Deutsche Bank: The Dollar Rally is Just Getting Started; Euro to Fall Well Below Parity Next Year

Not only is our Fed hiking rates into a suspect economy, they’re also doing it while our European partners in crime are easing via QE. This divergence has resulted in a 66 basis point spread between the Fed and ECB.

Deutsche Bank analyst, George Saravelos, thinks the dollar supremacy will continue, well into next year, punishing the euro to fall well below parity.

Australia and New Zealand are the only other G-10 countries with higher rates, and both of them are literally retarded kangaroo punchers.

“Historically, it is not only the direction of U.S. yields that matters for the dollar but also the absolute level,” Saravelos wrote in a note to clients on Friday. “When the USD joins the ranks of the high-yielders – defined as having at least the third highest central bank yield in the G-10 – it typically rallies very strongly.”

“The last time this happened for more than a few months was in 1979 and 1997; the dollar rallied by 30 percent and 20 percent respectively,” he added.

I’m in agreement with this analysis and believe a much stronger dollar will have a profound impact on the investing landscape. For one, look for the $RUSL to outperform all indices, since just 20% of business comes from overseas.

I don’t believe this will hurt $TLT, as much of the hawkish Fed policy is already baked into the long end of the curve. The main pressure and risks lies in shorter durations.

Gold and silver will get bludgeoned.

Oil and other major commodities will come under pressure.

Foreign investors will flock to our shores, in order to gain access to our markets and currency.

The last time the dollar ran like this was in the late 90s, a period that is considered one of the best eras in investment history — noted for its dot com bubble.

$AGIO is pulling one of two of its rare anemia drugs, due to liver toxicity issues, and the shares are being ravaged as a result.

“Our commitment is to make a difference in the lives of patients with PKD deficiency. It’s fortunate that we have two assets and we’re looking forward to moving AG-348 forward. Obviously, we would have preferred not to have this happen but that’s part of drug development,” said Agios CEO David Schenkein

This stock, along with the entire biotech sector, has been a clown show all year. You can thank punishing healthcare costs for the pushback to this terrific industry.

Here are some of the notable underperformers in the drug space this year.

$ALNY -54%
$ENDP -74%
$HZNP -31%
$RARE -36%
$JUNO -57%
$OPHT -94%
$PCRX -59%
$VRX -86%
$VRTX -39%
$ALXN -38%
$NVO -37%
$REGN -31%

Of the major non levered biotech ETFs, $BBC has performed the worst — off by 35% for 2016.

$CELG is the partner with Agios for both drugs.

One thing is for certain, the market is in love with President elect Donald Trump. The hope for change that is being exhibited by Wall Street, especially in light of Trump’s pro-business cabinet picks, will go down as the biggest post-election rally in the history of the United States.

Since election night, the Dow Jones is higher by 8% — rallying more than 1,000 points — making it the biggest and most gauche rally ever.

Source: WSJ

The Dow’s 8% gain in the five weeks after Donald Trump’s victory is the biggest surge following any U.S. presidential election in history. The rally, which has the blue-chip average on pace for its fastest 1,000-point rise ever, has been accompanied by a sharp jump in bullish sentiment.

When stocks move this far this fast, caution is usually warranted. This time, history might suggest otherwise.

There have been five other instances in which the Dow jumped at least 5% in a five-week period following a presidential election. Over ensuing six-month time frames, it continued rallying four of five times, gaining another 10%, on average.

A blogger cited by Marketwatch has slightly different data. He used the SPX and the Dow when for periods before the SPX was created. The issue I take with that is the SPX wasn’t 500 stocks until 1957, so much of what he has below might be incomparable gibberish. Nonetheless, looking at the tremendous rallies after Teddy Roosevelt, McKinley, Coolidge and Hoover, it appears the Trump-Bump may have room to grow — before being able to claim the top spot — according to this data.

source: Macro-Man

Tucker might’ve caused his first fatality. After a rather arduous interview with Tucker Carlson, Newsweek columnist, Kurt Weichenwald, might’ve died as a result.

In a odd twist of parodoxical irony, Tucker Carlson took on the Newsweek columnist over his baseless assertions that President Trump visited and frequented a mental asylum in 1990, wearing sleeveless dinner jackets and bouncing off walls.

The interview bore out a terribly addled Eichenwald, who displayed advanced symptoms of acute mental illness.

See for yourself.

After the show, Kurt took to Twitter to complain about Tucker and was then granted an invitation to receive a seizure by an internet troll, which Kurt was crazy enough to accept.

This is by far the funniest internet event of 2016 — just in time for the Christmas festivities. We’ve heard nothing from Kurt since then and can only hope for his speedy recovery, in light of his all important job to disseminate falsehoods for Newsweek, making us all laugh with heartfelt vigor.

Rest up Kurt and try to avoid accepting seizure from strangers.

Those who deny the assertions put forth by the Washington Post, citing unnamed and nefarious CIA sources, regarding Russian intervention in the US elections, are being labeled as traitors. Conservatives view all of the Russian hysteria business as the final stage of grief being played out in public, by a completely broken and mentally addled globalist movement left in shambles.

The media is attempting to up the rhetoric by moving past the discovery phase of the investigation, without ever having to actually prove that Russia meddled with the elections, in order to attempt to implicate the GOP and of course Donald Trump. Nevermind the fact that Julian Assange plainly stated today that Wikileaks did not receive the data from any state source, and certainly not Russia. Democrats are only capable of believing what they want to believe, which is that Russia helped Trump win. How else could they grasp the reality that America turned on them and their degradative policies that seek to annihilate the middle class?

In an NPR interview today, President Obama promised revenge against Putin for his meddling. Note that this is extremely uncouth and unseemly — especially since he is a lame duck President. To start a conflagration before the next President takes office is nothing less than a slap in the face to Trump.

Obama: The US will respond to Russia hacking at a time and place of our choosing. https://t.co/xJCwozgoeb

— Maddow Blog (@MaddowBlog) December 16, 2016

source: CNN

“I think there is no doubt that when any foreign government tries to impact the integrity of our elections that we need to take action and we will at a time and place of our own choosing,” Obama told National Public Radio.

Describing potential countermeasures by the US, the President said “some of it may be explicit and publicized; some of it may not be.”
He said he directly confronted Russian President Vladimir Putin about a potential US response, and said his counterpart acknowledged his stance.
“Mr. Putin is well aware of my feelings about this, because I spoke to him directly about it,” Obama said.

Obama and Putin conferred on the sidelines of the G20 meeting in China in September. Afterwards, Obama told reporters he raised cybersecurity with the Russian leader.

Intelligence agencies in October pinned blame on Russia for election-related hacking. At the time, the White House vowed a “proportional response” to the cyberactivity, though declined to preview what that response might entail.

Officials have said US actions against Russia may not be revealed publicly.

Speaking Thursday at the White House, Press Secretary Josh Earnest declined to say whether the US had already begun its response to Moscow’s actions.
“The President determined once the intelligence community had reached this assessment that a proportional response was appropriate,” Earnest said. “At this point, I don’t have anything to say about whether or not that response has been carried out.”

Enter Keith Olbermann, the liberal elite left personified. They have no interest in democracy.

Since Putin personally led attack on our election and coup against us, Electoral College must stop Trump and Treason pic.twitter.com/lBCaVnXy3o

— Keith Olbermann (@KeithOlbermann) December 15, 2016

The Russian Embassy in the UK’s response.

DNC hacking is revealed as inside job: will Russia-bashers be left unemployed? (not likely) pic.twitter.com/2n8CpOCX8e

— Russian Embassy, UK (@RussianEmbassy) December 15, 2016

The dichotomy of Europe spending $80b per mo on QE and US policy to tighten rates is having a profound effect on the euro, which is plunging again today to 104.

To put the decline in context, it’s important to note the currency is down about 50% from its peak and is now entering levels unseen since the early 2000s.

This trend, naturally, will cause many European asset managers to conduct carry trades, like greedy goblins — borrowing in euros to buy US stocks, which at some point in the future will become a tinder box of volatility when the dollar stops rising.

For now, this trade is dominant and no one seems to care how much the dollar goes up, most likely because foreign interests are making an absolute killing buying American stocks and enjoying the dual benefits of a soaring dollar.

Just in case you forgot to pay attention to actual facts, inflation is a fiction, something made up by Central Bankers to validate their rate hikes, which in turn have helped blow out yield spreads for the direct benefit of your local billionaire bankers.

Back in the real world, there’s no basis for a super tight Fed policy. Based off today’s CPI readings, inflation grew by just 0.2% for the month, 1.7% for all of 2016.

Over in Exodus, we have a raw commodity index. I view it as a real time gauge on inflation. We definitely saw a bounce this year, higher by 8.5% — but still well off 2014 levels.

Again, the assumption for higher growth is predicated off the thesis that Trump will deliver on tax cuts, huge fiscal stimulus program, and domestic productivity gains. By factoring in earnings and discounting valuations at much lower tax rates, there’s certainly a bull case to be made, even at 18x earnings. However, the Fed’s mandate of keeping the inflation genie in the box is going to begin looking ridiculous if we don’t start to see some actual inflation. Otherwise, they’ll be hard pressed to hike in 2017.

The 10yr bond yields have risen from a low of 1.55% to 2.6% since late September, nearly a 100bps move while inflation was running cold at just 1.7%.

Boolish.

If, in fact, it bears truth that the diabolical, all powerful, Vlad Putin was responsible for redpilling the American people via Podesta’s email box, then I’ll report on it. But, thus far, zero American intelligence agencies have made that claim. The only proof that Russia was the source that leaked to Wikileaks is some shrill writers at the Washington Post.

The Kremlin responded to the absurd claim leveled by a Washpo blogger, writing for NBC last night, who said Putin was personally involved in the hacking, calling it ‘amusing rubbish.’

Source: Bloomberg

“This is amusing rubbish that has no basis in fact,” Putin’s spokesman Dmitry Peskov said Thursday on a conference call with reporters, while accompanying the Russian president on a trip to Japan. Foreign Minister Sergei Lavrov also told reporters in Japan that he was “stunned” by the NBC News report, which cited two unidentified U.S. officials with direct access to the information.

“I think it’s clear that it’s stupid and absolutely pointless to try to convince anyone of this,” Lavrov said of the allegation, which NBC said came from diplomatic sources and spies working for U.S. allies.

What’s amazing to me are the amount of people who accept being lied to in such an incredulous, sophomoric, manner and never call bullshit on it. The state run media outlets are brazenly making stuff up and then calling out those who tell that truth as ‘fake news.’

None of this stuff means anything to anyone, because Dow 20,000, Santa Claus, and lots and lots of cocaine. I’ve never seen anything like this in all of my years doing this shit. The complacency and disconnect from reality is both an epic achievement of dissonance and also the most retarded shit ever.

Gold and silver walked into this session already hobbled, in a wheeled chair, injured. This morning said wheeled chair has been tossed into a fucking fire. Silver is off by 6%.

America’s borrowing costs continue to skyrocket. The Yellen Fed is out to fuck Trump and the economy. That is not hyperbole.

The euro is quickly moving towards parity with the dollar and look at the God damned yen. Japan is raping us.

All of that above was really bad. Does the market care? Not a fucking chance in red hell. A 12 handle on the VIX. Fuck me.

If that wasn’t enough, the yuan is down 0.44% v the dollar this morning.

Go buy some stocks. Get ’em boys.

European QE is a perversion of modern finance, as evidenced by the widening, or blowing out to use Wall Street vernacular, of yields.

Case in point, back in October German bunds were yielding -0.15%, while the US 10yr yielded 1.55% for a spread of 170bps.

Today, however, after the seemingly endless reservoir of optimism over Trumpism and fiscal stimulus, bunds are yielding 0.37% and US 10yr 2.60%, for a spread of 223bps.

Makes sense? Why the fuck should it? It’s not like finance is a logical sandbox anymore. Instead, it’s just a bunch of emotions filled in with random occurrences that people backfit in order to create a narrative.

By definition, the widening of US-German spreads indicates the US is becoming a riskier place to invest. As such, Germany is afforded cheaper credit and can finance at much lower rates — all thanks and praise to the abomination of grotesque proportions called QE.