US Dollar Goes Parabolic Vs. Russian Ruble and Japanese Yen
Despite the
junior resource sector being near a major bottom and going through a
bear market of epic proportions, I still believe that this may be one of
the best times to add to quality positions. Nothing perfects one’s
craft in the financial markets like a bear market. In a bear market one
has to refine their skills in stock picking. The emergence of a new
bull market is usually the most propitious time for outsized gains.
Investing
in stocks is easy if you follow the rules that have proven to be
successful over time. The number one rule is buying low and selling
high. Many investors are chasing the US dollar (UUP) and Large Cap
Equities (SPY) to record heights liquidating all their junior miners
(GDXJ). Be careful of selling low the junior miners and buying assets
such as US bonds (TLT) and large caps (DIA) at record high valuations.
In
2011, the herd mentality pushed silver and gold to record values
selling all their stocks before a multi-year correction ensued. See my
article back in 2011 which was published on Seeking Alpha which warned about the precious metals market overheating and my video analysis from August 2011 forecasting a bottom in the S&P500.
The
opposite tactic should now be considered of liquidating large cap
equities, real estate and the US dollar and build positions in junior
resource stocks that are extremely high quality and compelling takeout
targets. Gold (GLD) and silver (SLV) could gap higher by the end of
2014 and the top notch juniors could skyrocket.
It’s
not just me that sees the value in gold, but entire nations. The Swiss
voters decided not to back the Franc with a 20% gold reserve with a
pledge never to sell its gold again. However, it is important to be
encouraged that people are beginning to be concerned about fiat currency
and foreign exchange manipulation. The Swiss made a mistake back in
1999 to drop their gold backing.
Look
at the Russians who bought close to 19 tons in October. The Russian
Rouble is crashing along with the economy due to the Ukraine standoff
and record low oil prices. Smart investors should be adding precious
metals and energy to their portfolio instead of expensive US dollars.
Demand in China and India is still strong for gold and silver as
evidenced by record coin sales and numismatic premiums rising.
Could
the Russian economic collapse spark a global rush to buy physical gold
and silver by other nations and sovereign wealth funds? Eventually, a
change in psychology for precious metals could affect our junior mining
positions trading at pennies on the dollar to see explosive gains.
Many
Central Banks around the world have a zero or negative interest policy.
This expansion of fiat currency on the market has never occurred
before yet investors are flocking to the US dollar in record
proportions. However, smart investors are already positioning ahead of
the masses. When the US dollar bubble pops and follows other currencies
lower, then gold and silver may appear as the new safe haven. It is at
this time where our junior miners which are trading at pennies could be
trading for dollars.
When
this financial event occurs it will be too late to buy. One has to
prepare ahead of the storm. The sages ask who is wise? One who sees
the future. Its easy to recognize what’s happening now. Being able to
see the developing storms ahead and acting upon it before it hits is the
challenge. The rebound in precious metals could be one of a series of
gaps higher. Right now look for a rally to begin when the recent
downtrend in gold since July is broken to the upside at $1205.
For
the past 70 years, Americans have lived in economic luxury like we have
never seen before in human history. This has been due to huge
increases in debt and borrowing. The Roman emperor’s would be jealous
of the average American and Monday Night Football. More Americans care
about the top Quarterback ratings rather than the debt level. Only a
small minority of Americans and Swiss are concerned about the dangerous
debt levels in Europe, Japan and the United States.
Now
the dollar is strong against other currencies. Some incorrectly
believe this is true to the strength of the US economy. The only reason
the US dollar is rising is because all the other currencies are weak.
The Japanese and Europeans have been turning on the printing presses to
maximum for the past few months. Don’t be surprised to see credit
rating changes to these nations.
The
US may be on the verge of another economic crisis. In addition, there
is a growing chasm between the races in the United States. Look at the
violence and looting in Ferguson, Missouri. Watch the protests in Hong
Kong as well.
We
are in an environment which could destroy the banks. They are scared
as they are still sitting on hundreds of millions of bad loans. Don’t
be misdirected by the new age economists who say deficits and soaring
debts are not such a big deal. Eventually, the piper must be paid and
not with fiat money but with real money such as gold and silver that has
maintained its value for thousands of years.
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