Timing & trends
A new year is just two days away. How fast time flies!
For me and for you, I believe 2014 is going to be our best year ever. Why?
For the simple reason that if you follow my work, then you know I don’t buy into all the garbage that’s out there about the markets. By doing so, that also means we’re going to be properly positioned to make a bundle of money in 2014, and beyond.
Let’s take a look at some of the nonsense, especially five market myths that are out there and why ignoring them is your ticket to better profits …
Myth #1: Gold can’t go down when there’s so much money printing going on. This one is my favorites. All the shills out there who constantly talk about fiat money and money printing have egg all over their faces.
They said gold could never go down when central banks are printing so much money. I said “bull.” Listen to that garbage and you will lose your shirt.
And that’s what happened to oodles of investors who didn’t listen to me when I said gold had topped back in September 2011. Despite even more accelerated money printing, gold crashed and has now lost a whopping 38 percent of its value.
The facts of the matter are this:
First, what goes up must go down, and vice versa. There is a time for every move in the market, based purely on cyclical and technical factors. So if you get stuck to any one particular theory, vision, or even a set of fundamental forces you believe in, if you don’t realize that there is a time and place for every move the markets make, you will get caught — with your pants down.
Second, money has always been fiat. It was fiat even when the dollar was tied to gold. Why? Because the powers that be, the rule makers behind the monetary system, always have the power to change the rules, and devalue the dollar, as Roosevelt did in 1932.
Money is a medium of exchange, not a store of value. Throughout history, money has always been fiat. It was fiat in Roman times, fiat in Byzantine times, fiat in every great civilization and economy in the world, from Asia to Europe.
You might argue that some currencies are more fiat than others. Sure, I can agree to that. But my point is that all money is fiat. Consider even bitcoin, which is entirely fiat and secured only by its cryptography and the confidence — or lack of confidence — its users have in the digital currency.
Bottom line: Don’t buy into the fiat money nonsense when it comes to gold. Sure, it’s a part of it, but we already saw that part of the fiat argument play its hand in gold’s first leg up, from $255 to its high at $1,920.
That force is now dead, kaput. Gold’s next move higher — which is not that far off — will be due to something entirely different, as I have been saying all along. It will largely be due to the war cycles and how they are now showing massive social and geo-political unrest breaking out all over the word for the next six years.
Myth #2: Stocks can’t go up when interest rates are rising. Another great one. Fact: Most strong bull markets in equities occur when interest rates are rising.
Why? It’s simple: When rates are rising, they are rising because the demand for money and credit is going up. And if the demand for money and credit is going up, that, in turn, means that either:
A. The economy is improving, or …
B. That investors want to take on more risk for potentially greater returns, due to other motivations, like getting away from sovereign bonds, investing in stocks as a safe haven against government bank confiscation, and more.
The bottom line is this, especially at the turning point we are now in with historically and artificially low interest rates: Rising interest rates should be nothing to fear and instead should be music to your ears for the equity markets.
Myth #3: Hyperinflation is the end result of money printing. I used to subscribe to this one. Until I realized that throughout history there has never been a major core economy that experienced hyperinflation. Not one.
Hyperinflation only occurs in peripheral economies that do not have deeply liquid stock, bond and currency markets and/or a bombed out or dilapidated infrastructure.
If you want to bring up Weimar Germany, fine. The Weimar Republic had no bond market, no stock market and in the aftermath of WWI, no infrastructure to it either.
As I have been saying now for some time, the U.S. will not suffer hyperinflation. Higher inflation, yes. But hyperinflation, no.
Myth #4. The dollar is dead. Weak, yes. Likely to get weaker — after an interim rally — yes. Likely to eventually lose its status as the world’s single reserve currency, yes.
But dead, NO.
We all know the existing debt-based monetary system with the dollar at its core no longer works in today’s globalized economy. A new monetary system is needed.
A new Bretton Woods, if you will, that learns from all the errors of the past and designs and implements a new monetary system without a single currency at its core and certainly not one based on debt.
That time is coming. That is where the world is headed, toward a new electronic reserve currency unit that is used for international trade and transactions only and with all countries maintaining their existing currencies for domestic use only.
The dollar will lose its reserve status, but it will survive as our sovereign currency.
Myth #5: Real estate prices are sure to collapse again as mortgage rates rise. I love this one too, since so many pundits subscribe to it.
But in my opinion and research, it’s a bunch of baloney. Mortgage rates will negatively impact real estate prices when and only when they exceed the real rate of inflation and or the anticipated appreciation in property prices.
Since property prices in the U.S. are still at bargain basement levels, especially on an international basis … since the real rate of inflation at roughly 8 percent is well above current mortgage rates … and since property prices in general have much more upside potential, even to gain back just portions of what they lost …
Not to mention the fact that as mortgage rates do rise, potential home owners will buy now, rather than later, in anticipation of still higher mortgage rates, helping to push property prices higher.
There is simply no way, in my opinion, that another real estate bust lies around the corner.
A pullback from the last year or so of gains? Perhaps. But a crash, no.
There are many more market myths I could go into, but I think you get the picture.
The bottom line is this: Start the coming New Year with your eyes wide open, not shut.
That way you will see through all the market myths that are out there, all the garbage that the shills promote, and you’ll be positioned better than ever to protect and grow your wealth.
Happy New Year,
Larry
About Larry Edelson
New World Order – Collapsing Economy
The banks are in serious retreat. They have been caught manipulating various markets for short-term gains. They have to abandon commodity trading and Morgan Stanley just sold the energy trading to Russia. The IDEA of a New World Order was the driving force behind the Euro. The theory was to create just one government and you will end war. This theory has been proven to be unsound. The union of Europe is being torn apart at the seams. France is insane and wants to tax everything from YouTube to all electronics now.
Contracts to purchase previously owned U.S. homes rose less than forecast in November, indicating higher borrowing costs are holding back the recovery in residential real estate.
A gauge of pending home sales increased 0.2 percent, the first gain in six months, after a 1.2 percent drop in October that was larger than initially reported, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent advance.
Higher mortgage rates, tight lending standards and price increases driven by a limited supply of homes for sale are discouraging prospective buyers. Further gains in hiring, household wealth andconsumer confidence would help boost the housing recovery and give greater momentum to the economy.
“The combination of bank reluctance to lend and the pop in mortgage rates did throw a monkey wrench in that sector,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “We’re looking for a solid spring season, but you may not see the big climbs in price until March, April and May.” Estimates in the Bloomberg survey of 30 economists ranged from a decline of 1 percent to an advance of 5 percent.
Ed Note: Really good follow-up article to Marc Faber’s ‘Stocks Could Be Dead Money For A While”
It’s nearly official…
In two days, the U.S. stock market will close its best year since 1997… up around 32%.
Stocks moved up like clockwork this year. At a max, the market fell 6% from late May through late June. And we haven’t seen a major “correction” in stocks since fall of 2011, when the market fell 19% in a few months.
This lack of volatility has a lot of folks scared. And it’s easy to see why…
A shakeout in prices is healthy for any bull market. And without a downturn, investors continue to pile into stocks. Since it has been over two years since the last real correction, it’s easy to believe that we’re due for a price slump.
Personally, I expect to see HIGHER prices over the next two years. And when the next correction does come, it won’t be a 2008-style crash.
Let me show you why…
As longtime DailyWealth readers know, I’m a bit of a number junkie. When you see folks in the mainstream media babbling on, they’re usually tugging on your emotions… “fear” and “greed” are the two emotions often hit when it comes to markets.
But if someone stopped to ask for the facts – if they asked what history actually says – these arguments often fall apart. The mainstream media often sells a good story, not the facts.
Well, with all the recent bubble talk about stocks, I set out to see what we should really expect out of the market over the next few years… based on history, of course.
I looked at 60 years of data with a simple goal… find out how often stock downturns really happen. And more importantly, find out what determines their severity. I promise the results will surprise you…
Since 1953, we’ve seen 16 “bear markets” in U.S. stocks. My definition of a “bear market” is simply a sustained period of flat or down stock prices. (Specifically, either a 15%-plus fall in prices… or at least six months of price declines.)
With 16 bear markets over a 60-year testing period, we’re “due” for a bear market every four years. And our last bear market occurred just two years ago, in late 2011.
Said another way, the idea that we’re “due” for a big downturn in stocks simply isn’t true. Based on history, we should expect another two years of gains before the next bear market.
But here’s what’s even more important…
When the next bear market begins, history says it won’t be a 2008-style bust in stocks. Here’s why…
My testing uncovered an interesting quirk in our 16 bear markets. It turns out that when stocks fall during a recession, the fall tends to be much more severe. The table below shows what I mean…
As you can see, bear markets last around twice as long during a recession. And they cause an average fall of 38% in recessions versus just 18% in non-recessions.
In short, when the U.S. economy stinks, bear markets in U.S. stocks are much worse. And that’s great news today.
You see, while the U.S. appears to be stuck with slow growth, there is no recession in sight. No major economists are signaling a recession today. And our favorite indicators say we’re in the clear as well.
For stock investors, that means when the next correction does arrive, it won’t be 2008-style. History shows it will be more like the 19% fall we saw in 2011.
And again, history is clear that we’re not “due” for that correction to happen today.
When will the next downward move in stocks arrive? That’s a question no one can answer for sure. But when it does, I urge you not to panic like the masses.
The next correction won’t be a crash. It’ll simply be a bump on the road to higher highs. And I’ll be happy to use it as an opportunity to buy.
Good investing,
Brett Eversole
Further Reading:
What happens if the United States economy continues its recent recovery next year and the Federal Reserve carries on printing money?
American banks are awash with cash. What if borrowing suddenly has a revival to match the new life in the US economy? Inflation could very quickly pick up.
US stocks have outperformed commodities for the past three years. That position could be quickly reversed in an inflation scare, with commodities the prime beneficiary.
And what commodity has been beaten down the most this year?
Silver.
….continue reading the case for a Silver Surge HERE
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