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Currency Carnage
The US Dollar is on a rampage climbing to all time highs against major currencies across the world devastating the British Pound, the Euro, the Japanese Yen, the Chinese Yuan along with smaller currencies like the Canadian and Australian dollar. They have all dropped like they were 3rd world countries. This strong of a US dollar has negative impacts on the entire global economy. It isn’t that the USD is without risk, it is simply the best of a bad lot.
All forementioned fiat currencies are in desperate trouble and we will soon be witness to a great shaking of the financial system we’ve lived with for centuries. It will likely lead to a massive devaluation in all currencies and the end of the USD as the world’s reserve currency. What it will look like is unknown, but it almost certainly will be a commodity backed currency, likely Gold. I have a theory I will share in my next blog that I am currently working on.
Definition of a fiat currency- a currency not backed by a commodity such as gold but rather backed by the government that issued it. Being the world’s leading currency with the mountain of debt this government has printed the past decade, especially the past 2 years is little comfort. As mentioned, in my next blog I will share where and how I believe the US Dollar is near it’s end as the world’s reserve currency and how that will impact the global economy when it happens.
Recession Chatter
It Only Happens in a Recession
GDP fell for more than 2 consecutive quarters
Federal Express is down 52% from its high. The 3-prior 50+% drops in its history all occurred during recessions (1991-92, 2009-09, 2020).
The US Central Bank now projects a 0.9% increase in the unemployment rate; this has not previously occurred outside of a recession.
A strong US Dollar = tighter financial conditions = recession = earnings going down.
Purchasing Managers Index (PMI - an index of the prevailing direction of economic trends in the manufacturing and service sectors) falls first, which it has with individual stock earnings falling later.
Investment analysts have been aggressively cutting earnings estimates. Estimates have been cut by as much as 6.3% for the 3rd quarter since June 30th. This is the largest decline since the 2nd quarter of 2020.
Interest rates higher than 2008
Stocks off to their 4th worst year yet.
Inflation at 40-year highs
Mortgage rates rising – highest since 2008
Federal reserve aggressively raising rates
Precious metals prices
There is much talk about the price of gold and silver being down, so I thought I’d share some statistics.
Gold and silver like most commodities are priced in US$, for now! (More on that in the next blog 😊)
In US$ Silver is down 25% in the past year while Gold is down 8%.
However, in other currencies precious metals are doing quite well.
In the past 12 months
Canadian dollars
Gold is up 1.3%
Silver is down 7.1% (yet inventory is drying up due to demand)
United Kingdom
Gold is up 19.1%
Silver is up 4.6%
In Euro currency
Gold is up 13.5%
Silver is up 1.1%
Note: The demand for gold and silver has never been so strong. Central Banks around the world have been buying it en masse since 2017. The question to ask is, Why?
Inventories are getting slimmer and silver miners are going to halt production as they are close to or already are losing money to take it out of the ground at these prices.
Stock markets – “haven’t even started their crash”
Stock markets worldwide continue to go down. It has been a slow grind with no spectacular event such as a bank going broke (2008), or a COVID shutdown (20200, or a plane crashing into a tower (2001). It has been a rather boring drop, possibly intended to put you to sleep. All the while the mainstream analysts and the majority of investment advisors keep telling their clients to Hold on and many are having their clients buy more because it’s a great idea to “Buy the Dip”. As the attached chart shows, between 1929 and 1932 you had seven opportunities to “Buy the Dip”, all the way down until you were down 89%. Seven opportunities to lose more money!
LOTS OF OPPORTUNITIES TO LOSE MONEY BY BUYING AND HOLDING OR WORSE YET, “BUYING THE DIP”
No, these are not the times to Buy the Dip! There is no fundamental rationale reason whatsoever to even be in the stock market right now let alone buying more. We are only down about 25% which leaves room for another 65% drop to match 1929. This means that if you still own stocks, you can still get out and go to safety and save you and your family from the possible devastation that crushed the middle class in 1929. I believe that it is distinctly possible that we will have an event come out of the blue such as 2008 that will finally wake this market up from its slumber and the slow grind down will give way to a major crash.
You don’t need to participate in the downside. The wealthiest people after the Great Depression were those that had their money in cash and Gold. We currently do not own any equities at all, everything is in cash and money market. Our Rules Based Investing has saved our clients thousands of dollars and they are well positioned to go back into the market when the fundamentals return to favourable. Favourable fundamentals will only happen once inflation has been slain. In order for that to happen there needs to be a substantial drop in stock prices which will result in thousands of bankruptcies, both corporate and personal. The market needs to need to eliminate the debt and the currencies need to be reset.
This is the greatest transfer of wealth in the history of mankind, and you don’t need to be a victim, you just need to be prepared and properly positioned. It is a once in a lifetime opportunity and the door is yours to open.
Yours in Faith, Family and Finance,
Daryl
