Why Your Financial Future Will Be Built Upon the Chinese Yuan
If you have any illusions, put them aside now. It's the Yuan's world – the West is just living in it, or borrowing from it as the case may be.
Demand for the Yuan is growing at such a staggering rate that your financial future will be built upon it.
Admittedly, this is a very tough concept for most people to wrap their minds around. It's tough to lose "your" spot at the top and it's even tougher to know you're losing it and not be able to do anything about it because the leaders who are responsible for maintaining that position don't understand the end game.
It's made worse by Washington's insistence that the dollar is still a weapon when large swathes of the world now believe it's a liability. It's exacerbated by Europeans who forget that a sound currency actually requires underlying economic stability. It's threatened by the latest crop of Japanese bankers who seem determined to print money into oblivion.
Sadly, this is not new. The old guard always fights for the status quo when something different or not well understood like the Yuan comes onto the scene.
The Best Way to Trade the Currency Wars
The world may not be engaged in a currency war yet, but it is engaged in a growth war.
With domestic demand in most home countries anemic to moderate, the universal objective is growth by exports.
Unfortunately, countries doing battle in the growth-by-exports wars end up skirmishing in the foreign exchange markets. That's because every country that wants to export its goods and services wants them to be relatively cheap compared to its global competitors.
Driving down your home currency relative to the currencies of the buyers of your products is a way of implementing a "cover all bases" export growth strategy.
Of course, as countries trade blows in this "beggar thy neighbor" strategy, besides the danger of a debilitating currency war breaking out, rough and tumble currency manipulation leads to disruptive volatility in stocks, commodities, and bonds.
But while you personally can't do anything about currency battles or a full-blown currency war, it doesn't mean you can't profit from all the volatility.
Here are some simple ways to hedge your portfolio and have fun trading the markets to profit from bickering neighbors throwing currency Molotov cocktails at each other.
This Is a Recipe for Massive Hyperinflation or Bankruptcy
Nobody was really shocked when Venezuela devalued the bolivar earlier this month from 4.3 to the dollar to 6.3.
When it comes to the currency wars, massive devaluations are simply one of the keys to this "race to the bottom" strategy.
But Venezuela's bad behavior, and that of several other countries in the region, means that several Latin American countries are now likely to suffer hyper-inflation or declare bankruptcy.
For investors in Latin America, that raises the risks for everyone, even for countries with good policies and relatively low debt.
Unfortunately, long-standing investors in this part of the world have seen this hyperinflationary pattern before.
Investing in Silver: Price Dip is a Good Time to Buy
Good news for those investing in silver: The price slump is ending, making now a good time to buy.
Silver prices have slid since the start of 2013, and the white metal's down nearly 9% so far this year. Silver, which had hit a record high of $49.79 an ounce in April 2011, was trading for $29.36 Tuesday afternoon.
That leaves plenty of room for prices to climb – and plenty of profit for investors who buy on the dips.
Money Morning Global Resources Specialist Peter Krauth said recent weakness in gold and silver prices "has created a great opportunity for true contrarian investors" to add to their positions.
"We may not have hit the absolute near-term bottom, but I think the odds are good that we're pretty close," Krauth said as the sell-off accelerated in February.
How to Make a Fortune If the Currency Wars Go Atomic
There's a lot of talk about currency wars these days, but very little understanding about what that means for specific countries, economic growth, inflation, and your pocketbook.
Let's fix that.
First of all, there has been no declaration of any currency war. And there likely won't be.
That's because open currency warfare could quickly lead to a mushrooming global crisis.
But that doesn't mean countries aren't already engaged in currency battles; they are. They almost always are.
Here's an over-simplified explanation about how currency wars affect you.
The Pound Gets Pounded
As the global currency war intensifies, the majority of attention has been paid to the 17% fall of the Japanese yen against the U.S. dollar over the past few months.The implosion has given cover to the sad performance of another once mighty currency: the British pound sterling.
But in many ways the travails of the pound is far more instructive to those pondering the fate of the U.S. currency.
Japan has a unique economic and demographic profile which makes it a poor stalking horse. Newly elected Prime Minister Shinzo Abe and the Bank of Japan have clearly and forcefully committed Japan to a policy of inflation at any cost.
Even in a world of serial money printers their plans stand out as exceptional. Britain, on the other hand, is charting a more conventional course to the same destination.
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The UK government, under conservative Prime Minister David Cameron and Chancellor of the Exchequer George Osborne, has succeeded in bringing marginal discipline to their budgetary imbalances.
From 2009 to 2012, British government expenditures rose a total of just 1.6%, which was far below the official pace of inflation. (In contrast, U.S. federal spending grew by 7.9% over that time period). Since 2009 the British have kept their debt-to-GDP ratio lower than America's and have cut into that metric at a faster rate.
Is George Soros About to Short the British Pound Again?
Shorting the yen has earned George Soros more than $1 billion in profits since November.
Now Soros has set his sights on the second-most-shorted currency in the world – the British pound.
And he may have company, as the Financial Times reports: Along with Soros Fund Management, Tudor Investment Corp., Caxton Associates and Moore Capital – some of the best global macro traders – "see similarities in UK's predicament to that of Japan" and are interested in shorting the pound.
This adds to worries about the pound, which has already fallen 5% this year. And with exports falling, productivity low, and gross domestic product shrinking last quarter, Britain's economic outlook is foggy at best.
"There could be a dramatic weakening of the pound this year," one of the world's top macro hedge fund managers, who declined to be named because he does not want his firm's positions becoming public, told the FT.
For Britain's sake, let's hope that weakening doesn't lead to another "Black Wednesday," Sept. 16, 1992 – the day George Soros "broke" the Bank of England.
We Beat George Soros by Eight Months on the Yen (and Made You 44%)
One of our promises here at Money Map Press is to keep you ahead of the curve – and certainly ahead of Wall Street.
Frankly, this is what you pay us for, and we take very seriously our responsibility to deliver.
Here's another example of how we have.
The Wall Street Journal reported that some of the country's biggest hedge-fund players have reaped billions in windfall profits by betting against the Japanese yen – capitalizing on the fact that the Asian heavyweight must weaken its currency to save its economy.
Billionaire investor George Soros alone has made nearly $1 billion since November on wagers against the Japanese currency, which has skidded about 20% during the last four months, the newspaper reported.
And Soros isn't alone. Investors say that David Einhorn's Greenlight Capital, Kyle Bass's Hayman Capital Management LP and Daniel Loeb's Third Point LLC have also made big money on the yen's decline.
Indeed, betting against the Japanese currency "has emerged as the hottest trade on Wall Street over the past three months," The Journal reported.
But here's the thing: Money Map Press Chief Investment Strategist Keith Fitz-Gerald was eight months ahead of the hedge-fund heavyweights in identifying this profit opportunity. In February he told Private Briefing, subscribers that the yen was headed for big fall – and he even recommended an ETF that would let them profit from his prediction.
The upshot: Keith's recommendation has so far reaped a 44% windfall – which is more than double the 20% yen decline the hedge-fund Johnny-come-latelies have been able to profit on.
And this isn't an empty claim.
The Best Currencies to Invest in for 2013
The best currencies to invest in for 2013 come from Asia, South America, Australia – but not the United States.
The Federal Reserve's misguided insistence on a loose monetary policy, ongoing resistance to government spending cuts, and another increase in the U.S. debt ceiling will all conspire to boost inflationary pressures and restrain the value of the U.S. dollar.
That will, of course, impact domestic market performance and cut into real returns on dollar-denominated investments – but it will also provide major opportunities for U.S. investors who can target issues denominated in the strongest foreign currencies.
Unfortunately, that doesn't include most of the world's other major currencies – including the euro, British pound and Japanese yen – since the economies of the underlying nations are also suffering from sluggish economic recoveries and problems with excess debt.
As such, the strongest currencies in 2013 will likely be found to the north and west of the United States, starting with the neighboring Canadian dollar.