Posted on 01/19/2025 8:55:33 AM PST by delta7
A number of questions have been coming in about the European markets. Keep in mind that we are in the throes of geopolitical and political upheavals, not to mention the entry of Trump and his old-school nonsense about lowering the dollar to sell more stuff overseas and imposing tariffs. Those ideas I have dealt with constantly over the course of the past few decades. It is confusing without question.
The press does not understand currency, not even those in government. Absolutely everything has an international value, and this has led to the overwhelming majority getting things wrong. Many ask why mainstream media will not interview me on such important topics as this. The reason is simply – it is too confusing for them as well.
I have told the story at conferences about my Ferarri Trade and how I bought a 308 Ferrari when I lived in London in 1985 when the British pound fell to $1.03. The Italians were getting $60,000 for the car in the States back then. It was still priced in pounds when the pound used to be $2.40. I bought the car for about $35,000 when converted. The Italians could no longer sell these Ferarris for such a price in London. Hence, they doubled the price in British pounds based on $1.03.
Over the course of the next couple of years, the pound rallied and went to $1.90 again by 1988. I drove the car for 2 years, sold it used for £40,000, and virtually doubled my money. Then, people were buying Ferraris as an investment, thinking it was the car that appreciated when, in fact, it was just a currency play. If you did not look at the currency, you missed the whole point.……
……. In fact, I was buying German cars throughout the 1970s as the dollar was declining. A Porsche was $8,600 in 1970, and by 1980, it was $27,700. I would drive the cars for 2 years and then trade them in and get my money back, so cars never cost me a dime throughout the 1970s. I understood it was all just currency – not the cars themselves.
My father took the family to Europe for the summer of 1964, which taught me about currency as we traveled from Sweden to Italy and all around. We had to change currency every time we crossed a border. I learned that CURRENCY was actually a mental language. I would listen to the price in Italian lira and convert that back to dollars in my mind to asses if the value was a fair price.
I was really the only true foreign exchange analyst. I was dealing in billions in the early 1980s. Clients would even put me on a speak in the middle of an OPEC meeting. I was being called in around the world all on currency crises. That’s how I became friends with Margaret Thatcher.
I was being touted as the highest-paid analyst in the world, all for currency. When I was opening an office in Geneva in 1985, I was going to use some European names to blend in. I went to lunch with the head of one of the top main banks in Switzerland, who was a client and asked his opinion of what European name to use. He asked me to name one European FOREX analyst. I was embarrassed for I could not. He then explained why everyone was using my firm. He said there were no European analysts because they each would tout their own currency because it was a political issue. He explained everyone was using my firm because I did not care if the dollar went down or up. I said it was just a trade.
By 1985, I was summoned to the US.
They were arguing to force the dollar down by 40% to reduce the trade deficit as that theory today is espoused by Trump. That was the Plaza Accord, and I wrote to President Reagan and warned that they would cause a crash within two years, and that became the 1987 Crash. The Presidential Commission then called me in for that one. They just do not teach this stuff in school and that seems to be the problem.
In 1997, Robert Rubin, former head of Goldman Sachs, was also trying to talk the dollar down for trade. Again, he did not really understand currency and its impact on markets. The Asian currency Crisis unfolded weeks later. He may have been at Goldman, but that was more related to debt. To one person, a stock rally can look like a bull market, and to another, a bear market. When you get into currency swings of 10%-40%, it alters the perception of value because they still do not teach this stuff in school. We are clinging to old theories like Keynesian economics from the period of fixed exchange rates. Politicians are making the wrong decisions and investors are confused because these concepts are never taught.
As the greenback rallies, then the European share prices will appear cheap, just as Ferarri did in 1985 when the pound fell to $1.03. You will have domestic movement away from public assets as we have seen corporate rates move below that of government rates in France. Here is the FTSE in pounds and then in dollars. While you see new highs in pounds, the FTSE has not made new highs in dollars and has backed off, showing that the rally in the FTSE is not keeping pace with the decline in the pound.
This is why, in Socrates, you can plot any instrument in a host of various currencies. The definition of a bull market is something that rallies in terms of all the key currencies. When it is rising only in terms of the local currency, it is simply a domestic shift and not international.
*We do NOT see a major Crash on the horizon in shares, commodities, gold, silver, etc.
The greatest risk of a crash will be in government debt.*
Do note, we are seeing an anomaly, PM’s rising with equities.
I was being touted as the highest-paid analyst in the world, all for currency.He ran a Ponzi scheme. He never analyzed anything.
Armstrong’s latest interview, the fourth of fifth one this year. Seems people are waking up and listening.
Now and again Martin Armstrong will post something interesting. Often worth a read, I think.
But everything you said, MoneyBack, is true. So it’s a fair disclaimer to add to any Armstrong thread. Sort of like a political essay written by a member of the Democrat National Committee. Could be a great essay. But then there’s that DNC thing.
I’ll stick with investing in the USA. My brother worked in Europe for years and said business practices are ‘less trustworthy’ there.
IBTG
IAMB
I believe Buffett would advise long-term investors: invest 100% in a low cost S&P 500 fund using dollar cost averaging. For short-term investors (<15 year horizon) - invest 50% in S&P 500 fund with dollar cost averaging and 50% in low-risk bonds or treasuries.
This is not a get-rich-quick strategy but it allows you to sleep well. LOL!
It has been a long time since I have read the “Wealth of Nations” by Adam Smith. It is a tough read but will worth it. There are some audio versions that help explain it.
But one of the points I remember is what is wealth? Just think about that for a minute. Can you define it?
and note his book was about the wealth of Nations not individuals.
Anyway, his definition of wealth was “wealth generates more wealth.” Now that takes a little thinking. He illustrated with buying a worthless bog, tiling it, and now you can grow a crop on it. He disliked lawyers and govt as they were a consumptive activity although admitted they were needed in limited quantities for wealth generation.
My personal story was meeting a wise black gentlemen in the south. He said out of nowhere one day. “I watched the Jews.” “Yep” he said, “I watched the Jews, they walk down the street, see a piece of paper, pick it up, do something with it and make a lot of money. I watched them for a long time”
Now there is proper race relationship, learning from each other.
Yes, one could could tell by his self-promotion he was a character. The salient fact I see is that U.S Treasuries are not suffering. Perhaps it is the Trump Effect and there is a window of patience to see if the U.S. stabilizes, or lowers, its annual deficits. France is worse off no doubt.
Actively-managed funds are very seductive. Because every year, many of them will beat the S&P 500. Very impressive! So folks will pile into those funds.
But long-term, those funds are almost certain to lag the S&P 500. Today’s winner will be tomorrow’s loser.
So, yeah. A major mistake I made when I first started out was chasing those actively-managed funds. I’d buy the financial magazines, and go over all the return data.
It took me a decade to realize I was chasing rainbows. Then it became diversified index funds for me.
If I had to do it all over again, I’d buy a low-cost index fund that starts out aggressive, then becomes less and less aggressive the older you get. Set it and forget it.
“Over the course of the next couple of years, ...”
Armstrong managed to go bankrupt twice, lose $700 million of his investors’ money and spend eleven years in prison for securities fraud after his ponzi scheme fell apart, lose his securities license and Dr be banned from giving financial advice.
Sounds very much like my story.
How does Socrates do all these wondrous calcs in DOS?
Armstrong’s latest interview, the fourth of fifth one this year. Seems people are waking up and listening.People aren't listening. They are only watching. They want to see how a real Zombie looks like. Like Armstrong who has had so much cosmetic surgery that he cannot open his eyes any more.
Here are TWO more of Armstrong’s video just released. Be sure to watch them.
Enjoy!
How good is Armstrongat investing?
Upon information and belief, the current principal amount (exclusive of interest) of outstanding PGM Notes is approximately one billion dollars ($1,000,000,000), most of which are due to mature in the year 2000. The assets currently in the Fund, however, total no more than approximately forty-six million dollars ($46,000,000).
https://www.cftc.gov/sites/default/files/enf/99orders/enfarmstrong.htm
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