• It appears that DXY will continue trending upwards for the next few weeks, thus adding weight to the BTC lengthening cycle thesis. • The probability of any parabolic move from BTCUSD correspondingly drops.
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I suppose I'm writing this update from the fundamental perspective and from the perspective of someone working in healthcare R&D.
When COVID-19 first emerged, various markets got a huge hit. That was expected. The Fed aggressively engaged in QE to prop up the market; DXY trended downwards, and economic growth accelerated. However, there is a price to this, and the Fed will eventually taper their QE programme depending on their estimations of how much the market needs propping up.
I personally don't think the pandemic is over, but it is politically suicidal in many countries to suggest that the pandemic is not, at the very least, starting to wind down. This is why the Fed had a meeting with the CEOs of various big tech companies. This was followed by Microsoft CEO Satya Nadella selling off 50% of his Microsoft shares (remember what he did similarly back in 2018?), and the Fed announcing tapering in Nov.
I personally don't think the bullrun, at least the crypto bullrun, is over yet. Omicron may help matters (maybe), and persuade the Fed to turn dovish again (maybe).
As always, life is uncertain, the financial markets even more so. The logical approach is to avoid determinism, and focus on risk management and positioning over price prediction.
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As I have run out of money to buy the dip (set order at BTCUSD 20W SMA instead of the 0.382 level, silly me), we now have time to indulge in some dubious speculation on fundamentals.
First thing first, let's point out that the reactions of various governments towards Omicron are not commensurate with the evidence that we have. Yes, it is approximately twice as transmissible as Delta, with a potential R0 of up to 16. However, there is very limited evidence with regard to severity, with whatever evidence we have suggesting that full vaccination (ie 3 shots) greatly reduces its severity.
Why have governments across the world reacted with such alacrity then?
My suspicion is that they know that the current policies of reopening borders are not working. Borders have reopened, but insurance companies are refusing to insure air travel (insurance companies are good at risk assessment (survivor bias haha)). However, political sentiments do not allow not reopening borders.
Omicron is just a convenient way to reverse policies without losing too much face.
This is just dubious speculation, but we may see the Fed starting printing money like mad again in 1HCY22. Give them some time to work out the paperwork as many are clearing leave carried over from 2020.
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I'm glad that there is increasing probability that this thesis is wrong. In all probability, DXY will close below the 8W SMA. Historically, such failures have led to retests of the the 21W EMA. Currently, the 21W EMA is at $94.6.
Kev I've Been Burning The Midnight🛢️🪔 As A Bond Bull Us Bonds Being Future Us Dollars I'm A Us Dollar Bull Trending Higher Agreed👍🏼 FX Trend Is Dearest Friend
AlphaBravoCharlie77
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@d-MR96nBa, it's quite interesting to compare our respective approaches. My approach is less precise and less sensitive, usually gives too much of a lead time, but less stressful. Your approach is more precise and sensitive, more timely, but (maybe) more stressful. How well we have adopted approaches which fit our personalities and lifestyles! :)
d-MR96nBa
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@TheTradingWoodworker Have To Do What Works For You !
Think You Call That Wisdom Kev Making Life Easier For Yourself
d-MR96nBa
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Kevin.. Explain In Detail How The Fed Would "Print Money Like Mad" If What They Do Is Actually "Printing Money" What Kind Of Money ? And By What Mechanism It Would Get Into Asset Markets
You Were Asking For This😄
AlphaBravoCharlie77
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@d-MR96nBa, hahaha. I'm going to wuss out and say that it is a matter of speech. Which, in a way, money is--that is, money is the promise that something, however nebulous that may be, will be done.
d-MR96nBa
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@TheTradingWoodworker If By Nebulous You Mean Gibberish😂
I'll Give You The Straight Dope
When The Fed Embarks On QE They Create Bank Reserves With These Bank Reserves They Swap Them For US Treasuries In The Secondary Bond Market
They Do NOT Directly Purchase Treasuries From The US Treasury Thus No Debt Is Being Monetised
Bank Reserves Aren't Money Because Bank Reserves Don't Fit The Definition Of Legal Tender
Characteristics Of Money aka Legal Tender 1. Has To Provide Storage Of Value 2. Has To Have A Unit Of Account 3. Has To Be A Medium Of Exchange
Bank Reserves Only Satisfy The First Two Of The Three Criteria They 1. Provide A Storage Of Value 2. Have A Unit Of Account
BR's Aren't A Medium Of Exchange As Bank Reserves Aren't Accepted Outside Of The Banking System They're Like Arcade Tokens That Can Only Be Used Within The Banking System
Bank Reserves Are Counted Towards Total M2 Thought They're Trapped Held In Accounts At The Fed Allocated To The Banks They Have Swapped Bank Reserves For Treasuries
Ever Wonder Why The Velocity Of Money Keeps Failing Even Though The M2 Is Rising Bank Reserves Aren't Legal Tender No Money Is Being Printed
You Can Probably Tell This Drives Me Up The F'ing Wall People Speak On Such Complex Topics Without A Whiff Of Comprehension *🙌🏻PREACH Reverent⛪*
AlphaBravoCharlie77
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@d-MR96nBa, maybe another way to look at it is to see "printing money" as shorthand for QE increasing money supply by purchasing assets with new BR so as to provide banks with more liquidity. I'll be the first to admit that I'm no expert in this area, and many administrators that I know who work in related ministries are themselves no expert in this area (unless it happens to be related to the administrative functions under their jurisdiction).
I'm a trained philosopher working in healthcare R&D, and I'll be the first to admit ignorance and confusion. If we were to look at the rationale given for various monetary policies, the transmission of the desired effects to the target outcomes (employment, income etc) assumes a systematic connection between the proposed policies and outcomes, mediated by a set of monetary laws, subrelations or correlations (the words in fashion tend to change over time). The nature, properties and characteristics of these subrelations form the bulk of policy discussions (and publications haha). Evaluations of monetary policies also often involve comparative assessments of rival theories involving these subrelations. However, when we look at the various theories, we often find abundant references to supposedly observable patterns which actually possess no evidential significance or discriminating power (eg fully rational or fully random agents haha), but which are diligently adduced to support various arguments.
If you ask me, it's black magic, and no one knows with any reasonable certainty what is happening. The questions which you had previously asked about correlation vs causation and the exact mechanisms by which it "works" are also very good ones. Because, and as a Cartesian I think this is an important point, if they indeed understand how it works, then surely the process(es) can be mapped out and quantified, just like other processes which we deem to be clearly and distinctly understood.
That being said, there does seem to be the sentiment that things have been screwed up, and Omicron is a very convenient excuse to turn back certain decisions. How, why and when, I'm not sure if anyone knows. Maybe an easier question to ask if how would they frame it? And that goes back to the point about myth propagation that you brought up:)
d-MR96nBa
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@TheTradingWoodworker, This Is What I Love About You Kev Can't Just Bludgeon You With An Intellectual Hammer Cause You Give As Good As You Get And That's Exactly What I'm Hoping For
I'm Not Going To Totally Out Myself Though I'm An Ex Money Man A Trained Bull*hit Artist Turned Financial Poet Your Training Is Far Better Suited To Markets Than Mine Ever Was
In So Far As I'm Lead To Understand The Fed's Ultimate Intent The Desired Outcome So To Speak Is To Take Away From The Banks The Ability To Sit On Safe Slowly Appreciating Assets In The Form Of Longer Dated US Government Securities Forcing Them To Seek Returns Via Other Vault Hidden Voodoo
They're Trying To Stoke The Animal Spirits Get The Banks To Make New Commercial Loans Aka Actual New Money Creation
Leading To New Businesses More Jobs Yadda Yadda The Financial System Is Already Drowning In Bank Reserves More Of The Same Isn't Going To Make A Lick Of Difference To The Broader Economy See Japan Then Europe
The Banks Are Scared To Make New Loans Why Take Such Risk Especially After 2008 So What Do They Do Instead.. Buy Risk Assets
You're Right As Factual As All I've Stated It's Still Abstract Black Magic Like Money Itself
The Fed Deals In Expectation Policy Trying To Influence Behaviour With Financial Smoke Signals
If People Really Believe They're Printing Money And Why Wouldn't They They Should Start Spending Like Their Hairs On Fire
Clearly All QE Actually Does If Anything Is Make Banks & Financial Wonks Like Us Buy More Risk Assets
If They Were Pumping Hundreds Of Billions Into The Real Economy Month After Month After Month.. S**t We'd Be Weimar Zimbabwe By Now
Love Ya Baby Always A Blast
d-MR96nBa
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I've A Question Sir Kevin Of Singaporia When The Fed Engages In QE By What Mechanism Does This Prop Up The Markets ?
Thinking Correlation Verses Causation
AlphaBravoCharlie77
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@d-MR96nBa, this is a very good point! I'm no economist, but it's definitely correlative. Besides the serious problem of a very limited sample size, there's the problem of counterfactuals (eg Japan's QE programme), confounding factors and problems even with quantifying clearly the effects of QE. I'd say that the correlation is above the flip of a coin, but how much more I can't say with any reasonable certitude.
From the charts, DXY's general direction is downwards, but what happens in the interim is hard to predict with certainty.
That said, having have been in the fight against this pandemic for almost 2 bloody tiring years and being involved in the preparation for Disease X ever since I joined healthcare, I'm personally interested in how the interaction between the epi and econ boys and girls affect the economy. (Disease X is the theoretical mother of all pandemics. Many of us in healthcare see SARS-CoV-2 as a warm-up to Disease X.)
As A Bond Bull
Us Bonds Being
Future Us Dollars
I'm A Us Dollar Bull
Trending Higher Agreed👍🏼
FX Trend Is Dearest Friend