The Capital Wave Report - March 9Good morning, this is a PAID version of Me and the Money Printer.
Morning Surf Report
The S&p 500 reading is negative 36 this morning, with a -12.7 reading on weighted cap. The latter figure indicates that the breakdown continues among smaller S&P 500 names. The Russell 2000 reading remains under extreme pressure this morning. Good morning: Two quick things… first, I’ll address Iran and everything tied to liquidity and momentum in a moment. Second, I have a minor medical procedure today and will be out until the afternoon. That said, if you have questions, put them in the comments, and I’ll get to them. Tomorrow morning, I’ll walk readers through how to use this report and what it all means… Most important right now is to understand we’re in a volatile environment. I want to talk about the big risk problem that isn’t Iran. It’s the U.S. dollar. Right now, as markets selloff, the U.S. dollar is moving higher…
That confuses people, so let me keep this simple. I explained this on a video last week, but it warrants greater understanding. The dollar is both the primary trade currency… and the primary refinancing currency in the global financial system. This creates a dual problem right now. In the West, nations are scrambling for oil supply. To settle contracts, they need U.S. dollars. So they convert their currencies into dollars, which then drives up the cost of available dollars. The dollar’s value goes up as MORE DEMAND for dollars happens. That’s the first side of the equation, and most people understand this. But it’s not just oil. It’s every major commodity that is settled in U.S. dollars in markets. Then, there’s the more important (yes, I said more important) part of the equation. The dollar is a debt instrument… used to settle debts. It says so right on the Reserve Note. U.S. currency says: "This note is legal tender for all debts, public and private."
Well, funny thing about that. When it comes to debt and refinancing debt, you need a lot of dollars. So, right now, there are deep concerns about banking reserves, private credit (access to capital), and the refinancing of massive amounts of debt this year. What is needed to do so? The dollar. So, when we have these “liquidity events,” it turns into a race to cash. The dollar SURGED during the COVID epidemic for this reason. At the same time, people around the world are looking for dollars because their local currencies are also falling against the greenback. When our dollar strengthens, and their currency weakens or stays sideways, they need more local currency to pay off debt. That can quickly create a credit crisis. This has gone from “we’ll see what happens” to something very serious in just a few days. And that’s how it starts… quiet… without a lot of fanfare. Our signal has largely been negative since January 28 (with a few intraday positive moves, but never a suggestion of a sustained move). We’ve had cracks show in private credit, large drops in gold and silver, massive momentum downturns, a sharp correction in Korea, and now the question is whether investors flee to the dollar… All for their own individual, rational reasons. Remember to ask yourself the questions I presented in last night’s presentation… Stay cautious, stay vigilant, and control what you can control in this market. Meanwhile… If I’m Shorting Anything It’s…It’ll be this stock…... Continue reading this post for free in the Substack app
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