Dear Friends,
Here is small part of this week newsletter. I am sure you will enjoy it, daily cost of newsletter and flash news is nothing against risk you take in markets.
Currency war has begun
Dear Members,
The world has gone through many epic wars surrounding survivals, religions, feudal lords, countries, etc. Behind each and every war were powerful personalities that were able to gather massive followers and create histories (good or bad). But this time in this century I see wars beginning on currencies. I was just going through astronomical charts and it looks like a new war has begun which will be a very nasty one as currencies are playing a center part of human life and world economy.
China has begun this war years ago by exporting cheaper goods at a low currency rate, the Yuan. Not only do they have lower wages than developed countries, the government owns most businesses and it could and has kept Yuan arterially low.
In the meantime, China started investing in other currencies or buying other currencies. Their buying never stopped in the last fifteen years. At the point they started no one really understood why they invested so much in U.S. dollar in reserves? But last five years have revealed the answer. Figures say that their investments in bonds or cash in dollar will reach over three trillion by the end of 2011. Then they started buying Euro and now Euro comprises 25% of their currency portfolio. Lately they have been pumping money into Yen. Brazil has also shaken by their currency movement as China has started buying Brazilian Real.
I think most of you must have grasped by now what China wants to do! Picture has become very clear. Before, most people thought China is unwise investing so much in dollar and dollar’s fall might instigate a Chinese financial crisis. This is not true at all. We now can see with a lower Yuan, China can continue to export and compete favorably in the global markets and multiply their profits every day, each week, every month and each year. One economic calculation shows that Yuan is undervalued by at least 15-21%, which means by keeping their currency low. The money they make then is invested in other artificially stronger currencies, enabling them to accumulate wealth rapidly and dominate the global currency movement.
We have noticed that since last five years USA constantly or politely raising the issue of China’s “artificially manipulating currency” but China has been ignoring it. The US does not have much leeway against China’s lofty attitude because China is also US’s largest creditor. They need Chinese to keep financing US deficits. The US can either keep bagging to China for Yuan appreciations or they can put in place a trade embargo, imposing extra duties on Chinese good. Yet such trade sanctions will inevitably create global tension to unimaginable heights and wreak havoc financial markets.
Yes I can see that some huge wave is on the way in the currency market because planetary positions are indicating high level of uncertainty. Last week we have seen that after China announced increase in 0.25% interest rate on Tuesday all major currencies went down sharply and dollar moved up significantly but next day on Wednesday exactly opposite happened. My analysis shows that the currency war has begun on Tuesday, when Mars entered in the house of Scorpio (all three, Tuesday, Mars and Scorpio, represent war or fight). To me in financial markets, currency war has begun so you have to be very careful with trading in currencies. I also want to caution people in business or international trades not to make large currency bets, other than necessary hedging, from here on for a long period.
This currency war will be an epic one, and the most interesting part is that we will be witnessing its evolution. I am writing my next book “2011 World and Financial Prophecies” which shall be out by early or mid January 2011.
In 2010 Yen and Swiss Franc remained our favorite, but now war has begin to attentions will be diverted and blood bath in currency market......
Weekly newsletter from 25 to 29 October:
GOLD
When we talk about currency war, gold comes first into the picture because gold is the only reliable monetary instrument. However, lately gold has fallen into wrong hands—financial institutions, short term traders, speculators and banks issuing gold certificates or investment vehicles for safety but they are not buying so much physical gold. Yes, China and India has been buying but no one really tells that how long they will hold. I am just concerned that if gold starts moving down any time in the future (during the next six months, one year or five years) then the main problem will be that everyone would want to get out at the same time.
Anyway, I am long term supporter of gold as in 2001 we already said that gold bull market will last 52 years, out of which 10 years have passed and another 42 years are pending. So yes any sharp fall should be taken as a buying opportunity. But what price is right to start buying? If gold fall from $1,370 to $1,330 then is this a good buying level? Or should one wait longer? We all are aware about one thing that whatever goes up has to come down.
The coming global currency war will bring gold into the center point but I am not too concerned about it because gold’s destiny is already written on the day when this new century begin (01.01.2000). In the longer term gold will move ahead against the dollar and with the dollar, meaning it doesn’t make any difference how dollar moves. We will talk more on this in our coming book. I’m tempted to say what Gordon Gekko said in “Wall Street – Money never sleeps”, about what really will happen next after the financial crisis: “Buy my book”. Yes, all five of my books were very close to my heart but I am sure the experience I had in the past few years will make my next book most exciting and prudent.
Last week, gold remained very volatile. Gold broke one important rule and that is that it….
Lately one advice we gave—selling metal stocks and buy uranium stocks—has proven very profitable to our members, many of which sent me appreciation emails. Yes Uranium stocks are rocking during last one month. They are moving strongly and with command. I know now many metal people think that they know much more about metals. Some gold community members have become a bit arrogant but I request that they should remain humble and not carried away with the current trend.
Yes metals has great future ahead but uranium stocks have even far better future so no harm in investing in uranium mining stocks. Buy mining stocks which hold both gold and uranium deposit and you will make a fortune.
This week gold Monday gold will trade……
Tuesday….
Wednesday….
Thursday gold will….
Fridays gold trend will be…
SILVER
Among metals, this metal trades with the most volatilities. If you hold high leverage positions then either you can make huge money but you can also lose them all. Its ruler is the water planet Moon so uncertainty is also here to stay. Look at 1978 to 1980 when it rose from single digits to $50 an ounce. It brought unbelievable fortunes to many and it killed many as well in the rising as well as the falling.
Astro chart indicates a huge up move in longer term but surely shorter term remains…..
BASE METALS
Copper, platinum, palladium, aluminum, zinc, and lead will….,
COFFEE/COTTON/SUGAR
By the end of November coffee prices ….
Cotton, silver, and sugar--all these three commodities….
COCOA/ORANGE JUICE/LUMBER
Last week all these soft commodities remained sideways….
TREASURY BOND
Last week as mentioned thirty years bond prices moved down. We…
GRAINS
Last week all major grains held their gains. Future trend of grains is more solid than metals….
OIL
Last week oil traded sideways or weakly as predicted. This week….
STOCK MAKET
Last week stock markets held very well even after China’s interest rate increase. Almost all negative periods have been absorbed well by all major indexes so from now on any weakness should be taken as a buying opportunity. The whole month of November you should plan on building up positions as from next year on Dow and many other markets will touch all-time highs.
Yes, the currency war will affect many markets because many international investors will experience confusion and pain because of uncertain value of currencies. Currency appreciation or deprecation during such a volatile period could easily eat up all the capital gains from overseas investments.
In the longer term we see USA and a few emerging market perform well so investors should keep adding stocks of these countries on any weakness from here but keep in mind that volatility is part of market so in between the rises some down movement will also come. Therefore please avoid trading with high leverages.
Keep your investment area specific and focused so you can take full advantage of coming bull market in that specific area or sector.
This week is the final week in which some uncertainty can be experienced but overall bullish trend will remain intact. Uranium, rare earth metals and other alternative energy stocks have moved up very sharply this year so they may take some rest before they start moving up again but keep finding good stocks and keep adding to your portfolio.
Rare earth metals area is now totally controlled by China, which supplies almost 97% of the metals. There are many potential mining companies in this area which can supply rare earth metals in the future but to develop these mines will take at least two to three years and more. Currently many mining companies in USA and Canada hold huge deposits of rare earth but all these mines are sitting idle and currently many stocks of these mines are flying on valuation ground not because they are making profit. So we have to be very careful in choosing companies.
Uranium and alternative energy stocks have a different story and that story holds solid fundamental ground. These companies have great future as they will be playing great roles in shaping the energy future of the world from here. Keep adding these stocks on the falls.
Previously many times I have recommended and….. We are starting special monthly services on Uranium and alternative newsletter which will only talk about alternative energy and Uranium.
CURRENCIES
In this week ……
I wish you good luck for this week. Trade carefully as current time is very volatile. Markets are moving rapidly on both sides but keep focused on longer term trends that we predict and I am sure you will do extremely fine.
Point to be noted - Defense stocks are trading lower as world don’t see any major conflict, we had in our mind for this hedging, defense and oil stocks will be great short in coming time.
Best advice – Don’t be hurry in buying ….
Thanks & God Bless
Mahendra Sharma, Sunday, 24 Oct