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.
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 …
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!