Some Are Finally Figuring It Out …

In a recent article in the New York Times, some analysts and reporters are finally figuring out what I’ve been saying all along: Investors all over the world are hoarding cash, which is deflationary …

And most of the cash is being hoarded in U.S. assets. Mostly in U.S equities … in U.S real estate … and in high grade U.S. corporate bonds.

No surprise, really. I’ve been telling you about this since at least last year, and how several major economic cycles were all converging to make this period through late 2020/early 2021 one of the worst on record.

That’s because the cash, instead of being spent by governments and consumers on infrastructure and retail, is also depressing interest rates artificially low as investors chase after returns.

And eventually it will also create massive bubbles in stocks, then commodities, and more.

We’re not at that bubble point yet. We have a ways to go in equities and commodities. But there’s no doubt the capital inflows into the U.S. are big.

According to Brad W. Setser, an expert in global financial flows who worked at the United States Treasury from 2011 to 2015 …

Roughly $750 billion of private money has poured into the United States in the last two years alone. About $500 billion, he calculates, reflects European and Asian investors buying United States Treasury securities, bonds issued by Fannie Mae and debt issued by top-shelf American companies.

Many are expecting the foreign inflows to taper off soon, because the sentiment outside of our country toward either Hillary or Donald is just as bad, if not worse, than it is inside our country’s borders.

So the thinking is that foreigners will soon start pulling their money back out, right after the elections.

I say hogwash!

The U.S. dollar is still king of the hill.
The U.S. dollar is still king of the hill.

First, interest rates here are higher than they are in Europe (where they are mostly negative), in Japan and most other parts of the world. So that automatically acts as a sort of magnet attracting foreign capital.

Second, interest rates aside, and even considering Hillary or Donald, the U.S. capital markets are still considered the most liquid and safest markets on the planet.

Third, the U.S. dollar is still king of the hill in the currency markets. And despite all those pundits out there who say it’s going to crash any day …

It’s not going to crash and instead, it’s going to get even stronger as more and more capital flows into U.S. asset markets seeking shelter.

Fourth, Europe and Japan are a mess, and their economies will get even worse next year.

Fifth, all — and I mean ALL — of my cycle work continues to point to a period of economic chaos that hasn’t been seen since at least the Great Depression.

Bottom line: Be sure you’re prepared to weather the next several years. If you’re not, they promise to turn your life inside out and upside down …

While if you are prepared, not only will you protect your wealth, you’ll also have multiple opportunities to grow it many times over.

Best wishes,

Larry

 

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Comments 54

  1. Jean October 26, 2016

    Ok so what should we do now!?
    I am seventy percent invested in gold and equities?

    Reply

    • john October 26, 2016

      Sit tight! You have me for company.

      Reply

    • jim moore October 27, 2016

      Better get gold and silver to hold in your hand! if its written on a piece of paper its worth the paper its written on…

      Reply

      • Wayne Yount October 27, 2016

        I agree 100% relative physical gold and silver. One should hold the metal themselves and allow no one to know of the amount or location of your asset. Paper gold is just as worthless as the criminal US Government and the fiat currency. Criminal World Bankers hate the physical metal for a reason.

        Reply

      • Pat Cockerham October 29, 2016

        Where do you store it? If you have it in gold vault and phone communication was down how would you get it or sell it?

        Reply

  2. John Van De Beuken October 26, 2016

    What gold mining stocks do you recommend?

    Reply

  3. $1,000 gold October 26, 2016

    so if rates go up in america, wouldn’t the dollar get stronger? wouldn’t imports do well? wouldn’t this favor emerging markets?

    Reply

  4. lemuel oates October 26, 2016

    what about the bond market?

    Reply

  5. Jayson October 26, 2016

    Tell us who is going to win the Presidential election, and what percentage of the popular vote will they get?

    Reply

  6. MAF October 26, 2016

    That’s great Larry. You may be right but what do we do about it ? Reminds me of 2008. Lots saw the housing crash uunfolding but very few knew to short mortgage bonds.

    Reply

    • dennis October 27, 2016

      what are your thoughts concerning the real estate in the san jose silicon area in california, the san francisco bay area:

      Reply

    • Scott Hartzler October 29, 2016

      I did puts on the DOW in ’08.

      Reply

    • Scott Hartzler October 29, 2016

      Despite what the brokers told me, options are way less risky than shorting equities.

      Reply

  7. John October 26, 2016

    I saw a so called expert report on Seeking Alpha that said gold was headed way down. One of the comments posted said “you need to talk to Larry Edelson.

    Reply

  8. Jake K October 26, 2016

    Larry: Thanks for your good work but you have me confused. Do you anticipate the market to go down in the near future and then rise rapidly or do you think we will have a continued increase with very little correction? What is your thinking in the next 6 months?

    Reply

    • Como651 October 27, 2016

      If I remember correctly Larry has recently said the DOW may trade sideways for a while then make its way up towards 30,000 or could test support at 17,000 first. I don’t think he ever gave any exact time frame when it could could retest 17,000 or how long it could trade sideways until breaking out. All his models can do is predict probability based on past data with uncertain probability. It’s like forecasting weather and the forecast can change. Still his models give you probabilities of what to expect which is better than nothing.

      Reply

  9. Edward willhoyt October 26, 2016

    Could you rate your gold silver stocks so someone interested in buying more shares could make that selection based on your knowledge.

    Thank you!

    Reply

  10. Alex October 26, 2016

    “And most of the cash is being hoarded in U.S. assets. Mostly in U.S equities … in U.S real estate … and in high grade U.S. corporate bonds.”

    That’s not hoarding cash then, is it? I work in investment management; we would never get away with telling clients their securities are cash. Am I missing something here?

    Reply

    • Ron October 27, 2016

      Hi Alex,
      I agree… Buying Equities is like betting on companies succeeding… and what other Countries and foreign investors believe they are worth…

      If the government is changed and Business returns to the US, the equities will rise in spite of inflation. Less taxation, less regulation and more employment will reduce the Deficit and curb the need t for more social spending handouts..
      Of course, the Dollar may go up in relation to gold which can reduce the return on equities… but tax cuts should make up for that.
      Higher interest rates will come… not as a result of inflation, but due to more consumer spending.. and borrowing as faith in the future improves.

      What do I know?

      Reply

  11. Brendan Thow October 26, 2016

    Thank You for your excellent advice Larry
    Your a GURU in this field
    Keep up the EXCELLENT advice which is greatly appreciated.
    Cheers
    Black Tulip

    Reply

  12. John Senechal October 26, 2016

    So should we be hoarding cash to take advantage of opportunities during the up coming economic chaos?

    Reply

  13. Ken Swanson October 26, 2016

    Once again I have learned and been informed!!
    Keep up the good work.
    Thanks!!

    Reply

  14. UDO October 26, 2016

    Fear – Fear sells . Economic chaos is coming . M. Armstrong wrote about that 2 yrs ago already – has it happen yet ? No ? How would I feel it ? By investing in the wrong sector ? How about no investing at all ? Will I be safer than ? Yes ? Good !!!
    Not everybody is in stocks or bonds and very , very few people are in prec, metal which will be down right into 2017 at least – bounces to count .
    Good luck people – fear sells – enjoy

    Reply

    • ROBERT October 26, 2016

      You got that right.
      Whoever does this the best makes the most money. Stansberry is a prime example of getting rich by scaring the gullible instead of giving especially good advice.
      Selling advice is more certainly profitable than investing, whether the advice is good or bad.
      The problem with holding cash is that regardless of the fictional CPI put out by the government, my cash can buy half what it could when Dubya took office.

      Reply

  15. Antonio October 26, 2016

    Larry,

    What is your feeling about investing some cash in US rental real estate peoperty at this point?

    Thanks

    Reply

  16. theresa Fogel October 26, 2016

    Dear Larry,

    You are doing fine. Artificial Intelligence is our future…

    The best of everythlng,
    Theresa

    Reply

    • Bob October 27, 2016

      It has to be as there is very little real intelligence out there.

      Reply

  17. Larry (San Jose, CA.) October 26, 2016

    I agree wholeheartedly that the next few years will likely be very challenging.

    But you also have said more than once that the Dow will reach 31,000.
    A number of times you said that it would happen in 2017. Other times
    you said that it will happen by 2020. Quite a difference in timing. Which
    possibility is more likely according to your charts?

    Can you be more clear in the November issue of Real Wealth?

    Reply

  18. Bart October 26, 2016

    How the hell is owning real estate end securities “hording cash”; they are the very definition of non cash especially real estate which is considered illiquid.

    Reply

    • Eli October 27, 2016

      Yeah I was also confused by that comment – definitely not what I would call cash.

      Reply

  19. W.J. Zellerbach October 26, 2016

    Though I am 96 I think your analysis is correct.

    Reply

  20. Randy October 26, 2016

    As I recall, an interim correction on the DJ30 was around 17,000. The market has been range bound since Sept 9th. It seems to be waiting for something, I know not what, perhaps the elections. If Trump wins and he is successful in slapping import duties on Mexican and Chinese imports; I will short those stock markets. Multinational manufacturers will take a hit, too.

    Reply

  21. Wayne Yount October 26, 2016

    Larry I agree with you relative the growth of gold and silver values relative the fiat currencies. Informed people of the world are becoming more aware of the criminal activities of the world central bankers. They have been solely responsible for bringing the world to it’s financial knees. Criminals who should all be placed in front of a firing squad.

    Reply

    • Bob October 27, 2016

      Remember, it’s only criminal when you do it, not when they do it. That’s why they are the government

      Reply

      • Wayne Yount October 27, 2016

        Bob, sad to say, but you are indeed correct. Sir, you have a good day.

        Reply

  22. Steve October 26, 2016

    The problem with any of these type of articles is that I am not sure who to listen too. If you listen to Larry, it’s hold cash; equities and real estate. Forget about gold and silver. If you listen to Jim Richards, it’s dump all cash and put everything into gold, silver and real estate. If you listen to Mike Maloney, it’s all gold and silver until the time is right and then sell off the precious metals for more tangible assets. Some say the dollar will crash by Christmas (JR), while others says no way (Larry).

    My issue is that, other than Mike Maloney, the only way any of us can ever figure this out is if we sign up for newsletter X or weekly email Y, for the low low price of anywhere between $49/year all the way up to over $2000. Over the last couple of years my fear has caused me to buy into several of these, and the only thing I have come away with is about $500 less in my bank account, a few books I have yet to read, and so many scary emails I have no clue if I will loose my job, end up in a FEMA camp, make it big in precious metals, own my entire neighborhood because I have some gold bullion, or have my house burned down by rampaging American welfare receipients.

    In my mind the only people making any money are the ones selling a newsletter telling all there subscribers what to buy. Someone previously said it best, how can any economic losses be felt if you are not in the market in the first place? I have been out of the markets for decades, other than my employer mandated retirement system (I am a government employee) and I have not lost any money. If you don’t play you can’t loose. And while I may be losing purchasing power due to inflation, the entire country is having that issue and has been having that issue ever since 1913 (thanks FED). I have found that the best course of action, which none of these people say (except Mike Maloney) is to just get my butt out of debt. Then I will have enough money to do what I need to. And if things go south, I will have less expenses and can afford to adjust to accommodate.

    I agree that gold and silver (bullion) are not bad purchases. After all, gold is still gold. Silver is still silver, But stocks are paper that can go to zero. And while the currency in my pocket is still worth something, why not at least use it to get what I need and get out of debt? That seems way more logical than putting that same currency into a market that is tied with like a Hot Wheels car.

    I get over 60 emails a day from various money and market types (Money & Markets, Money Map Report, Daily Resource Hunter, Power Profit Trades, etc.). It goes on and on, and I don’t even have time to read them all and still actually do my job and spend time with my family. The funny thing is that, after a year of these emails, I have seen that they all report the same thing, in waves. One starts with “the dollar will collapse by September 2016 due to the Yuan being added to the SDR basket” and by the end of the next week, everyone is writing the same articles. Same with, new investiging method can make you $37,000 per month, just send us $1250. I am starting to think they are all written by the same people, just putting a different picture in the email.

    My advice, get out of debt, hold some gold and silver and watch everyone else run around with their hair on fire always being one step behind the wave. Are the times coming going to be fun? No. But even in World War II Germany not everyone was dying at the end of a rifle muzzle. Nor did everyone die in the Great Depression. Hope springs enternal, and I am tired of all the fear tactics that scare you into giving your hard earned money to someone to get a daily email that you will never read or even act on.

    Now if someone would just tell me what stock to buy without charging me for the privilege, then that would be something.

    Reply

  23. Chuck Burton October 26, 2016

    A stronger Dollar means higher prices for imports. Maybe that will cause American manufacturers to cut back on sending manufactures elsewhere, and make more things at home. This may add some jobs, but, unfortunately, Automation will reduce jobs that used to be required. A GM transmission plant, locally, uses around 200 employees to produce products that once would have needed probably 10 times that many workers. This is a trend that is growing by leaps and bounds: higher paid workers, but many fewer of them. That means many more people being supported by fewer earners. Higher prices, but fewer buyers.

    Reply

  24. Chuck Burton October 26, 2016

    There should have been a substantial correction in the stock markets, already. The inflow of foreign money is doubtless why it hasn’t happened yet, and why markets could run to Larry’s 31,000 equivalent, maybe after a relatively small correction. BUT, that could set us up, ultimately, for something that will make the Great Depression look like Happy Days. The political tinkering with the economy is creating the Bubble of All Bubbles, and it MUST sooner or later burst. One good thing about Trump, is that he seems to see something of this, and he wants to start leashing the professional politicians with term limits.

    Reply

    • Chuck Burton October 26, 2016

      That is why so many, even in his own Party, oppose him.

      Reply

    • F151 October 27, 2016

      I would like to see the actual numbers on this “inflow” that has been mentioned so much here. Is it up 5%, 10%, 20%…How Much??

      Reply

  25. JBM October 27, 2016

    Larry,

    I’m a bit disturbed by the implication that you have information we need regarding your writings in Money and Markets, but we have to buy your books to get that information.

    Reply

    • F151 October 27, 2016

      He has to make a living somehow.

      Reply

  26. Bill Larson October 27, 2016

    I am looking for some direction on investing and favor stocks that pay a higher amount than my 3.5 % mortgage. Maybe I should just pay down my mortgage.

    Reply

    • Sawbuck October 27, 2016

      Mr Larson,
      Paying down/off your mortgage is the smartest thing to do, especially if you are over 55 yrs old. I say go for it!
      Dave

      Reply

  27. gordon October 27, 2016

    Keep buying stocks oops John Deere may be on the verge of cutting its dividend for the first time in 28 years. Like the poor performing CAT and Alcoa these guys are bellweather stocks so ding dong something is wrong.

    Reply

  28. Manuela Pinto da Silva October 27, 2016

    As confused as all the others

    Reply

  29. Will October 27, 2016

    Larry, it seems that you are trying to say that Europeans are either selling their assets in Europe and converting the proceeds to US equities, real estate and bonds or that they are converting cash they may have hoarded in the past into assets in the US. In no way would that be hoarding cash.

    Furthermore, how is such “cash” then depressing interest rates? I thought that ZIRP and NIRP did that!

    Capital flight from Europe to the US is not just in search of better returns; there is a fear factor as well. This flight money is a sure sign that the bubbles in Europe are starting to pop. Flight money coming to the US then becomes another huff and a puff on the asset bubbles forming in the US. If the Dow bubble ever reaches 31,000 before bursting then I would not want to be sitting on that bubble. The needle inflating this bubble will be such a sharp short term spike that it will prick the bubble itself. There will be so many sellers that your stop loss will be smoke before it is even executed.

    Hoarding cash means keeping in ready hand dollar bills, gold and silver. All else is an asset until describe as smoke; including 0s and 1s.

    Cheers,

    Will

    Reply

  30. jim moore October 27, 2016

    I hope everyone has physical gold or silver….
    If its written on a piece of paper its worth the paper its written on!

    Reply

  31. James October 27, 2016

    I think their should be more than two newsletters a day. I am predicting a bull market in the precious metals market.

    Reply

  32. F151 October 27, 2016

    Larry,

    If Americans are hoarding cash…that IS a sign of deflation. Others at Weiss, like Mike L., say we are in inflationary times. I tend to agree with you on this one.

    Reply

  33. Russ October 27, 2016

    “If its written on a piece of paper its worth the paper its written on!”

    This is an over-used and patently untrue or deceptive phrase. Can we please stop using it for these discussions?

    People need a medium (money) to facilitate trade. Intrinsic value has no practical effect. Until the grocer stops accepting dollar-denominated funds and requires you cut off a corner of your gold bar to pay for groceries, the metal means nothing intrinsically. To spend gold, it must first be converted into whatever the vendor will accept. Intrinsic value only relates to the market conversion rate and of course, does mean it will always maintain its convertibility into whatever currency is in use.

    Reply

  34. Ashu juneja October 28, 2016

    He is comparing Dow Jones with 1929 crash.
    Larry u r confusing….
    Common sense : after crash Dow will go down close to 10000 ,then Europe n Japanese money could come after Dow Jones which should happen in 2021 .

    Reply

  35. Betty Wallace October 28, 2016

    Hi Larry.
    Please give me you real thinking about the stock market at the moment.
    I am out and have been out for some time and the market has been at the 18,5K several times but never goes over and up.
    So are we waiting for the market to take a big drop before it goes really up and maybe near the 30K area, I am confused here?????Please tell me more straight about your thinking here, will really appreciate that.
    Betty

    Reply

  36. Anthony Green October 30, 2016

    Hi Larry, while we all are waiting for the signal to buy gold,in one of your recent comments you said it was okay to buy Royal gold. Is that still valid or should we wait ?

    Reply