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
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

Will A Cascading 'Crackup-Boom' Start In The 'Peripheral Nations'?

Stock-Markets / Financial Markets 2015 Dec 31, 2015 - 03:56 PM GMT

By: Gordon_T_Long

Stock-Markets

This Chart Is Regularly In Gordontlong.Com's Monthly Mata Report


Minsky Moment

The Question To Consider Is How You Will Make Money When The Crack-Up Boom Arrives?

... or Has It Already Arrived?

1- Venezuela

As Zero Hedge Reports: Consider Venezuela

It's that time of year again. When hindsight is 20/20 and coulda/woulda/shoulda gives way to reality. With the US equity market barely able to keep its head above green water, a look around the world shows investors could have done a lot better (or not).

In fact, as Handelsblatt shows , the best investment in the world in 2015 would have been - drum roll please - Venezuelan stocks!

What investors got for € 100,000 in 2015

Note - these returns are from a EUR-denominated persepctive

So - that proves it - buying stocks during hyperinflation "works" and protects your purchasing power, right?

Not so fast! While Venezuela's official spot Bolivar rate has been flat at 6.2921 all year as Maduro dreaded the admission that his nation is in utter collapse, the "real" exchange rate - or 'Dolar Libre' Rate - has been crashing...

Venezuela Dollar Libre Exchange rate

Which means, if you wanted to "invest" in Caracas Stocks last year (by moving your USD into Bolivars, buying stock, then moving your "gains" back into USDs to bring home and celebrate), things look a lot different.

Caracas Stock Exchange Index

From a 287% gain, you would have actually lost 22% of your initial USD stake!

So sorry, hyperinflation does not pay after all!

Still, The Fed, ECB, BoJ, PBOC will keep playing the 'inflate' and debase game until they are all proven wrong.

2- Brazil

Let's also consider Brazil. Brazil was an investment darling as hot money flooded into Brazil prior to the 2008 Financial Crisis and the Commodity boom exploded with China's emergence as a global manufacturing giant.

Bovespa

However, things haven't been so good since the Financial Crisis and 2010 as China began to slow. Recently things have only gotten worse as government corruption and failed policies surface.

Following recent strength on the heels of hope for a new finance minister, news that Ruosseff has sent the minimum-wage-hike Bill to Congress appears to have crushed the hype of any fiscal rectitude and sent Real tumbling. Down over 4% - the most since September 2011 - BRL is back above 4.00 per USD, giving up all the recent gains.

Broad weakness in EMFX...

Emerging Market FX Index

Seems to have been exacerbated by:

*Brazilo Rousseff Sends Bills on Civil Servant Wages to Congress

A Bill that could cost BRL 4.77 billion, wrecking hopes of any improvement in the fiscal situation. As Bloomberg reports,

Brazil's bigger-than-estimated minimum wage increase and potential credit expansion make it harder for govt to control around 11% on year inflation and cut budget gap, Marcelo Schmitt, portfolio manager at investment firm Sul America, says in a phone interview.

These initial policy steps after Barbosa replacing Levy as finance minister are concerning, says Schmitt.

And so...

BRL per USD

This is the biggest drop in BRL since September 2011.

Charts: Bloomberg

How Have Brazilians Done After The Big Run Up When Denominated in "Bogus" USD?

The Devastation - From 65 To 20!

Brazil iShares Daily Chart

A Cascading Crack-Up Boom

The Crack-Up boom is already underway in many of the peripheral nations of the world. It is more about a cascading series of events. The story in all the peripherals is similar to both Venezuela and Brazil. The only way to make Money in the Crack-up Boom is in the US$, remembering the US Dollar will be the last to fall while globalized Crack-Up Boom is underway. However, the US$ will eventually fall.

It may be subtle but what is happening is Emerging Market Wealth is being pillaged around the world via "Exorbitant Privilege" and a fictionally valued US$. This is the greatest "Debt for Equity" Swap in history. M& A activity has exploded as overvalued US stocks (due to buybacks and borrowing to pay dividends) is used as "currency" in this M&A binge.

The real question is where is the crack-up boom occurring today and most importantly, how will you keep your wealth after the Cascading Crack-up Boom ends.

Gordon T. Long
Publisher - LONGWave

Signup for notification of the next MACRO INSIGHTS

Request your FREE TWO MONTH TRIAL subscription of the Market Analytics and Technical Analysis (MATA) Report. No Obligations. No Credit Card.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments. © Copyright 2013 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from him.

Copyright © 2010-2015 Gordon T. Long

Gordon T Long 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