Currency Wars ? How to Hedge your position  With Gold

As leaders from around the world meet this week to discuss fears of competitive currency devaluations, analysts told CNBC the currency war could lead to a sharp rise in gold prices in the second half of this year, after a falloff in the first half. We think a currency war will be the biggest story of 2013 when we look back on the year,” Patrick Armstrong, managing partner at Armstrong Investment told CNBC on Monday.

Currency devaluations will be on the agenda as the Eurogroup of finance ministers meets on Monday. France said it would raise the issue of the strengthening euro at the meeting, and again on Friday when the G20 finance ministers meet in Russia. Armstrong said gold always does very well when there’s bad news, and said Armstrong Investment is long on the precious metal.”The G20 meeting I think is going to focus on what people are doing with their currencies, trying to gain an edge with currency manipulation. Whenever that’s the backdrop, gold has a place in the portfolio,” he said. Full story

In the short term to midterm time frames exactly the opposite will occur.  Gold will not surge to new highs, in fact after a rally (possibly to the 1750 plus ranges), it will drop to the 1500 ranges.  We expect gold to trade in a wide range this year. However in the end we will differ to our signals.. Right now the monthly signal is at a sell, which means that Gold will not trade to new highs until this signal is neutralized.

Finally when the press starts talking about something usually the opposite occurs. Over the long term they are right, Gold will spike to new all time highs and will most likely trade well past 2500 before another top is in place.  In the final feeding frenzy stage when Gold and Silver become the rage, we will have another bubble and like all bubbles it will end badly. In the meantime, the currency wars are in full swing as the central bankers worldwide debase their currencies to maintain a competitive edge.

Currency Wars Return, 1930s Style: Who Will Lose Out?

As countries try to weaken their currencies to boost exports, the risk of a currency war similar to events seen in the 1930s has heightened, and policymakers are making sure they are on the winning side, according to Morgan Stanley. The balance of power now rests with Japan, according to the bank, as Japan’s policy-makers’ more dovish approach looks set to bring the world a step closer to a currency war. The Bank of Japan doubled its inflation target to 2 percent in January and made an open-ended commitment to continue buying assets from next year. This follows a leadership change, with new Prime Minister Shinzo Abe openly calling for aggressive monetary stimulus from the country’s central bank. Full Story

Regardless of what they claim here, the losers will be the same group. The story never changers, only the players do, but the players always belong to the same group. This group of individuals is known by many names one of the most famous is cannon fodder.  Individuals in this group believe that their government has their best interest at heart. This same group also does not understand or want to understand the evils of inflation. This is the same group that learns nothing generation after generation. So while many may feel sorry for this group, remember this saying. You sow what you reap. If you sow nothing you will reap nothing. There are many ways to protect oneself against the evils of inflation.

 Student Debt Is More Subprime Than Ever

“In all, 33% of all subprime student loans in repayment were 90 days or more past due in March 2012, up from 24% in 2007, according to a Wednesday report by TransUnion LLC .Meanwhile, the Chicago-based credit bureau found that 33% of the almost $900 billion in outstanding student loans was held by subprime, or the riskiest, borrowers as of March 2012, up from 31% in 2007.” With the economy on an unexpected downturn, things are starting to look worse than ever.  Full story

Another example of a disaster in the works and while something can still be done the powers that be will do absolutely nothing to prevent this bubble from exploding. This disaster will probably be used as the basis to trigger another strong correction in the markets at some point in the future, providing those in the know how with another good buying opportunity.

A Subprime Revival? Yes, but ‘Old Style’ Subprime

And at least one more former subprime veteran is starting a new company. But his new venture will focus on small balance commercial mortgages. More on that next week…Keep in mind that if nonprime comes back it will be nothing like the insane loan programs of 2002 to 2007. We’re talking 70% LTVs, maximum.  According to the Quarterly Data Report, subprime lending peaked in 2006 at roughly $800 billion or 25% of all fundings. Such a market share will NEVER happen again. For historical subprime rankings drop an email to: [email protected] Sometimes, it’s nice to take a stroll in the graveyard. By the way, we’re working on a possible story about one nonbank lender that is willing to make more than 10 loans to investors who buy homes. We’re told that many bank lenders cap their loans to one borrower at 10. This lender will go up to 20…Full story

Whenever we see the word it will never happen again, it’s a clear sign that it will happen and on a much larger scale. They will find some loop hole eventually to offer these sub-prime mortgages because there is a lot of money to be made in this area, especially if you can dump them on someone else after you have sold them. Once this market opens up, you can expect the housing sector to explode upwards and go through another speculative phase.   Housing stocks are ripe for a nice correction.

Currency Wars and Other Developments