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Five months ago, in my January issue of Real Wealth Report, titled “How to Make A Bundle of Money in 2009,” I published my six forecasts for this year.
Let’s see how those forecasts have unfolded thus far … and take a look at how much more money you can potentially make this year.
January 2009 Forecast #1: A Surprising Rally In World Stock Markets
Despite nearly everyone agreeing last January that the carnage of 2008 was merely a sign of more losses to come — and that the global economy was headed into another massive deflationary Great Depression …
I stood virtually alone, stating that 2009 would become “The Year of the Trap” — and that investors who weren’t quick on their toes and didn’t think unconventionally would be obliterated.
I went on to say that because the world’s monetary system was no longer based on a gold standard …
Because the dollar is nothing more than a piece of paper …
And because we have floating exchange rates that can be utterly deceiving to economists and investors …
That deeply oversold stock markets would begin to take on attributes of a hedge against depreciating currencies, namely the dollar, and stage surprising rallies.
And what’s happened?
After bottoming in March, stock markets all over the world staged some of their strongest, sharpest rallies in history …
The Dow Jones Industrials is up 36.4 percent from its March record low
Europe’s markets are up an average of 37.2 percent
Shanghai’s Composite Index is up 35.0 percent
Hong Kong’s Hang Seng Index is up a whopping 66.7 percent
And how have investors who followed my suggestions to buy investments in select ETFs such as the Dow Jones Diamonds (DIA), Energy Select Sector SPDR (XLE), and iShares FTSE/Xinhua China 25 (FXI) fared?
Very well, indeed! They’ve experienced gains of as much as 42.7 percent — in just 12 weeks.
And in natural resources, which I also said would rally sharply, the gains have been even larger …
Gold is up 21 percent
Oil has jumped 103 percent
While copper, agricultural commodities and more have also thrust as much as 12 percent higher off their recent lows
Handing even bigger gains to subscribers of my Real Wealth Report.
Does all this mean the economy has bottomed, or that global growth is back on track?
Hardly.
The economy will be a disaster for many years to come. And you’re going to see even more traps laid for the typical investor:
A deteriorating economy coupled with markets that seemingly ignore the fundamentals — and that instead begin to trade as if they are money themselves, replacing the dollar as a medium of exchange.
But there’s more …
January 2009 Forecast #2: Another Bubble Will Burst —
The Bond Market
At the time I issued that forecast, I again was virtually alone, posing the following question to almost everyone I spoke to:
“How is Washington ever going to borrow the money it’s committed (almost $14 trillion) to bailing out the U.S. economy?”
No one seemed to be asking that question.
Even fewer were wondering what implications it had, as investors were simply caught up in which bank or company would fail next … and what would stocks do tomorrow.
They failed, in my opinion, to use uncommon wisdom and question how Washington could ever bail out any portion of the economy without bankrupting its already bankrupt balance sheet even more.
The end result, I said, would be a devastating collapse in U.S. Treasury bond prices. Investors seeking out safety of government bonds would be crushed.
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What’s happened since that forecast?
U.S. Treasury bonds have experienced their worst-ever plunge, falling from a price of nearly 137 in January to 115 today, a 16 percent beating.
As a result, interest rates on 10-year bonds have soared from 2.2 percent to 3.4 percent in five short months, derailing the Federal Reserve’s efforts to keep rates low.
January 2009 Forecast #3: The Shocking Next Leg Down In The Dollar.
I can’t even begin to tell you how many analysts told me I was dead wrong on the dollar in January.
Their theory: Since the world’s debt markets were shrinking in the throes of the most massive asset liquidation the world has ever seen …
Since most of those debts were in dollars and therefore, had to be paid back in dollars …
And since Europe’s massive debts to Eastern Europe could be even more devastating than the disasters in U.S. debt markets …
The dollar, they said, could go virtually no where but up. After all, they said, that’s what the dollar did during the early stages of the Great Depression.
But again they failed to understand the critical importance of the gold standard back in the 1930s … and equally important, they failed to understand that in the 1930s, the United States was the world’s largest creditor.
And today? It’s the world’s largest debtor!
Those two fundamentals — no gold standard today and the United States being the most indebted country in the history of civilization — made it a fait accompli that the U.S. dollar, despite occasional brief rallies, would take almost everyone by surprise and start plunging again in 2009.
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What’s happened to the value of the U.S. dollar so far this year?
After a brief, shallow rally into March — the dollar has collapsed, cratering more than 12 percent.
As you can see in this chart of the dollar, the plunge has been dramatic, swift, and deadly to those whose finances have not been positioned properly.
And despite occasional rallies that will occur from time to time, I maintain my view that the U.S. dollar is headed much, much lower — and will eventually be replaced as the world’s reserve currency.
Indeed, if you’ve followed my analysis of the dollar for any length of time, you also know that my warnings about Bernanke’s secret debt solution (devaluing the dollar) … and the G-20′s hidden agenda of a new world reserve currency, even a single world currency — are on track and in motion, with China spearheading the campaign.
Speaking of which …
January 2009 Forecast #4: China, Again!
China, I said in January, was doing and would continue to do everything in its power to turn its economy around. And it would largely succeed. After all, China had …
Nearly $2 TRILLION in cash, so there’s no need to borrow any money internationally
Committed at least $585 billion to stimulus programs, almost 20 percent of its GDP
Had maintained pretty robust growth, with retail sales growing at an annual rate of better than 20 percent … disposable income on the upswing … and soaring incomes where it mattered most for Beijing, in the rural areas
End result, I said: Chinese stock markets were undervalued and ready to explode higher again.
And that’s exactly what happened. As I noted earlier, the Shanghai Composite is up 35.0 percent from its March low … 63.8 percent from its major low last November — and it’s one of the best performing stock markets on the planet, again!
January 2009 Forecast #5: The Long-Awaited Real Estate Bottom
To be sure, this forecast has not panned out — yet.
Even so, I have absolutely no doubt that we are very close to the bottom of the residential real estate collapse, at least in terms of median home prices and national averages.
Chief reason: Real estate prices are, on average, now undervalued compared to many other areas of the world, and in terms of their replacement cost.
Moreover, pending sales of existing homes have now risen for three months in a row. A positive sign indeed, along with shrinking inventory levels and plunging permit activity, which has reduced the supply of new homes coming into the market.
Ironically, it may not be the government’s efforts that ultimately turn the real estate markets around.
Rather, it may be the exact opposite of what everyone is expecting:
The uncommon view that the turn-around may be due to a jump higher in mortgage rates — from levels we may never see again in our lifetimes — causing a herd of buyers to come out of the woodwork and start buying property again.
But real estate, from depressed levels, can become just like other tangible assets and …
January 2009 Forecast #6: Commodity Reflation — Powerful New Rallies In Natural Resources
Once you understand that it isn’t just supply and demand that affects prices, then you will have one of the greatest investing secrets of all time on your side …
And you will begin to consistently understand the markets, making more money than ever.
What am I talking about?
There comes a time in the history of every economy … every great civilization … when financial markets separate from the economy and begin to take on safe haven attributes — especially when government bond markets and confidence in the government, is on the wane.
It happens when the currency — shares in the country’s national stock — is being devalued, just like what’s happening to the U.S. dollar now.
During those times, certain assets such as the bluest of the blue-chip stocks and especially tangible assets — actually come into favor as hedges against a depreciating currency and cracking, even collapsing confidence in government.
That’s where we are now. It’s why gold and oil are soaring again … and why, sooner rather than later, stocks may take on attributes of an inflation hedge, just like they have done in countless other countries that have debased their currencies.
It’s also where uncommon wisdom — through an unbiased study of history — will not only protect your money, but help you profit beyond your wildest dreams.
So if you want to make money in the months and years ahead, throw almost all conventional wisdom out the window!
Best wishes,
Larry
P.S. For more of my insights … specific buy and sell signals … on-the-ground analysis from wherever in the world my travels take me … be sure to subscribe to Real Wealth Report.
At just $99 a year, it’s a bargain!
About Uncommon Wisdom
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Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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