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On the Brink of an Asset Explosion

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Unsuspecting investors won't recognize the market top and will get sucked down into the depths of the bear.

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Not only that, but sentiment has now turned to extreme bullishness for the dollar and extreme bearishness on the Euro. That is a recipe for running out of buyers of dollars and a prescription for a violent short covering rally in the Euro.

Now remember, the stock market has been rallying despite the dollar. Oil is over $80 despite a strong dollar. Copper is only about 15% from all-time highs despite a strong dollar. Gold, the strongest commodity of all, is holding well above the prior bull market high of $1025 in defiance of a strong dollar.

All asset classes are now wound up as tight as a drum. If, or should I say when, the dollar begins the trip down into the next intermediate cycle low all assets are set to explode higher.

As hard as it is to believe, I think there's a very good possibility that the third leg of this cyclical bull could match the first leg and tack on 200-300 points in the next few months.

I think virtually everyone underestimates the effect that the multi-trillions of dollars the Fed has pumped into the system is going to have on all markets.


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Unfortunately that's probably the single worst thing that could happen for two reasons.

First, I'm afraid that not only will the stock market surge higher but so will the commodity markets in an inflationary explosion. It was $147 oil and $4.00+ gasoline that eventually broke the back of the global economy in '08 when it was already reeling from a bursting credit and real estate bubble.

Second, I'm afraid the average investor is going to fall for the hype that the Fed has "fixed" all of our problems. If the S&P is trading north of 1400 it's going to appear that the coast is clear.

Nothing could be further from the truth, so when the market tops and rolls over into the next bear phase virtually no one will recognize what's happening and everyone will again get sucked down into the depths of the bear.

Only this bear will be much worse than the last one.

This bear won't be caused by problems in the credit markets. No, this bear is going to be driven by structural problems in the currency markets and soaring inflation. Unfortunately we aren't going to fix a currency crisis by printing money. Money printing is going to be the cause of the crisis in the first place.

The only asset class that is going to offer any protection in this environment is commodities. And the one sector that will thrive in a currency crisis is the precious metals.

Not only will gold and silver outperform in the pending inflationary surge, but they will protect investors during the inevitable crisis that the Fed's insane monetary policy is going to unleash next year.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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