Click Here for this Week's Full Letter - March 17, 2015

Greetings,

          It’s always lonely at the top, especially if you’re the United States. These days the US seemingly loses a long-standing ally every week. Most recently the White House admonished Great Britain for its subservient behavior towards China, notably its decision to become a founding member of the $50 billion Asian Infrastructure Investment Bank, which will compete with the Washington-based World Bank and IMF. The reprimand was a rare breach in the “special relationship” that has been the backbone of western foreign policy for decades.

          This comes on the heels of Benjamin Netanyahu’s speech to Congress, which highlighted Israel’s fall out with Washington. Israel is worried America’s potential nuclear agreement with Iran threatens Middle East security. As US and Iranian diplomats made progress on Tehran’s nuclear program last week, Saudi Arabia quietly signed its own nuclear-cooperation deal with South Korea. The Saudi’s have given America the cold shoulder for several years, but now they’re threatening to kick off a nuclear arms race in the world’s most volatile region. Germany, Russia and China, accounting for 20% of global GDP, have all had a bone to pick with the US in recent years.

           However, there’s one reason these countries can’t stand up to the US in any meaningful way: the US Dollar. USD is the world’s reserve currency and there’s not even a close second. The US has the world’s most powerful military, rule of law and a credible/independent central bank. The idea that the Chinese Renminbi is about to overtake USD as the currency of choice in global trade is crazy. China just announced plans for deposit insurance and floating interest rates last week. In fact, if China were to declare war on America right now, the US’s most potent weapon might be the Federal Reserve. A sudden rate hike to 5% would cause a recession in the US, but it could create a revolution in China where jobs are increasingly scarce.

           No country understands America’s clout in global finance better than Brazil. Two years ago Edward Snowden exposed American spying on Brazilian companies and politicians. At the time Brazil’s President, Dilma Rousseff, cancelled a state-visit and demanded an apology. The apology never came, but now, facing a severe recession, Rouseff is planning a state-visit for this year – where she’s expected to come hat-in-hand looking for a trade deal. Money does not equal power, but when it comes to geopolitics the US has both.

          Marketfy upgraded its portfolio system last week, but there were several bugs and I was unable to complete several trades. Meaning: I really don’t know what the Cup & Handle Fund’s performance was last week. Most of the positions went in my favor, so I expect we made money. I sent out my March investment letter yesterday – if you’d like to start receiving these letters click here.

Today’s letter will cover several topics, including:

• Swiss Watch
• Chairlift To The Top
• Biotech Bubble?
• Chart of the Week

With that, I give you this week's letter:

March 17, 2015

         As always, if you have any questions or comments or just want to vent, please send me an email at mike@cup-handle.com.

Until next time, tread lightly out there,

Michael Lingenheld

Managing Editor – Cup & Handle Macro