The Dow has flashed a
giant sell signal, and is headed much lower. Gold is trading at $945, and headed
much higher. Oil is at over $145 a barrel!
Corn is flying. Soybeans
are soaring, now over $15 a bushel. The price of sugar is up more than 30% in a
month!
If you think the disasters
you've seen in the stock market so far are bad, or the price increases in
commodities are due to top out, think again.
Reason...
The currency upon
which most of the world's economies ultimately rely ... the world's reserve
currency ? the U.S. dollar is about to get trashed again, big
time.
--
My forecast is not just rooted in my 30 years of experience trading the
markets, nor from my travels to Asia three or four times a year. Nor is it the
result of my focus on natural resources and tangible hard assets as an
investment class.
I'm also looking at powerful forces that are jumping out of my charts and my
research ...
Force #1. The Latest U.S. Dollar
Rally Has Faded and
Fizzled
I told you that the dollar was weak at the knees, that any rally would be
nothing more than a temporary bounce. And that's precisely what's happening.
When the dollar bounced off its record low in late April, the pundits again
started touting "the end of the bear market in the dollar."
But all it's been able to muster up is a meager 5% rally since then. And now
it is plunging anew ? giving back almost all its gain in just the past two
weeks, sliding from a high of 74.50 on the Dollar Index to as low as 72.38 ? a
mere 1.8% away from a NEW record low.
Looking back, the so-called "dollar rally" was nothing more than a temporary
bounce. Like dozens of others over the past seven years.
And looking ahead, there's nothing on the economic horizon that will change
its direction, which leads me to ...
Force #2. Fed Chairman Ben Bernanke
and Treasury Secretary Henry
Paulson are full of baloney.
Recently two of the most powerful officials in the world started trying to
talk up the dollar. But have they done anything at all to back up their
words?
Hardly! Neither one of these men has come up with the slightest of actions to
back up their words. And let me tell you why: They don't want a strong dollar.
They want a weak dollar because they believe that boosting U.S. exports ... that
paying off debts with cheaper dollars ... and inflating away our debt-addicted
economy is the cure-all for the U.S. economic problems.
Don't believe me? Well then, why hasn't Ben Bernanke taken tougher action on
inflation? Why is Paulson running around the world talking about some
hair-brained scheme to liquidate failing financial institutions, trying ? to no
avail ? to convince other countries that closing weak institutions will somehow
save the U.S. dollar?
This is a problem. When two of the most powerful men in the world say
something, but don't back it up with action, you get ...
Force #3. A Rapid Decline in
Confidence in U.S.
Investments
Every day, I put myself in foreign investors' shoes. Then I look back at the
United States from their eyes. If you do the same, here's what you'd see
...
- The biggest budget
deficit in the history of industrialized society. For a country that's
supposedly one of the most prosperous in the world ... that's already
shocking.
- Second, you'd see
another $55 trillion in unfunded liabilities in social security, Medicare, and
government pensions. If the U.S. were a developing country, you might
understand. But such a huge debt pyramid in America? Hard to believe. Harder
to understand.
- Next, you'd see a new
Fed Chairman who's afraid to lift a finger ... who's actually giving money
away for free ... and who seems willing to let inflation roar out of its cage
like a wild lion.
- Then you'd see the
virtually non-stop decline in real estate values ... banks reeling from the
morass ... companies like American icons GM and Ford on the verge of
bankruptcy ... a tumbling stock market ... an imploding Wall
Street.
- And you'd see a Federal
Reserve that doesn't give a hoot about savers. Instead of giving them a
positive return on their money, it's willing to let their money lose value
each and every day
So is this the country and
the currency you want to invest in?
Hardly. Don't get me
wrong. I love this country. But as the month of June's stock market performance
just showed us ? the worst June since the Great Depression ? it should
be abundantly clear to everyone now that the U.S. economy is in big
trouble.
No wonder ...
Force #4. Asian
Central Banks
Are Already Dumping
Dollars
If you think the dollar is
vulnerable to big selling by private Asian investors, wait till you see the
danger of big selling by Asian central banks!
So far, most Wall Street
analysts assume their bark is louder than their bite: The foreign central banks,
say they, merely talk about dumping the dollar. But they never really do
it.
True? No.
According to the June 30
update of the Currency Composition of Official Foreign Exchange Reserves (COFER)
report from the Bank of International Settlements, central banks of developing
economies now hold just 52 percent of their reserves in U.S. dollars, compared
to 81 percent back in 2001.
India and China have made
the biggest shifts, slashing the composition of their reserves away from the
dollar and into the euro, other currencies, and gold.
Recently, other
influential holders of U.S. dollar reserves ? Korea, Sweden, Qatar, the United
Arab Emirates, and Russia ? signaled they may also start cutting back their
dollars.
If just a few of these
central banks start pulling out of the dollar ? which I believe could happen any
day now ? that alone will spell disaster.
What happens when the
dollar plunges? Every dollar you have ... every investment you own ? will be
severely impacted. Some will be annihilated.