The US Dollar is falling apart fast. Really fast. Two days ago it completed a failed daily cycle when it traded below 76.12.
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Now, literally within this hour, the US Dollar has already failed its yearly cycle by trading below 75.63. The next downside target for the US Dollar would be the 3 year cycle low at 70.70.
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Click on the chart to ENLARGE
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Can you comprehend what will happen to the price of commodities when people realize that the world's reserve currency is in a precipitous freefall? Who will want to own the currency then?
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Who wants to own it now, for that matter? Something like 70% of all new government debt is being purchased by our FED - not the Japanese, or Saudis or Chinese. We Americans are buying our own debt because no one else wants it.
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So what will people buy with dollars to get rid of them? Why, just about anything that is tangible, for starters. Such as, you guessed it, gold and silver. I believe at some point just weeks away people will make this exchange in shear emotional panic as the waterfall they are riding is accelerating towards earth.
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For a relatively brief period of time precious metals will be seen by many as the only way to save ones self from the onslaught of hyper inflation. And as you know, this is the dynamic that fuels a parabolic rise in price.....too many people desperately chasing a solution to an impossible problem.
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This is a great time to buy precious metals and their miners. Today.
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Very comforting..hard, cold metals are our saviour! What about the effects on SOCIETY, and how will metals improve life?
ReplyDeleteAnonymous,
ReplyDeleteI would rather be miserable and hold lots of hard, cold metal, than be miserable and hold fists full of fiat, worthless, debased currency......
So you read TSI to improve society & life???
ReplyDeleteGo read a bible or something.
This site is about making money, not telling you how to lead your life.
There are plenty of other sites for that
The way they always have for over 5000 years.
ReplyDeletemetals improve life in a vaiety of ways! Silver is used in medical equiptment, computers, cameras, &c. The effects on society remain to be seen. But metals have nothing to do with that.
ReplyDeleteHow much gold does Ben Bernanke own?
ReplyDeleteSAD BUT THIS IS JUST THE BEGINNING OF HOW WE WILL B AFFECTED...HAIRDADDY
ReplyDeleteMaking money, preserving wealth,improving society
ReplyDeleteand pursuing happiness are not mutually exclusive.
Remember also to serve God.
During the Vietnam War, soldiers in country were issued fiat money, to curtail black market activity. In recent years, the US gov't has revised all denominations. Any chance the US government will simply repudiate old-style bills? Seems to me the biggest losers would be drug lords in S America. Also, modern US 1-ounce gold coins show a face value of $50. Can US govt "reset" the currency...?
ReplyDeleteKudos to you for calling it like it is--so far at least. Many analysts were calling on their readers to sell their mining companies--Zeal was big for that. Thus a lot of folks got burned.
ReplyDeleteThanks for your help.
PS No better time than now to load up on essentials also.
Ctoivo - thank you for the compliment.
ReplyDeleteI always have and always will think the world of Zeal. They produce extremely top notch research, in my opinion. Their track record is incredible. They are a huge credit to the education and betterment of the general investing public, as well.
A reader alerted me days ago to their recent report regarding silver - to ask me what I thought of it. I read the report and replied that it made complete sense, which indeed it does.
Except for one thing.
None of the research concerned itself with the behavior of the dollar, which, in my opinion, is critical to understanding what is happening.
Each and every gold and silver parabolic has been fueled by a serious breakdown in the US Dollar. To not realize that is akin to not knowing why a car runs on gasoline and not water.
I have a lot to learn. And I hope they have added some new information to their tool chest from this experience, as well.
John,
ReplyDeleteI will have to take issue with your comment that Zeal produce top notch research .When I first got interested in gold and silver their newsletter was one of the first I subscribed to .I was really impressed by Hamilton's writing ability ,he does an excellent job of writing a great essay .
But their stock picking ability was just horrible.Almost every stock they picked lost money .They would use stops and just about 90% of their picks were stopped out for losses .In fact it got so bad they had to tighten up their stops since their losses were so great.
I continue to read his free material that he puts out each week and his predictions are just as bad as they were years ago
Don't know about you guys, but I think this can ALL be solved by just going out into your yard and chanting "Yes we can" a million times.
ReplyDeleteChanting "Yes, we have no bananas" will also do just the same
Well Robert - I guess I just believed when they state their track record is such and such, that is what it is. And it sounded really good. But perhaps your first hand information is more accurate. Or maybe we should ask Jim with the million bananas?
ReplyDeleteJohn,
ReplyDeleteGreat work- your nicely aligned graphs of 2008 showing USD, SPX, HUI was an eye opener- it really showed that as dollar collapses, markets will also go down but gold and silver can go up.
Do I understand correctly that once the dollar cycle is done, it will HOWEVER start to go up again sometime in summer?
Thanks,
John, good to see your analysis on the Zeal article. I don't know about their stock picks but the overall analysis is good. BTW a number of respectable analysts have been predicting financial meltdown (much like in 2008)but have been twarted to date. In fact I think the famous Arch Crawford is near the end of his collapse window the end of this Mar.
ReplyDeleteBTW I bought a little FSG (2xAu/SPX bear) spread ETF to see how it performed intraday vs the actual indexs. Seems responsive. This ETF could be an interesting play for those who subscribe to the Au=Dow longterm view. The usual caveats about ETFs should be a consideration.
I will bet you Bernanke owns a lot of gold and silver (physical I might add). He's not going to advertise it, but he's not dumb.
ReplyDeleteThe dollar cycle is expected to bottom sooner than summer. If the 2008 scenario continues to play out then when the dollar bottoms we could get a simultaneous relief rally from the stock market for around 8 weeks before the stock market continues south in the context of a huge secular bear down leg.
ReplyDeleteWow, John, all interesting comments.
ReplyDeleteBOTTOM LINE...we didnt create this mess. We just need to try to SURVIVE whats going on and have money to be able to talk about it. I personally enjoy your work.
thx, Ron (in arizona)
Regarding Zeal, I also have my experience to share. Back in 2003, I followed their suggestion and went short on QQQ. Needless to say, that was the "perfect"timing and everyone now knows what happened at that time. I lost a large amount of money. Of course, I am responsible for my own mistake. However, I'd like to warn people out there about the "incredible" track record of Zeal - indeed!
ReplyDeleteJohn,
ReplyDeleteCan you please clarify your statement regarding the comparison of 2008. Do you expect a rally in the stock market over the next 8 weeks while the US dollar continues it's decline? Then in early summer the start of the next leg down of a secular bear market?
Hi JC -- I expect the stock market to fall over the next 8 or so weeks along with the fall in the US Dollar. During this time, gold/silver and miners will go much much higher.
ReplyDeleteWhen the dollar finally bottoms the gold and silver parabolic will blow up and at that same time the stock market will begin a relief rally that lasts 8 or so weeks, then the secular bear market will resume its downward implosion.
In my opinion, this is an ideal time to rethink the allocation of funds in one's retirement plan.
People who did not see what was going to happen in 2008 ended up riding the SPX down from 1575 to 666 in the early spring of 2009 - many then got discouraged and sold their positions after seeing their value reduced 50%.
And of course they could have saved their entire retirement if they had just adjusted their holding as the bear leg began - rather than at its bottom.
I had a theory back in early February that the Fed had a major problem on its hands and is losing control of the interest rate market. In order to gain control and lower the cost of borrowing as well as servicing it's debt (Treasury and FED=same entity), we would need to see a new flight to safety, preferrably in bonds. In order to do this, we would need a deep selloff in the markets to create this flight. In addition, I suggested that we would see some sort of announcement to unload debt currently sitting on the Fed's balance sheets. This morning, the Treasury announced it is selling it's MBS portfolio at the rate of 10 billion a month or more if market conditions warrant it. I would bet the Fed will announce a similiar program soon. They need to re-create organic buying of gov't debt and that can't be done if the stock market is flying.
ReplyDeleteI find it odd that the dollar will fall and the stock market will tank though. I would have anticipated that the market would rise just stay even on a value terms in relation to the dollar.
Once people stop accepting the U.S. dollar as the world's reserve currency it will only be a matter of time before there are riots in the streets.
ReplyDelete