Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Dollar Mirage in the Desert

Currencies / Financial Crash Nov 16, 2007 - 10:21 AM GMT

By: Money_and_Markets

Currencies

Best Financial Markets Analysis ArticleJack Crooks writes: I'm in Las Vegas for the Traders' Expo right now, where I'm going to teach a group of investors how to cash in on currencies. Today, I want to share with you what I'm going to tell them here in Sin City ...

It's Five O'Clock in the Morning and the Markets Are Drunk on House Money


By now you must be wondering how financial markets have continued on such a torrid pace throughout the year. After all, the world is aware of our Federal Reserve's credit market house of cards, right?

Maybe. But plenty of financial institutions are still losing their assets after making bad bets with this imaginary money!

Just look: Bank of America, Citigroup, Morgan Stanley, Merrill Lynch, Bear Sterns ... they're all feeling the pain of reckless investing.

Yet despite many of our "elite" banks coming clean on credit market losses, Main Street investors aren't heeding the warnings. Then again, why should they? So far, they've just been stacking up chips by making risky bets.

Heck, all we've gotten so far are a few stock market hiccups!

As far as I'm concerned, over-confident investors are throwing good money after bad. And our central bank is merely postponing the inevitable.

The real pain will arrive when the house closes the chip window. In short, we're at an important stage in the game. Sure ...

The Gamblers Could Keep The Party Going for Now

Like I just said, a lot of investors are content with ignoring the warning shots until their portfolios come directly under fire.

They're just following the lead set by the Federal Reserve, and playing high stakes poker. Unfortunately, Bernanke doesn't have an ace in the hole.

It's a high stakes game, and all Bernanke can do is bluff!

The Fed knows hiking interest rates will crush the housing market and the economy. And it knows cutting interest rates will further inflate the world's asset bubbles.

In other words, the Fed is damned if they hold and damned if they fold! So they do the best they can and try to bluff their way out.

They're trying to stimulate economic growth rather than worry about asset bubbles.

In the process, they're pushing the dollar lower. Mind you, I think the Fed WANTS the greenback to fade. They want the stock market to stay juiced. And they certainly want Mr. and Mrs. Consumer to keep buying into the game.

Investors figure there's no reason to stop gambling if the house is going to keep fronting the money.

However, there will come a turning point, and a whole lot of unaware people will lose their shirts ...

Watch for Signs that the Market Is Sobering Up and Leaving the Table

At the saturation point, money will become less and less stimulative ... and the party just won't go on any longer. This is the apex of the boom/bust cycle. It's the turning point we have to watch out for.

A classic example: Japan, 1989.

The Bank of Japan fought hard to escape a deflationary stranglehold. However, all the easy money in the world — even a zero interest rate — did nothing to help. The Japanese economy suffered 14 years in the grips of a deflation bear.

The Fed is running the same risk today, and it needs to be careful of digging an inescapable hole out in the middle of the desert. It's not easy to orchestrate an orderly fall in the dollar AND avoid a panic collapse.

After all, the lowly greenback is still the world's money. Any panic run from the world's money has major implications for every market around the globe.

We're not there yet, but the day of reckoning is getting closer. The grand finale will most likely come in spectacular fashion; what I like to call "climax selling."

When the deck is stacked, it's time to act ...

I'm watching the action very closely. And while the house money keeps flowing to the global economy, I think the best approach is to ...

Limit Your Risk by Stacking The Deck in Your Favor

If you've ever been to Las Vegas, you know as well as anyone how easy it is to give away your money. That's why I keep most of my chips off the poker tables and in the currency markets, where I can wait for the odds to turn in my favor.

The search for higher yields has drawn capital out of some currencies and into others. For example, the British pound, the Australian dollar and the euro have climbed to historic highs. It's like the whole world is betting on black!

Meanwhile, currencies like the yen have been cast by the wayside. You can imagine what's going to happen when these extreme bets reverse course. A lot of investors will lose their shirts, and a select few who were prepared will hit the jackpot!

Best wishes,

Jack

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in