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Graham Summers’ Free Weekly Market Forecast (China Dumping Dollars edition)
The US
Dollar broke to a new low in the overnight futures session. It’s not surprising
as China announced over the weekend that it expects to trim its US Dollar
exposure by 2/3.
Yes, China
has finally had enough of the US and its Federal Reserve. All of us were
wondering at what point this would happen: China would only remain heavily
invested in an asset that is rapidly losing value for so long.
Well, now it’s
happened.
Last week,
several high-ranking Government officials in China announced that the country
needs to diversify away from the Dollar… lowering the country’s exposure to
Dollar related assets to $1 trillion (1/3 of its current levels).
Soon after
this, the US Dollar definitively took out its 2009 low.
This only
leaves the 2008 low for major support.
Gold and
Silver have both exploded higher on the news. Gold cleared $1,520 per ounce while Silver cleared $50 per
ounce.
In simple
terms, the world is now moving away from the US Dollar in a rapid pace. Russia
and China are no longer using the US Dollar for trade between each other. Saudi
Arabia is sending representatives to China and Russia to strengthen trade ties
(which hints that oil may not be priced in Dollars in the coming years). And
the BRICS (Brazil, Russia, India, China and now South Africa) recently staged a
conference in southern China to discuss trading in their domestic currencies
rather than the US Dollar.
If you have
not prepared for mega-inflation in the financial system already, you cannot
afford to wait any longer. The only thing holding the Dollar up was the belief
that China and other foreign nations would continue to use Dollars: the Fed’s
intervention was based on the idea that these countries would play along.
This is no
longer the case. China has broadcast to the world that it’s had enough. It’s
now only a matter of time before the US Dollar collapses. So if you’re not
already moving into inflation hedges, you’re in major trouble.
If you’ve
yet to take steps to prepare your portfolio for the coming inflationary
disaster, our FREE Special Report, The
Inflationary Disaster explains not only why inflation is here now, why the
Fed is powerless to stop it, and three investments that absolutely EXPLODE as a
result of this.
All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.
To pick up
your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
Good
Investing!
Graham
Summers
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Agreed : deflation will kill commodities run.
Inflation will kill USD and fiats. But we don't know when one or the other runs rampant. Too many balls up in the air...I don't think financial Armageddon will occur before we have a new president in WH.
Aka : beginning 2013. But the storm clouds will build up all along 2011-2012 in an uncertain roller coaster ride!
No certainties until we get an agreed charter for NWO Oligarchs, of which the China bunch are an INTEGRAL part.
This is projected plan A of Oligarchs. Doesn't mean it'll happen that way as there is only so much one can do to manipulate markets and social sentiments!
There is ALWAYS a Plan B lurking in the back curtains.
These are paradigm changing days. So 'stay wary, tread lightly', is the only good advice out there!
The biggest indicator that we are not in a hyperinflationary stage is that housing prices are falling and unemployment is showing no signs of statistically significant decline.
In a Zimbabwe type of runaway inflation, housing prices should be screaming up, wages should be increasing (quite the opposite).
And, no hyperinflationist is addressing these contra indicators of hyperinflation....they simply point to Commodities and dollar debasement. Well, if housing continues to collapse and unemployment sucks...it's not hyperinflation.
We are in a temporary reflationary period of social mood. When social mood turns (and it will), sit back and watch the show of equities collapse and oil going below $30 (unless there is a World War coming, which is also very possible). Gold, which to me is an equity, will collapse as Cash becomes king. Credit implosion will re-commence and that's when deflation will rape every notion of hyperinflation.
Also, during the Japanese Tsunami and nuclear melt down...Gold did not pop! If it is the truest safe haven, gold on its own should have rallied. Rather, gold went in lock step with the equities. Gold is behaving 100% like an equity...this has been very bothersome for me to see it as a safe haven.
Instead, in Japan, the Yen's strength exploded! So much so that the "Honda Accord" had to be hastly implemented. For Japan, Cash is king as it's Yen will strengthen more than earlier 76. To me, USD will do the same as deflation ravages our country.
I believe Prechter is very correct in his "..all the same market" concept.
I am incrementally adding to my 3X short ETF positions (primarily FAZ). I understand that I will experience paper loss until the market turns. I believe we are at the cusp of a Primary Wave 3 down. However, extreme sentiment against the dollar makes UUP attractive.
The key word is to prepare: have cash at hand; short term T-Bills (currently zero interest but safe). As Prechter says, people are chasing yields and return on their money...but they should be more worried about return of their money.
And who will stop printing dollars? Bernake might take a breather, but he'll be replaced if he refuses to play ball. Congress can't stop spending--ergo, they'll print until the dollar is used for wallpaper.
I'm bullish on the dollar precisely because nearly 97% of sentiment is bearish.
When the boat tilts 97% to the bear side, it's better to be on the other side or side lines.
I believe we are at the cusp of a multi-month rally for the USD....!
Likewise. We'll see how it pans out. GL.
Is that just because most are against it, or is there something else to the trade?
Global debt is dollar denominated; hence the reserve currency status of USD.
When this temporary reflationary period ends (which has brought the equities from S&P 666 to current levels); deflation will rape and ravage all commodities and equities because credit will implode.
When credit disappears, USD strengthens and via EW analysis, we are at the cusp of a primary wave 3 down...the show for exits will be amazing.
Here it is....
Inflation to a dollar holder vs a yuan holder ....two different worlds....
Deflation in real terms will be the name of the game to most of the world....
Just where is the money going to come from ....with extremely high debt levels....lots of debt just means less money to price goods and services....
Too many people believing inflation due to dilution effects....
One has to include the ability to buy things before inflation becomes rampant...
With no further QE...deflation will become the game in a big way....
Just where is the money going to come from to inflate prices.....
money will come from thin air like always