Mike Burnick: Hello, everyone, and welcome once again to this special online strategy briefing for Supercycle Trader. I’m Mike Burnick and in just a couple of moments I’ll be joined by your editor, Larry Edelson.
But first before we get started today, I’d like to remind everyone that this is of course an interactive briefing and it’s about you, our members, and Larry is of course here to answer your questions. So if you do have any comments or any questions for Larry about Supercycle Trader or the markets in general, please remember you can enter your questions now by typing them into the question window you see just below the video player. Just hit send and we’ll do our very best to answer just as many as we can get to today.
And now without further ado, let me introduce Larry Edelson, editor of Supercycle Trader. Hi, Larry. It’s good to speak to you again.
Larry Edelson: Yeah, thank you, Mike, and Supercycle Trader members, thank you for attending today. Thank you for your patience in the delay I had with the pneumonia last week and also thank you very much for all the well wishes and advice that I received from all of you. It was really wonderful and endearing to see those well wishes. I’m back on my feet. I was watching the markets the entire time and I’m raring to go and it appears that the markets are really starting to heat up as well. So that’s great.
Now, let’s talk first about the winds of economic change that are already starting to hit this month. So far this month we’ve seen deflation worsen in Europe throughout the entire European Union. Inflation levels are falling. Deflation levels are picking up even in Germany, the core economy of the European Union. We’ve also seen Germany’s economy industrial production start to plunge. We’ve seen Deutsche Bank and now a $7 billion quarterly loss.
Here in the U.S., we’ve seen the Social Security administration announce that there will be no cost of living adjustment raise for the second year in a row for 2016. We’ve seen Fitch cut Brazil’s credit rating to near junk levels. In Japan, the other major sovereign debt country that’s out there with Western style socialism that’s running into trouble, we’ve seen industrial production plunge again and we’re seeing the Bank of Japan prepare at any minute now to print even more Japanese yen and on October 7, just a couple of weeks ago, almost three weeks ago, we saw the IMF warn of a global financial crash that’s looming out there and one of their major warnings was the complacency that’s out there about government debt. So you can see the October shift that I talked about is starting to happen. The subtle signs are there.
Now, today we’re going to look at the big picture outlook for gold and silver, the charts, the euro and the U.S. dollar, interest rates, U.S. equity market, Europe’s equity market, and crude oil and I’ll discuss each market with you as we go through these slides. I’m going to move kind of quickly because I want to leave plenty of time for your questions.
Let’s start with the gold chart that I showed you last month and don’t worry if you can’t see it super clear on the screen. You will get a copy, a hard copy, of all this.
In the last webinar I told you that gold had basically two paths: a little bit further bounce and then a decline or an even bigger bounce and then a decline. It was only a matter of how much bounce would we get and the November date, November 12, 13, give or take a few days, for an important cycle low remains in effect. The only question was really how big would the bounce be.
Here is an updated chart of gold. It’s not completely up to date because I did these slides over the weekend. But gold did get up to 1,191. It did get up that high. But what’s happened in just the last two days? Gold has plunged $40. It’s not on this chart here but in the last two days, yesterday, and today alone it’s down $26, gold has plunged from 1,191 to roughly 1,143. Gold is taking path A. That’s where we are right now. It had a sharp rally. That rally fizzled out almost as quickly as it came and we are now on path A. As long as support gives way at 1,138 and we’re trading at about 1,142 right now… If 1,138 gives way, we will have confirmation of a decline into the middle of November and that could be a doozy. It really could be quite a doozy.
We can’t confirm it just yet but the important next stepping stone to the major decline I’m expecting in gold will be a close below 1,138. What if we don’t get that? Well then it is true we may bounce yet again into the B path but then we would decline a little bit further out in time, possibly early 2016. But right now everything looks good for path A lower. That’s nice because we have an inverse gold ETF and that’s starting to pick up its head and so are several of our other positions which I’ll get to in a minute.
Silver, here’s the chart from last month. I said it would move a little bit higher to just above $16 and then begin to move lower and indeed, that’s basically what happened. This chart, again, is not updated. Silver did poke up about $16 and now it’s fallen back to the 15.25, 15.35 level. It is opting or choosing path A lower.
So we need to watch the precious metals here very closely. We are at an extremely critical inflection point for the precious metals. If all goes according to the cyclical timing, we should see gold and silver move substantially lower into the middle of November. If that occurs, we will then have two scenarios. Either gold and silver make new lows in which case we will have a very high probability that the final bottom is in or gold and silver fall into November but they do not make new lows. If they do not make new lows, it will probably mean the bear market is going to extend a little bit further. Either way, the most important thing to note here is that gold and silver’s bear markets are not yet over but they are starting to come into bottoming type of action.
Okay, let’s look at the euro. I don’t have last month’s chart here. I just put up this one. This, too, is a couple days behind the current trading activity. The euro yesterday and the day before yesterday and today is plunging, right on schedule. It looks on the chart here that we’re about at $1.13. We’re actually below the second rising purple dotted line there. We’re now down to about 1.09, much lower than what you see there and I will show you updated charts in my next issue which will go out tomorrow. You’ll see all the updated charts.
The euro is tanking. It’s tanking because Europe is a mess. It’s going down the tubes. Mario Draghi knows he has to print more money. He will probably announce it by December if not earlier and the euro is just cracking apart at the seams. It has a lot more room on the downside to go. It will find some support temporarily at the 1.08 level, then it will drop to 1.04 and then it will drop to 1 and then into early next year, below 1 or parity with the dollar. It is in big, big trouble.
The flip side of that is that our projections for the dollar are also coming into play. By the way, we have nice open gains starting to accrue in the inverse euro ETF and in the call options on that inverse euro ETF.
Similarly, or conversely, the dollar is starting to rally. You can’t see it on this chart. You’ll see it in a chart I put in an issue tomorrow but the dollar has had a very, very strong rally in the last couple of days, breaking through resistance with a lot of power behind it. The dollar is going to head up to 1.07 on the dollar index. We’re long the dollar ETF and we are long calls on the dollar ETF which at this moment are up about 42%.
Okay, now, we’ve had a big move up in the dollar in the last couple of days, big move down in the euro. Don’t be surprised if you get a little bit of a pullback in each over the next couple days. Prices fluctuate. That’s how markets move, okay. So don’t be surprised if you see the dollar come off a little bit, euro rally a little bit. It means nothing. Separate the noise from the trend. The trend is lower for the euro, higher for the dollar.
Okay, interest rates. Let’s talk about interest rates. Obviously they’re still on everyone’s mind. We had a Federal Reserve meeting just yesterday. Federal Reserve basically did what I expected. Mike, you and I were talking about it just the other day.
Mike: That’s right.
Larry: They basically were more hawkish about interest rates than they were last month… giving a signal that they’re ready to raise interest rates, indeed probably in December but they’re not quite ready yet. Whether or not they raise rates in December remains to be seen. But I can tell you this, interest rates are at a very, very critical juncture. Probabilities lie with interest rates starting to rise. They’re already doing that in certain segments of the yield curve ahead of the Federal Reserve but we cannot rule out at this point in time that interest rates will actually decline further.
The reason I say that is that the stock market is still on very, very thin ice and if we get a panic to the downside in the stock market, we will get a last gasp flight to quality, safety — it’s not quality and it’s not safety but a lot of people think so — into Treasuries which may send rates temporarily lower no matter what the Federal Reserve does.
So the important point there is interest rates are really at a critical juncture. The second important point there, what interest rates do or don’t do in the next few months has no bearing whatsoever on the larger trends which are in place and that’s deflation. Commodities are still in deflation but they’re in a window of time that stretches from really November into March/April of next year where we should see a rolling series of bottoms start to occur in the commodities sector and you can refer to the Real Wealth Report of October where I talked a lot about that and if you don’t have a copy please feel free to contact customer service and get a copy of the October Real Wealth Report.
Let’s talk about the Dow, the one market that, yeah, I’ve been having a lot of trouble with. So have a lot of other people. It has certainly been defying expectations. This chart is not updated. I will show you an updated chart in tomorrow’s Supercycle Trader issue. But the Dow has gotten up to about 17,700, 750 as we speak. The important point I want to make about the Dow Industrials and this also applies to Europe’s stock markets is that both markets, European stock markets and U.S. stock markets, are on extremely thin ice. By that I mean there is no support for these markets. It is only the blue chips that are moving higher. Most of the stocks in publicly traded stocks in the United States such as the Dow Transports, Dow Utilities, Russell 2000 Small Caps, etc., are declining. It is really a few handfuls of stocks that have gone up since the August lows, primarily your big cap blue chip stocks and your big names like Microsoft, Google, Apple, Amazon, etc.
Why is that happening? It’s happening because hedge fund managers, pension fund managers, institutional fund managers, they always have to be invested in the stock market. They can’t sit in cash. They have to put their money in the stock market so as they see the rest of the foundation of the market, the footings, the bearings, the bottom floors of the market, start to get weaker and weaker, they start crowding their capital, pulling their capital out of those weaker sectors and putting it in the bigger cap stocks which are largely considered safer to park their money and deeper and more liquid. We are seeing the same thing happen in Europe. The Italian market, Spanish stock market, Greece, all the peripheral equity markets in Europe are lagging and even falling while fund managers pull their money out of those peripheral economies and put it in Germany’s DAX which is the equivalent of our Dow or our S&P 500.
This is not a healthy situation for the stock market. For a real bull market to occur you must have all the troops going forward, charging the hill with the generals, the generals being the blue chips. Here you have the troops running away and only the generals climbing the mountain. This is a dangerous situation. Historically it leads to nasty surprises on the downside. So I am still bearish the stock market.
We have had some trouble with our positions in UVXY. We’ve gotten stopped out twice. It stinks. I can’t stand it. I hate it. But I’m going to stick with my models even if we’re stopped out yet again. I will go back in at the right time because the downside on the stock market is becoming bigger and bigger and bigger with the passage of time. We are not going to be going long stocks until the troops catch up with the generals and the Dow closes above at least 18,500. So I want to be perfectly clear about that. This is not a market that you want to be totally, completely, 100% invested in the stock market.
Okay. Let’s talk about oil. Oil, we got into a position. It immediately went against us. That happens. Lately it’s been happening more frequently than I would like but we have to have patience. The trends are the trends. There’s a lot of noise in these markets as the winds of economic change start to unfold and oil, we got a rally and then we got a decline back down to about 42. It’s not shown on this chart but you’ll see an updated chart tomorrow. Now oil has violently turned back to the upside and our USO ETF is now back above water. So that’s great news.
Oil should move up to $50 to $52 in the coming weeks and then it will crash going into early January and February. So we’re planning a short-term long position here in energy. We’re going to reverse hopefully at or near the top and catch the move down into early next year where oil will drop below 40, probably to at least 36, maybe even lower. We’re going to see some violent moves in all markets in this last quarter of this year and going into next year.
Okay. Let’s go right to your questions. Mike will host and read the questions to me. I’ll address as many of them as I can and let’s get going.
Mike: Absolutely and I’d just like to remind all of our listeners at home that if you do have a question for Larry, you’ll see on your video player screen you’re watching right now, just below that screen is a little question window. You can type your question for Larry right into that window and just hit send and it’ll pop up on our end and as he said, Larry will do his best to get to as many as we can in the time we have allotted today.
So, a lot of questions already in the queue, Larry. Some are similar so I’ll try to paraphrase a few but here’s a good one from Ramona who asks, well first a comment. She says, “Hello, Larry. I hope you are recovered and feeling healthier. Now I have a couple of questions.”
Larry: I have, thank you.
Mike: “I still own UGLD for some reason. What should I do with this? I see it as not part of the portfolio any longer.” And her second question is, “What did you recommend we do with the majority of the allotted monies set aside for Supercycle Trader? Right now it’s just sitting in my brokerage account in cash.”
Larry: Okay. You should not own UGLD. If you ever, and this applies to everyone… If you ever find yourself in a position and for whatever reason you didn’t enter the stop or you are on an airplane and traveling and whatever the reason may be and it’s not in the portfolio, that means we’re out of the position and you should immediately exit it and if you want to double confirm the position being out, contact customer service.
As far as the second part of the question, you’ll have to refresh my memory there, Mike.
Mike: Sure, Larry. Let’s see here. I’m just looking through the questions. Ramona asks as her second part of her question…
Larry: Oh, cash. I’m sorry. Cash, yeah.
Mike: Yeah, what do you recommend…
Larry: Yeah.
Mike: …them doing with the majority of the cash that’s just sitting in the brokerage account?
Larry: Well, just leave it in your brokerage account. It’s that simple. There’s nothing wrong with being in cash. Don’t worry. As these markets start to heat up, we’ll deploy more and more of that cash.
Mike: Good to have some dry powder in this volatile market, right?
Larry: Yes.
Mike: Okay, here’s another question from Susie. She comments that, “It’s incredible watching the market’s up and down, sharp up and down moves yesterday after the Fed statement. As long as the Fed keeps interest rates under control, do you think the market will continue to go up? The market is under the Fed’s magic spell right now, listening to other market predictions. Many are saying to go with the Fed and not fight it. The market will go up as long as the Fed controls the market.” Those are her words, not mine. What are your opinions on that?
Larry: Well, the Fed does not control the markets. I know it seems like they do but the Fed does not control the markets. Fact of the matter is interest rates are low because the velocity of turnover of money and credit is low. They’re not low because the Fed says they’re going to be low. They’re low because the global economy is not doing so well and people are hoarding cash which is pushing up the dollar and they’re not borrowing as much as they used to. Okay and under those conditions, stocks will definitely have to correct because the economy’s not growing. What is holding up stocks is not the Federal Reserve. What is holding up stocks is capital inflows from other parts of the world that are in much worse shape than the United States. Okay?
Now, all markets have pullbacks and the market is so stretched, it cannot go much higher without staging a pullback. We are not on a new leg to Dow 31,000. It’s not going to happen unless we get a sharp pullback. So, you know, the risk is definitely on the long side no matter what the Fed does. I do suspect, since most people, most investors and traders don’t understand that, you know, you’re going to see ironically the stock market fall before the Fed raises interest rates and when they do finally raise interest rates, you’ll see a bottom in place in the stock market because the biggest bull markets in stocks occurs with rising interest rates, not falling interest rates.
Mike: Yeah, a common misconception that a lot of people get wrong, don’t they, Larry?
Larry: Yep. Mike, you’re really breaking up. I can barely hear you. I’m not sure why that is.
Mike: I’m not sure. I’m hearing you okay. But anyway, we’ll press on with the next question.
This one comes from James.
Larry: See if you can speak up, please.
Mike: Okay. This next question comes from James who says, “I currently have short positions in UVXY, EUO, DOG, SQQQ, QID, and VXX. Under the current market conditions, should I still keep them and if so, for how long? I have never played short ETFs before and I’m not familiar with the associated fees.”
Larry: Well, again, you know, we don’t have a lot of those positions. You should have been out of those positions so you need to refer to the issues and the portfolio table and if you have any questions, contact customer service.
Mike: Okay. Here’s another question from Henrika. She asks, “Hello, Larry. Why not recommend some ETFs or stocks that would go up during the recent market rally so we could make up some gains while the market has had this counter trend move?”
Larry: You’re fading out, Mike. Sorry, I can’t hear you.
Mike: Okay, let me… Can you hear me better now?
Larry: Yes, a little bit better.
Mike: Okay. This next question comes from Henrika who says, “Hello, Larry. Why didn’t you recommend some ETFs or stocks that would go up during the recent market rally so we could make some gains during the counter trend move higher?”
Larry: Well, sure. That’s a good question. A, I didn’t expect it to go up as much as it did and B, the risk is on the downside. So I don’t like contrarian trades on a short-term basis. They’re too risky.
Mike: Okay, here’s a question from James. “When do your updated forecasts predict the bottom for gold and silver and at what price?”
Larry: Well, we’re on target now for a November low. Hopefully, if that comes, we’ll be in good shape. We should… The low has to be below $1,000 in gold.
Mike: This question, let’s see, is an interesting one again going back to ETFs from Ron. Ron says, “Do you have any concerns, Larry, about holding 2x or 3x ETFs, inverse ETFs, for longer than a day as they propose in their prospectuses?”
Larry: Yeah, look, it’s a little bit of a negative. It’s like time decay with an option. Yes, I mean, that is true but sometimes we don’t have a choice, okay? I would not hold leveraged ETFs for months or years at a time and that’s for sure. But for a few weeks, even as much as two to three months when a big move is occurring or expected to occur, it’s not a problem.
Mike: Okay. Here’s a question from Michael. “What is your recommendation regarding purchase of gold miners that are not traded on the New York Stock Exchange or NASDAQ but only on the Canadian exchanges or the pink sheets?”
Larry: Well, we will certainly be looking at some of them when the bottom comes for the precious metals and miners. We’ve had a bounce in miners, pretty decent one, bigger than I expected. But the mining sector has not bottomed. In the last couple of days, mining shares have fallen off dramatically along with gold and silver. So I maintain my view, based on my cycles and my forecasts and my technical models, that the mining sector has not yet bottomed. When it does you can bet we will be looking at a lot of different mining companies, big and small. But they will have to be the healthiest of the crew.
Mike: Okay. Here’s a question, kind of a current events question from Bob. “Larry, glad to hear that you’re feeling better. My question is Argentine financial markets, they’ve rallied a bit post the presidential election. Do you think it too early to react to current events, particularly in light of Argentine’s long history of economic struggles?”
Larry: Well, I’m not sure exactly what the question is. If it refers to investing in Argentina, I would not invest in Argentina.
Mike: Yeah, I think that Argentine stocks specifically is what he’s talking about here.
Larry: Yeah, yeah, yep. I mean, you have a very unstable government, you have a very unstable economy, and you have a very unstable currency.
Mike: Three good reasons not to invest there.
Okay, here’s another question from Kyle. Kyle says, “Is it time to go short oil? One of my own timing signals from an options screen has changed from bullish on DIG to DUG which is the inverse oil tracking ETF today.”
Larry: Well, that must have been a few days ago, my guess when the question came in.
Mike: Yes.
Larry: Yeah. Oil had a rally and then it petered out and now it’s starting to rally again. So, you have volatility in the oil market right now. We should move quite a bit higher in the short term and then collapse again. But I don’t believe we’re going straight down. I believe we’re starting to rally first.
Mike: Okay. Here’s an interesting question we got from Neil, actually kind of a comment and then a question. Neil observes that, “There’s an old mantra in the market that is gold goes up when the market goes down and gold goes down when the markets go up. My concern is that when this major correction occurs that you’re forecasting and then bottoms and the market starts to turn higher towards Dow 31,000 over the next several years, again, as you forecast, if this mantra holds true, then wouldn’t gold also decline?” So…
Larry: That mantra is an incorrect mantra. It is a false mantra, okay. You cannot come up with statements like that and anyone who tells you that really is just trying to sell you something. Look what happened in 2008, ’09, the real estate wreck. Gold crashed right along with the stock market. Okay? Gold then went up with the stock market. In the Great Depression gold went up with stocks and the dollar, okay? The relationships between these sectors and asset classes changes and you have to understand when they’re changing and why they’re changing. In the future in gold’s next bull market, it is going to go up right along with stocks for the simple reason that no one in their right mind would invest in sovereign debt and gold is a great hedge against collapsing governments and so are stocks. That’s what happened in the Great Depression and it’s going to happen again.
Mike: Hmm. Here’s a question, speaking of international sovereign debt, from Steve. He says, “On Tuesday the government of Italy sold a two-year note yielding -0.02%. Is this going to be the new normal in Europe and possibly in the United States too?”
Larry: It’s definitely the new normal in Europe. It’s going to be that way for probably as far as the eye can see right now. There is the possibility, as I mentioned while I was discussing interest rates on the interest rate chart earlier, that we could see the short end of the yield curve here in the United States go negative. If the stock market collapses and puts in a major, major correction people will… flights of capital will go into the short end of our yield curve which could push, say, Treasury bills, two-year notes, five-year notes into negative territory. That possibility does exist. But it would only be temporary here whereas in Europe it’s going to last for quite some time.
Mike: Hmm. Okay, here’s a question from Linda that’s interesting also. “Larry, you mentioned in a recent webinar that you trade your equities in a firm that is more or less international. I live abroad in Costa Rica and would like to know what brokerage firm you are using. Could you please tell me?”
Larry: I use Interactive Brokers. I think they’re the best on an international basis. I do not trade equity ETFs. I do follow the same trends that we’re doing in Supercycle Trader but I trade exclusively in the futures market. Interactive Brokers covers all equity markets, futures, FOREX. It’s a very good and financially sound broker.
Mike: Okay. Let’s see, here’s a question from Tom that’s interesting about gold. “Larry, people talk about paper gold, the paper gold market and the physical gold market behaving very differently. There are comments about physical gold being under constraints or manipulated. Is that the truth?”
Larry: No. It’s total B.S. It’s total B.S. conjured up by analysts who want to come up with some excuse why gold is going down and why that can’t last and therefore you should buy. It’s some kind of anomaly out there, da da da da. It’ll resolve itself and you should buy. It’s just hocus pocus. The futures market… Look, the physical market in gold wouldn’t exist without the futures market and vice versa. Futures have been around for almost 3,000 years. They originated in Greece, futures on wheat, corn, bronze, many other things. You know, the futures markets are essential to proper pricing. If you didn’t have futures markets you would have a highly illiquid physical market because you would have dealers, miners who couldn’t hedge, okay. So, you know, again, they’re not informing you properly.
Mike: Okay. Here’s a question from Carlton. He asks, “Will there be another financial bank meltdown and when? Will small local banks fall victim to this and close their doors to customers and how large do you think the impact will be? Like the 2008 crash or much worse?”
Larry: Well, yes. I mean, the entire globe is facing another major financial crisis. It’s going to occur in stages over the next five years. We will be the last one, the United States will be the last one to get hit, probably late 2017. First it’s Europe, ongoing and accelerating, and it’s Japan next which, as I indicated at the beginning of this presentation, Japan’s industrial production is starting to slump, Bank of Japan is getting ready to print more yen. So, you know, it’s always the periphery that goes first and it’s the core economy, which is still the United States, that goes last.
Mike: Okay. Here’s a question from James about trading. James asks, “Larry, you sometimes recommend trades using ETFs and sometimes using options. Is there a method or rationale behind choosing to do the trade one way or the other?”
Larry: It really has to do with the profit potential and, you know, just portfolio design, so to speak, so that we get some added turbo charging profit potential to it. It’s really that and it really has to do with the potential in the market. If there’s not enough potential or the move is not expected to occur very, very quickly then, you know, I might opt for just the ETF and not the option.
Mike: Okay. Here’s a question from Tom. “Is gold still on target for the mid November low that you talked about previously?”
Larry: So far, so good. I got my fingers crossed.
Mike: And a question from Bill. The pros and cons of putting a portion of his Roth IRA into gold and the proper time to do so.
Larry: Well, I’ll address when we get to the bottom. There are some nuances to putting gold in a retirement program that everybody needs to be aware of and I’ll address it when the time is right.
Mike: Okay, makes sense. Let’s see, several similar questions here about the markets.
Here’s an interesting one. “Larry, if 30% is the maximum you recommend to allocate towards gold, how much additional would you allocate towards silver?”
Larry: Well, that’s really a question I think for Real Wealth Report… because I don’t have that kind of allocation in Supercycle Trader. Supercycle Trader is going to be an active trading service. In the Real Wealth Report I do and have mentioned allocations towards the precious metals out of a total of 100% that’s following the Real Wealth Report. So of the 30%, I would at this point and don’t hold me to it because it may change as we bottom out in gold and silver, but it would probably be in the neighborhood of 65/35 in favor of gold.
Mike: Okay. Yeah, I think this gentleman probably is a Real Wealth subscriber perhaps and Supercycle Trader. The second part of his question, Ian asks, “Will Supercycle Trader subscribers be receiving different or separate advice on when to invest in gold or silver from subscribers to the Real Wealth Report?”
Larry: Well, again, Supercycle Trader will be trading gold and silver. Okay. You will also get, if you’re not a Real Wealth Report member, and I put out an alert to Real Wealth Report now is the time to start accumulating physical gold and physical silver and here’s what to do and how to do it. If you are not a member of Real Wealth Report, you will get it as an adjunct to Supercycle Trader because that’s a critical thing going forward and I don’t want you to miss it.
Mike: Okay, makes sense.
Larry: Most of you are subscribers to Real Wealth Report. So that’s not a problem. But I won’t leave anyone in the blind when it comes to that.
Mike: There you go.
A question from David. “If the pension funds are moving into the U.S. generals, as you said, stocks like Microsoft, Amazon, and Google, are those good buys in the near term?”
Larry: I don’t think so. I don’t think so at all because, you know, part of the corrective process is those generals are going to start running downhill, you know, wondering where their troops are.
Mike: Well said. Let’s see, a couple of other questions here again, similar questions about the stock market.
Here’s an interesting one. “Where to park cash in the short term? Would you recommend Treasury bills?” Dick would like to know.
Larry: Treasury bills, Treasury bills, money market funds, yes. You’re not going to earn anything. In fact, I think the yield there is negative already at -0.01%. But it’s safe and liquid.
Mike: Okay. Here’s an interesting question, again, on your outlook for UVXY which you own in the portfolio.
Larry: Uh-huh.
Mike: Your outlook I imagine hasn’t changed on that.
Larry: Oh. Oh, okay. I’m sorry. I thought there was another part to that question. Well, you know, we’re in there. We got stopped out twice as I said earlier. I don’t like it. I’m very unhappy about it. We had initially a very, very, very good trade in it and then we bombed out twice. But this market is going to fall and it’s going to fall hard and UVXY, every indicator I look at when I run my projections and my computer models shows it soaring to over $100. So we may, you know, if we get stopped out again, I’ll stand aside and let the dust settle but I will be looking at it again from a long, you know, as a long position because I’m not going to go long the stock market, not until it proves itself and that’s a long way away.
Mike: Okay. Let’s see, here’s another question from Edward. “Larry, it seems that the market moves do not currently go in line with what your expectations are. Is it possible that some of your cycles or systems methodologies you’re using may have changed recently because of changing market fundamentals?”
Larry: Well, I’m always questioning that, posing that very same question myself and it does happen from time to time. Cycle work is very, very good but it’s not perfect. No one has a crystal ball, okay, and anyone who tells you that is basically, you know, B.S.-ing you. The euro is following it very accurately. The dollar is following it very accurately. Gold is following it very accurately. The one market that’s not is the stock market. And I’m constantly testing and asking myself why and I believe it has to do really with the severity of the financial crisis that is really beginning to pick up momentum and it’s manifesting itself in all those pension funds and fund managers, hedge fund managers, etc., getting out of the troops and crowding into the generals for safety because they always have to be invested. So that is probably what’s levitating the market and defying gravity, so to speak, and defying the cycle projections for the Dow. That’s fundamentally how I can explain it and it makes perfect sense and it’s validated by the same thing in Europe. But, you know, gravity always wins out so it’s taking longer and the bounce has been bigger but the market is getting weaker and weaker. It seems on the surface, and this is how markets can be so deceiving, that it’s stronger than ever. But don’t be fooled because if you look down and drill down to the internals of the market, if you think of it as a house, the roof may look intact but the foundation is crumbling. The bearing walls are starting to buckle. The footings are starting to sink and it’s really not a good situation.
Mike: Here’s a question from Steve. “What is going to happen to real estate and when? Should I think about selling my house and renting for a few years and then buy again towards the bottom of the market?”
Larry: Well, you know, I can’t advise personally as far as real estate goes. It’s such a location-centric situation. I think the real estate crisis has come and gone. I think prime areas will continue to do well, not as well as before the real estate bubble, obviously. But I think prime locations are okay. Periphery, not so good locations, might have some trouble initially when mortgage rates really start to rise. But, you know, good locations should be fine.
Mike: Okay, here’s a question from Don. “After gold does bottom, will you be recommending Perth Mint gold certificates and how safe are they?”
Larry: Yes. They’re… Perth Mint’s very, very good.
Mike: Okay.
Larry: Very, very good. Yes, I will be recommending them.
Mike: Barb has a question about your analysis about Europe and Japan. “After Europe, Japan, and then the U.S.A. fall, what next? Do you expect a new world order including one currency, a global currency?”
Larry: Well, when… (excuse me) Yes, there’ll be a new world order in the sense, not a conspiracy type of thing that you hear so much about or, you know, the Rothschilds taking over or what’s that other… Bilderbergs, all that stuff. That’s all gobbledygook conspiracy stuff, okay? There will be a new world monetary system with a new reserve currency that will probably be an electronic currency administered by the IMF, tied into a basket of commodities. China’s yuan will be a part of that. China will be the largest economy in the world by far and U.S. will be second. You know, it’s the way it’s going. It’s just… The world is changing.
Mike: Okay, here’s a question from Bob about Latin America. He says, “Given the strong significant economic problems being experienced in places like Venezuela and Brazil, do you see an opportunity to capitalize on the current economic and political crisis using, say, an inverse ETF?”
Larry: No, they’ve been beaten up too bad already. I’m looking… You know, when commodities bottom, some of those natural resource economies will be fantastic buys. So I’d rather wait and probe the long side for some spectacular trades once commodities bottom.
Mike: Okay. Shifting from Latin America back to Europe, Charles has a question. “How can European money coming over here and pumping up our markets to help push it to Dow 31,000, if their currency becomes basically useless paper?”
Larry: Well, that’s why they’re getting out of their currency.
Mike: Before it becomes worthless, right?
Larry: It’s that simple. It’s that simple. I mean, you know, savvy money moves first and savvy money is very, very big these days and it moves first, okay, and if a currency’s going to collapse, it’s going to get out and go into a safer currency, a more liquid market, a safer economy, a safer market. I mean, and it’s not just the euro. You have capital flowing into the U.S. blue chips coming out of the Middle East and coming out of China as well and parts of Asia. So, you know, the capital is all pointing largely to the U.S.
Mike: Okay, here’s a question from Chris about the election. “With the upcoming presidential elections, do you think the Federal Reserve will hold off on interest rates hikes so as not to rock the financial boat, so to speak? If so, would not that generate a year end rally in the stock market?” Your thoughts?
Larry: Well, they held off this week. They hinted at, strongly hinted at raising rates in December. But, you know, whether they do or don’t, it really doesn’t amount to a hill of beans in terms of the big picture. It doesn’t change the trends. It really doesn’t. It causes some volatility and additional noise and maybe some delays, but it never changes the trends. I don’t think the Federal Reserve could give two hoots about, you know, who the next president of the United States is or the elections. That’s the furthest thing on their minds these days.
Mike: Okay. Let’s see, here’s a question from Anthony, kind of a follow-up question from an earlier one I guess. He says, “Hi, Larry. I have one additional question following on today’s market action so far,” as he remarked yesterday. “Well, you know, we’re sitting on some open positions that are to the downside.” And he says… He goes on to say, “I believe that bursting of the bubble is inevitable but timing-wise are we not fighting the Fed here at this time?”
Larry: No, we’re not fighting the Fed. I know, again, you know, that’s the superficial rationale that you hear everywhere. No, we’re not fighting the Fed. What we’re… What I probably underestimated, let’s put it that way, is the amount of capital that’s crowding into the blue chips that’s holding up the Dow and the S&P 500 and the DAX in Germany. That doesn’t mean the forecast is going to be completely wrong and that stocks are going to take off to Dow 31,000. It’s not going to happen. What is going to happen is there’s going to be a correction. It may start tomorrow. It may start next week. You know, I can’t say for certain at this point because the cycles are very muddled in the stock market right now and they’re muddled not because of the Federal Reserve but because of what I believe is going on, capital inflows crowding into the blue chips, lifting, gravitating, levitating that market while the troops run for the, you know, head for the hills. It’s an unsustainable situation.
Mike: Okay, here’s a question from Lowan. He says, “What do you expect for Thailand’s market, up or down?” You’re right there local. What are your views?
Larry: Well, a year and a half ago when the political crisis started here again, the Thai SET was trading at about 1,100 and I was on a TV show here and I was asked what I thought and I said it’s going to soar and they all thought I was crazy but it indeed soared quite dramatically. It was one of the best performing stock markets in the world over the last couple of years, despite the fact that it was in a military coupe and under military control. Thailand is still under military control. The economy is weakening a bit. Stock market remains okay. The currency has weakened about 10% this year, 12% this year. But the economy is hanging in there and if you’re a Real Wealth Report member, you’ll recall that a few months ago I wrote about ASEAN… taking place this December, A-S-E-A-N, Association of Southeast Asian Nations. It officially launches in December of this year. It’s been under work, underway for many, many years now but basically there’s an economic community forming in Southeast Asia, ten Southeast Asian nations, which include Thailand, Myanmar, Singapore, Indonesia, Malaysia, Brunei, Vietnam, Cambodia. They’re forming an economic community. Trade barriers are coming down. English is the official language. They are moving towards uniform labor laws. They fortunately did not make the same mistake that Europe did. They did not embrace a single currency. They were smart enough not to do that and anyways, you’re seeing now an economic community start to develop of Southeast Asian nations which is going to be a very important driving force for the rest of Asia outside, you know, outside of China and India over the next several decades. So Asia is where it’s at, period. You’re seeing the decline of the West and the rise of Asia. This is a long-term phenomenon. It’s going to take decades to unfold but not even decades. I mean, within five years, China will be the largest economy in the world. So, the world is rapidly changing.
Mike: Okay, here’s an interesting question from Rob. He says, “Larry, we are three weeks past the October 7 date you gave for convergence. What events can you point to to confirm that date for you?”
Larry: Well, I cited it at the beginning. We’ve seen a lot happen in October that shows you that the economic winds of change are unfolding. Europe’s economy is getting weaker and weaker.
Germany’s economy, the only leg holding the European Union together, is starting to weaken dramatically. Deutsche Bank is in trouble. Volkswagen is in trouble. Japan is starting to falter again and the Bank of Japan is ready to print more yen. The ECB is ready to print more yen. On October 7 the IMF put out one of its most vociferous warnings I’ve seen in years about a global financial crash looming. So it’s happening. You just have to look out there and see what’s happening, okay, and it’s going to pick up in momentum and this is really only the beginning. We are in the beginning, early in the beginning. This thing is going to go on for years and it’s going to get worse and worse and worse. The good news is the trading is going to get better and better and better. The opportunities are going to be coming… You know, we’ve been in markets that have really been — let me put it the right way — very difficult to trade because there’s been no volume and no liquidity. Volume and liquidity’s going to come back because markets are going to start trending, trending and trending and trending and having nice swinging moves and that’s what traders love and those traders have been very quiet for the last several months and when they get back in, we’ll be in there with them.
So I’m really super excited about it. I really am. But I’m not unempathetic. I am empathetic with all of you. You are my dear members. You’ve entrusted me, okay, and I take my responsibilities very, very seriously and I can tell you, it’s not going to be easy but good things don’t come from easy work. It’s going to take time. It’s going to take patience. It’s going to take iron will and we will prevail. You will prevail.
Mike: All right.
Larry: You have my promise on that because I’m going to do it. I’m doing it for myself. I have to do things for my family over the next five years and I consider you basically part of my family. So hang in there. I will not let you down.
Mike: Great sentiments, Larry, and unfortunately that’s about all the time we do have for today but if we weren’t able to get to any of your questions or if you have anything (excuse me) additional that you’d like to ask Larry at any time, please remember that you can always submit your questions directly to the Supercycle Trader editor mailbag which you find right on our website and Larry will either answer those questions individually, which he spends a lot of time doing, or perhaps in a future issue of Supercycle Trader. So with that said, thanks again for joining us today and, Larry, thank you for your time and your insights as well.
Larry: No problem. I enjoy it. Thank you for helping out today, Mike, and, everyone, thank you for your well wishes last week. Thank you for attending today. Be on the lookout for an important issue tomorrow and let’s stick together and let’s make it all happen.
Mike: Thanks, Larry.
