As I was taking an Uber ride to the Shangri-La hotel in Paris for drinks at the bar two days ago, I noticed that many people gathered outside the gate as I was pulling around the curve. At first, I thought it was a celebrity from Hollywood or a big sports icon, but it turned out that as I walked into the lobby, Elon Musk’s mother was sitting in the lounge waiting for her son to come down.
Just as he passed by accompanied by his mother, who is celebrating her 75thbirthday in Paris while he participates in the conference in town, I remembered seeing Peter Thiel the day before in the Four Seasons hotel.
Paris is packed. The Olympic Games will be held here next year in late July, and the construction projects are in motion along with many improvements and upgrades the city is doing to prepare for the rush of tourists from around the world.
France’s economy is based on tourism and luxury fashion, and they are both running on all cylinders.
That is a key factor for the strength of the euro and international stocks, which correlate closely to mining stocks!
A strong euro is detrimental for U.S. tech equities in general and positive for resource companies.
The reason is that when the entire world is in risk-on mode but prefers to own a portfolio that’s not focused on the United States, money is flowing out of dollars, which is the perfect setup for a meltdown in the dollar:
As I’ll show you next, the FED’s latest FOMC decision paves a clear path to a weak dollar going forward.
Leaving interest rates as they are in June left the door open for further increases in July if needed, but markets are convinced to a high degree that come September, which is the following rate decision, the FED will not do any more hikes.
In other words, the July meeting is priced in as the last hike.
Jerome Powell is very aware that inflation will take time to come down, but their main predicament is that they can’t really get a handle on the lag effect.
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They see their policy is working on mortgages (the housing sector) and growth stocks (venture capital), but whatever isn’t immediately impacted by interest rates is hard to predict, if not impossible.
The Federal Reserve is taking it slow. In their estimate, they’ve taken the necessary steps to bring inflation back down, and their thinking is that the conditions that are needed for making that reality work are already with us.
What Elon Musk knows is what Joe Biden, Wall Street, and we believe as well: the dollar’s next big move is DOWN.
China is stimulating and easing, which means that their loose-money policies encourage investment while the “higher for longer” regime is slowing the economy down even more within the U.S.
The next stage is to see a clear and unmistakable selloff in the dollar. As I’ve said all year, my estimate is that it will begin right after the FED’s last rate hike!
We are probably only one month away.
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