The news is great at telling us what's happening. But knowing what's happening is a lot different than understanding what happened – and that's what makes the difference between an average investor and truly great investors.
Gold's crash Monday is a perfect example. The media was falling all over itself as one pundit after the other came on TV to talk about how gold was falling and how far off its highs it was. Few tied the devastating slide to real economic events — let alone made the connection to actual trading.
But that's my bread and butter. Today I'm going to tell you what really happened and why – from a market insider's perspective. Then I'm going to tell you what to expect next and, most importantly, how you can use the situation to your advantage.
There are three fundamental things going on – all of which are at a very high level and all of which are completely transparent to most investors:
1) Japan caused the biggest single one-day gold sell off in 30 years.
No one sold their gold holdings by choice; many big players were "forced" to sell gold to meet margin calls associated with Japanese bond holdings that have gone wild since "Abenomics" came on to the scene.
You see, newly elected Japanese Prime Minister, Shinzo Abe, and his sidekick Haruhiko Kuroda – Bernanke's contemporary at the Bank of Japan — have embarked on "Abenomics," or the injection of $1.4 trillion into the Japanese monetary system over the next two years as a means of stimulating the moribund Japanese economy. This will effectively double the Japanese monetary base to 270 trillion yen, or $2.9 trillion USD.
That's hard to grasp in an era of trillion-dollar budgets, so let me put what they're doing into perspective. In order to hit his targets, Kuroda is effectively going to have to inject, print, stimulate or quantitatively ease to the tune of approximately $150 billion a month – that's 76% more than the $85 billion a month Uncle Ben and the Fed have been kicking in here, in an economy that's roughly one-third the size.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.