On Thursday 13th July 2017 BSE Sensex scaled a new landmark: Mount 32000. Entire media went Gaga over the event, every newspaper carried the news as their headline. Maybe the media will have another event to celebrate soon: NIFTY hitting 10,000: it is only 100 odd points shy of the coveted mark. Now a flashback: NDA Govt. under PM Modi presented its first budget on 28th February 2015 and the Nifty touched 9129 that day, which became a headline the next day. We all know what happened thereafter. Again when NDA presented its 2nd budget on 29th February 2016, Nifty did a U-turn and touched 6826 three days later. The newspapers carried this as their headline on 4th April 2016. Rest is history: Nifty in July 2017 is at 9900 grabbing another headline. I need not tell you what is going to happen next: because history repeats itself.
That is why the title of this post is 'Make hay why the sun shines'. I had heard stock markets being labelled as 'Satta Bazar' or 'Casino' but never believed that stuff. But the way stock markets are being manipulated around the world today, we need to rethink. The major Central Banks around the world (US FED, ECB, BOJ etc) have colluded with one another to create a slush of liquidity to lift stock markets to unsustainable levels, having total dis-regard to the principles of economics. The artificial money created by Central banks has not helped the poor sections of society, instead they have created a greater rich-poor divide. They have also helped their respective Governments to pile up excessive debts which they are unable to service. Their game plan is now about to end, which will lead to the greatest asset bubble burst in history and the ensuing stock market collapse world over.
A global currency reset is inevitable: US Dollar will cease to be a global currency. We all know that the US economy is in a massive debt trap, so what will cause the bubble to burst. Today US is passing through one of the greatest political crisis in its history. The divide between the Democrats and Republicans has reached dangerous proportions. Democrats who thought that the post of President of USA was their right have not been able to accept Trump at the helm of affairs. Several stories are being cooked to implicate Trump and his family, and they might even try to get him impeached. On the other hand Trump is also collecting evidence against Obama and Hillary, and may open criminal investigations against them. All this does not auger well for an economy that is under serious threat of exploding. As I have mentioned in my previous post several US states are on the verge of Bankruptcy. US Dollar is fast losing its grip as a 'Reserve currency' with as many as 23 countries bypassing US Dollar as a medium of payment for international transactions. The fall of the Dollar, and along with it the Equity markets is a foregone conclusion.
What could be the alternative to the US Dollar? The Euro zone has its own share of problems, so Euro may not be looked upon as a viable alternative. A viable alternative can be provided by the BRICS (Brazil, Russia, India, China, South Africa) nations. Together these nations account for 43% of the world population and about 25% of the world GDP, which is equal to the GDP of USA. They have already launched their own alternative to the IMF called the New Development Bank (BRICS Bank). It would be in the interest of India & China to strengthen the BRICS agenda rather than fight over petty issues. The 9th summit of the BRICS nations is scheduled to be held at Xiamen, China in September 2017. This would be an opportunity for this group to provide global leadership in the aftermath of the US Dollar collapse.
Now coming to the markets and the behaviour of various asset classes in the aftermath of the global crisis. This is the last opportunity for the investors to book profits in the equity markets, as the markets may start correcting within the next couple of days. We are looking at a 40-50% erosion in US stock prices, which will lead to a correction of up to 20% in Indian markets as well. The crisis may also lead to softer energy prices, which will be good for countries like India. That is why we shall fall much less as compared to western markets. The best investment bet in these troubled times would be precious metals (Gold & Silver). The prices of Gold & Silver have been artificially suppressed by big US banks operating in the derivatives segment, whereas the physical demand for these metals continues to be high. Gold and Silver touched record highs of $1900/ ounce and $34/ ounce in 2011, and since then they have corrected substantially. They are likely to regain these levels, and even beyond, within the next one year. This translates into a return of 55% and 110% respectively from the current levels. Investors are advised to switch a part of their investments into Gold ETFs or Silver futures to make a killing in the emerging scenario. Please enjoy the last leg of the global rally in equity markets and await for the turn of the cycle, which may kick in sooner than most people expect.
Now coming to the markets and the behaviour of various asset classes in the aftermath of the global crisis. This is the last opportunity for the investors to book profits in the equity markets, as the markets may start correcting within the next couple of days. We are looking at a 40-50% erosion in US stock prices, which will lead to a correction of up to 20% in Indian markets as well. The crisis may also lead to softer energy prices, which will be good for countries like India. That is why we shall fall much less as compared to western markets. The best investment bet in these troubled times would be precious metals (Gold & Silver). The prices of Gold & Silver have been artificially suppressed by big US banks operating in the derivatives segment, whereas the physical demand for these metals continues to be high. Gold and Silver touched record highs of $1900/ ounce and $34/ ounce in 2011, and since then they have corrected substantially. They are likely to regain these levels, and even beyond, within the next one year. This translates into a return of 55% and 110% respectively from the current levels. Investors are advised to switch a part of their investments into Gold ETFs or Silver futures to make a killing in the emerging scenario. Please enjoy the last leg of the global rally in equity markets and await for the turn of the cycle, which may kick in sooner than most people expect.
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