A cura di Walter Snyder, Swiss Financial Consulting
The last Newsletter predicted the arrival of the Renminbi in grand style and the penultimate number underlined the bond rout and the fact that the US Dollar is overvalued. The huge American national debt has been repeatedly mentioned as well as the enormous US trade deficit. The present cycle is in its 92nd month, making it the third longest one in history. So the downturn is coming soon. The longer the cycle, the more the downturn. Sell high now and reenter the market after the downturn.
It is unknown what the catalyst will be that sets off the crash, but with debt at all time highs, leverage terribly high, P/E ratios historically high, interest rates set to “normalize” in the near future (Fed), political uncertainty in Europe, Trump under siege in the US, neocons on the attack and lots of other factors like North Korea, the Syrian civil war, Islamic terrorism, inflation, auto loan defaults, etc., it is time for asset managers to prepare in advance for the “correction” that is now overdue.
Overpriced speculative stocks should be sold now because their prices are simply too high. They might go even higher in the very near future, but the downturn risk is more than a reasonable investor ought to be willing to take on. Getting out of overpriced US equities at the moment is quite profitable. The problem is where the proceeds should go once they have been raked in. The Forex markets are going to be subject to high volatility as soon as the first tremors in the market are felt, which will make holding cash somewhat risky. The Swiss Franc still enjoys haven status but has become overvalued. The Euro will go down. Go into Renminbi or Rubles?
This Newsletter has suggested commodities, real estate and gold, which always glitters, as investment areas that should be considered. Of course, commodities are subject to volatility due to seasonable changes and cycles. Diamonds are also a possible investment, but one must be very careful and rely on the advice of an expert.
Currently the prices of mining shares are a bit high and overbought because investors are looking for hedges. The Chinese in particular like buying gold mines. Do they know something that we do not know?
In any case investors should position themselves defensively so as to minimize losses when the crunch comes. Retrench and stay only with stocks that are not overpriced and which consistently produce dividends. The stock market crash will usher in a harsh recession that will have repercussions globally. It will be bad news for the USA while the entry of the Renminbi into the international spotlight will mark the beginning of a global realignment of 21st century economics. Ipse dixit.