King $Dollar and Inflation

When the inflation news came out last week, you could hear the relieved exhale from Wall Street. Jerome Powell immediately put a damper on the joy. He stated that his Federal Reserve will continue to fight for the 2% inflationary target. He cited his phony indicators. The fact that inflation fell below 4% with nine straight months of falling prices has not convinced Powell the fight is over.

Believe it or not, he is right. With that said, our reasons are a far cry from the weak and poor indicators that the Fed uses. We look no farther than your wallet. 

King $Dollar...

...had a very troubling week. It broke its resistance price at 100.5. It continued to fall under 100. It closed last Friday at 99.61. It is way below its 50-day moving average of 105.11. It is inching towards its 200-day moving average of 98.18. If it breaches that level, it will probably test its next support level at 96. If this trend in a falling dollar continues, the next resistance point will not matter. The damage will be done.

Last Week

We mentioned that gold comes alive after the 7th of July. It lived up to our alert. It had a strong week. When the dollar weakens commodities strengthen. If the dollar continues to fall, we see gold testing $2100. This may be good news for gold stocks and investors like JFL, but the US consumer will be hit by a new wave of inflation. Since we import everything, a weaker dollar makes everything cost more. Prices are set to soar in August.

We will never know, but I feel that the Fed will buy dollars to keep the currency from falling. This is how bureaucrats manipulate to deceive us. However, the Fed could help the dollar with another rate hike later this month. They do have multiple means and ways to perform. With that said, consider this tidbit? The Suisse parliament has been investigating the fall of their bank, Credit Suisse. They will not reveal the findings for 50 years. Yes! You read that correctly. The Swiss people should find their own meme to end this deception. Of course, we like ours, End the Fed!

Anyway, there is other related news that emboldens our view. The CEO of Citibank stated after she released their earnings report, "There is no investment demand!" We told you that commercial real estate is in do-do due to COVID, stay at home workers and higher interest rates. They are taking effect. These things take 12-18 months to have an effect. Commercial real estate is feeling the pain. This puts pressure on the banking industry and Powell's higher interest rates are not medicine. They are a pillow over your face. In yet another news related aspect, Russia has again put its block cage on Ukraine grain shipping. The last time saw a loaf of bread rise by one dollar. Not good.

Debt

Our government leaders seem to have only one concern, their ego. President Biden shows total disregard to our national debt with his $39 billion forgiveness program for student debt. He is only seeking to buy votes. This is unconscious able! In addition, world leaders are following in the same footsteps. We are heading for a day of reckoning and a debt crisis. By the way, this is more bad news for the dollar.

Conundrum

A lower dollar will give the stock market breathing room. Prices will rise, but we have tried to reveal to you that troubling weather is approaching. We say, "Take your profits. Put your stops in. If you reach break-even, get out!" We may be wrong, but it is better to be safe than sorry.   Peace.