A Market Review and Opinion Report by MoundReport.com's Head Analyst James Mound
Update on the State of the Currency Markets
The release of my currency forecast (Click here for details) is perhaps the most critical report I have ever put together. When currencies make major moves the world is left with little choice but to adjust the prices of commodities, real estate and stock valuations, and I believe a major currency event is fast approaching.
In fact I believe it has been in the works for over a year. Let’s take a look at what has been going on to set this fundamental situation in motion:
Greece
Greece opened the world’s eyes to the fallacy in the construction of the euro currency. Simply, a unified currency is only as strong as its weakest country’s economy, and Greece is one horribly messed up economy. The bailouts proved that every country in the constituency was too big to fail and it has setup perhaps the worst currency collapse in the world has ever seen. It is not so much about Greece, but Portugal, Italy and every other country that follows. Eventually the strongest countries will no longer be able to support the weakest ones and the euro currency will fail.
Money Musical Chairs
When the euro currency panic first began the masses desperately searched for stable economies and strong currencies to reallocate their euros. The U.S. dollar got some investor money, but the major beneficiaries were the Japanese Yen and Aussie and Canadian dollars. The yen remains on a rampage, surging about 65% in just over 4 years. The Australian dollar is up over 80% in 3 years and the Canadian dollar surged about 40% in just over 2 years following a 2009 bottom. The point is these currencies have seen huge moves as a beneficiary of this euro debacle, but the question of the day is do they have any more left in them?
Inflation Misunderstanding
Following the 2008 global financial collapse the unified effort to cut rates to virtually zero heightened inflation concerns, and the length of time this would remain the status quo became the focus. The theory was, and for some still is, that the longer rates remain this low the more dramatic the inflation impact will be later. The fallacy in this thinking is that low rates are actually making money more accessible than when rates were higher. The reality is money flow is tight, credit even tighter, and money is very hard to come by. Joe Investor is certainly not confident enough in the state of the world economy to be as loose in his spending as he was 4 years ago. Simply there is no loose money and inflation is not the risk. This realization will be a major catalyst to a monumental shift in currency valuations.
ECB Premature Rate Hike
In an effort to lead the world out of recession the ECB decided it would be a brilliant idea to hike rates earlier this year. Luckily the Fed stood strong, but at the time the policy leaders took a backseat to the ECB and the euro bounced. Well that was short-lived and reality has clearly set in that rates need to remain near zero for a long, long time to facilitate a recovery.
If my prediction comes to fruition then these events have setup a major currency cataclysm, a genuine volatility event that could change the landscape of your investments for years to come. I have written a critical currency market forecast and it will be released Tuesday evening. I encourage you to take advantage of the 60% discount provided to buyers who purchase prior to the release of the report at a price of just $99 and it includes some great free bonuses. To order or learn more visit http://futurespress.com/Mega_Email/2011/Q4/LandingpageReport/
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