I wrote this in September, but thought it would be worth sharing now.
I am still playing the waiting game with stocks.
It half looks like planning a strategic exit into companies that can weather recession is a good idea. This will include companies that don't depend on consumer spending to thrive. But then there are signs that the bull market isn't dead yet as well.
Right now I am looking at Gold and Gold stocks specifically, as the US dollar looks ready to devalue.
There is a lot of research that goes into these short quips. I decided to boil it down to some bullet points.
- The US trade deficit is massive. That's not a reason alone to leave the markets. Balance of Trade has been Negative on the whole for the US since at least 1987. It's just very very big now. https://www.census.gov/foreign-trade/balance/c0015.html
- But - countries that Trade with the US receive US dollars for their goods. in a similar way, countries that trade with Canada receive Canadian dollars for the things we import. When this money hits foreign markets and is deposited, banks have two choices: 1) let it sit and lose money by paying interest on the deposits 2) invest it and make money.
- Banks choose to invest, and this is the driving force of the Canadian Housing bubble, the 2006 US housing bubble and now the insanely massive, world-wide credit bubble. Central Banks all over the world are investing in US debt securities (but especially China), because a) they are very liquid and b) it's an easy way to equalize the balance of US dollars vs local currency.
- http://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp
- The US dollar had previously been depreciating against other currencies, primarily because China had been steadily dumping US treasuries.
Now, based on my last post you might think I'm contradicting myself. This is not so, because in my last post I commented that the markets are showing no clear signs. I am merely preparing for either situation of new bear or new bull.
