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PLAYING With FIRE: Trump Devastates USD!
I’m in Europe right now because the key for the market’s next rally is here.
European stocks have underperformed U.S. equities for a meaningful length of time. Historically, when this occurs, the correlation soon returns to normal.
This means that either the American markets head lower as well, joining their EU counterparts, or European stocks rally, joining the global bull market again, making a case for an “everything bubble.”
Since the markets here, in Europe, looked to have bottomed out and began to trade in an uptrend just recently, it seems like we’re going to be continuing our ascent towards the blow-off top, which we have discussed many times before.
Many indicators are pointing towards another major leg up, a final one, before this economic expansion slows down, dragging some of the world’s biggest financial centers into a bear market territory.
What many analysts and investors are overlooking, though, and I want to make sure you are not, is how we enter the next economic contraction:
- Where will interest rates be?
- What level of inflation will we go through?
- Where will the USD index trade and what will the price of gold be?
- What will unemployment numbers look like?
These four critical questions will determine how long the contraction will last, how severe it will be, and how quick the recovery will occur.
The FED is obviously in charge of where the Fed Funds Rate will be at the time, and I see it at the 2.75%-3.00% level, as investors finally say NO to stocks and begin to diversify into alternatives.
Judging by the fact that the central bank has stated that two more hikes are due this year, a 2.75%-3.00% world is about one year away.
Inflation is already becoming noticeable, but in 6-12 months, as we enter a slowdown, it will be even higher. Procter & Gamble, for example, have already announced that they will be passing the costs on to the consumer for diapers and other basic products.
So, you see, right when jobs become less secure and companies stop hiring, inflation will be at its peak.
Inflation is highly unpredictable, but don’t be surprised to see CPI numbers published, which are above the 4% range.
The most interesting element, though, of the coming contraction, which Wealth Research Group forecasts will occur in the second half of 2019, at the latest, is where the USD will be at the time.
You see, President Trump, in his quest to make America great again, wants to bring manufacturing back to the U.S., which I personally believe is a risky policy.
The U.S. cannot possibly lower its wages and currency to be competitive on the world scene. Remember, between the Far East, Africa, and Euro-Asia, a quarter of the world’s countries have cheaper manufacturing than China!
No, the U.S. hasn’t got a prayer to bring textile, electronics, shipbuilding, or automobile assembly lines back in a meaningful way.
Instead, what the U.S. should be thinking about becoming a leader of quality products and services, not low-cost ones.
I can count on one hand the countries, which can compete, in terms of human talent and technological capacity, what America is able to do.
What the U.S. needs, if it is to lead in the 21st century, as it did in the 20th, is an educational revolution.
Americans are not properly educated on the basics of economics. They don’t save, which is why 47% of them rely on government subsidies. This is the No.1 priority, nationally, to reach a 10% savings rate, at the minimum.
Saving instead of spending on consumer products, which is what the average person does, allows the economy to grow in other ways, because of the additional savings power, deployed towards higher ROI activities. The fact is that the rich are contributing more every year, since the middle-class is eroding and around 100 million Americans aren’t paying at all.
Courtesy: U.S. Global Investors
Secondly, Americans should read more and think about what they read.
In 2017 alone, a stack of the best financial books, available for anyone to buy, could reach outer space.
50 years ago, people didn’t have the same access to powerful information, which is critical for success, as they do today. If President Trump wants to leave office, knowing that he has done his country a service, he should survey the country’s wealthiest people on what books impacted them the most and make that knowledge widely available.
Here’s the bottom line – America can’t and shouldn’t compete with countries, which are 200 years behind it, concerning every modern metric of affluence on labor jobs. They need to rethink their future, and so should every single person.
I repeat my 2008 prediction, which is on its way to becoming a reality: By 2022, there will be NO middle-class in North America. The higher income brackets will constitute 10% of the population and the remaining 90% will own no assets and have zero savings.
Lowering the purchasing power of the USD by running giant deficits will not solve the problem the U.S. is facing, which is what Trump is betting on.
The reserve currency role, which is both a blessing and a curse, is misunderstood by most.
It allows the U.S. to have access to capital without end, but the government has made it a point to take those precious resources and turn them into weapons, mostly.
Now, they will need to balance their militaristic aspirations with the promises made to their 80M Baby Boomers, which will put additional pressure on the budget.
Trump doesn’t need to make America cheap again. The government needs to look at ways to inspire people to save, read, and think.
Warren Buffett famously said that his daily routine for decades has been to read eight hours a day, think about what he has read with regards to his own life, save money, and invest it.
I encourage you to do the same.
Don’t, for one second, wait for the government or anyone else to lift you up. Use your brain to find a specialty, a niche, and a problem, which you can solve and capitalize on it.
If you’re an employee, do what I showed my brother to do. Come up with a major plan, once a month, and present it to your boss. Do this without getting asked to.
After four months, my brother received the green light on one of his proposed pitches to the decision-makers in his workplace. He proceeded to lead a team to implement this and within four months received a 35% promotion in salary.
Every business on the planet wants an employee that treats the business as his own and delivers valuable ideas. The way to get there is to specialize every day, by reading quality content and leveraging it.
Look at your daily routine. Trim the fat. Cut your TV time and exchange it with reading. Sleep an hour less for six months. You will add 180 hours of deep thinking to your life and will able to turn that into results.
Cut your social life to half of what it is for a while. Make sacrifices because there will be no middle-class by 2022. You must own assets by then, as many as possible, so you can build on those and put a wall, a fortress of wealth, around yourself and your family.
Trump won’t save you. Gold won’t either. Only you can change by feeding your mind with the right knowledge and acting on it!
Legal Notice: This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.