The US$ is beginning a long term bull run. Why? Several reasons first the US economy is the only country performing and trying to hold up the world economy. Second, fear in Europe and possibly Japan on higher taxes and possible confiscation of wealth. Third, there has been about US$ 3 trillion borrowed around the world and as the USA stopped QE there are now less US$ being put out there and therefore all the borrows are in effect short US$. This is massive. This is what leads to currency crisis, but NOT in US$ but in emerging market currencies as they borrowed US$. The capital flows are showing massive movement to US$ and this is also propping up the US equity markets – we suspect a pullback in the US markets – that will provide a buying opportunity and the US markets will go higher into 2015.
Commodities will struggle with the strong US$ but as the Sovereign debt crisis grows there will be a point when commodities rise with the US$ we suspect this to begin in 2016 with the full resumption of the sovereign debt crisis.
Gold: It has been a difficult 3 years for gold as it has dropped further than we had thought it would. Does this bother us? No not really, as we still believe the sovereign debt crisis is just beginning. People will start to notice when the US economy starts to turn down in 2015. This will be the kick off for precious metals – we have said to patiently accumulate – many of you have and it will pay off into 2016~20. But before that we may see gold actually fall to $1,000 or perhaps a bit under, the tree needs to be shaken and the talking heads on TV need to say gold is dead, we are not far now. That time will come as the Sovereign Debt Crisis hits the USA and that seems likely around the autumn of 2015 when the US economy starts to turn down. We stand by what we said 3 years ago accumulate gold on a regular basis, the longer term strategy will work gold will rise into 2016~2020.
Bonds, especially government bonds, are DEAD, avoid completely, as they have finished their bull run from way back in 1980!
Europe – avoid as there will be structural changes which can’t be predicted- many now seem to think buying or holding money in Germany will protect them if there is a breakup of the EU assuming they will get Deutschmarks. Too much risk go to US$.
The UK economy is tracking the US far closer than the EU. However the GBP is weak and we expect this to range trade 1.50 -1.70 depending on electoral outcomes.
Asia – China is it an enormous mess? No one really knows the extent and Chinese growth is slowing perhaps more than most people think.
The Yen and the Nikkei: The Yen has almost reached 122 now it is 117.80. The Nikkei came to life in December 2012 and again in October 2014 as the BOJ implemented aggressive monetary stimulus. The initial strength into May 2013 was a ‘true’ increase when measured in any currency. However, since then any increase has been a reflection of the weakness in the Yen. The Yen is at an important juncture, we see the 50 week moving average is coming into play — perhaps a test of 115? Before we have a much larger leg down for the Yen, perhaps 140? Abe walked away with the election as the voters really do not understand what is happening (Abenomics better work, or the Japanese Pensions are toast). The Bank of Japan now owns bonds worth 60% of the value of the Japans’ GDP and is buying 17% more each year in just over two years they will own more than the annual GDP of Japan — that can’t be good.
Currently there is exhaustion in the Nikkei — all weak Yen driven — a monthly close of under 16,300 would imply more downside in 2015.
So in 2015 continue to accumulate Gold, Commodities and the US Equity markets. Please get it touch if we can assist with your investments.
