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.