DRESS Rehearsal Over: USD Main Event BEGINS!

The U.S. Dollar has already lost approximately 80% of its purchasing power since 1971.

It has taken 47 years to get to this point, which means it’s losing just about 1.7% annually, but over a long enough timespan, this has completely changed how Americans live their lives.

The sneaky devil called inflation doesn’t strike all at once. Instead, it pierces away at your salary and fixed-income investments, chipping through them, until 20 years into your career, you’re essentially in the same place you were when you got started.

When it’s all said and done, living in the U.S. is a double-edged sword. 

On the one hand, it’s still ranked as the best place in the world to do business, and there are plenty of opportunities to grow your wealth, but in actuality, the U.S. is highly divided between Have and Have-nots.

The different states are very distinct, regarding their economics, taxes, weather, overall vibe, demographics, and leading industries; the people themselves hold truly unique views on all matters, from the constitution to the rule of law, corruption, corporate behavior, and the future of the country.

What’s not in question, though, is the outlook for the U.S. Dollar – it is utterly guaranteed that it will be a reserve currency in less than 10 years from now.

Courtesy: U.S. Global Investors

Not every rate hike will trigger a 29% increase in the price of gold, nor will it cause a 17.8% one, but the trend is clear, though.

Investors understand that the bull market in stocks has been a dramatic success so far, but that the risks of P/E ratios reverting to the mean, which would require a 25% decrease in prices, are eventually going to occur.

From the standpoint of an institutional investor, the USD is less attractive today than gold, since inflation is becoming the main problem, but more so, because Trump’s policies are leaving no room for doubt – trade wars will ensue.

Courtesy: U.S. Global Investors

Owning gold, instead of saving in Dollars, has been a phenomenal decision, as we’ve discussed many times over the past 15 months.

Portfolio Wealth Global was launched in January of 2017, with the premise that the election of Donald Trump would usher-in a USD bear market.

This was the main reason I wanted to publish our research.

After a strong bull market for the dollar between 2011 and 2017, our team realized that populism would make the U.S. a country, which is hard to deal with. 

Remember, the U.S. is a significant trading partner for all the Asian nations, which could not be where they are today without American consumerism.

China went from being the poorest land on our planet to being the strongest force, outside of the U.S., in a process, which took 40 years.

I don’t see this process slowing down, but only intensifying.

Courtesy: U.S. Global Investors

As you can see, the fact that yields are rising for short-term bonds is what triggered the poor performance of the stock market so far this year.

Portfolio Wealth Global had alerted that when dividend yields are lower than short-term bonds yields, then funds flow into bonds, but when inflation also becomes an issue, then investors want neither stocks nor bonds.

They want real assets, instead.

Gold could spend the majority of 2018 above the $1,400 price level. It wouldn’t take much to send it there.

Gold is already up 3% this year, while stocks are down 3%. While Portfolio Wealth Global sees stocks, commodities, and cryptocurrencies all rallying together at some point in 2018, because the USD and the bonds market will fuel interest in alternative securities, we feel one event could be the defining moment for 2018.

This event will occur when the FED raises rates at 50 bps (Basis Points) in one foul swoop, it could only mean one thing: their inflation radars are blinking red.

That’s the all-in sign for me.

We’re walking a tightrope, and the eventual fall is around the corner.

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