Current Stock Market Condition: Strong Bull

“People do not trade the markets; they trade their beliefs about the markets.”
– Van Tharp

The Big Picture

Can you predict when a country will default or go bankrupt? In 1999, Alan Greenspan and Paul Guidotti published the Greenspan-Guidotti rule: To avoid default, a country must maintain hard reserves equal to at least 100% of the debt maturities in the next 12 months. In other words, if you cannot pay off your short term debt, speculators are going to target your bonds and your currency. The result will be an assured default.

The U.S. is the largest holder of gold (with about $300 billion worth). We have about $58 billion worth of oil and about $136 billion worth of foreign currency. Let’s see, that totals $494 billion, and we’re stretching things by adding in the foreign currency reserves. We have about $3.5 trillion to finance. That’s a deficit of about $3 trillion. So based upon the Greenspan-Guidotti rule, we are supposed to default within the next 12 months. In addition, foreigners own about $880 billion of debt that is due within the next 12 months—almost twice our reserves.

  • The Federal Reserve continues to print money to buy the debt, which totally debases the currency.
  • JP Morgan needs to buy $57 billion worth of T-bills each day to hedge its derivative position.
  • The Current Stock Market Type Is Strong Bull Again

    Dow Jones with 10,309 is 17.47% up this year, S&P500 with 1,087.27 is 20.37% and Nasdaq 100 with 1,765.46 is 45.71% up.

    The strongest countries are Brazil (67), Latin America Largest (66), Mexico (63), and China/India (61). Other strong areas include the Yen (64), building material (53), Health Care (64-62), Pharmaceuticals (62) and REIT (61). The DOW itself is pretty strong at 59 rating.

    The weakest countries are Emerging Europe (39), South Korea (42), and Austria (42). Other weak areas include broker/dealers (36) Networking (39), Currency Harvest (not sure what’s measured here at 36), Oil and Gas Equipment (36), and Oil and Gas Exploration (38). The U.S. dollar is also pretty weak at 40.

    The following are futures, real estate, bonds, and the strongest and weakest ETFs: gold (78), precious metals (76) Base Metals (71), silver (70), and steel (70) all stand out. The weakest areas are internet b2b (17), natural gas (18), building (29), Russia (33), nuclear energy (35), and home construction (36).

    Inflation-Deflation Model

    CRB index and Gold are up, clear signal of inflation, plus danger for the U.S. dollar.

    The dollar is heading down again, with its weakest showing this year. Part of the weakness is because of a massive carry trade in the dollar. People are borrowing the dollar and using it to buy assets (like gold, oil, and commodities) at very cheap prices. In addition, they are profiting from the fall in the dollar. However, this massive “carry trade” will reverse one day—just like the yen carry trade did—and that could be an interesting time. In addition, the U.S. has to refinance a huge amount of debt in the next 12 months and that really is bad for the dollar.

    Now, what you can do to help your children achieve financial independence at a early age?

    1. What financial lessons John D. Rockefeller learned from his father as a child, and what these lessons taught him about money. The truth may shock you….
    2. The 3 Essential skills you must teach your children in order for them to be successful as adults.
    3. The single-biggest mistake parents make when it comes to teaching children about money… and how you can avoid it.
    4. Games you can use to teach children in a fun way that will make them enjoy learning about money.
    5. Specific strategies for getting your children to think like a business owner and investor at a young age, preparing them for success later in life.

    Source: Financial Lessons for Kids by Rob Minton
    Rich Dad’s Rich Kid, Smart Kid: Giving Your Children a Financial Headstart by Robert Kiyosaki
    10-Minute Life Lessons for Kids: 52 Fun and Simple Games and Activities to Teach Your Child Honesty, Trust, Love, and Other Important Values by Jamie Miller

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