We recently presented our latest, members-only Edelson Institute Executive Briefing. In this online presentation, we covered the status of ALL the major markets including: gold, silver, stocks, oil, the dollar and more.
Plus, we updated you on our latest strategies and specific trade recommendations for E-Wave Trader.
If you missed this exclusive presentation, or want to see it again, simply click here now to access this exclusive briefing!
Or if you prefer to read our analysis in detail, we’ve also produced an edited transcript of the event as an added bonus. I hope you enjoy it.
Mike: Hello everyone, and welcome to the special monthly executive briefing for the Edelson Institute. I’m Mike Burnick, Executive Director of the Institute, and with me today, I’d like to welcome back a very important member to the team, Sean Broderick. Hi Sean, thanks for joining me today.
Sean: Hi, thanks very much for having me back.
Mike: Absolutely. I’m pleased to say Sean recently joined the Edelson Institute as a senior analyst and editor, or I should say re-joined us, since Sean and I go way back. In fact, he was my first boss here at Weiss when I joined the firm in 2002.
Sean: That’s right, a long time ago.
Mike: And of course, we’ve both learned a lot from Larry Edelson over the years, which we’re going to pass along to you, our members, in today’s presentation, including our cycle forecasts, and answers to your most-pressing questions. So, let’s dive right into the presentation now and take a look at key markets.
So, the first market that we want to cover of course is gold.
And the good news here is that gold broke out to a new high in August, above the $1,300 level, in fact it got as high as $1,354. And so that breaks a downtrend line that’s been in place for five long years.
So, there’s no question this confirms the bull market in gold, which began back at the end of 2016, right Sean?
Sean: Yes, in fact, this pullback in gold comes with a rally in the U.S. dollar. It’s no surprise the U.S. dollar hits a five-week high the same time gold hits a four-week low. Because gold is priced in dollars … I call it the seesaw of pain, when one goes up the other one gets hurt.
Now, gold looks like it has to test $1,280; I think everyone’s expecting that. If that support breaks … now it doesn’t have to, gold could just bounce along there, but if it does, probably $1,260 is the next line of support you would see come into play.
Mike: In fact, we tested that $1,280 level this morning, trading as low as $1,280.40, so it’s right smack into that support zone that we’ve been warning readers about.
The bad news is as you can see in this chart, is our cycle forecast does show a pullback coming straight through October and perhaps into November. So, that just means that we need to be patient here, and wait for a much better buying opportunity, which we expect at year-end.
Sean: I would say that there are great fundamentals for gold that just have to come into play. We just had the World Gold Council say, “We’ve hit peak gold production.” So that’s supportive.
Mike: That’s good news.
Sean: And we have the rise of the Asian middle class in those cultures that have a real affinity for gold. So, you put those two things together, and that’s a longer-term, very bullish picture.
Mike: True. Very good fundamental support for gold, in addition to our cycle forecast, showing much higher prices as we move into 2018. This next slide is our cycle chart of silver. It looks very similar to gold.
We’re tracking a decline straight through the month of October, perhaps early November. And Sean, you know they call silver the devil’s metal, because it’s many times more volatile than gold, or at least it seems that way.
Sean: It’s like gold on steroids, or maybe it’s gold without its antidepressants. Because when things are great and you see gold moving up, silver goes way high, and then when things are looking bad and gold goes down, silver just falls off a cliff. I was just going to point out that it looks like we’ll probably see a test of $16, which is major support last seen in July.
Mike: That’s a key technical level. The first support is around the $16.50-$17, but you’re right, we could see a complete retest all the way back to the July lows … again, because silver is so much more volatile than gold. So, don’t be surprised if it follows a steeper correction during this down phase too.
Now let’s move to the next chart: mining stocks. Again, as in gold and silver, we’re kind of looking at the same sort of pattern here.
Both the junior and the senior miners are forecast to move lower. Again, toward the end of October, perhaps extending into the early part of November. And interestingly enough, Sean, we’re actually looking for the senior miners to underperform the junior miners in this phase. That’s what the E-Wave cycle forecast suggests. Which is unusual, but it’s not unprecedented, and sometimes the larger-capped stocks do get hit harder.
Sean: A lot has to do with the amount of debt those big companies carry, which makes them more leveraged to the price of the metal, right? And if we are talking about GDX, that has major support at $21, which it has tested three times in the past year.
So that looks like an area that could come into play in this kind of pullback … it doesn’t have to, but there are a lot of technical traders looking at that level, and saying, “I’m really not interested in buying until that level, but when that level comes along, I’m probably going to buy with both hands.”
Mike: That’s absolutely right. And that’s exactly why we recently added the Direxion 3X gold miners ETF, that tracks the inverse of GDX times three. That symbol, of course, is DUST.
The trade is designed as both a hedge for your long-term positions, your gold mining stocks that you hold as a core position, as well as a way to profit directly from this decline. In fact, DUST is already up about 10-11% as we speak.
Now the good news … really the bigger picture, Sean, that we want everyone to keep in mind, is this pullback is ultimately great news, because it’s going to hand us an opportunity to snap up a lot more gold and silver stocks on the cheap.
Sean: Would you rather buy things when they’re cheap, or would you rather buy them when they’re expensive? Well, from the cycles, we can tell things will get cheaper, and that’s when you want to buy.
Mike: Absolutely. Buy low, sell high! Now, let’s take a look at the next chart.
Moving onto the energy sector … and we see that oil points higher into October as well. Our cycle forecast has really been right on cue for the energy markets as of late. We saw a top in early August followed by bottom at the end of the month. Spot on the money, and now we’re climbing higher.
Sean: Right, and on Wednesday the 27th I wrote a column for the Edelson Institute about how bullish I was on oil right now. There’s a lot of fundamentals that go along with the cycles. For one thing, the EIA, which is the U.S. Energy Information Administration, is predicting a large rise in U.S. oil production, but according to people in the field, that’s probably not going to be there, not as much as they want. It is going up, but not as much as expected.
At the same time, global oil demand should rise by 1.7 million barrels per day, and as recently as February it was only supposed to be a jump of 400,000 barrels per day.
And then you have us exports. Exports are rising fast because U.S. crude oil trades right now at a $6 per barrel discount to the international benchmark. So, all the foreigners are lining up to buy our oil. You put those things together, and it’s really all the ingredients you need for a real oil bull market.
Mike: All those factors lend great fundamental support to our ongoing cycle forecast, which does call for higher prices down the road. And because of the fundamental support, we may actually see the highs extend out a little bit.
You can see here, we’re forecasting a high early October, but we may actually see the turn date extend out a little bit further. Remember, sometimes these turn dates can be off by as much as a few days to a few weeks, one way or the other. So, stay tuned for our signal on that. But black gold is outperforming, even if gold and silver are underperforming right now.
Moving onto another energy market, we also have a position on natural gas, and likewise, as you can see here in this chart, natural gas should move higher into our October.
The trend is not quite as strong as oil, but it is moving in the right direction. And Sean, once again, there’s really good fundamental support in the natural gas market.
Sean: There are great fundamentals. If you look at the exports to Mexico, they’re surging. And it’s not just that. One liquified-natural-gas export-facility after another in the U.S. is coming online. There’s a new one that should come online in October. So that’s how we sell liquified natural gas to the entire world. That raises our exports of natural gas, and the more we sell to foreigners, that’s more of a bullish force in the market.
Mike: And again, natural gas is to crude oil what silver is to gold, right? It’s very volatile. Natural gas is much more volatile than crude oil, which is volatile in its own right. So, we need to be a little bit patient here and let this trend unfold and wait for our signals.
Sean: We can also see things like weather that can all play into this. And just add more volatility to this market.
Mike: True. Now let’s move onto the stock market, shifting gears here, you can see in our latest cycle forecast for the Dow, it shows really a choppy trading range here into year-end.
We see a little bit of a decline coming in October, but then a rally again in November. It’s kind of sloppy back-and-forth. And obviously, we’ve been forecasting a more significant decline in the Dow, which simply hasn’t materialized, at least not yet.
The interesting thing is, though, if you look at some of the major U.S. markets, other than the Dow … it’s a very different picture, and much more bearish.
This chart that I inserted and just pulled up the day before our webinar is the Nasdaq-100 Index, and as you can see we’re in for a bit more of a rally here as we move into mid-October, but then a precipitous decline that will carry all the way through year-end and into early 2018.
If this proves accurate, then we’re looking at a substantial decline in the part of stock market, the Nasdaq, which has really led the rally all year long. And that’s those big-cap Nasdaq tech stocks like Apple, Facebook, Google and the others, that have accounted for most of the gains this year in stocks.
So, if that sector of the market is likely to falter, then you really have to look out below for the Dow, the S&P, the Russell, all the major market indexes. Incidentally, although it’s not include here, the cycle forecast for the S&P 500 looks nearly identical to the Nasdaq-100 Index, which is showing a sharp decline into year-end.
So, the Dow is the only index, Sean, that’s not in agreement. But it looks like we’re in for a correction here in the market.
Sean: Well, there are many things that have, over time, been driving up the stock market. But one factor recently has been anticipation of these new tax cuts. Because they’re rolling out a new tax plan in Washington, D.C., that’s supposed to have lower corporate taxes, and that’s why you’re seeing these big-cap stocks just move higher.
But what many investors don’t realize is the real beneficiary of corporate tax cuts is the small-cap stocks, the small-cap companies.
Mike: Domestic companies.
Sean: Because the big companies don’t pay that much in taxes, either the leaders in the Dow, or those huge tech leaders in the Nasdaq-100 … they have all these great accounting schemes, they don’t pay any tax in some cases. So corporate tax cuts won’t benefit them that much. So, you see a rise in anticipation of tax cuts, and then when the reality sets in you see a sell-off, and that’s how you get this kind of volatility.
Now, one more thing, for these big-cap tech companies, they’re also talking about repatriation of off-shore profits that these companies have. And so now people are buying those stocks thinking, “Well, if they have to bring that cash back home, then they might do an extra dividend or something like that.” But what’s it do for the underlying business of the company? It really does nothing to improve it, and then you can see a sell-off, as the reality sets in.
And finally, I have to make a third point, which is that we don’t know what the final tax plan will be. Washington is a sausage factory, you don’t want to see how sausage is made, and the end result might not be what you expect it will be.
That’s why we can see so much volatility in here, swings up and down as anticipation is met or isn’t met, as people have hopes for something that really doesn’t work out, or as new surprises come along … You can really see some big swings.
Mike: Those are all great points. We’re liable to see more volatility, just as you pointed out, especially as this tax plan works its way through Congress. That’s always a treacherous process.
Now turning from stocks to the dollar, this is interesting in terms of stocks … You know the dollar has been punished all year, down 10-11%, but last week, the Fed came out a bit more hawkish than expected … They did lay out their game plan for starting to unwind their massive $4.5 trillion balance sheet … That process will start in October, when they’ll start rolling off some of their Treasury bonds and mortgage-backed securities.
But also, they indicated that they may stick to their original forecast for raising rates once more this year … and perhaps as many as three times in 2018. So that kind of spooked markets a bit, and also it led to a major upside reversal in the dollar, and a downside reversal in the euro.
So, although the dollar rally has been pushed out a little bit in time …. it hasn’t come as soon as we originally forecast … but it looks like we finally got that reversal to the upside now.
And Sean, if we see this follow-through, it means a lower euro, which of course, plays right into our positioning with the ProShares UltraShort Euro ETF.
Sean: Absolutely. I saw the U.S. dollar bottom earlier in September. And partly it is the Fed; they are a bit more hawkish, or interpreted as more hawkish. So, right now, the bond market is currently pricing in a rate hike in December at around 70%. Just a few months ago it was around 30%. So, there’s more anticipation of a rate hike.
At the same time, we have a tax cut, and so everybody likes that, and so that boosts the dollar. And then the forecast for economic growth was just raised again. So again, it’s a forecast; we don’t know what the final result will be, but as people turn more bullish on the U.S. economy, that tends to support the U.S. dollar. And so that’s really what we’re seeing playing out here.
Mike: That’s exactly right. And the stock market really needs to be very wary about this strength we’re seeing in the dollar. As the dollar rally continues, as our cycles forecast, we could see the stock market get undercut … Why? Because so much of the profitability for the S&P 500 comes from overseas, mainly Europe and emerging markets.
Now a stronger dollar, basically will undercut that earnings growth. So, the double-digit growth rates of the past couple of quarters we’ve seen in S&P 500 earnings could vanish. And that would be an important prop knocked out from under the stock market, because valuations are already stretched to the upside. Something worth watching there.
Sean: And in fact, if you go back to the earnings reports of those companies with large overseas operations, you’ll see currency advantage, currency advantage over and over and over again. And what that led to was earning surprises; on the flip side that can lead to earnings disappointments.
Mike: So, that bears watching going forward. Let’s shift gears now, and move into our Q&A section of the presentation. And we’ve got a lot of great mailbag questions that have come in. I wish we could get to every single one here in the time we have today, but we’d be here all week.
We did pick out a lot of questions that are representative of many we received over and over again. So please keep your questions and comments coming in the Editor’s Mailbag, and we’ll do our very best to provide our straight answers to each and every one of them.
So, let’s start out with a question on gold from Nancy. She says,
“I’ve been waiting patiently to buy gold bullion. Is now the time? I would greatly appreciate having a buy signal. Thank you, Nancy.”
Well, Nancy, we certainly would love to give you that buy signal. It looks like it will come later this year, though. According to our cycle forecast, we’re looking at early November as possibly being a bottom and upside turn date for gold. And yes, we will be adding to gold bullion positions at that time.
Sean: Your patience will be rewarded, Nancy. We saw gold enter a new bull market at the beginning of last year, and we just saw it break its big downtrend, which actually confirmed that bull market, but things zig and zag. We’re just in a zag downward, which leads to what? A great buying opportunity. So, you know that’s coming. Just be a little more patient.
Mike: That’s a great point, Sean. Nothing moves up in a straight line, so we just have to be a little patient here … wait for gold to digest its recent move that it’s had since the July low, and then we’ll see another buying opportunity just around the corner. So, hang in there, Nancy.
Let’s see … next question comes from Leann. She says,
“Hi Mike. What is your prediction for the timing of a possible stock market crash in the U.S.? Is it still safe to buy some Weiss top-rated dividend stocks for growth and safety, or is it better to buy now or wait until after the October-November period, because as strong stock market correction is likely? Thanks for all your guidance, Leann.”
Well, thank you, Leann, for the nice comments. And yes, we do expect a stock market correction as we just outlined a few slides ago, especially in the Nasdaq. The S&P 500 similarly shows a sharp correction potential into year-end.
Now, we don’t think it’s going to be a major correction, though. You mentioned a market crash. We’re not looking for anything like that. So, it’s not like you have to go out and divest your entire portfolio of high-yielding dividend stocks. That might be a foolish move.
At most, we’re probably looking at an 8, 10, 12% correction. It’s been over two years now since we’ve seen anything close to a 10% correction. And the longer we go without a correction, the steeper the correction could be.
Still, we’re not looking for anything like a replay of 2007-2008 when the S&P got cut in half. So it’s probably a safe bet to continue holding your top-rated dividend stocks. Keep some cash, some powder dry, on the sidelines, too, because we’ll see a better buying opportunity in stocks come the first of next year.
Sean: And I would just add, Mike, you don’t buy the average dividend stock because you’re looking for a short-term price performance. You have a longer-term view, right? And so, if you want some stocks that pay nice dividends, any time is a good time to buy, really. And I can tell you that it has been shown, that in a market correction, dividend stocks have that cushion, and they tend not to fall as badly as those stocks that do not pay dividends.
Mike: That’s a great point. They tend to be a lot more insulated from the market’s gyrations. Let’s take another question.
“What is the difference between E-Wave Trader and Supercycle Investor? Don’t both services do the same thing?”
That’s a good question. Both services, of course, share the same big-picture vision of the Edelson Institute … the training that both Sean and I got from Larry Edelson over many years. And they draw heavily on the study of cycles. But Sean and I also have our own unique investment styles, or unique insights, and so our investment recommendations are bound to be different.
For example, E-Wave Trader uses options and leverage. Sean’s Supercycle Investor doesn’t use options. And Sean is focused on some of the big megatrends that he’s identified, which are unique segments of the market that require special analysis. Sean, why don’t you talk a bit about that?
Sean: Well sure. We’ve been doing very well in stocks that produce lithium and cobalt, because those are the energy metals, and there’s an energy metal megatrend … You can see it happening now, pullbacks can be bought. It just looks really strong. There are other mega trends as well. So, you actually get more of a good thing, and it’s a very different thing, because as you said, we each have our own investing styles.
Mike: There’s added diversification, with both services, in terms of the recommendations and the investment strategy. So, that’s the easy answer there.
Another question. This one shifts to energy.
“You cover the energy market of oil and natural gas. Do you also track atomic and solar energy? And if so, what is the outlook as to the present and the future?”
That’s a great question. Sean, I know you follow the energy sectors closely, including nuclear power as well as solar. Why don’t you tackle this one for us?
Sean: Sure. I’ve had my head handed to me in atomic power over and over again, because of uranium miners. And I know that I say gold miners are the most optimistic people you’ll ever meet … They have to be, because they head to the same patch of land for seven years in a row and think they can turn into a mine.
Well, uranium miners have those guys beat by a mile. They are really optimistic. And the only time to buy nuclear power … that’s uranium miners … is after some kind of disaster involving a nuclear power plant. Then everything falls flat, and then they’re actually bargains.
Solar energy … There’s tremendous growth in solar energy, but the problem is, in the pricing side of that, there’s a race to the bottom. So, you have to be very selective about what you buy. There are opportunities in it; they do come along, and I’ve made some nice money in solar energy.
I’m more positive on solar. I think you can buy nuclear power stocks, like uranium miners, but you just have to wait for the right timing opportunity.
Mike: Timing really is the key with these alternative energy stocks. Obviously, the solar-energy industry had a really nice move this year. We saw the whole sector break out of a multi-year downtrend, and is in a new bull market now. So, we’re definitely focused on solar … have several stocks on our watch list, and we will let you know when the time is right to jump on these … waiting for a pullback right now to digest the recent gains.
And of course, in terms of nuclear power, you mentioned the uranium stocks, Sean … several of those also on our watch list. In fact, we own some in the Real Wealth Report right now. Looking to add further … again, when the time is right. Because, as you pointed out, Sean, it’s been a long time waiting for a lasting, tradable bottom, in uranium stock.
Let’s take another question.
“Weiss Group warns of financial Armageddon shortly down the road. And Larry talked about this, too. Where do you put all the profits we are making from our investments so they’re safe, according to everything we’re hearing?”
This is from Greg. Thanks, Greg. Good question. Well I think two of the safest places you’ll have to put your money when the you-know-what hits the fan eventually here over the next few years is, No. 1, gold of course. And we’re very keen to see this bull market continue in gold, with the next buying opportunity coming up later this year.
But also, don’t overlook blue-chip U.S. stocks. When we see the global financial system in trouble, we’re going to see a massive amount of money flow into the U.S. stock market from around the world. Why? Because governments can go broke, government bonds can go bankrupt, but Apple’s not going to go bankrupt. Nobody’s going to confiscate your money in Apple, or in IBM, or in Boeing.
Those companies are going to be long-lasting winners for many years to come. Volatile? Yes. We’ll see some ups and some dizzying downside moves in the stock market, but ultimately for a long-term store of value U.S. blue chip stocks really can’t be beat. Sean, what’s your take?
Sean: Well, one thing is … this question is warning of financial Armageddon shortly down the road. That’s actually not what we warn of. We speak about phases happening, and in the early phases, we’re actually going to see the U.S. grow stronger as money flows from overseas here. And so, what you really have to do is, you have to stay tuned. Follow our signals, and we’ll tell you what looks good at that time.
And just to touch on a great point that Mike made … Years back, when the Zimbabwe currency crashed … And I mean, it went to nothing. They had people carrying money around in wheelbarrows.
Mike: … I remember that.
Sean: The best-performing stock market in the world that year was the Zimbabwe stock market. Simply because there’s real value in those companies. They actually produced things. And so as the currency went nowhere, the stocks actually went up. So, that’s something else to keep in mind, too.
Mike: That’s a great point, Sean. Good question, Greg. Thank you. And let’s move on to another.
“Should we sell stocks now for profit, and buy same later at a lower price? Will the market go low enough to do this sensibly?”
That’s an interesting question. As we mentioned before, we’re not looking really for a stock market crash here over the next couple of months. Nothing like 2007, 2008 … at least not yet. More than likely we’ll see an 8, 10%, maybe 12% correction in stocks.
Sean: … One is due.
Mike: We’re way overdue for one. It’s been over two years since we saw anywhere close to a 10% correction, when we normally get one or two about every year. So, we’re certainly overdue.
Let’s take another question.
“I’ve recently come into some funds to get my physical gold and silver positions to the ideal 10% or 15% of my investment portfolio. Is now my last chance before metals go up, before I get the ideal level of physical set before the rise in metals and the geopolitical storms hit?”
When it comes to physical gold and physical silver bullion, you should already have a core holding of that. Anywhere from 10% to 15%. But right now, is probably not the time to add to it, because we are in a short-term correction phase. Once we do see a bottom and the cycle turns higher, which we expect later this year … that would be your next good buying opportunity to add to physical metals.
Sean: There are really two ways to buy physical metal. One is to make a purchase every month. In that case, you don’t really worry about the price, you’re just adding to a certain position. The other is to follow the Edelson cycles, and look for that low. And we are saying prices are going lower, so if you want to time the market, then you should wait a while.
Mike: Good answer. Another question, this one comes from Douglas.
“Mike, kudos to you for guiding our investments in these uncertain times. Looking in the short term, what does the AI model forecast for the valuation of the U.S. dollar to the Japanese yen for October, November and December?”
That’s a very specific question, a good one, Douglas. Thank you. And thanks for your kind comments. Our forecast for the dollar is higher into year-end, and right into 2018. That’s higher versus both the euro and the yen, as well as probably most other foreign currencies. When the dollar really gets going to the upside, Sean, there aren’t many other currencies in the world that can beat it.
Sean: In fact, we had a great chart on this in Gold Mining Millionaire recently. Perhaps we can send this out to these subscribers as well. The Japanese yen is under all sorts of pressure right now. The U.S. dollar, as we talked about, really has some things in its favor, which is a trend that we expect to see continue … which is the U.S. dollar appreciate against the Japanese yen, at least for the short term, anyway.
Mike: That’s a great idea, Sean. As a matter of fact, we’ll be sending out a full transcript of this webinar, so if you happen to miss the webinar or you just want to go over it again you can read it word-for-word, page-by-page. And what we’ll do is we’ll put that cycle chart of the U.S. dollar/yen pair into the transcript so everybody can see it.
Next question comes from Celia.
“What do you think about the volatility index? Why is the index unmoved by recent geopolitical turmoil?”
Another great question. The VIX – aka the Chicago Board Options Exchange SPX Volatility Index — has been dead all year long, and traded down to an all-time low recently. It’s been below 10 for most of the last six months, which is unheard of. But the volatility index simply tracks the relative value of options on the S&P 500. So really, it’s a reflection of investors’ sentiment, which has been very complacent lately.
Investors have not been seeing much in the way of volatility, and that’s exactly the way the market has been acting. We’ve seen very few moves in the S&P 500 up or down 1% or more over the last six months. When we do eventually get the correction, the VIX will spike higher, as it always does. But that’s more of a coincident indicator; it’s not all that predictive of what will happen in the market.
Let’s take another question.
“It’s understandable the cycle charts have scan dates shown. However, it would be quite useful to show price ranges also.”
That’s an interesting question. We get that question often. But, the cycle charts are much more attuned to the timing rather than price. The timing of the cycle lows, and the subsequent cycle highs, the uptrends and the downtrends. They tell you the magnitude of the moves. Really, they’re not as useful for the actual magnitude. Whether they’ll move down …
For example, the drop we’re forecasting in gold could be $50-an-ounce or $150-an-ounce, it can’t really be determined very well from the cycle charts. Keep that in mind. Sean and I both use other technical indicators, many of which Larry taught us over the years, to gauge the likely targets on the upside and the downside of key markets. So, you’ll see other analysis and indicators from U.S. for price targets.
All right, let’s take another question with the time we have remaining.
“Will you be offering option recommendations for GLD, SLV and the Dow?”
Yes, the short answer is of course we will. We feature options in E-Wave Trader, and call options, on GLD, which tracks gold, and SLV, which tracks silver, are very possible when the time is right. Also, we’re looking at the possibility of put options right now on the stock market.
I think that when we finally get the stock market correction we’ve all been looking for, it will be more in the high-flying tech stocks, especially the FANG stocks that really led the charge up in the Nasdaq over the last year. And so, for that reason, I would be looking at put options on something like the QQQ, for instance, which tracks the Nasdaq-100 index. And that is on my watch list right now, but again, we want to make sure the timing is right. Because when it comes to options, Sean, timing is everything.
Sean: Yes, it is. And also, there are some great inverse ETFs that also allow you to play the downside in those major indices as well.
Mike: Leveraged inverse ETFs, as a matter of fact, are often times a better way to play it than options.
Ok, next question.
“Your gold charts keep moving the low and a strong upturn. Now it’s late November or December. Is there any real evidence that won’t continue through 2018?”
Well, that’s a great question. And of course, the neural net model, E-Wave Trader model that Larry Edelson developed over many years, is an artificial intelligence model. It’s a neural net. So, what that means is, it constantly incorporates fresh data into the program to create these cycle forecasts.
So, what happens to gold, for example, over the next 30, 60 days, will have an impact … as you would expect, on what the forecast is three or six months down the road. So, for that reason, yes, the cycle turn dates do sometimes move a little closer, or a little farther away … We’ve seen that happening in the energy sector as well, where the peak was originally forecast to be coming here at the end of September; now it’s pushed out to October.
We have seen the same thing in gold and silver. Originally, we were looking at a bottom for gold in October. Now it looks like it could be more likely November. That’s all part and parcel with a neural net model. It is a living, breathing thing that’s always learning from its successes, learning from its mistakes, incorporating new data, and giving you the best possible forecast at that point in time. So, you have to be patient with the fact that sometimes the forecasts do move.
Let’s take one more question.
“Both my wife and I are state retirees, and so our income is state retirement and Social Security. Although I use your recommendations for investing, that income would not be enough to sustain us if we were to lose our retirement and Social Security. Should we be concerned?”
Mike: Well, Sean, I think they should be very concerned about Social Security, at least, not meeting people’s needs in the future. What’s your view?
Sean: There could be some real problems in funding it, because it does face some problems. It’s hard to predict exactly what those funding problems will be, but that is something that you have to keep in mind.
Mike: And of course, on E-Wave Trader we’ll keep you abreast of those situations and present you with new opportunities … how you can profit from them, and up any shortfall you may see in your retirement or your Social Security benefits. So, stay tuned.
We’ve got time for maybe one more question. And this is a good one.
“China and Russia, plus many more, have already dumped the U.S. dollar for trade. What impact will the new special drawing rights usage have on world economies?”
That’s a good question. We get that a lot on the U.S. dollar. Basically, when you’re looking at the dollar and the value of the dollar, it’s not so much trade that’s important to look at. The key for the dollar strength … really for any currency … is global capital flows.
Those are much bigger in the aggregate, and outshine trade-weighted dollars by a long shot. So, it’s where people are moving their money. Are rich Japanese investors and institutions keeping their money in Japan, are they moving it to emerging markets, or are they moving it into the U.S. dollar for safety? Are European investors moving their capital around within the eurozone, or are they moving it the heck out of the eurozone, and into U.S. dollars?
Now we’ve seen over the last few years, steady flows into the U.S. from most foreign markets. Now there’s an ebb and flow to that, and for most of this year we’ve seen the flow reverse, where money was moving more out of the U.S. and into Europe and into emerging markets.
And the reason for that is obvious … It’s because European stock markets and emerging markets have been outperforming the U.S. The MSCI Emerging Market index is up over 30% year-to-date, whereas the S&P 500 is up only about 11% or 12%. So, when you see a big performance differential like that, naturally some of the hot money will chase that performance.
Long-term though, both Sean and I are very keen to follow the cycle forecast, which shows massive capital flows back into the U.S. And that may be starting already, and happen next year. Sean, your views on that?
Sean: Certainly, we’re gonna keep our eyes on China and Russia. And yes, China is trying to do more trade in its own currency. But still, the U.S. dollar is the world’s reserve currency … That’s not gonna change anytime soon. Right?
Sean: And as the global economic cycles play out as the Edelson Institute is predicting, and there’s a lot to back that up … then the U.S. dollar is really going to look more attractive. Now, a lot of things can happen. There could be big things going on in the world. Never say never, but really, we’re more positive on the U.S. dollar right now.
Mike: Absolutely. We see a definite rally in the U.S. dollar unfolding now.
So that’s about all the time we have for today, but once again, I’d like to thank all our members for their terrific comments and their questions. Please keep them coming into the Editor’s Mailbag, and we’ll keep you informed as best as we can.