Battered Dollar Syndrome No Surprise


Yesterday’s Wall Street Journal article  “Battered Dollar Roars Back, Catching Investors by Surprise” (1) provides a vital message about your current investments, savings and wealth.

The article says:  Investors are betting that an increasingly aggressive Fed and tumult in Europe will lift the currency.

The dollar has already bounced roughly 2.9% from its September lows and has risen in five of the past six weeks, powered by gains against the euro, yen and emerging-market currencies. Investors betting against the dollar have also cut back on their positions recently.

The surge in demand for dollars caught some investors off guard.

The strength (or weakness) of the US dollar can provide a vital clue on when Wall Street’s longest bull market will end.

A dollar surge can be an early warning to a steep, disastrous, stock market plunge.

The day before that Wall Street Journal article appeared, we sent this warning to Pi subscribers.

 

The U.S. dollar turned negative against most major rival currencies last week after an employment report showed the first decline in job creation in seven years even though wage growth was better-than-expected.

The weak dollar trend is still in force this week.  

The ICE (Intercontinental Exchange) futures contract is a leading benchmark for the international value of the US dollar and the world’s most widely-recognized traded currency index.

The U.S. Dollar Index DXY, measures the U.S. currency against six major rivals, – (euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc).

Dr. Richard Smith CEO of Tradestops.com (2) wrote this about the dollar.

Stock Market Headwinds Building

Headwinds are continuing to pick up steam for US stocks and there’s increasing evidence that the music is in danger of stopping.  In this case, the music is the declining US dollar.

Historically, the stock market is bullish when the US Dollar is bearish.  Yet, we knew that the dollar had moved strongly higher since its low in the first half of 2016.  It triggered a new Stock State Indicator (SSI) Entry signal in November.

tradestops.com

There’s increasing evidence that the dollar could be nearing the end of its fall. If it does, it will likely be a huge problem for US stocks.

Our time-cycle forecast for the dollar has been very accurate. It’s showing that the move lower in the dollar is about to end. There looks to be a short-term bounce through the end of November and then a large move higher in 2018 that could last almost the entire year.

tradestops.com

I’m currently looking for the US dollar to rally to the $95 level… and for the US stock market to take a breather… possibly even as much as 5% – 7%.

If the dollar falls below $91, however, it will be a huge confirmation of even higher prices and valuations for US stocks.

This is some math we can use to see how close we are (are rather the US stock market market is) to the edge of a crash.

Watch the dollar index DXY and the ETF UUP.

A drop below 91 is a signal that market strength is still alive.   A rise to 95 suggests that the trend of rising US shares is in a danger zone.

Currently DXY is closer to 95 than 95, at 93.79… but has been falling.

finance.yahoo

We can see a similar trend in the chart of the Powershares ETF UPP.   The falling dollar trend reversal began last month.

finance.yahoo

finance.yahoo.com/chart/UUP

UPP  seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Long US Dollar Futures index. The index is comprised solely of long futures contracts. The futures contract is designed to replicate the performance of being long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

The trend of a weakening dollar was continuing this morning as the chart at Market Watch shows.

market watch

You can keep track of the trend at the Market Watch website.

The US dollar US stock market relationship is one small clue we can use to skirt the edge as Wall Street continues its longest bull market in history.

To read yesterday’s entire Pi message, please read below how to subscribe to the Purposeful investing Course (Pi).

Gary

Increase Safety – Earn More

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The Purposeful investing Course (Pi) is NOT about fast moving, speculative stock and currency trading.  Pi is about slow, worry free, good value investing from finding good value. 

There are only three reasons why we should invest.  We invest for income.  We invest to resell our investments for more than we had invested.  We should invest to make the world a better place.

We should not invest for fun, excitement or to get rich quick.  Let’s put our time to better use.

This is why the core Pi model portfolio (that forms the bulk of my own equity portfolio) consists of 19 shares and this position has not changed in over two years.  During these two years we have been steadily accumulating the same 19 shares and have not traded once.

This good value portfolio is based entirely on good value financial information and math.

The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets developed using my 50 years of investing experience and study of the mathematical market analysis of Michael Keppler and his company, Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers, such as State Street Global Advisers, use his analysis to manage over $2.5 billion of funds.

The Pifolio analysis begins with Keppler who continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  He compares each major stock market’s history.

Fwd: keppler

Michael Kepler CEO Keppler Asset Management.

Michael is a brilliant mathematician.  We have tracked his analysis for over 20 years.   He continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  He compares each stock market’s history.  From this, he develops his Good Value Stock Market Strategy and rates each market as a Buy, Neutral or Sell market.  His analysis is rational, mathematical and does not cause worry about short term ups and downs.  Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each BUY market.

This is an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

A BUY rating for an index does NOT imply that any stock in that country is an attractive investment, so you do not have to spend hours of research aimed at picking specific shares.  It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.  Investing in the index is like investing in all the shares in the index.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pifolio consists of Country Index ETFs.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.

Here is the Pifolio.

70% is diversified into Keppler’s good value (BUY rated) developed markets: Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom.

30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: Brazil, Chile, China, Colombia, the Czech Republic, South Korea, Malaysia and Taiwan.

The Pifolio consists of iShares ETFs that invested in each of the MSCI indicies of these BUY markets.

For example, the iShares MSCI Australia (symbol EWA) is a Country Index ETF that tracks the investment results the Morgan Stanley Capital Index MSCI Australia Index which is composed mainly of large cap and small cap stocks traded primarily on the Australian Stock Exchange mainly of companies in consumer staples, financials and materials. This ETF is non-diversified outside of Australia.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

The Pifolio is the main portfolio we study in our Purposeful investing Course.  Then we add spice with leveraged speculations that offer additional profit potential often using leverage.

My fifty years of global investing experience helps take advantage of numerous long term cycles that are part of the universal math that affects all investments.

For example in the 1980s, a remarkable set of two economic circumstances helped anyone who spotted them become remarkably rich.  Some of my readers made enough to retire.  Others picked up 50% currency gains.  Then the cycle ended.  Warren Buffett explained the importance of this ending in a 1999 Fortune magazine interview.  He said:  Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!

I did well then, but always thought, “I should have invested more!”  Now those circumstances have come together and I am investing in them again.

The circumstances that created fortunes 30 years ago were an overvalued US market (compared to global markets) and an overvalued US dollar.

The two conditions are in place again!  There are currently the ten good value non US developed markets and none good value emerging markets mentioned above.

Pi shows how to easily create a diversified, worry free portfolio that includes each or all of these countries with Country Index ETFs.

The current strength of the US dollar is a second remarkable similarity to 30 years ago.  Three decades past, in 1985 the dollar rose along with Wall Street.  Profits came quickly over three years.  Then in 1988 the dollar dropped like a stone, by 51%  in just two years.  A repeat of this pattern is growing and could create up to 50% extra profit if we start using strong dollars to accumulate good value stock market ETFs in other currencies.

Guarantee

Enroll in Pi.   I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free purposeful investing.  If you are not totally happy, simply let me know anytime within 60 days.

#2:  I guarantee to cancel your subscription and refund your subscription fee in full, no questions asked.

  Subscribe to the Pi for $197.

Gary

(1) www.wsj.com: Battered dollar roars back

(2) Learn how Tradestops.com can improve investing discipline.


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