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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (44194)	1/2/2004 4:39:16 PM
From: BubbaFred	Respond to of 74559

Currency and Trade Wars: Ringing in the New Year “...As old world orders decline, new ones rise. And as an investor, you look out on a geopolitical and economic landscape that’s in the midst of profound change. The year 2004 promises to be filled with danger AND enormous opportunity to profit as the world comes to grips with some of the following facts...” Dan Denning "Putting intelligence together is like doing a jigsaw puzzle, only the picture is missing, some pieces are gone, and just for fun somebody threw in pieces from a different puzzle." - Marty Peterson, Deputy Executive, CIA The signs of American economic decline are all around us now: a trade deficit that keeps growing, a federal deficit that Congress and the president happily add to with expensive new energy and Medicare bills, and a stock market that prices in an economic nirvana. But as 2003 comes to a close, it's my sense that the madness will get worse before it gets better. The period of time that comes with the end of cycles (economic and historical ones) tends to be violent, volatile, and, for some, prosperous. As old world orders decline, new ones rise. And as an investor, you look out on a geopolitical and economic landscape that's in the midst of profound change. The year 2004 promises to be filled with danger AND enormous opportunity to profit as the world comes to grips with some of the following facts: • The dollar standard is ending, yet we don't know what will replace it. Perhaps the euro. Perhaps a Chinese currency valued against a basket of foreign currencies: the yuan standard. The demise of a paper currency shouldn't catch anyone by surprise. After all, no paper currency in history has retained its value forever against nature's currency, gold. But the fate of the American stock market is now linked with the dollar. And as the dollar falls, so, too, will most (though not all) stock prices. • America is the most hated nation on Earth. How could it be that less than 15 years after the collapse of the Soviet Union, America has replaced the USSR as the Evil Empire? In the minds of Western intellectuals, European politicians, and Islamic radicals, the United States and its current president are the most dangerous forces in the world. As 2004 begins, America has many enemies. • The rise of China and a new era of trade wars. What America was to the 19th century, China is to the 21st. A great global force of production and falling prices has risen in China. It is the world's largest producer of goods. It will soon become one of the world's largest consumers of commodities. These two developments will mean the continued decline of American manufacturing and a tremendous bull market in commodities for U.S. investors. They will also mean a new era of trade wars. • A cultural civil war is born in 2004. The American right went off the deep end with outrage at the personal and ethical infidelities of Bill Clinton. The presidential election of George W. Bush and the war in Iraq have similarly overthrown the collective mind of the American left. What remains is the most intense period of cultural warfare since the 1960s. The 2004 presidential election will expose just how wide the rift is between Bush's and Clinton's America. It will take place against a backdrop of state and federal debt and intense debate over America's role in the world, and the future of the War on Terror. Look for an increase in terrorist activity as the terror network attacks American resolve. These are just some of the issues we're going to explore in the next year. What's truly astonishing is how all of them seem to be converging, a sort of high water mark of geopolitical and economic shocks. The results will be an acceleration of trends already in motion. As the dollar declines, gold will rise. Whether gold and the Dow cross at 2,000, 3,000, or 4,000 doesn't matter. Sometime in the next two years a big move in gold is coming. The same goes for Asia. In 2000, the stock market ended a 20-year secular bull market. In 2002, the secular bull market in bonds ended. And in 2003, a new secular bull market in commodities was born. Now is the time to invest in it. What's driving this new bull market (other than the normal boom and bust of economic cycles) is the emergence of Asia as a major producer and consumer of commodities. The biggest favor you can do yourself as an investor is recognize that economic prosperity comes in cycles. And while it may be cycling out of North America and into Asia, and away from financial assets and into hard assets, absolutely nothing prevents you from recognizing this and profiting from it. The sooner you do, the less you'll have to worry about. Dan Denning is the editor of Strategic Investment. dailyreckoning.com Gold and Hyperinflation 321gold.com