Trade Alert: It’s truly a Currency World War
Recall that we are, everywhere in the developed world, in the midst of an all-out World Currency War. To really drive the point home of what we’re talking about with these accelerating currency wars, let’s call it by something a little more striking – WCW1.
Silver and gold are ripping higher this morning, continuing a big move from late last week. Even the paper promised ETFs are on fire. Let’s take a look at today’s headlines and connect some dots, shall we?
1. Japan’s Below-Forecast Growth Fuels Sales-Tax Debate
2. Japan Inc. Profit Doubles to Add Support to Economic Rebound
3. Dollar gains, Japan GDP disappoints
4. Stock Indicator Update: Time to ring the cash register?
Now then, here’s what all these headlines mean.
1. There will be no meaningful new taxes in Japan until the next major market reset. The approach of the generals (read: the leaders in our government, Central Banks and finance ministries around the world) in WCW1 is to run huge deficits propped up by Central Bank debt buying. Which is another way of saying these generals are using the age-old tactic of printing new currency with no underlying value to run their countries.
2. As I’ve been pointing out since 2009, there’s an all out push by every national, state, county, local and any other governmental body to subsidize, expand and bring in new corporate earnings. Targeted tax tricks and welfare for giant corporations and ever-higher stock prices is the obsession of our leaders the world over. That’s had profound results for corporate earnings and stock markets around the world, exactly as I’d expected. This won’t end well. The question is, as it’s been for the last year or so, how long do we stay at the poker table with our bubbled winnings?
3. See, Japan GDP disappoints, but Japan corporate earnings are on fire. What to do? The currency war generals in Japan will use a “weaker than expected GDP” to do what the always do — create new targeted tax tricks and subsidies for giant corporations. See point #2 above. Meanwhile…Dollar gains? Oh no! Our currency war generals can’t have that. Stronger dollar might mean good things for the consumer and saver at home, but it would also be a drag on corporate exports, margins and therefore, earnings. The response from our nation’s currency war generals will be to…print more money and create new targeted tax tricks and subsidies for giant corporations.
4. A lot of smart, responsible investors and money managers who’ve got huge profits in their Tesla, Priceline, LinkedIn, Facebook, Google, Sandisk, Yelp, Zillow, (*put your bubbled stock here), etc, who are feeling queasy about the gains. Meanwhile, gold and silver are down huge from their highs last year and a rotation into something less parabolic than the stock markets is probably a possible trend for a while here. Where else they gonna go, bonds? Treasurys? Joining the Fed in their debt buying? Probably not a good idea amongst those same smart, responsible investors and money managers.
Now let’s talk about our our tactics to win the currency war for our household. Here are the trades I’m making today. I’m selling about 3/4 of my SLV calls and all my SLV common. I’m trimming about 1/3 of my FutureFuel position, which is up at new all-time highs again. And likewise, I’m trimming about 1/5 of my LNKD common.
Finishing up by returning to our poker table analogy, I suggest taking some of your chips off the table, heading over to the jewelry store and picking up your wife some gold and silver gifts, having a great steak dinner and taking in a show on the house. We worked very hard and overcame a lot of adversity, doubts and drama to get to this point, and if you’ve been following the TradingWithCody.com playbook, you’re well on your way to overcoming the damage to civilization that comes with every war, even Currency Wars.
