Pervasive Dollar Strength
November 23, 2015
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
The US dollar is quite a good deal better and it is better almost universally, falling only relative to the Mexican Peso and relative too to the Brazilian Real. Further, even in the case of the Peso, it is weaker by only the very barest of margins, and relative to the Brazilian Real, given the dollar’s surge higher late last week, we are seeing just a bit of correction, with the trend still in the dollar’s favour and against that of the Real. Further, we note that the Ruble is quite weak and so too the Chinese Renminbi, but we note too the rather more severe weakness of the British Pound Sterling and of the Canadian dollar… both of which preclude us from saying that capital around the world is seeking the safety of the “English speaking currencies,” and instead allowing us to say simply that capital is fleeing to the US.
The focus these days seems to be upon China and the slowing economy there. There is no question that the economy in China is slowing, but “slowing” in China means that instead of 10-12% GDP growth the economy is growing at 5-7% and that, in Chinese terms, is recessionary. We are not of the mind that believes that China is slowing into a real recession, which is the psychology of the market at the moment and which seems to be the dominant thesis being promoted by those seemingly most popular in the print, radio, TV and blog media. We shall simply suggest to those who “buy” into the notion that China’s economy is collapsing that they remember that the greatest net migration in world history is still taking place in China as several hundred million Chinese from the western provinces move to the stronger economic environs of Eastern and southern China and that this migration shall not end for decades into the future.
Have there been pockets of over-building? Of course? Are there practically whole cities that have been built that may go empty; are there whole areas of building that shall go uninhabited? Yes… obviously and to argue otherwise is naïve. Have there been roads built that shall never be used? Without question there have been… and there will be in the future. However, as we have said relentlessly here and in speeches and interviews we have given, we must always remember that China’s villages in the west have left the 14th century behind and the people leaving them are leaping into the 21st century and they are not going back. Having seen modernity, they are not going back to life in the Dark Ages. That is always worth remembering when one is overcome by “Chinese bearishness” as presented so relentlessly by others.