Chapter 1: Understanding Market Trends

The fascinating aspect of analyzing financial markets is that the data tells a truthful story. Technical analysis, which gained traction after the 1929 market crash, emerged as a method for traders and investors to navigate the misinformation prevalent during the preceding bull market. The term "irrational exuberance," famously introduced by Alan Greenspan, reflects a sentiment that has pervaded financial markets throughout history.

Technical analysis offers a lens through which to observe the ongoing fluctuations in various financial instruments—stocks, bonds, and currencies—providing insight into real-time activities, regardless of insider maneuvers or media commentary. The market constantly oscillates between fear and greed, and technical analysis quantifies these emotions while also keeping track of time.

During my interactions with investment groups, I typically begin by asking whether members identify as traders or long-term investors. They invariably respond with the latter, likely influenced by the conventional wisdom imparted by brokers and financial advisors. In the U.S., it's often asserted that long-term investing is foolproof; however, the reality is that while money may not be lost, time certainly can be.

I often present a chart of a well-known stock—without dates—to illustrate a significant peak and subsequent decline, highlighting that it took three decades for the stock to return to its previous high. This example depicts General Motors (GM) from 1965 to 1995, a time when GM was considered a quintessential blue-chip stock. However, the rise of the Japanese automotive industry and poor management decisions led to GM's decline. A notable incident involved Ross Perot, a board member, who humorously suggested that the company could "at least make the best rear-view mirror in the world" and was subsequently ousted for his comment. The chart encapsulates a pivotal shift in a crucial American industry, emphasizing that while no money was technically lost, anyone who had invested in GM with plans to retire in 1970 likely found themselves still working in 1995.

This discussion leads us to the current state of the US dollar and the pivotal question: Can the Biden administration mend the three decades of Republican-induced decline?

Chapter 2: The Political Landscape and Currency Value

In 2002, President George W. Bush labeled Iran, Iraq, and North Korea as the "axis of evil," a statement that coincided with the peak of the US dollar. At the time, no news outlet or commentator recognized the implications of this remark, but the chart certainly did.

It is interesting to note how the dollar tends to rise under Democratic leadership while experiencing declines under Republican leadership. This raises the question: do people perceive Republicans as incompetent in governance, or is it a strategic decision to maintain a weaker dollar to benefit American multinational corporations?

The decline of the dollar during the Bush administration was significant, with a 30% drop reflecting a cheaper American economy. In contrast, despite facing consistent opposition from a Republican Congress, the Obama administration managed to restore much of the dollar's value in the eyes of the global market. Had Hillary Clinton succeeded in the 2016 election, it’s conceivable that the dollar could have achieved full recovery based on historical trends.

However, under Trump, the dollar's performance stagnated or fell once again. Presently, Biden's administration appears to be making strides toward restoring the dollar's standing internationally. This may seem counterintuitive based on news narratives, yet the market's response suggests otherwise.

As an investor, understanding the dollar's trends based on political leadership is crucial.

In summary, the evidence from historical charts clearly indicates that the dollar’s trajectory is closely tied to the party in power. This is not subjective opinion but a factual representation of market behavior.