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Clive Maund: How US Investors Can Best Protect Themselves as Disaster Looms for the $
HOW US INVESTORS CAN BEST PROTECT THEMSELVES AS DISASTER LOOMS FOR THE DOLLAR AND THE US ECONOMY...
July 10th, 2008
The economic disaster that is unfolding in the United States is rapidly gathering pace. The heavy declines in the stockmarket indices in the recent past, while large enough in themselves, mask ruinous losses in many big name companies that appear to be headed for bankruptcy, and given that movements in the stockmarket generally presage fundamental developments in the economy in 6 to 9 months time, the outlook is grim indeed.
American citizens and investors are being hit by a triple whammy - inflation is destroying the value of savings - for the few left who save, that is, the decline in the currency is destroying the value of all assets held in US dollars, and all the while the value of the core asset owned by most people is plummeting. Although many might find it hard to define the term "stagflation", most people are being economically ravaged by it.
On this site about a year ago, US subscribers were warned to move all assets out of US dollars, as much as possible, since which time the dollar has declined heavily. Now, with the dollar looking set to enter another freefall phase after its recent weak relief rally, it is once again of the utmost importance to shift whatever assets possible out of dollars - and not into the British Pound, which looks even more vulnerable. Why is the dollar set to fall heavily? - because other countries are set to raise interest rates to protect their currencies and to attempt to control inflation, but the US cannot do the same, because if it did the already chronically weak economy would implode. The raising of interest rates in other countries will exacerbate the flight out of the dollar. Of course, if the Fed were to attempt to lower interest rates at this point, the dollar would simply collapse.
To conclude. A major dollar downleg looks imminent that should lead to a powerful rally in gold and silver. Get all available assets out of US dollars as soon as possible. Buy assets that protect against the ravages of inflation, gold and silver are the obvious centre stage choices. In times of acute economic crisis governments have often resorted to war to rally people round the flag and get themselves off the hook - for this reason some sort of attack on Iran, although in many respects irrational, is regarded as a strong possibility between now and the election.
On the 1-year dollar chart we can see technically why the dollar is set to "take it on the chin" vey soon. Over the past 4 months it has staged a weak countertrend rally towards the underside of a zone of strong resistance. This rally has served to unwind the deeply oversold condition that existed back in March, as shown by the RSI and MACD indicators at the top and bottom of the chart, and to close up the huge gap that existed between the index and its 200-day moving average. With the 200-day moving average still falling steeply and the index now not far below it, the stage is set for renewed decline - and once the March low and the psychologically important 70 level are breached there will be nothing to stop it going into freefall.
Of course, a collapsing dollar is likely to fuel a powerful rally in gold, which should rise against other currencies as well, for the reason that the money supply and consequent inflation are ramping up globally. The rise of gold cannot ultimately be stopped by government or central bank interference or manipulation, because the eventual clamour for gold (and silver) in physically deliverable form will sweep aside any attempt to suppress. To the extent that their efforts to suppress the rise of gold and silver in the short-term are successful, all they will succeed in doing in creating a "pressure cooker" effect that will result in explosive gains later.
In the light of the above it is interesting to look at the 1-year chart for gold and observe again the powerful breakout from the 3-arc Fan Correction that we had earlier predicted. This breakout is a harbinger of doom for the dollar and signifies that it will soon "go down the gurgler". The reaction by gold over the past week or so following the breakout is perfectly normal and is viewed as providing a last chance to load up before a major rally. Many are worried that gold and silver stocks will be dragged down by a falling stockmarket anyway, regardless of gold and silver going up. There are are 2 points to make regarding this. One is that even if the stockmarket continues to fall over the short to medium-term, the drop in the dollar is likely to be so large that it triggers a powerful rally in gold and silver so that gold and silver stocks move counter-cyclically to the broad market, as they frequently do anyway. Another point to consider is that we could soon be in a situation where the broad market rallies feebly, or at least doesn't drop much, on account of its deeply oversold condition, but at the same time the dollar drops like a rock - in this situation gold and silver, and gold and silver stocks, would soar.
We will now take a look at 2 charts which symbolize the depth of the unfolding economic crisis in the US. Both these stocks are household names and were for many years regarded as pillars of the economy, They are General Motors and Freddie Mac.
The recent drop in the major US stockmarket indices, while large, masks the ruinous declines in many big name companies, and almost makes one wonders if the indices are being tinkered with in the same way as the government inflation statistics - which are an out-and-out fraud designed to swindle old folk and other people on fixed incomes out of cost of living increases. General Motors has declined by a staggering 75% since last October - it would appear that with oil at about $140 a barrel people are starting to lose their enthusiasm for gas guzzling SUV's. A shame they can't or won't adapt. General Motors looks set to be carved up like a beached whale, or headed for bankruptcy.
Meanwhile, Freddie Mac, the giant mortgage concern, has dropped from over $60 to about $10 during the same period. Its chart aptly symbolizes the horrifying state of the Real Estate market in the US. It looks even worse than the GM chart and points also to bankruptcy/dismemberment.
To conclude. A major dollar downleg looks imminent that should lead to a powerful rally in gold and silver. Get all available assets out of US dollars as soon as possible. Buy assets that protect against the ravages of inflation, gold and silver are the obvious centre stage choices. In times of acute economic crisis governments have often resorted to war to rally people round the flag and get themselves off the hook - for this reason some sort of attack on Iran, although in many respects irrational, is regarded as a strong possibility between now and the election.
HOW US INVESTORS CAN BEST PROTECT THEMSELVES AS DISASTER LOOMS FOR THE DOLLAR AND THE US ECONOMY...
July 10th, 2008
The economic disaster that is unfolding in the United States is rapidly gathering pace. The heavy declines in the stockmarket indices in the recent past, while large enough in themselves, mask ruinous losses in many big name companies that appear to be headed for bankruptcy, and given that movements in the stockmarket generally presage fundamental developments in the economy in 6 to 9 months time, the outlook is grim indeed.
American citizens and investors are being hit by a triple whammy - inflation is destroying the value of savings - for the few left who save, that is, the decline in the currency is destroying the value of all assets held in US dollars, and all the while the value of the core asset owned by most people is plummeting. Although many might find it hard to define the term "stagflation", most people are being economically ravaged by it.
On this site about a year ago, US subscribers were warned to move all assets out of US dollars, as much as possible, since which time the dollar has declined heavily. Now, with the dollar looking set to enter another freefall phase after its recent weak relief rally, it is once again of the utmost importance to shift whatever assets possible out of dollars - and not into the British Pound, which looks even more vulnerable. Why is the dollar set to fall heavily? - because other countries are set to raise interest rates to protect their currencies and to attempt to control inflation, but the US cannot do the same, because if it did the already chronically weak economy would implode. The raising of interest rates in other countries will exacerbate the flight out of the dollar. Of course, if the Fed were to attempt to lower interest rates at this point, the dollar would simply collapse.
To conclude. A major dollar downleg looks imminent that should lead to a powerful rally in gold and silver. Get all available assets out of US dollars as soon as possible. Buy assets that protect against the ravages of inflation, gold and silver are the obvious centre stage choices. In times of acute economic crisis governments have often resorted to war to rally people round the flag and get themselves off the hook - for this reason some sort of attack on Iran, although in many respects irrational, is regarded as a strong possibility between now and the election.
On the 1-year dollar chart we can see technically why the dollar is set to "take it on the chin" vey soon. Over the past 4 months it has staged a weak countertrend rally towards the underside of a zone of strong resistance. This rally has served to unwind the deeply oversold condition that existed back in March, as shown by the RSI and MACD indicators at the top and bottom of the chart, and to close up the huge gap that existed between the index and its 200-day moving average. With the 200-day moving average still falling steeply and the index now not far below it, the stage is set for renewed decline - and once the March low and the psychologically important 70 level are breached there will be nothing to stop it going into freefall.
Of course, a collapsing dollar is likely to fuel a powerful rally in gold, which should rise against other currencies as well, for the reason that the money supply and consequent inflation are ramping up globally. The rise of gold cannot ultimately be stopped by government or central bank interference or manipulation, because the eventual clamour for gold (and silver) in physically deliverable form will sweep aside any attempt to suppress. To the extent that their efforts to suppress the rise of gold and silver in the short-term are successful, all they will succeed in doing in creating a "pressure cooker" effect that will result in explosive gains later.
In the light of the above it is interesting to look at the 1-year chart for gold and observe again the powerful breakout from the 3-arc Fan Correction that we had earlier predicted. This breakout is a harbinger of doom for the dollar and signifies that it will soon "go down the gurgler". The reaction by gold over the past week or so following the breakout is perfectly normal and is viewed as providing a last chance to load up before a major rally. Many are worried that gold and silver stocks will be dragged down by a falling stockmarket anyway, regardless of gold and silver going up. There are are 2 points to make regarding this. One is that even if the stockmarket continues to fall over the short to medium-term, the drop in the dollar is likely to be so large that it triggers a powerful rally in gold and silver so that gold and silver stocks move counter-cyclically to the broad market, as they frequently do anyway. Another point to consider is that we could soon be in a situation where the broad market rallies feebly, or at least doesn't drop much, on account of its deeply oversold condition, but at the same time the dollar drops like a rock - in this situation gold and silver, and gold and silver stocks, would soar.
We will now take a look at 2 charts which symbolize the depth of the unfolding economic crisis in the US. Both these stocks are household names and were for many years regarded as pillars of the economy, They are General Motors and Freddie Mac.
The recent drop in the major US stockmarket indices, while large, masks the ruinous declines in many big name companies, and almost makes one wonders if the indices are being tinkered with in the same way as the government inflation statistics - which are an out-and-out fraud designed to swindle old folk and other people on fixed incomes out of cost of living increases. General Motors has declined by a staggering 75% since last October - it would appear that with oil at about $140 a barrel people are starting to lose their enthusiasm for gas guzzling SUV's. A shame they can't or won't adapt. General Motors looks set to be carved up like a beached whale, or headed for bankruptcy.
Meanwhile, Freddie Mac, the giant mortgage concern, has dropped from over $60 to about $10 during the same period. Its chart aptly symbolizes the horrifying state of the Real Estate market in the US. It looks even worse than the GM chart and points also to bankruptcy/dismemberment.
To conclude. A major dollar downleg looks imminent that should lead to a powerful rally in gold and silver. Get all available assets out of US dollars as soon as possible. Buy assets that protect against the ravages of inflation, gold and silver are the obvious centre stage choices. In times of acute economic crisis governments have often resorted to war to rally people round the flag and get themselves off the hook - for this reason some sort of attack on Iran, although in many respects irrational, is regarded as a strong possibility between now and the election.
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