What’s happening to the Hong Kong Dollar is happening everywhere in the Eastern Hemisphere.
And you know who benefits from all of that, right?
The below video from Real Vision is responsible for this week’s blog post. It’s relatively short, and very good.
Brent Johnson most of you know. He came up with the Dollar Milkshake Theory, which I’m fully on board with, and he’s the only other person I know of aside from myself who really goes deep into world currencies.
Francis Hunt is AKA “The Market Sniper”. While I could not disagree more with his technical analysis, his long term fundamental views on the world have always been upper-tier. Pretty sharp on energy too.
Watch it all. Please enjoy.
At the 4 minute mark, Francis shows how when the DXY goes up, the Hang Seng typically falls, which means money is leaving the market, and therefore the country. This is correct, but this phenomenon is pretty much happening everywhere, to try to make it look like it’s Hong Kong-specific is nuts.
5:30 mark — You may ask yourself, “Why can’t any country just peg their currency to the USD?” This is why. Pay close attention to what Francis and Brent say here.
9:40 — When pegs break, they BREAK. Remember EUR/CHF? If you’re holding any pegged currency, please be aware of this.
15:30 — One thing that is fairly unique to Hong Kong is because of all that’s happened there in the past 4 years, just how many people have fled. So much money, talent, and business that was there ten years ago no longer is.
This is likely to happen in places like Europe too because…
Crisis One Has Officially Arrived
The energy crisis is here.
I would say we’re in the first inning of it, which means it could go on for awhile.
Countries who have made boneheaded mistakes by listening to NGOs instead of people who actually work in the energy space are finally having their chickens come home to roost.
With energy prices either becoming exorbitantly expensive, or even worse, energy just simply not being available, this will cripple business.
Keep in mind, most businesses run on thin margins to begin with. The only ones who would have any chance of surviving this are the large corporations who already have lots of cash reserves, or plants in other countries outside of the EU.
Score another catastrophic loss for small/medium businesses. Done on purpose? That’s another conversation.
But if this is happening, why would any foreign money want to be invested here? Bail, Bail, Bail!!
As money comes flooding out of these businesses, just like we saw in the HKD video, expect the currency to suffer too.
And if even more money is going to be leaving the Euro, where do you think the majority of that money is going to end up?
This gives me an even further bullish bias on the USD and the DXY.
And bear in mind what happens to literally everything else when the dollar goes up.