Readers know of our incessant bleating about the worsening Economic Time in America.
But we are now on "red alert" for the current month of October - and suggest how to earn off this.
1. What is so bad about October?
Call it instinct. Many of the bigger market crashes have occurred in October, but nobody knows why. So we are just going to accept the reality of this perception.
What we would say is that finally, finally, markets have woken up to our long-held concerns about The Economic Time™ in America getting worse and worse.
Their next shock is another long-held belief of ours: stagflation is returning.
Those of us who survived the oil shocks of the seventies and eighties know this scenario: growth stops and inflation rises.
Inflation rises because of cost-push pressures. Today's cost-push pressures are:
- Rising RMB. The avaricious politicians in Congress keep forcing China to revalue. That means that Chinese exports to America rise in cost.
- Falling dollar. Besides, the rate cut in America implies that the USD has to fall more - as all superpower currencies do.
- Rising commodity prices. Wheat, oil, gold - you name it, people are scrambling for safe havens.
- Slower productivity growth. As suggested in The Economic Clock™ of America: unit labor costs are rising 6x faster than when they bottomed.
The bottom line: companies either pass higher costs on, or they don't. If they pass such higher input costs on, the Fed will have to tighten yet again. So down goes turnover. Alternately, if they don't pass these higher input costs on, with demand receding, their margins wilt. Either way, profits have to disappoint.
This stagflation scenario is going to start souring the market subconscious this month, so expect a bear run to follow. Initially, all markets will get hit. But America will get hit the longest and hardest...
2. How to Make Money Off This Idea
1. Always consult your financial advisor before investing!
2. Buy commodity ETFs and individual commodities like gold, oil and wheat.
3. Buy high yielding Asian currencies.
4. Buy the Euro and Sterling.
5. Buy a "short" ETF on the US stock market.
6. Load up on China and Hong Kong.