Important Q&A with Larry!

Larry Edelson

I’ve been receiving so many email questions of late, about almost every market, that I decided to devote this week’s column to answering the most important ones. So here we go. Do note that the questions have been edited for clarity and brevity …

Q: In late September, rumors were running wild that the Chinese yuan would be given reserve status by the IMF and that the U.S. dollar would crash. But the opposite happened. The yuan fell and the dollar soared. Why?

A: Don’t buy into the garbage about the dollar crashing anytime soon. It’s not going to happen. Period.

There are several reasons why. Chief among them:

A. There is too much dollar-denominated debt out there — at least $14 TRILLION, and much of it outside of this country. As that debt gets paid off, however slowly, it’s dollar bullish. And …

B. No other single currency, even the euro, comes close to the number of dollars in circulation around the world.

Total global currency reserves are roughly 62 percent dollar-based. For the dollar to crash, you would need the yuan or some other currency to replace those dollars held all over the world, overnight. That’s not going to happen so easily.

More simply put, there’s not enough currency in the world to topple the U.S. dollar. There are not enough euros, yen, pounds, or Swiss francs, let alone yuan.

Bottom line: The notion that the dollar is going to crash anytime soon, is nothing but bad analysis and/or fearmongering. It will have its pullbacks, but it’s set to move higher into at least late 2017.

The U.S. dollar is set to move higher into at least late 2017.

Q: Why are you so bullish on Asia, China, while so many analysts are bearish?

A: Simple answer: Most analysts who write about Asia have never put their feet on the ground here, or if they have, it’s for a few days to attend a conference.

On the other hand, I have a home there and travel all over Asia, with my most recent trip being to western China and following the old —and new — Silk Road.

In other words, I get out and mix with the people, with farmers, shop owners, the locals.

Do that and you see an entirely different Asia. You see one that is booming with desire, booming with wants and needs, booming with economic growth.

Moreover, you have to understand where these economies are truly coming from, and how they are managed. It’s all very different from what you know about the West, and very different from what the analysts who never go there or spend a few days there at most tell you.

Nationalism in Asia is extremely high, as high as some 80 percent approval of the current government in China, just as an example.

So, when governments in Asia steer their economies in a certain direction, the people approve and follow. That too is obviously very different from the West.

But most of all is the fact that three out of every five people in the world live in Asia.

And they are all pretty much at the same point as the United States was in the late 1800s: Experiencing industrial and service sector revolutions and the birth of free-market economies.

Economies that are four billion people strong. My advice: Don’t buck the trend in Asia. You’ll get run over by eight billion feet.

Q: Is gold still on track for its next leg up? How about silver?

A: Unequivocally, and timing-wise, YES. Based on all my models, there is no question, no doubt whatsoever, that the precious metals should start to rally again.

Importantly, a real buy signal will come in gold only with a close back above $1,275 on a weekly basis. I am not happy with the recent sloppy trading in the metal, so until we get more clarity, caution is advised.

Q: Has oil bottomed once and for all?

A: No, it has not. That said, we did get the short-term rally to back above $50. But according to all my models — and despite recent OPEC agreements — oil should plunge back to new lows in the first quarter of 2017.

Hard to believe? I agree. But that’s what my models tell me. Moreover, any agreements struck by OPEC members aren’t likely to hold. Individual members desperate for cash will likely start cheating again, and there you go, pedal to the metal with supplies.

Plus, you still have …

A. Deflation and the strong dollar.

B. Sickly economic growth in Europe and meager economic growth in the U.S. crimping demand.

Q: What’s your latest on the U.S share markets?

A: Long-term still extremely bullish. Short- and intermediate-term, expecting at best sideways action, at worst, a decline back to test longer-term support levels, which now stand at roughly 17,000 in the Dow Industrials.

Keep in mind that no matter what you hear, no matter what kind of foolish analysis about earnings, etc. that most analysts espouse …

The U.S. equity markets remain in long-term bull markets because …

1. They are the world’s largest, most liquid — making them magnets to attract capital from weak economies such as Europe … from crisis hot spots around the globe like again, Europe, and the Middle East … and other regions of the world where the cycles of war are now ramping up.

And …

2. They are the world’s strongest bastion of capitalism. That means as governments of the West, namely the U.S. and Europe, become more authoritarian, struggling to survive, capital will continue to pour into U.S. equities.

U.S. equities are non-confiscatible, offer private sector opportunities to build capital, and are symbolic of true capitalism.

Those attributes are going to become even more important in the months and years ahead.

Lastly, some parting comments for today: For all of the above questions as well as those I have not been able to address in this column:

1. Don’t buy into all the garbage out there in the financial media.

98 percent of it is either dead wrong or fear-mongering to part you from your money.

2. Think out of the box. Question everything you ever felt you knew about the markets. Everything you read or are told, even by me.

Think independently and you will not only survive any financial crisis that comes your way, you will also prosper.

3. Build your cash, your ammo, while the markets are relatively quiet, like they are now.

Keep at least 70 percent of your liquid net worth and use roughly 30 percent of your liquid capital for all the great profit opportunities that will come your way!

Best wishes, as always …

Larry

P.S. When the K Wave crashes into the American economy …You’ll either be one of the lucky few who are rich and secure; or one of the millions who are hungry, desperate, and afraid. Now you might be tempted to say, “Dow 31,000 sounds pretty good to me, Larry, I’ll just hold onto my U.S. stocks and watch them double in value.” In other words, you might be tempted to sit tight and do nothing. But sitting tight is the worst thing you could do, for three reasons … to find out what those reasons are click here before it’s too late!

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

Comments 39

gordon October 26, 2016

As a serious investor can you explain to me the rational in the following statement. quote Apple Inc posted a third quarter in a row of declining iPhone sales on Tuesday, but beat Wall Street targets for its flagship product and forecast higher-than-expected revenue for the critical holiday shopping season.unquote. 3rd quarter in a ROW for declining sales but beat Wall Streets dodgy numbers BUT our numbers will be higher than forecast (Ouija board consulting no doubt.) for the critical holiday shopping season so buy our products WOW This makes the forecasters economists the biggest liars in the world to get you to buy the stock. Shameless.

frank October 26, 2016

well larry i wish i had the cash that you guys always say put some aside like 70% and play with 30% i dont have enough to do that maybee i will strike it rich with your direction keep up the good work larry

Jerry Fetter October 26, 2016

You mention the gold buy signal as being when gold closes > 1275 on a weekly basis. Not sure what that means. Greater than 1275 every day for one week, greater than 1275 every Friday for several weeks, greater than 1275 for ????? Appreciate your good work. Thanks.

Mick Dundee October 26, 2016

Larry doesn't reply here so I'll have a go. If you look at charts you look at intraday, dailly, week,, monthly etc charts. If you look at weekly chart then it is the closing price of the week that is the final price on a weekly basis. So for sure that is what Larry is saying. POG must be able to finish the week >$1275. So if POG ticks up above $1275 on say a Wed, you should, based on Larry's advise, ignore the urge to rush in. This advise is of course assuming that charts will give you some advance warning of events to unfold. If you have a failure to deliver on a Monday or war breaks out etc and price gallops away, some re-evaluation of situation may be warranted. You can wait for Larry's extra-ordinary mail advising what to do or you can do what I do to sleep well at night; have a core holding of physical PM's that I keep adding to in small amounts every so often.

Tom October 26, 2016

nothing today

Anita October 26, 2016

As a long time subscriber is it possible to get a copy of your book and the reports you offer to new subscribers?

Norbert October 26, 2016

Hi Larry : Keep up your good work, you sound knowledgeable ,sane and honest different from the frenetic activity and "wisdom" being produced by the experts .regards Oct.26.2-16

Merlo October 26, 2016

Larry, what effect the December vote in Italy cause in the US and the world?

SteveH October 27, 2016

Hi Merlo, This is what Bloomberg thinks about it. We all await Larry's comments. https://www.bloomberg.com/view/articles/2016-10-17/will-italy-leave-the-eu-follow-the-money

Chuck Lusky October 26, 2016

Good Morning Larry, In the Q&A discussion on, October 26, 2016, regarding oil, gold, and silver it was pointed out that deflation and the strong dollar will keep a lid on the price of oil. In line with the current deflation and and the strong dollar, the CRB index has been trending down for some time. Why will the price of gold and silver rise while the dollar remains strong? If deflation continues will this make "cash king" and not precious metals? How are gold and silver different from most other commodities? Thanks, Chuck

Leroy Schaefer October 26, 2016

Thank you so much for the above information. Much of it I have been wondering about. Leroy Schaefer

Dwight Keltner October 26, 2016

When would you recommend buying gold and who from and would you know when the wheat market and cattle market will turn around thanks Dwight

Tomas Evans October 26, 2016

Hi Larry, Just one general question. According to Bureau of Labor Statistics Inflation rate in US for Last 12 months e: (year over year, YOY) is 1.46%. You are talking on deflation for the last good couple of months . What is going on here? Regards, Tomas

paul f October 26, 2016

with the water way opening up because of climate change in russia and sweeping around and down to china, will that effect the silk road in any way for transportation in the future between the two options?

Linda October 26, 2016

Larry you recommended to buy UUP. I went back 10 years of UUP chart the price range is between $21 - $27. Today it is at $25.50. Do you have a long term target price for UUP? Thanks

malcolm g chapman October 26, 2016

Dear Larry, thank you for your insight, im not a big investor but I watch what is happening in the world, yes the US has evolved into the biggest third world country in the last 8 years compared with other third world countries, did well on Bakken oil a few years ago, then got out, I bought Canadian dollars through my Ever Bank account as it seams to be a stable currency as I believe the US dollar will drop 75% others more educated say 80% so I could make a few dollars, It will probably happen soon after the election, thats when we will learn of the true debt that has been hidden from us. Hears my take on things. I expected a collapse of the dollar before now, however other countries are pouring their money into US banks, the dollar is gaining making a fall even harder that will effect world banks as everything is based on the US dollar even our Debt.The good thing is if it does fall, that 20 Trillion will be only worth 5 Trillion and manageable to pay off.I believe Trump will win, however nothing is going to happen over night. all these duplicitous branches of Gov will be cut, saving Billions a week, welfare and SS fraud,self deportation of Illegals will save more billions a week, cutting off billions to countries that stab us in the back,the Mexican peso will be worth more, US industry will be coming back for safety reasons as the world erupts in chaos especially Europe & China but the US will not be down for long, a rising dollar will raise all boats world wide, We will abandon the middle east and let them slaughter each other, they have nothing we want, their only export is sharia law?.The insurgents in the middle east will blow up Saudi OPEC oil for religious reasons,the US will become the worlds oil, gas & coal supplier, China is building dozens of cheap coal fired plants but have no coal?.Russia's investment in the middle east will be good in the short term but will bankrupt them, the Russian/china gas and oil pipeline to china will be abandoned, technically and financially not feasible. The US & UK countries will emerge on top.Japan will be doomed by mother nature, thats my story and im sticking with it, what do you think?

andy October 26, 2016

China & Russia are hoarding Gold , so I would not be too quick to write off their survival especially if all the paper currencies tank , that is what has happened to all paper 'money' over the centuries as people saw it's value fall and refused to accept it. The dollar won't escape ,after all ,the US have printed more than anyone else, if anything it could be the first to lose peoples trust,and collapse, Keynsian debt economics which has been the basis of all the modern worlds paper currency just does not work. Gold and Silver has gone through the centuries and emerged every time as something people trust, When the Greeks tried to mix it with copper in order to pay the army in the Trogan wars and Merchants realised something different in the weight or colour they hoarded the original pure coins and circulated the mixed ones but eventually no one would accept that as payment, exactly what will happen with the paper .

Raymond Lutz October 26, 2016

Thank you for your timely reassurance of your views on today's markets. It helps me to stay with you on my investments.

Lawrence graves October 26, 2016

Larry, I know you have probably answered this question a dozen times, but here goes anyway. Financial market experts predict the FED will raise interest rates beginning this year and accelerating in 2017. Aren't rising interest rates bad news for gold? Thank you.

Chuck Burton October 26, 2016

"U.S. equities are non-confiscatible". That may be true at present, but politicians can change laws to benefit governments and themselves. Mrs. Clinton is, above all, a politician, and if elected, she will do whatever she thinks necessary to hold power. She could teach Elizabeth I a thing or two.

ian October 26, 2016

Yes Larry I believe maybe not all the figures but some,But until the DOW gets below that 18,000 these dam bulls are keeping their heads above water,maybe today maybe tomorrow it could crash to 16000 but Ive been waiting ages,Im not holding my breath.

Lis October 26, 2016

What about the pegs? Euro pegs. Dollar pegs. How may currencies will get the "Swiss flu"? How many countries will land in "Greek debt"? As the worlds leading currencies begins their dance macabre, we should start to see casualties all over the place. So: what about the pegs?

james stephenson October 26, 2016

You like China - how about TCTZF - Tencent Holdings. - Internet-mobile services. Started 1999, now the 11 largest stock Cap in world. Performance is spectacular - 29% ROE, 36% Operating Margin, EBITDA 36.6%, Sales per employee $4 million. Market Cap. $260 Billion - just behind General Electric and JNJ - WOW

Chuck Burton October 27, 2016

Try TCEHY. That version of Tencent at least pays a small dividend.

james stephenson October 26, 2016

Please reply about TCTZF

Barbara Handly October 26, 2016

Why do you spend so much time in China?

Tony October 26, 2016

Hi Larry my intake China was inducted to the IMF last year SDR valuation occurred this year. A deposit of so called tangible assets was required in order to give it % of SDR currency.Some analysts say gold is not currency. but China becoming transparent partially gave the Yuan its initial valuation So I guess gold is currency

Ben October 26, 2016

What do you think of single premium, dividend paying, whole life insurance for that 70% of cash upon which you sit? Your Money is protected from gov't , gains = 6-9%, and its tax-free to your heirs + you can take loans against it, without interest should you need it. What are your thoughts. Thanks, Ben

Jim October 27, 2016

Ben, stop and think: LIC's are very limited in what they can invest in. Where do you imagine they could put your single premium to earn so much, net of all their reserves and expenses (including the agent's commission on such a sale)? Also, LIC'S don't make interest-free loans to policyholders. Good luck!

Jerry October 26, 2016

Larry, Thanks for your timely insight on the markets. You have obviously found the right combination of cycles and data plus experience to so accurately time the markets. I have been a trader for many years and I know how difficult that can be. Thanks again. Jerry

Apis Bull October 26, 2016

Now this is sound advice. Starting to get worried you sold out to fearmongering, this is the Larry I fell in love with. All but Asia markets. Japans demographics and economy are imploding. Chinese real estate bubble about to burst, yes Yuan is cheap right now but dont trust an economy that is ran by a government that sensors the internet, human rights violations, no reapect for the environment and you expect them not to cook books? Buyer beware

Jack Yankee October 26, 2016

Larry: You keep saying that "U.S. equities are non-confiscatible". Yet, our shares are 'owned' by our brokerage houses. The shares are issued to the houses, such as Scottrade, ETrader and such. We think they are ours, yet, in actuality, they are owned by our brokerages. In the case of severe crisis, our government has all the cards in the deck. It can declare that the assets of our brokerage houses are government property. Since our shares are named as being owned by the brokerage, and they are governed by the government, they ARE confiscatible! It's not like it used to be, where the shares were mailed to us, and we held them in our possession. Jack

Chuck Burton October 27, 2016

And remember, politicians can ALWAYS change laws, when it suits their greedy little purposes. Remember, FDR made people turn in their gold for one price, then, when the turn in was complete, raised the price. He cheated people out of the difference in those prices.

Barb October 26, 2016

I've been reading about banks and government pushing the masses to do all spending online as they want to usher in a cashless society (predicted in Revelation) where one can no longer use cash to pay for goods and services (and I assume no more credit cards too). My own bank is promoting their free bill payment services, even willing to write out checks and mail them on my behalf for free. Since when did a bank do anything for free? It fits, however, with the idea to bring about a cashless society so they know everything everyone does with their money and can tax accordingly and so that they can control everyone in the country. Your take?

Chuck Burton October 27, 2016

But if all accounts are held in blockchain (Bitcoin, ie.), there is no central record, no need for banks and such. It should actually make all transactions secret, and undecipherable.

H. Craig Bradley October 26, 2016

RISK-ADJUSTED RATE OF RETURN KEY GOING FORWARD Those who espouse Relative Strength or Momentum Investing styles would ordinarily not keep much money in cash unless the other investment classes show increasing weakness. At that point, allocating up to 50% in Cash makes good sense, since most (conservative) investors want to minimize loss of principal. You need a strong defense, as well as a strong offense. Being overly aggressive in terms of your individual risk tolerance ( for volatility) will work against you sooner or later when the market has a big drawdown. Cash can be a very good hedge at certain times, as it was this past January and February. Still, cash is guaranteed to lose at least 2% every year due to inflation and it pays only .02% in most liquid accounts. One should be invested in equities with 50% of their money long term. In particular, retirees ( over age 62) face an even bigger risk by being under-invested: Longevity Risk or outliving their money. As people get older, health care related expenses increase substantially. Add that in with Death and Tax ( Increases) and you can see financial outcomes remain uncertain. You have to keep invested. "You have to be in it to win it", as they say.

Bob Schubring October 26, 2016

Meanwhile, the big shakeout worry is in shares of communications media. A Libertarian victory in as few as one US state, could deadlock the Electoral Vote and force the House of Representatives to pick the winner of the 2016 Presidential election. This will be a volatility-builder, if it happens. Unlike the parliamentary governments of Europe, where parties haggle out the details of a coalition government, when no party won a majority, the US Constitution provides this mechanism for resolving an Electoral Vote deadlock, but the mechanism has never been used. Almost certainly the Republicans can assemble a coalition with the Libertarians, but that will mean appointing Libertarians to the Cabinet. This will be nearly as big a story as the Brexit vote. And it will be a major problem for media firms that have consistently ignored the growing numbers of US voters who feel they are not represented by the two major parties. The two-party system presumes a flat world, in which there are two, and only two, sides to every issue. Accepting that issues have multiple sides, requires also recognizing that a workable compromise to solving a problem, cannot happen by one of two sides defeating the other, but instead, by forming a consensus between all the parties to an issue. Just as financial markets achieve a balance between money and all assets, by accepting input from all the participants in the market, political processes must do likewise.

Ken October 27, 2016

There is one question no one seems to want to answer. Or maybe they assume I am full of bovine excrement? Since Bretton Woods in 1944, the dollar has been the reserve currency. This suggests to me that there must be trillions of dollars in foreign accounts used for everyday transactions in virtually every country. It seems to me that when the dollar loses its reserve currency status, this money will eventually find its way into our economy, igniting a huge inflation. All of these countries will have no use for all of those dollars, so what else could happen. Will foreign countries continue to support our economy when the U.S. becomes just another blot on the map?

Rick Frazier Jr. October 28, 2016

Larry, do you believe that in the future to keep a tab on people's income, that a computer chip will be used to store all of our monies, medical records, our whole personal information? That being said, is that a likable possibility? It seems to be heading that way!