It’s been a while since I did a Q&A, and though I have a number of things I could discuss they will wait for another day for two very important reasons.

Firstly, by doing a Q&A I can reply to questions which typically takes me a bit shorter than it does to write longer articles. This is important because it’s a Friday night and my wife is looking smoking hot…

The second point. Oh, I forget what that was.

hot female photo
Photo by Netcolon, pixbay

Onto it then…


I just downloaded your US$ Bull Market Report from Dec. 2014.  It seems most of your predictions did not work out and the US$ has been in broadly a sideways to slightly up market since then.  The Yen is back to 100.

Your entire thesis on the US$ Bull Market appears to be based on the notion that US interest rates will rise whilst interest rates everywhere else will stay low or fall or even go negative.

Doesn’t your recent podcast on owning gold negate the US$ bull stance?

With the FED having postponed its tightening cycle several time and the market now starting to doubt the FED will ever raise interest rates, does your stance from 2014 still stand?

What is your stance on the USD/JPY? It seems the JPY is the new save haven currency which strengthens whenever there is a crisis.  Do you still stand by your prediction that the JPY will weaken substantially against the USD?

Where do you buy the currency options (especially USD/JPY) you refer to in your write-up?  Could you kindly let me know which exchange they are traded on? (I have market access to all major exchanges

Kind Regards


Let me break the questions down one by one.

Dollar Index

Not sure what charts you’re looking at but to get on the same page here is what we said on November 13, 2014:

“A bull market in the US Dollar is underway and its magnitude and duration are likely to catch everyone by surprise. I believe it isn’t out of the question for the USD Index to advance by at least 50% within the next 5 years. If this forecast proves correct, there will be profound ramifications for the global economy and many financial markets, particularly emerging markets.”

The Dollar Report was published a few weeks later so the thesis is the same. At the time it was trading at 86. And today we’re at 95. Didn’t we just catch the biggest move in the last decade?

DXY Index

We’ve been bumping and grinding for the last 12 months and we are forming a converging wedge which typically portends a break. I think we break higher. Maybe I’m wrong but that’s where the weight of probability lies for me right now.

Remember, the dollar spent 10 straight years doing nothing but go down. To expect it to go up in a linear fashion is foolish. It’s not going to happen. Markets don’t work like that. They are non-linear.

The dollar bull thesis is in part due to an interest rate differential – as you mention – but there is more to it than that. The USD carry trade unwinding is arguably a much bigger force behind a rising dollar than interest rate arbitrage.

Then there is the fact that on a relative basis, especially politically, the US looks a whole lot less shaky than does Europe or Japan, where Kuroda-san continues on the path to destroy the yen. This is a ridiculously sad situation given that the two podium donuts on show in the US actually look less bad than the clutch of parasites at the helm in Europe. It is what it is.

USD and Gold

With regards to being dollar bullish as well as long-term gold bullish I believe we are likely to see both rising simultaneously.

The factors driving the two asset classes are at this point in time working to strengthen both. For more on this you can listen to my discussion with Raoul Pal.


I guess this is not really fair if you’ve not been a long term reader as we put out a special Japan report in January 2012 saying we were shorting the yen. It was at 72. Twelve months later at 89, and hit a high of 125 before moving back to 100 today.

For me this is a long term trade I’m happy to have on for the next decade. I actually think it’s possible we get back down to 95 before heading much higher. I’m not prepared to buy the yen in anticipation of that but if we get there I’ll be pressing the short trade. This is quite simply something that I think you can set and forget and not be too worried about short-term noise.

Options on currencies are available via the Saxo platform. If you’re a US citizen then you’re a lepper to Saxo and they don’t want anything to do with you.

Easy enough to get around by using an offshore (non-US) company to open an account. I don’t know of any other platform that offers options on currencies. Perhaps readers can comment below if they know of any.

Next question:

“Thanks for your fantastic blog – it is much appreciated.

I would be very interested in your view on two points:

  1. China looks like a Ponzi scheme to me too. However in the tradition of searching for non-bias-confirming views, I come accross the argument that Chinese SOE debt is not as bad as it looks because savings are very high, those savings fund corporate loans, and therefore in China debt is often used as a substitute for raising capital in the equity markets. By this reasoning, a debt for equity swap could at a stroke hugely reduce the debt load. An example of this argument is here:

  1. I have heard you talk about the frequency of six-sigma events in today’s markets. This may or may not be remarkable, but I think we have to exercise caution over this interpretation of a statistical measure. Standard deviations are only applicable to normally distributed events, and financial events are certainly very far from normally distributed. I think that the frequency of n-sigma events is just re-enforcing this fact, though of course their increase does point to a change in the climate. Do you agree with this?

Thanks again,


China, a Ponzi Scheme?

This argument has been used before. It’s a variation of “we owe it to ourselves so it doesn’t matter”.

Let’s say you lent money to your cousin Joey who, instead of using using it to grow his business as promised, bought a Bentley (he clearly has terrible taste).

Since you found that, after he failed to pay you back your money on time, he’s put some mileage on it, taken out an additional loan against the car to access some more cash, and dinged it parallel parking which we can’t really blame him for since it’s such a big ugly sucker. You’re family so it doesn’t matter?

What about a debt for equity swap? You get the equity in his “ugly as sin” Bentley. But wait, it’s encumbered and when you net out the debt against the equity you realise the

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