 2000s with lots of people shouting It´s gonna change the world. No more central stuff, all decentralised. Well, this really only had benefits for illegal things. The same seemed true with Bitcoin - however I underestimated that use, especially with it being illegal for Chinese to hold their wealth in foreign currency. Should have kept some of it when it was at 10$/BTC when I used it to pay for some things to try it out...

For what its worth I am long GDX/GDXY and about o move into the best individual gold stocks I can get. I just doubled my metal holding position as well. I consider gold low risk high reward and stocks medium risk but high reward in todays world. As regards Bitcoin, I understand the potential but just haven't seen the widespread support for it from so many smart folks RVT have had on recently, you have all heard the lukewarm or negative views. Raoul and a few regular commentators on here are rapid on BTC, but it just seems to have such a strong Chinese connection and ownership and the PRC seems very happy to stamp down on stuff they don't like that I am not convinced its worth more than a small flutter high risk/high reward. Finally, and without malice, BTC feels like a younger persons thing........ gold has millennia behind it plus all those central banks and very wealthy people holding it in vaults. Younger generations have little wealth, the older ones who have most of the wealth are just not interested in crypto (yet) but I remember when the gold price and the Sterling exchange rate with the dollar were always quoted each day on the BBC news back in the 70s. Gold just feels generational.

IDA I. I find that interesting about USDCNY to BTC because there have been ideas that the Chinese are using BTC via the USDT (Tether) printing presses to get their money out of china. I do wonder the implications.

I wonder if gold is standing out against BTC because it's the time tested choice now. This doesn't mean that BTC can't or won't fill a similar roll. I would guess that most people around the world who have lost their jobs/ seeking security aren't trading the few dollars they have for gold. It's probably the smart money and big funds right now, apparently the London PM desks are trading more gold than is mined annually right now (heard this on a podcast https://www.sprottmoney.com/Blog/multiple-tsunamis-converge-on-gold-and-silver-weekly-wrap-up-942020.html). I feel BTC will have it's time in the sun, it's probably once an inflationary or deflationary event starts to really be recognised on the streets and people start to notice the effect and look to put their pay cheques somewhere other than fiat. How does that sound in terms of the potential retail adoption for BTC, perhaps silver will also find growth under retail growth in the same way.

I don't know much about Bitcoin, but I have noticed that it is positively correlated to the USDCNY cross, so it's like a hedge against China devaluing (it seems).

After watching Mike Green talk about Bitcoin I am starting to get worried. Bitcoin should be exploding higher during all of this QE but if you look at the past few days it is falling whilst Gold and the Gold miners are roaring higher. Seems like people believe Gold to be the better safe haven. I would be really interested to know the investor makeup of Bitcoin - What percent of owners of bitcoin are retail investors vs institutions and High Net Worth Individuals. As the economy is crashing and people are losing their jobs I don't see much demand for bitcoin from retail investors. In fact we have seen they might liquidate to fund their living expenses.

Let me put it this way. Julian will correct me if I misspeak. The Fed seems to have written a blank check. This "whatever it takes" approach will make it very tough for some risks to trade lower. JB remains concerned about stocks in the medium to longer term, but in the short term its easy to see how we can bounce in stocks. People will be able to focus on the positive, in Cv19 risks. The overall picture will look like it is improving. And with unlimited money the number of forced sellers will decline. Buying stocks would not be his preferred way of trading a countertrade in risk assets. He prefers things to fade the dollars recent strength. This is different to Raoul's position as last stated. If the Fed is gonna be this aggressive, the odds are it can produce more dollar liquidity than its peer central banks in a short period. But natural resource and basic materials stocks are very beaten up and have scope to bounce substantially relative to the wider market, given the Fed is underwriting consumption but not production. Whether thats a trading bounce or a secular trend will depend on the Fed's resolve. If the Fed keeps pressing F9, they will eventually create that secular paradigm shift.

I think it shows that things are unclear in the shorter term. I have a longer term time horizon and I'll stick with my thesis unless I see a structural shift in how the markets trade. My edge is in the medium to long term and only very very occasionally in the shorter term

Not so hard with JB, as I speak to him regularly. In can be pretty tricky with RP. Where the questions are specifically about his views I try, but I do worry I will may have misunderstood. But often the questions are about the rationale for a specific piece of logic and its pretty easy to fill in the gaps. Specially when they are simply technical questions about volatility or how a futures contract works etc. Its a useful point to remind people that while I try to answer for RP, there are times when there really isn't a substitute for his personal answer. When that happens I usually email him and just ask. But very kind of you to say.

Couldn't agree more... it's added a great new dimension to MI.

Firstly thank you both for replying. So my understanding here is as follows: With MMT at full flow we can expect to see enough fiscal spending directed towards real infrastructure projects to boosts real economic demand for commodities. With that in mind the argument is that withholding any further downturn or prolonged shutdowns, we can expect commodities to have seen their bottom at this point, and a rise in the AUD? I was wondering if Australia and the southern hemisphere in general are yet to see the impact of full scale infections due to it being their summer time, i imagine this could affect the AUD too making this a short term trade?

Adding to what Harry said. To your point, monetary debasement, QE, money printing call it what you will, doesn't necessarily boost aggregate demand. Although, there is some trickle down via the wealth effect. However, this crisis is moving us to the next stage of policy intervention monetary debt debasement, MMT etc. ie central banks print to directly support fiscal spending and that really does support demand. Its early days, but the Rubicon has been crossed and going forward it will be government spending on things like infrastructure, which will drive economies. That should be good for Australia as she produces a lot of those products. I also believe its US dollar negative, a double kicker for the Aussie.

So oil is a good example. The spot price of oil is destroyed. Why? Cos there is no demand for it right now. And worse there is limited storage. So the spot price can drop and drop cos if there is no where to store it it is worthless. However if you can store it, then it has some value because futures prices rise steadily as we move into the future. The futures market is arguing that the current extremely weak demand is temporary and in 18 months it will be gone. That's probably roughly right, give or take a terrible recession. But spot prices do not give any room for investment in future productive capacity. So somewhere in the future, the owners of the existing capacity will be able to charge a lot for it, if demand roughly normalizes, once we get through all the ridiculously large volumes of stored oil.

Hi Jake. XME is cheap. But more importantly it's part of our longer term theme of owning tangible vs financial assets as we see governments ramp up fiscal spending supported by monetary debasement.

Hi Moritz, I hate to give time frames, because in my career I've discovered that its hard enough picking the direction, let along the time frame of the trade. But here's what I'd say. IF I'm right about a $ high and looking at the bigger picture historical cycles, then my assumption is that we are looking at a multiyear $ decline of around 20-25%. That said I believe, the initial window is probably open until September/October. I'm worried that in Q4 the virus may reemerge.

Thank you, and thanks for the flash update. Makes perfect sense to me.

Hi Greg, very sorry my mistake. I'd put a stop below 0.5980

James I still like GDXJ a lot. Central bank balance sheet expansion continues to build and hopefully, we have seen the $s high.

The EWW is composed for the most part of consumer staples and essentials, i.e. Walmart division in Mex, Pemex, cellular companies, etc. Believe these will hold up even in a severe quarantined economy.

there is a macrovoices interview today by the way