I’ve been receiving so many email questions of late, about almost every market, that I decided to devote this week’s column to answering the most important ones. So here we go. Do note that the questions have been edited for clarity and brevity …
Q: Rumors abound that the Chinese yuan will soon be given reserve status by the World Bank or IMF. That might occur as early as October. It is also said that the U.S. dollar will crash as a result. Your thoughts, Larry?
A: Will the yuan gain reserve status? Absolutely. Will it crash the dollar? Absolutely NOT.
Look, don’t buy into the garbage about the dollar crashing any time soon. It’s not going to happen. Period.
There are several reasons why. Chief among them:
A. There is too much dollar-denominated debt out there – at least $9 TRILLION. As that debt gets paid off, however slowly, it’s dollar bullish. And …
B. No other single currency, even the euro, comes close to the amount of dollars in circulation around the world.
Total global currency reserves are roughly 62 percent dollar-based.
For the dollar to crash, you would need the yuan or some other currency to replace those dollars held all over the world, overnight. That’s not going to happen so easily.
More simply put, there’s not enough currency in the world to topple the U.S. dollar. There are not enough euros, yen, pounds, or Swiss francs, let alone yuan.
Bottom line: The notion that the dollar is going to crash come October, or anytime soon, is nothing but bad analysis and/or fear-mongering.
Q: Why are you so bullish on Asia, China, while so many analysts are bearish?
A: Simple answer: I live in Asia. Most analysts who write about Asia have never put their feet on the ground here, or if they have, it’s for a few days to attend a conference.
On the other hand, I get out and mix with the people, with farmers, shop owners, the locals.
Do that and you see an entirely different Asia. You see one that is booming with desire, booming with wants and needs, booming with economic growth.
Moreover, you have to understand where these economies are truly coming from, and how they are managed. It’s all very different from what you know about the West, and very different from the analysts who never come here or spend a few days here at most.
Nationalism in Asia is extremely high, as high as some 80 percent approval of the current government in China, just as an example.
So when governments in Asia steer their economies in a certain direction, the people approve and follow. That too is obviously very different from the West.
But most of all, as I pointed out in last week’s column, is the fact that three out of every five people in the world live in Asia.
And they are all pretty much at the same point as the United States was in the late 1800s: Experiencing industrial and service sector revolutions and the birth of free market economies.
One that is 4 billion people strong. My advice: Don’t buck the trend in Asia. You’ll get run over by eight billion feet.
Q: Is gold still on track for lower lows? Silver?
A: Unequivocally, YES. Based on all my models, there is no question, no doubt whatsoever, that gold is heading below $1,000 and silver to roughly $12.50.
Per my column of two weeks ago, the short-term timing sell signal I wrote of is also on track, as gold plunged last week from roughly $1,209 to about $1,182 — a pretty significant $27 drop.
There’s one last chance for a bounce, but unless gold can get above $1,210 this week, everything remains on target for a June low, down near or below $1,000.
If by some miracle gold moves back above $1,210, the low will be postponed until October.
Either way, the precious metals remain in bear markets.
Q: What’s your latest on the U.S stock markets?
A: Long-term, still extremely bullish. Short- and intermediate-term, expecting at best sideways action, at worst, a decline back to test longer-term support levels, which now stand at roughly 14,300 in the Dow Industrials.
Keep in mind that no matter what you hear, no matter what kind of foolish analysis about earnings, etc. that most analysts espouse …
The U.S. equity markets remain in long-term bull markets because …
A. They are the world’s largest, most liquid — making them magnets to attract capital from weak economies such as Europe … from crisis hot spots around the globe like again, Europe, and the Middle East … and other regions of the world where the cycles of war are now ramping up.
B. They are the world’s strongest bastion of capitalism. That means as governments of the west, namely the U.S. and Europe, become more authoritarian, struggling to survive, capital will continue to pour into U.S. equities.
Equities are non-confiscatible, offer private sector opportunities to build capital, and are symbolic of true capitalism.
Those attributes are going to become even more important in the months and years ahead, again, as the cycles of war ramp ever higher, and as investors all over the world begin to realize …
That it is the governments of Europe and the United States that are really the sectors that are in trouble, and that trillions of dollars will soon begin to pour out of sovereign debt …
And flood into our stock markets even more.
Lastly, some parting comments for today: For all of the above questions as well as those I have not been able to address in this column:
1. Don’t buy into all the garbage out there in the financial media.
If the medical profession had as much mis-information, garbage and fear-mongering out there as the financial world does, we’d all be dead by now.
2. Think out of the box. Question everything you ever felt you knew about the markets. Everything you read or are told, even by me.
Think independently and you will not only survive any financial crisis that comes your way, you will also prosper.
3. Build your cash, your ammo, while the markets are relatively quiet, like they are now.
That way, you can deploy your capital at the right times to capture the truly life-changing profit opportunities that are soon coming your way.
Best wishes, as always …