If you think the recent bounce in the Dow and other world markets means an end to this year’s opening curtain of turbulence, think again and instead, fasten your seatbelts. The fact is you haven’t seen anything, yet.
In the weeks ahead, the Dow Industrials will fall as low as 13,938 … the S&P 500, as low as 1,353.00.
After some pullbacks, the dollar will stair-step higher this year to over 112 on the Dollar Index, roughly a 13% gain. The euro, conversely, will plunge to 0.91, or worse. The pound sterling will crash into the 1.30 level. And even the Chinese yuan will suffer one blow after another.
This will be the year that will make even the most experienced traders’ and hedge fund managers’ heads spin. Huge losses will be taken by the biggest and brightest of them.
Why? Because the second act or the back wall of the financial crisis of 2008/2009 is now coming home to roost, smacking the governments of the world as a result of all their policy mistakes of the last several decades …
Turning markets inside out and upside down, for all of us, in a way that has not been seen since the Great Depression.
|This year will make even the most experienced traders’ and hedge fund managers’ heads spin.|
Investors are already feeling it. I can tell from my inbox, where loads of email questions are coming in each and every day of the week.
So let me address a few of the most important questions in the rest of today’s column.
Q: Larry, you were right as rain when way back in early 2013 you said the world was going to start to get very nasty again. My question is: Why is this happening?
A: It’s human nature, repeating itself, in great waves, or cycles. All very predictable. All one has to do is study history then measure it using advanced computer techniques and what are called Fourier transformations on data series to extract the cyclic timing.
That’s the scientific end. But the cause is simply human nature. History does indeed repeat itself for the simple reason that, “Those who cannot remember the past are condemned to repeat it.” (Philosopher George Santayana, December 16, 1863 – September 26, 1952.)
That is true not only of investors, but also of world leaders, who continue to make the same mistakes over and over again.
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There are examples everywhere today. Just as in the Great Depression of the 1930s, governments are once again attacking the wealthy, blaming speculators, imposing bans on trading, imposing capital controls, engaging in currency and trade wars.
And more, including becoming more authoritarian, more repressive and finger-pointing.
When you study history and the repetitive nature of the rise and fall of civilizations and monetary systems, it becomes as predictable as the seasons of the year. It’s just the time frames that differ.
Q: Have gold and silver bottomed?
A: I believe there is a good probability that they did bottom in late November/early December last year.
However, we need more confirming evidence. On my systems, that means we need to see gold close above $1,187.80 and silver above $15.46, at a minimum.
Until that happens, unfortunately, gold and silver do remain at risk of another decline to new lows.
Q: You have warned everyone to stay away from government bonds, yet they continue to rise in value. What gives?
A: If you want to be among the sheep being led to the slaughterhouse, be my guest. Buy as many sovereign notes and bonds as you wish.
But be forewarned: Sovereign debt is the world’s largest, most dangerous financial bubble. Tens of trillions of dollars will be wiped out in sovereign debt in the years ahead.
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Q: Oil fell into the mid-$20s, just as you forecast last year. Has it bottomed?
A: All my models now agree that oil has bottomed. I would not be surprised at all to see oil suddenly climb back to the $40 level first. Then pull back, and then head to the $50 to $60 area by year-end.
Q: China is really hurting us all now, wouldn’t you say?
A: No. China is NOT the problem. Yes, its stock market took a big hit right from the opening bell this year, but you can’t pin all the global turmoil on China any more than you can blame any single president of the United States for any of our problems.
The governments of Europe, Japan and the U.S. are the real elephants in the room. They are all now starting to fight for their lives because they are all bankrupt and dysfunctional.
Add in the rise in finger-pointing and the related rise in geopolitical problems and you have a total mess on your hands, one which is just getting started.
Q: There are one or two analysts out there predicting the imminent death of the dollar, something to do with the Saudi’s repricing oil in another currency. Your thoughts?
A: Nothing but hogwash, conspiracy theory stuff to scare the heck out of you.
First, why would the Saudis or the Chinese or the Russians for that matter want to kill the dollar when they all have huge dollar reserves? It would be worse than shooting themselves in the foot; they’d be shooting themselves in the head.
Second, what other currency in the world has a deep, liquid enough market to effectively price oil in? The yuan? No way. The ruble? Not going to happen. The riyal? Too tiny a currency market.
Proof: Some of the same analysts predicted the dollar would crash last October/November when the yuan was admitted to the IMF SDRs. And what happened? Exactly the opposite: The yuan crashed and the dollar soared.
My recommendation: Ignore that type of fear-mongering analysis.
Q: Have the grain markets bottomed?
A: No, most are bouncing right now, but they should have one final leg to new lows heading into late March.
Q: What are you personally doing with your money, Larry?
A: Other than my home, car etc., I am 100% in cash with roughly 30% of that dedicated to trading futures and FOREX. I have another 20% ready to go aggressively into precious metals, but not until I give my members the signal first, when it comes.
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