As covered on this weeks VRA Call (link at end of update) it is now clear that the FED cannot raise rates and that the global currency war just moved to DEFCON 3. And…for the time being…the stock market will continue to ramp higher.
VRA Prediction: Wednesday’s decision by the Federal Reserve NOT to raise interest rates has provided us with THE blueprint to exactly how our financial system will come crashing down. Market watchers will refer back to the events of the last 60 days, and in hindsight, will point to the FED’s actions during this period as a “hat tip” to the economic carnage that would come to pass in the weeks and months to come.
Folks…what I am laying out for you here is not journalistic hyperbole. Everything that I have witnessed over the last 30 years has led me to the conclusion that we now discovering exactly how the end game begins…and yes…it has begun.
Stay with me as I was I walk you through these recent events, along with why the FED’s decision yesterday not to raise interest rates in the near future will lead to this eventuality. What I am reporting here is not being reported anywhere else, at least as far as I know, but everything that I see points to the conclusion that I have come to.
One: Over the last 60 days, the US Dollar (USD) has soared in value, when compared to every major global currency. This 20% plus move higher in the USD (versus a basket of weighted foreign currencies) was the single most dramatic move in the history of currency markets, and I believe an indication of exactly what is about to come. Remember, the currency markets are the largest and most liquid markets on the planet, so these kinds of historic swings were unheard of in the past.
Two: The move higher in the USD picked up serious steam following the employment report for February (reported on 3/6). Following this report, the markets “hunch” became the markets “certainty”…namely, that the FED would announce that yes, they in fact would raise interest rates in the near future…most likely in June. But…wait a minute.
Three: What transpired after the February employment report proceeded to scare the sh*t out of Janet Yellen, the FED, and Central Banks and bankers all over the world. The sheer power of the unprecedented move higher in the USD caught them completely off guard…sending shockwaves through the markets.
Four: Everything culminated in Wednesdays (in)action by the FED. Instead of raising rates for the first time in 9 years, the FED backed off completely…even indicating that it may be well into the second half of 2015 before they considered doing so.
The Quadrillion $ Question: If the FED cannot increase interest rates in the US by just .25% (that’s one quarter of one percent)…again, for the first time in 9 years…without the USD skyrocketing in value so dramatically that it throws the entire world into turmoil, then what’s going to happen when the FED is “forced” to raise interest rates in order to head off rising inflationary pressures?
Getting the picture now??
Folks, we’ve just been granted a sneak preview of the systemic turbulence that’s headed our way. It’s crystal clear (to me, at least) that this is how the end game will begin. The FED is now caught between a very large rock and an even harder place. They cannot increase rates without damaging the economy (which an ultra strong USD would certainly do, as our exports become too expensive).
However, in the very near future they will come face to face with the reality of currency inflation, which we already see showing up in 8.3% m2 money flow statistics…which will VERY quickly evolve into price inflation. Once that Genie is out of the bottle, Janet Yellen’s FED will have very few (if any) tools to deal with runaway currency strength.
And yes…for those that are wondering…this is the exact situation that causes precious metals to skyrocket in value…even while the USD ramps higher at the same time. History will tell us very clearly that the global currency war led to the greatest bull market in the history of precious metals.
Bottom line: For now, nothing has changed in my forecasting. The stock market has quite a bit of room to run before we get to DEFCON 1. The VRA Trading & Investing System continues to target a 20-30% move higher in the overall market, between now and the end of 2016. But now, we have the early indicator for a major market reversal that I have been looking for…we’re just not there yet…so let’s make money on the upside while it’s there to be made.
Significant Move Higher in Precious Metals and the Markets
As I have been writing, the dramatic move higher in the USD was overdone…and by a long shot. The FED’s decision caused the USD to tank, and foreign currencies like the Euro to make a very important recovery.
Just as the machines and robots can force markets to one extreme, their reversal of positions then causes a violent move in the counter direction…and this is exactly what we saw in yesterday’s action.
Only time will tell if the FED has the power to stabilize the action in the currency markets, because if not, we are likely looking at the cause for the next black swan event.
Finally (for now), overnight I ran every screen that the VRA Trading and Investing System uses, and assuming that the FED can “control” USD strength, we should see a final bottom in the oil markets within the next 30-45 days (or less). The massive amount of QE, currency inflation and equity manipulation globally is causing huge moves higher in global equity markets…most specifically in China. Remember this most important point; from 2009 – 2014, China was responsible for more than 50% of ALL commodity demand globally. This is an incredible fact, especially when you consider that China has just 15% of the worlds population. Assuming that China’s stock market move to multi-year highs is telegraphing an acceleration in Chinese GDP, the coming recovery in oil prices could be fast and parabolic.
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Here’s the link to this weeks VRA Call:
Until next time, thanks again for reading…
Publisher/Editor VRA (est. 2003)