Asia Sez to Americans: “All Your Money Are Belong to Us”

What follows is a collection of quotes from reports and investment signals I receive every day. Most of these are not free. In fact, I pay as much as $3,000 per year for some of my subscriptions. I’ve made selections from the past four days — to give you a peek behind the curtain.

My focus is on global markets and currencies (with side orders of petroleum and commodities). Meanwhile, the world’s focus is on deliberately kicking America’s ass (even if it hurts them in the short term). Many nations are willing to take a hard economic hit to rid the world of a dangerous invading nation with an insane leader threatening to “throw atomic bombs” at his make-believe enemies. As a result, experienced U.S. investors have been dumping their US dollars (frantically over the past ten days) — except for:

1. Investment professionals who watch CNBC — the corporate-profit-driven business cable channel with a propaganda mission to drive up the Dow.

2. Investment professionals with a case of cognitive dissonance, indecisive paralysis, senile dementia, or right-wing brain rot.

Your hand-picked selection of financial quotes appears below the fold.

A Special Note on the Title

The title of this Essay comes from a popular 90’s arcade game called Zero Wing. The Japanese game was so poorly translated, that it became a cultural icon throughout the world. Especially the phrase: “All your base are belong to us.” Here’s a view of the salient screens in the game:

My favorite flash version of this craziness is located here –> The “All Your Base” Flash Experience

(I fixed it so it opens a new window. Click it. It’ll get you high. Mind your speakers!)

Okay, pass the Dharmaceuticals and let’s get this on… BTW, I did publish this at Orange, but I’m putting in stuff, below, that I can only tell you guys (and my gays, of course).

THURSDAY — Get Ready for Another Dollar Bashing!

What Happened:

Yesterday, the markets got wind of the latest Durable Goods Report. Core Durables came in at 0.3%, as opposed to the 7% expected. That’s a big ouch! Durables as a whole came in – 1.7% vs. +1.6 as expected.

How Markets Reacted:

The U.S. dollar got crushed as traders heard about the less than enthusiastic numbers. They dumped the dollar with new found enthusiasm.

What It Means:

Man, the U.S. dollar just can’t catch a break. This has pushed EUR/USD back above 1.4300.

Are things going to get better anytime soon? More than likely not. Just Wednesday, Bank of America announced the layoff of several thousand employees. Motorola posted a loss this quarter in today’s announcements. Also, Daimler (Chrysler) announced a loss.

So what does this mean in currency land? The dollar is down because the market is losing confidence in the greenback fast. Plus, foreigners are taking more assets from the U.S. (selling their stock holdings of these slowing companies, selling real estate, etc.) and repatriating their money out of dollars and back into their home land.

This makes foreign currencies go up and the dollar go down. Currencies are moved by both economic and sentiment levels. Both right now are in the toilet. So until this picture changes fundamentally, all stock market rallies and dollar rallies should be sold once they start to roll over.

FRIDAY — Nations are Pouring Their Investment Funds into Asia

What Happened:

Foreign powers are now more willing to inoculate themselves from weakness in the United States. They’re doing this by establishing Sovereign Wealth Funds (SWFs), or government-sponsored investment companies. Booming countries – including major oil producers in the Gulf States as well as Russia – are going to make major changes to the way they invest. And Sovereign Wealth Funds are the vehicles they’ll use.

Nations use these government-owned investment corporations to invest surplus reserves. They’re rapidly becoming a popular way for central banks to get rid of their U.S. dollar investments, which are plunging in value on almost a daily basis.

It’s estimated that SWFs currently have more than US$2 TRILLION in assets under management. That’s quite a chunk of change! However, they are expected to exceed US$13 trillion in assets just 10 years from now.

How Markets Reacted:

Already, nations are moving their investment funds into other more stable currencies such as euros and British pounds.

What It Means:

This is just the beginning. Nations will become more aggressive in investing outside the dollar, which means currencies of other nations will get bid up in the process.

We believe the Japanese yen is one currency that will benefit greatly from this trend!

See, SWFs are going to allocate a much greater share of their investments to Asia. For some countries, it will amount to investing in their home region. For others, it will simply be going where the growth is. But all of them are likely to gravitate toward Japan, which is the second-largest economy in the world.

End result:

We will see more dollars being converted into the yen and other Asian currencies.

WEEKEND — Dollar Sell Signal Rumor from Commodities Guru Jim Rogers:

Jim Rogers broadcasted his intentions to sell ALL his U.S. dollars over the next few months. He’s using some of the profits to buy Chinese yuan instead.

According to this living legend, the “policy” of the Federal Reserve is “to debase the currency.” That’s why he’s trading in his dollars for yuan.

He used this little history lesson to point out why he’s so pessimistic about the greenback.

“The U.S. dollar is and has been the world’s reserve currency, the world’s medium of exchange. That’s in the process of changing. The pound sterling, which used to be the world’s reserve currency, lost 80% of its value, top to bottom, as it went through the whole period of losing its status as the world’s reserve currency.”

So even though it’s already been under pressure for years, the dollar still has significant downside risk, yikes! According to Rogers, the Chinese yuan (or renminbi) is “the best currency to buy right now. I don’t see how one can really lose on the renminbi in the next decade or so. It’s gotta go. It’s gotta triple. It’s gotta quadruple.”

MONDAY — A Private Trade Signal for Currency “Options” — and a High-Level Explanation of the Global Money Machine

Background:

I said last Friday that if the G-7 finance ministers didn’t make a strong statement supporting the dollar, the market may perceive it as a green light to sell the buck.  Well, they didn’t, and the dollar is suffering the consequences.

The G-7 decided to let the dollar decline. That’s because a falling dollar will tend to add global liquidity to all asset markets.  And that was the devil’s tradeoff for the G-7, i.e. either keep the global music playing by sacrificing the buck, or take a stand on the buck and risk a big selloff in global markets and risk more contagion. 

Thus, we are in an environment that has to be labeled “The Return of Risk Taking.”  And it’s a very fertile environment to hold options that bet on a continued dollar decline. 

A Yuan for the Yen:

So what about the yen?  Doesn’t it do badly in an environment of risk taking?  Well, it used to, but I think the game has changed there, too. 

Though the G-7 did not support the U.S. dollar, it did collectively bash the Chinese currency, complaining the Chinese yuan is significantly undervalued.  This was the first time we saw the U.S., Canada, and Europe together in such a forceful manner on this issue.  I think they are finally getting serious. 

The Chinese currency is at least 40% to 80% undervalued against the U.S. dollar according to most analysts — and it could be a lot more than that.  The political pressure on China and the inflationary pressures in China, are growing rapidly, thanks to the policy of currency manipulation.  We may have finally reached that stage where it is in the best interest of China to act, and let its currency float much higher, much faster. 

Why is a stronger yuan good for the Japanese yen?

Japan competes with China on exports to the West.  A stronger yuan will allow Japan to implicitly let its currency move higher.  I think this will now clear the way for the Bank of Japan to finally hike interest rates.  Artificially lower interest rates in Japan have suppressed the yen for a while, as you know.  It has been the catalyst for the carry trade. 

Thus, we now have another reason why the carry trade in the yen could become unwound, besides just risk.  That’s why I am still very bullish on the yen even in an environment of risk appetite.

(This signal goes on to tell investors to buy March Yen at a certain strike price…)

For those playing along at home — I wish I could tell you that if you invest in “international funds” through your mutual fund at work — that somehow you are in the “foreign” market.

Nothing, however, could be further from the truth. As long as your investment is demoninated in dollars, you are losing money every hour of the day.

The big problem this week, is that on Wednesday the Federal Reserve may lower interest rates (to keep the U.S. corporations happy with the Dow Jones Averages) — this will simultaneously cause the dollar to lose a great deal of value around the world. But most Americans won’t notice — yet. And on Friday, an important report on U.S. employment comes out (it’s called the Nonfarm Payroll report). If this shows the U.S. is losing jobs this month (doh!) it will signal to the world that the U.S. economy is in trouble, which will kick the dollar even further down in value.

The last time I published the trading account, below, was in my Essay here exactly one month ago:

http://docudharma.co…

At that time, it was up $118,000.  By continuing to bet against the dollar (and investing a bit more in the Euro and Pound) it is now up to $169,000. By the end of next week, I would expect a lot more improvement:

You know what to do.