Saturday, March 05, 2011
The press has not been talking about this yet (or they have, I don't know since I don't watch TV or read newspaper). The DX chart shows that the USD has just broken its support line. The dollar crisis is coming (again!). Uncle Ben will eventually face the fact that too much money printing will cheapen the value of the currency.
What will happen?
First you need to understand the basic: Money must generate yield (i.e. interest rate). Nobody can stand to see their money generate 0% return. This idea has been reinforced by money managers.
When one asset class is not generating any yield, investor will move the money into another asset class. Traditionally, the money will move into either bond or equity. That is why you have the inverse correlation between bond-equity. Equity goes up, bond goes down. Bond goes up, equity goes down. But that relationship is not valid now as we have another class to invest, commodities and precious metals. With the invention of ETF/ETN, it is now easier to invest in commodities an precious metals.
The next mania is happening now, right in front of our own eyes. This is your chance to get 1000% return (if you get it right and stay with the trend). Try not to underestimate the trend. Remember that when SSE was at 3000 and everyone calling it a bubble - which it eventually doubled to 6000?