For the past 35 years, Pamela and Mary Anne Aden, the “Aden Sisters,” have accurately predicted world market trends. Their research has become the cornerstone of modern technical analysis and chart interpretation. Their guidance has assisted thousands of subscribers beat the market consistently through decades paving the way for their followers’ financial success. Their flagship newsletter, “The Aden Forecast” has consistently been a point of reference. It was elected “Newsletter of the Year” by MarketWatch and it’s commonly referenced in financial media such as Barron’s, Wall Street Journal, Business Week, Dow Theory Letters, Forbes, Smart Money and CNBC, among others.
Japan, Hungry, Sweden, the Eurozone and others are implementing negative interest rates
IS YOUR PORTFOLIO READY TO BEAR REALITY?
Dear Fellow Investor:
We are Pamela and Mary Anne Aden, better known as the Aden Sisters.
Like you, we’re concerned about the current pace of the global economy, the stock market and how we can protect our portfolios.
For the past 35 years we have been following and analyzing world market trends.
We’ve helped thousands of subscribers understand the markets by analyzing price patterns as well as showing how the implementation of macro-economic and monetary policy worldwide affects the market place.
In doing so, our subscribers have secured double digit profits for most of the past 35 years.
In recent years, our concerns over the state of the global economy and typical investment strategies have intensified.
Economic policy implemented by the U.S. Federal Reserve after the financial meltdown has proven useless. Even worse, the Fed has fueled an appetite for reckless monetary policy to be implemented around the world.
This set a precedent for other sovereigns that would allow them to cheapen their currency, effectively engaging in a currency war.
Cheap currencies and cheaper production has allowed products and services produced outside of the U.S. to be more attractive for American and international consumers alike. This is impacting the U.S. economy directly in two big ways.
The first is that American businesses are closing up operations in the U.S. and opening in other countries with more favorable conditions for profiting from lower production costs.
And secondly, local and international consumers are buying products that are produced outside of the U.S. because they are cheaper.
China was among the first to implement measures to seize momentum.
China cheapened the yuan in an attempt to defend its export market share… particularly since investment and exports have been a key economic driver for China during the past 30+ years.
Back in August, Reuters reported…
“China shocked global markets on Tuesday by devaluing its currency after a run of poor economic data… The devaluation was condemned by U.S. lawmakers from both parties as a grab for an unfair export advantage… It was the biggest one-day fall since a massive devaluation in 1994…”
More recently, countries like Japan, Sweden, Switzerland, Hungary, the Eurozone and others have adopted other drastic measures such as negative interest rates in an attempt to spur growth and competitiveness in the international markets.
That’s right, countries that would adopt measures that would charge depositors on their bank deposits rather than paying interest.
THESE POLICIES HAVE DISRUPTED THE ENTIRE ECONOMIC SYSTEM.
On the one hand, these extreme measures have squeezed value out of these currencies, making the U.S. dollar a more valuable currency.
This in turn makes products and services produced inside of the U.S. more expensive for the international consumer community, which currently accounts for about 50% of gross revenue streams for most of the S&P500 companies.
The loss of business is affecting and will continue to affect the value of most companies that make up the major stock indices and averages within the U.S.
However, the stock market remains near all-time highs amid a sputtering global economy and lackluster demand for products and services.
It’s actually simple.
The individual long time saver and other low risk investors who look for low risk assets are now looking for riskier options to make a return on capital because zero or negative interest rates have made it virtually impossible to make a low and risk free return.
The chart above shows a direct relationship between accommodative monetary policy in ways of quantitative easing (“QE”) and zero (or negative) interest rate policies (“ZIRP” and “NIRP”) with rises in the stock market during the past 10 years.
Michael Burry, the person who was made famous by predicting the sub-prime mortgage collapse stated in an interview in regards to zero (and negative) interest rates:
“Zero interest rates policy (ZIRP) broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough.”
WILL RATES RISE?
The Fed has been announcing a rate hike for the past couple of years. But a lackluster economic recovery has made it very hard.
However, to accept a failed economic policy after spending trillions of dollars is no easy task.
Last year, during the month of December, the Fed raised rates from zero to a quarter of one percent (0.25%) and announced it will raise rates on 4 additional occasions during 2016 citing the promising state of the U.S. economic recovery.
TO THIS DATE, THE FED HAS REFRAINED FROM RAISING RATES
In the past, the Fed has looked at inflation as a gauge to raising rates.
It has announced that interest rates will remain near zero as long as inflation, as measured by Personal Consumption Expenditure Index (PCEI), remains below 2% and employment reaches maximum capacity.
But inflation remains near zero despite tireless efforts to boost it up and unemployment remains a concern as broader measures of unemployment still show considerable slack in the labor market.
Recently President Obama met with Fed chair Yellen behind closed doors in regards to current economic policy and the state of the economy. This is the first time since 1951 this has happened during an election year.
What was discussed we will never know.
This will put downward pressure on the dollar, providing an artificial life-line for the U.S. economy. That is, it’s effectively putting a lid on the can of worms the current state of the economy is in.
In other words, “kick the can down the road.” Leave the problem solving for the next President to resolve.
Normally a country would celebrate the strengthening of their currency. It was indicative of a sound monetary policy as well as steady economic growth.
However, in a weak globalized economy that’s spiraling towards deflation with soft demand for all assets across the board, being the strongest currency is not necessarily a good thing.
Consumers and liquidity have become limited and the fight for those few consumers on limited budgets intensifies.
Globalization has integrated world economies at a scale never seen before and government policy to create a more competitive environment in their own backyard has turned into a global mantra.
Whether it’s an American consumer or foreign, the appeal for American made products and services declines since these tend to be more expensive when compared to products and services produced abroad.
This has led to a decrease in exports (sales of American made products and services abroad) and a natural increase in imports (purchases of products and services produced abroad) as consumers look to save a buck on products and services being purchased.
It’s no coincidence the U.S. trade deficit is currently one of the largest in history.
The Department of Commerce recently announced that the trade deficit was almost $50 billion. This was an increase of US$1.2 billion from a month earlier and a 13.1% increase from a year earlier.
This confirms that consumers are buying products and services produced outside of the U.S. rather than American made products likely due to the difference in price.
THIS IS SETTING U.S. COMPANIES UP FOR FAILURE.
Ultimately, lower sales will lead to massive layoffs, lower valuations and bankruptcies. The Dow Jones Industrial and Transportation Averages have already signed a Bear Market confirmation. The bursting of the stock market bubble is around the corner.
Indicators everywhere are already showing signs of caution.
U.S. manufacturing is in a downtrend. The ISM, the official gauge for manufacturing, has actually shown contraction in this sector for most of the past year (see Chart).
CNN Money published several articles on the importance of manufacturing and how it’s been a thermometer of economic growth since 1915.
Back in November it started with an article called, “Is U.S. manufacturing signaling a recession?” and then in January it again published another related article called, “U.S. manufacturing index at worst level since 2009.”
Traditionally, two back to back quarters showing contraction would be seen as a sign of recession.
It is clearer now than ever before, that the true state of the U.S. economy is on soft ground.
Could we see negative interest rates in the U.S. if slack in the economy continues?
The answer is YES.
Although Yellen has voiced in public that negative interest rates are not a tool the Fed is considering to further ease monetary policy in the U.S., it has requested banks to include negative interest rates in its annual stress tests for 2016.
An article published by Bloomberg in February confirms this reality. The article stated “As interest rates turn negative around the world, the Federal Reserve is asking banks to consider the possibility of the same happening in the U.S.” Can you hear the sound of dull drums yet?
…where do we go from here?
History is always a good place to start…
Currency debasement through loose monetary policies is as old as currency itself. The need to generate liquidity during times of economic duress has been tried on hundreds of occasions throughout history.
And every single time society has looked to debase its currency, it has failed.
It happened to the Romans over 2000 years ago, to the French in the late 1700s and to the Germans in the 1920s. It happened to China in the 1940s, to Yugoslavia in the 1990s, Argentina in the 2000s and it’s happening to Venezuela today.
And it will happen again as central banks around the world look to spur growth by increasing the money supply.
How much longer can the world sustain these reckless monetary policies? What will happen when the rubber band snaps?
It’s impossible to know the full extent of such an occurrence.
However, there is a way to protect yourself from the perils of world central banks. The anti-thesis of the implementation of loose monetary policy is GOLD.
Throughout history, gold has played a key role as money.
Gold has proven over and over again that it is the ultimate currency. It has kept central bankers and loose monetary policy in check for millennia.
It’s no coincidence that all major economies around the world hold gold to back up their own currencies.
It’s the central banker dirty little secret
Some think that during the past years, gold has been artificially suppressed by certain world powers so that they could continue to hoard large amounts of gold. CNN Money published back in February 2016, “China is on a massive gold buying spree.” Mining.com, based on data from the World Gold Council, published in January of 2016, “China, Russia lead central banks gold buying spree.”
Ultimately, central bankers know that in a world where currency debasement and negative interest rates are the new normal, the importance of holding gold, an asset that historically has been considered money, is necessary given the eroding value of currencies.
Never forget, gold is the ultimate checks and balance, and number one public enemy of loose monetary policies.
Throughout history it has exposed (hyper) inflationary environments. It happened before and it will happen again.
Right now, gold and gold shares are coming out of a bear market. They’ve broken key resistance to the upside and they’re looking poised to rise further.
But it does not stop there.
Gold is at the brink of a major up-move.
But even more impressive are the gold miners.
Since the start of the year alone, HUI, a major gold share index, has risen 130% from its January 2016 low to the April 2016 high. And by historical measures, they remain incredibly cheap in a world where stocks across the board have over stretched their values.
Some of the best opportunities for investments are popping up all over.
THE BEST OPPORTUNITIES TO PROFIT ARE DURING BEAR MARKETS.
It is here that we want to make our knowledge and experience available to you and assist you in making the right choices moving forward.
We started our newsletter 35 years ago specializing in precious metals, particularly gold and silver.
We’ve been in the industry longer than most. We have lived through moments of economic duress and economic bonanza. We’ve seen bear markets and bull markets. We’ve made great profits and we’ve weathered the storm when necessary.
We’ve beat the markets consistently for most of our 35 years in the industry and want to offer you the opportunity to gain from our knowledge, our research and experience.
OUR SPECIAL OFFER TO YOU
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Looking forward to tackling the markets together!
Pamela and Mary Anne Aden
Owners and Founders