In a recent article in the New York Times, some analysts and reporters are finally figuring out what I’ve been saying all along: Investors all over the world are hoarding cash, which is deflationary …
And most of the cash is being hoarded in U.S. assets. Mostly in U.S equities … in U.S real estate … and in high grade U.S. corporate bonds.
No surprise, really. I’ve been telling you about this since at least last year, and how several major economic cycles were all converging to make this period through late 2020/early 2021 one of the worst on record.
That’s because the cash, instead of being spent by governments and consumers on infrastructure and retail, is also depressing interest rates artificially low as investors chase after returns.
And eventually it will also create massive bubbles in stocks, then commodities, and more.
We’re not at that bubble point yet. We have a ways to go in equities and commodities. But there’s no doubt the capital inflows into the U.S. are big.
According to Brad W. Setser, an expert in global financial flows who worked at the United States Treasury from 2011 to 2015 …
Roughly $750 billion of private money has poured into the United States in the last two years alone. About $500 billion, he calculates, reflects European and Asian investors buying United States Treasury securities, bonds issued by Fannie Mae and debt issued by top-shelf American companies.
Many are expecting the foreign inflows to taper off soon, because the sentiment outside of our country toward either Hillary or Donald is just as bad, if not worse, than it is inside our country’s borders.
So the thinking is that foreigners will soon start pulling their money back out, right after the elections.
I say hogwash!
|The U.S. dollar is still king of the hill.|
First, interest rates here are higher than they are in Europe (where they are mostly negative), in Japan and most other parts of the world. So that automatically acts as a sort of magnet attracting foreign capital.
Second, interest rates aside, and even considering Hillary or Donald, the U.S. capital markets are still considered the most liquid and safest markets on the planet.
Third, the U.S. dollar is still king of the hill in the currency markets. And despite all those pundits out there who say it’s going to crash any day …
It’s not going to crash and instead, it’s going to get even stronger as more and more capital flows into U.S. asset markets seeking shelter.
Fourth, Europe and Japan are a mess, and their economies will get even worse next year.
Fifth, all — and I mean ALL — of my cycle work continues to point to a period of economic chaos that hasn’t been seen since at least the Great Depression.
Bottom line: Be sure you’re prepared to weather the next several years. If you’re not, they promise to turn your life inside out and upside down …
While if you are prepared, not only will you protect your wealth, you’ll also have multiple opportunities to grow it many times over.