BUBBLE, CRASHED, INFLATION OR DEFLATION?
Dated 20, September 2009 by Mahendra Sharma
Dear Members,
Finally we started felling better from last week on the behavior of all major markets because it looks like that they are coming closer to planetary movements. I feel that the gap was widened between planetary movement or market trading pattern in the last six week during the final stage of Saturn changing. We all aware, that Saturn is planet, which can force any market in any directions with any prices. If you do a little bit study on the nature of Saturn, you will realize that he is responsible of boom or doom of history.
Today let’s talk about what’s happening in the markets. The period between September and early March last year looked like that whole financial system was in big mess, banking industries were collapsing, no one knew how low the markets and stock prices would go, and the story of India and China was fading. But the stimulus package came as the final hope like the last try before the death, and yes it worked so far. However now many hidden complications are coming out which few people know about them (I hope Ben Bernanke and Timothy Geithner are aware about them).
We are all aware that huge amount of money were pumped in the system which just kept fueling stock prices on paper to going higher. Impact on economy will came later only if paper value remain same or above from here because then they can participate or spend money on real project. If any major cracks come in financial market (which we are expecting from October) then we don’t know what would happen to whole financial system. Lehman story will look very small in comparison. Similarly, if markets crash from here, 1929 and the tech burst will pale in comparison against the coming burst of financial systems. Greenspan warn a few times during the tech bubble but Bernanke is keeping very salient on the current short term bubble which is artificial, and the magnitude of its consequence can bring down whole financial system because no one will able to hold this market when it starts crashing down this time in the month of October.
We are also aware about China holding $800+ billion USD paper and Japan holding around the same amount, and currently trade dispute is arising between China and USA. This indicates that China has not been listening to USA for some time, and so now USA came out with a small punch to make China wake-up, slapping the heavy duty on tire imports. Time will tell that USA can make China buy more USD or stop them from buying USD because in both scenario effect will be different. Yet this main scene in USD will be shake up the world's currency market in the coming future.
Many believe that Dollar is being used in carry trades like Yen before because of the low interest rates in the US. However, remember Yen is Japanese currency and Japan doesn’t have that huge influence in financial as well as geopolitical systems. Also overwhelming majority of international financial transactions including wiring transfer take place in USD. I feel many traders and investors are making a biggest mistake by doing carry trades with USD because if twenty percent move up comes in dollar what will happen? Can anyone answer my question? If dollar moves up twenty percent from here then outside of USA 15% of the banks would close down or they will be in problem. There will be huge rush for Dollar, which will rise beyond anyone's current imagination. Many be this was the reason that why I have been saying dollar index toward 200 but that time I never aware about that this kind of situation could arrive?
Time has come to meditate, because any above situation won’t help investors. At this time only holding the Dollar looks safe. Let China and USA fight on trades, let British artificial economy start falling apart (we know that Pound devalue won’t affect UK or the world much as UK doesn’t have exports), let financial markets keep moving up, and let Bernanke, Timothy and President Obama live in illusion and feel happy that they have won economic war. But according to me, water is silent and one big wave can clean everything away from us so better to remain alert because month of October is just two weeks away from us.
I am not worried of inflation at all but surely at this time I am worried about worst deflation which can start in the month of October. Markets are jumping but God-Father USA economic data are hiding facts—deficits, unemployment, and housing markets are still not well and in short span of time stocks prices are behaving that we are onto the moon, which mean that we are heading toward worst.
I am warning investors to stay away from stock markets, metals and other investment instruments at this stage. Stay in cash or hold USD for the next six weeks. There is big reason and today once again I would like to write here what planets gave us so much in the last fifteen year in world financial market, don’t miss understand that I am trying put myself on top of the world but I am trying show that if all these below predictions came true then why not the next one:
1. Great bubble of Technology – Predicted in 1996, same time we predicted burst of technology would happen in 2000 March.
2. Boom in commodities, like gold reaching $1000, oil $100, silver $21, copper $400, Platinum $2100 and for most of other commodities same view—predicted in 2001, when investors where scared of the name of “commodities”.
3. Dollar crash for the seven years, predicted in 2001. Also last year rise prediction came true but we were early on that.
4. Housing market falls, fall of key banks and financial market crash—predicted in 2007
5. February 2009 we also predicted sudden rise of all market from March 2009.
6. 2008 crash in commodities especially oil and metals.
If these above predictions we got from planetary movement then I am sure what current planetary movement's guiding has some meaning in it. So watch markets but don’t get involved in it. They can keep rising until last week of September, and Dollar can trade sideways until last week of September but October will bring biggest surprise in world financial market—it might become a mystery why it happens. Many will blame that extra cash sloshing around created the problem, FED and central banks should have allowed markets to settle down with their own strength, many other will say that it was artificial bubble created by the FED, while politicians and bankers will blame each other and common man will say it was part of destiny.
Any way this week letter is important, and I want my members to think twice: there is no need to make money in stocks, metals or oil at this stage because current illusions can misguide you so keep awareness because we want to discuss in the end of October when we will be investing again.
I will go with word call deflation from here, because in 1990 after Japanese market crashed, they came out with stimulus package, everyone thought that it would work but till today Japan is struggling, many banks went under in the last twenty in Japan but Japan survive only because they had great export and export trade remain in plus till today so deficit remain in control but USA and world story is different. Also Japan's debt/GDP ratio is over 350% now after 20 years of fiscal stimulus that did not go anywhere and US only 60% today.
Final note: In 2008, many times we mentioned that Bernanke would do best job compare to all past Fed chairman when investor’s were criticizing him. Now only Bernanke can save world by giving indication soon interest rate is rising and stopping stimulus packing and this can happen during this week meeting, so prepare for that and this is good sign. Stopping stimulus and rate rising will cool down current rising market which is happening for free money available for speculation.
This week trading strategy from 21-25 September
GOLD
This week on Monday gold will break $1000, but later in a day it will try to stabilize. Tuesday weakness will remain in gold prices and in both first days of the week selling gold around $1009 will bring good profit. Trading range will be $1014.90 to $993.80 by Tuesday, if it breaks $993 then next target is $979.20 .
Wednesday gold will trade with little direction and I strongly don’t recommend any trade as day will be uncertain with volatility, hold your shorts.
Thursday and Friday gold will remain stable in Asia and Europe but will move down after midday trading in New York and we will see lower side predicted prices.
SILVER
This week silver will trade sideways without gaining much. Monday and Tuesday silver will follow gold but from Wednesday to Friday silver will perform a bit weaker than gold,
Monday and Tuesday trading range will be $17.23 to $16.72, if it break $16.72 then next target will be $16.04. Wednesday it will trade sideways so no trading recommended.
Thursday and Friday silver will trade positive in morning in Asia but it won’t able to hold the gains. Yes we see some high volatility on Thursday and Friday and any upside move should be taken as selling opportunity.
CURRENCIES
Last week dollar made low of 2009 but dollar index did not fall down that much. We have noticed in recent days that dollar usually falls right after the USA market opens, regardless if the economic data is good or bad. This gives indications that powerful people who want to pocket gains by the coming rise of dollar are trying to convince investors that dollar is doomed. Anyway, whatever is happening in USD is confirming that future coming bull market in USD is intact and it will rise historic high.
Now at this stage few people are buying dollar. On the contrary, traders are selling dollar with carry trades which will become a suicidal commitment when dollar rises given that there is such a huge short position in dollar today. USA is not Japan and USD is not YEN. I am too much worried for many banks, institutions as well as countries that are participating in the carry trades in USD because up rising trend in USD can crash even countries' currencies. I hope FED is not playing games to kill many countries' currencies and financial systems by inviting them to the carry trade party by keeping rates too low and keeping USD weak. Once carry trades or USD short positions get to the tipping point, then one sharp upward move in USD will be enough to wipe out many countries.
Once again I will recommend people to watch closely on dollar's move. For the time being you can ignore bear comments on Dollar because mentally they can influence you. Also ignore gold extremists' comments on weak dollar because these kinds of comments can push you away from USD, if you read too much. If you don’t want to buy USD that is fine but don't sell USD in any terms either.
This week dollar will rebound strongly on Monday, and the whole weak dollar will remain positive except Wednesday evening and Thursday. Monday, Tuesday and Friday dollar will start trading positive.
Last few months we were very positive on Yen outlook and it did performed well but from this week Yen will start losing charm against USD so time has come to get out from Yen position. Thos who holding the Yen buying against Euro and pound can hold position as Yen will still gain against all other currencies.
Commodity currencies like Australian dollar, Canadian dollar and Rand will have last laugh this week, meaning this is the final week in that they will try to keep their heads up. Unfortunately they will start losing value from here.
Australian and Canadian dollar will lose more than two percent during this week.
I see sharp correction in Rand from next week so current week is good time to take short positions in Rand. Trading range of Rand will be 7.38 to 7.79 and within next three weeks it will move above eight.
Pound lost big value during last week and this week still it will break 1.60 against USD.
Euro will try to gain during middle of week of Wednesday and Thursday but rise will prove short lives
Swiss franc also will lose more than two percent during this week against USD but will gain against many currencies.
This week due to FED's coming meeting and rate decision, huge movements will come in currencies so trade after decision is over or buy Dollar on any weakness.
STOCK MARKET
Stock markets can still stay in positive territory for another week but they can also fall any time now. We are expecting CRASH from...
COFFEE/COTTON
This week coffee and cotton will...
SUGAR
This week sugar prices will move....
GRAINS
This week grains will trade....
OIL
This week oil will trade with....
Best trading strategy for this week...
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Thanks & God Bless, 20 Sep, 2009
Mahendra Sharma. www.mahendraprophecy.com