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For many moons, Larry Edelson, Mike Larson and I have been alerting you to a series of upcoming disruptions and dangers overseas — wars, revolutions, recession, and chaos.
We told you they would spread; and they have.
We predicted they would drive wave after wave of flight capital to our shores, and they have.
Plus, we pinpointed the most obvious, most immediate, victims of those disasters — investors who plowed their money into emerging market countries. And now, those investors are getting killed in a series of disastrous stock declines:
Brazil has suddenly flip-flopped from a miracle economy to a basket case.
Brazil’s service sector, once robust, has just suffered its largest fall since early 2009.
Overall economic activity is falling at an estimated annual rate of almost 5%.
The Brazilian currency — the real — has lost half its value.
And a massive corruption scandal, which began with Brazil’s oil giant Petrobras, has now spread fear to the boardrooms of dozens of the country’s largest corporations.
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Result: EWZ, the once-high-flying ETF that represents Brazil’s largest companies, has suffered a long-term plunge from over 99 to a recent low of 27 — a wipe-out decline of almost 72%.
Moreover, it is now approaching the extreme low it made back in the depth of the 2008 bear market.
If that level is broken, look out below!
South Korea, recently a darling of global investors, has suddenly been cast as one of the dogs.
Youth unemployment has crept up to record highs.
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The working-age population, which, until recently had made South Korea an export powerhouse, is shrinking.
And among Korea’s elderly, poverty is the worst of all 34 countries that belong to the Organization for Economic Cooperation and Development (OECD).
For all these reasons — and more — EWY, the ETF specialized in South Korea’s blue chips, took a beating in 2014, rallied, and has now taken an even bigger beating in 2015.
Malaysia, another recent “miracle” economy, has been hit even harder:
Its currency, the ringgit, has crashed to its lows of the late 1990s.
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Its central bank, desperate to prevent an even more dramatic currency crash, is depleting its foreign currency reserves.
Adding corruption to the mix, the government’s giant investment fund — 1MDB — is under investigation over allegations of a massive misappropriation.
The biggest blow of all: The global oil-price plunge, gutting Malaysia’s largest source of revenues.
So it’s no wonder that the ETF devoted to Malaysia’s leading stocks has also been smacked down, busting through four years of lows.
But it’s Russia that currently worries me the most — both for the sake of its own people and the rest of the world.
If Russia’s economic swan dive could be blamed exclusively on its showdown with the West — sanctions, countersanctions and now more sanctions — you could argue that, once politicians on both sides come to their senses, a big rally might be in the offing.
Alternatively, if you could pin it all on the oil-price slump, you might argue that, as soon as oil markets turn, all would be fine.
The reality, however, is that Russia is being dragged down by both of these simultaneously. And both are entrenched megatrends with no signs of ending: The anti-West propaganda machine in Russia is now fully entrenched and empowered, making it almost impossible politically for the leadership to reverse course. And even if oil markets started recovering today, it could take years for Russia to recoup lost revenues.
Bottom-line: Russia is trapped in a Great Recession that’s probably going to be a lot bigger than what the U.S. has seen in recent years. They’re looking at …
* GDP set to shrink by 3.4% this year and by as much as 9% overall
* A ruble that sank by half last year, and is now sinking again.
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* Plus a great bear market in Russia’s leading stocks, which, even in the absence of an East-West conflict, would frighten away the most cold-blooded global investor.
Like Brazil’s stock market, it’s not too far from the prior Big Bottom made in early 2009. Â
And like Brazil’s, if that critical low is breached, a further collapse could be hard to avoid.
The big question …
What does this mean for U.S. investors?
Are these foreign markets strictly victims of the global flight to quality — hitting their stocks hard, but giving ours a boost?
Or are they early storm warnings of similar tempests that could ultimately reach the United States too?
We believe that, for now at least, it’s mostly the former. But it’s not too soon to start waving a yellow flag of caution.
So if you haven’t done so already, be sure to …
Own only the highest-quality stocks in the strongest U.S. sectors …
Keep a super-sized portion of your money in cash, and
Get ready to take even more protective action if needed.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 14 comments }
what’s next, you ask? a sure sign of a bubble when the working class enters the market in droves, like just happened in china. when these bubbles pop, they usually go all the way to a bottom. china is having its 2009 moment like america did, but will begin its secular bull when the dust settles, which is a ways off. these major bottoms last a year or two, like all recession do, but in the end it’s all good. you’re right, martin. it’s too soon to buy the bric countries, and america is the place to be.
what next? everyone seems to think a rate hike by the fed will never happen, like interest rates will never go up again in our lifetime. a rate hike by the fed is coming. probably next month, or very likely before year’s end. just the talk of a rate hike pushed the 10 year bond up 100 bips to 2.5%, and pushed gold down to $1,100. imagine what an actual rate hike by the fed will do to the price of gold? now you know why i’ve been calling myself $1,000 gold for the past few years. the gold bubble popped at the end of 2011. that was the end of the gold bull. when these bubbles pop they usually go all the way to a bottom. for three years i’ve been saying gold is toast and will fall all the way to its old r/s level set in 1980 of about $1,000. it will overshoot to the downside, rebound to the high side, but when the oscillations are over we’ll end up about where we are now for the next couple decade. so far, i’m the only one i know of who’s made the right call on gold.
gold cemented in at 1000 sounds like a good good call unless there is a devaluation on the US$ or USBond default of any sort… then gold is a hedge for all things paper including currencies. gold will adjust to revaluations of all types. look at 100 yrs of gold purchasing power. It is a yardstick which is why its the enemy of paper currency dependents and creators.
Congrats to you, $1000 gold!!
Fed rate hike likely…? I don’t get it. Folks on CNBC and FOXB lead the viewer to believe that the Fed must hike rates in order to “fill their arsenal” with bullets to shoot at the next (inevitable) recession….a .25 hike is “filling their arsenal”…?? And then “one and done” is the prevailing thought, because the Fed doesn’t want to undo whatever positive effect all this bond buying may have done…???
It’s like putting a pea in your shooter to ward off a grizzly attack!! Good luck with that FOMC!!!
the fed will likely raise rates in september. the best tool for the fed to use now is to push investors out of bonds and into stocks by raising rates. plus, a stronger dollar will help struggling emerging economies whose currencies will appear weaker by comparison. if all goes well, i expect we’ll see new s&p highs by year’s end.
History tends to repeat itself.
Right now, oil is down, gold has sold off, and we’re coming up to an election year on the heels of an 8 year democrat presidency….It’s just an almost identical situation to 1998 and 99!! …and then look what happened with all of it in 2000 and the next couple of years thereafter!!
It reminds me of the movie “Terminator.” After watching the cyborg tear apart the steering column of the car to “hot wire” crank it, the boy, John Connor, turned down the sun visor and the keys fell into his hand….”Are we learning yet….???”
I don’t get it. In his article above, Dr. Weiss refers to slumping oil prices as an “entrenched megatrend.” But on May 18, exactly 12 weeks ago, he hailed Mike Larson’s “Greatest Energy Opportunity in 3 Decades”, which predicted oil price recovery based on “much higher global demand” and declining supply (Mike: Because the forces driving this surge are not just technical lines on a chart. They are long-lasting, unstoppable fundamental forces that will continue to drive prices higher for years to come!)
Which is it?
i agree with neal. the commodities bull is over. gasoline prices will be under $2 by year’s end in most of america. look at the chart mr weiss posted above. the emerging countries, especially china, are in recession. recessions last a year or two. demand for commodities won’t be back until the bric countries restart their economic engines. meanwhile, there’s no better stimulus than low gas prices. the party is over for texas, but the rest of us are going to love this cheap gas.
Neal, haven’t you learned? The Weiss guys put out their predictions with instructions for us, the readers, to “act immediately!” However, the truth be told, what they’re forecasting often DOES come true….BUT it may happen 2 days, 2 weeks, or 2 months….or even 2 years… from the time of their prediction!! It’s up to us to figure out the time frame and/or often, the price level…and try not to go broke in the meantime!
….And then, once their prophecy does come true, they shower themselves with many, many accolades! They say how that they knew it, they foretold it, and now it has proven that they are “right as rain!!” The pieces and parts of their predictions they choose to mention at the time (regardless of how contrary to their other predictions) are happening “in spades!!!” …at least, that’s been MY observation of their writings for the last 15 years……
sound kind of like the same technique donald trump is using for his presidential campaign.
Don’t put your trust in ANY $. If Interest rates to rise even a little, then all H “brakes” lose? More world debt and then only God can help.
Slohttps://www.google.com/url?sa=t&source=web&rct=j&url=http://www.merriam-webster.com/dictionary/enlarge&ved=0CDkQFjACahUKEwiswJmN_6zHAhUHmogKHfsAB6A&usg=AFQjCNFZaZzioa6r3-kWamuNRtUCMBXlZQ&sig2=UIu70StXl3-g7u3BZ50L5Auslumping oil
You really believe the economy is going completely “down the drain”?
The forget gold and silver. In a barter economy people will want soap, paper products, common medical supplies and 0.22 bullets; hoard those and when needed you can trade for most other items you’ll need.
It begins to signal more about economic recession, maybe not here, but broadly,” said Nicholas Colas, chief market strategist at ConvergEx. Could rate hike trigger long-awaited ‘correction?