Month: March 2014

USDJPY: With the pair seen building on its Tuesday rally, further bullish offensive is expected towards the 102.82 level. A cut through here will pave the away for a run at the 103.43 level, its Jan 29 2014 high. Above here will set the stage for a push further higher towards the 104.oo level. Further out, resistance comes in at the 104.50 level and then the 105.00 level, its psycho level. Its daily RSI is bullish and pointing higher supporting this view. Support comes in at the 102.00 level, its psycho level. Further down, support stands at the 101.50 level followed by the 100.00 level with a cut through here opening the door for a run at the 99.50 level. A loss of that level will turn attention to the 99.00 level, its big psycho level. On the whole, USDJPY remains exposed to the upside on further strength.

Article by www.fxtechstrategy.com

Article By RoboForex.com

Analysis for March 5^th, 2014

EUR USD, “Euro vs US Dollar”

Probably, Euro is completing ascending zigzag (D) of [B]. In this case, later price is expected to form final descending zigzag (E) of [B].

Probably, price is finishing ascending zigzag (v) of [v] of C of (D), which may be followed by final descending zigzag (E).

Possibly, pair is completing final ascending zigzag (v) of [v] of C, which may be followed by descending zigzag (E).

GBP USD, “Great Britain Pound vs US Dollar”

Probably, pair has already completed ascending impulse 1 of (C) of [B] and started forming descending correction 2 of (C) of [B], may be in the form of zigzag. However, we should note that this assumption hasn’t been confirmed and price may yet change structure of wave 1 of (C) of [B].

Probably, pair has already completed final ascending impulse [v] of 1.  In this case, price is expected to start forming descending correction 2.

Possibly, pair completed diagonal triangle (i) of [a] of 2 of descending correction 2. Right now, price is falling down inside impulse (iii) of [a] of 2.

USD CHF, “US Dollar vs Swiss Franc”

Probably, Franc completed descending zigzag D of (4), which may be followed by final ascending zigzag E of (4).

Probably, price finished descending impulse (v) of [c] of D, which may be followed by final ascending wave E of (4).

Possibly, pair completed final descending impulse v of (v) of [c] of D and started ascending zigzag E of (4).

USD JPY, “US Dollar vs Japanese Yen”

Probably, Yen finished ascending impulse (A). In this case, price is expected to start large descending correction (B), may be in the form of zigzag.

Probably, pair finished diagonal triangle [i] of A of (B) of descending correction (B). Right now, price is completing ascending correction [ii] of A, which may be followed by descending impulse [iii] of A of (B).

Possibly, price is finishing ascending correction [ii], which may be followed by descending impulse [iii].

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

By WallStreetDaily.com

The National Weather Service says there’s virtually no chance the drought in California will end by spring. And yes, we should all care.

Specifically, there’s a 0.1% chance the state will receive enough rain to qualify as an “average” wet season.

But you know what else has a 0.1% chance of ever happening? You and me matching wits and investing prowess with Warren Buffett.

He’s arguably one of the best investors of all time – and as a result, one of the richest people in the world.

Of course, we’re still smart enough to learn a thing or two from him. And thankfully, he’s more than willing to teach us via his annual letter to shareholders of Berkshire Hathaway Inc. (BRK.B).

With that in mind, yesterday we began our rundown on the 10 most shocking and important revelations in his latest letter. It’s time to pick up right where we left off…

~Buffett Shocker #6: Bet on the Urge to Merge

In the last year, many of Berkshire’s subsidiaries engaged in a growth-via-acquisition strategy.

As Buffett writes, “Our many subsidiaries are regularly making bolt-on acquisitions. Last year, we contracted for 25 of these… These transactions ranged from $1.9 million to $1.1 billion in size.”

Notice the deal size? They’re all small caps.

More importantly, Buffett reveals that this urge to merge is guaranteed to continue. “Charlie and I encourage these deals… Many more of these bolt-on deals will be made in future years.”

If Buffett is encouraging and betting on more small-cap M&A activity in the future, we should, too.

~Buffett Shocker #7: Mistakes Happen, Plan Accordingly

Even the Oracle of Omaha gets it wrong!

When discussing his various investments in companies, Buffett reveals that a few “have very poor returns, a result of some serious mistakes I made in my job of capital allocation. I was not misled: I simply was wrong in my evaluation.”

Buffett also confesses that these mistakes won’t be his last: “I have not… made my last mistake in purchasing either businesses or stocks.”

The key takeaways for us?

First, plan on getting it wrong from time to time, and plan accordingly.

By that I mean, position size. As Buffett shares, his “serious mistakes” involved “relatively small” positions. Doing so is the only way to minimize the impact of our stupidity.

Second, be proactive about reducing the number of mistakes. Here, too, Buffett offers up timely advice: “Call Charlie.” That is, his partner, Charles Munger.

In other words, we shouldn’t be afraid to get a second opinion on any investments we’re considering.

And remember, as Buffett writes, “A business with terrific economics can be a bad investment if the purchase price is excessive.” So always insist on buying at attractive valuations.

Hint, these stocks don’t qualify: Tesla (TSLA), Amazon.com (AMZN), Facebook (FB), Netflix (NFLX) and Twitter (TWTR).

~Buffett Shocker #8: Live Debt-Free

Dave Ramsey is the king of encouraging debt-free living for consumers. I’m a believer, too. And so is Buffett, apparently.

He writes, “We will always maintain supreme financial strength, operating with at least $20 billion of cash equivalents and never incurring material amounts of short-term obligations.”

If we learned anything from the financial crisis, it’s that too much debt kills. Literally.

We’d be wise to mitigate that risk entirely by demonstrating some “supreme financial strength” of our own. Specifically, by paying off our debts and stockpiling some cash for emergencies (i.e., irresistible buying opportunities).

~Buffett Shocker #9: Bottom’s Up!

Too many people try to figure out what’s going on in the world before investing. Buffett offers up an alternative – ignore it!

When talking about two of his smartest investments, he writes (emphasis added), “What the economy, interest rates, or stock market might do in the years immediately following – 1987 and 1994 – was of no importance to me in making those investments… We have never foregone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.”

Put simply, bottom-up analysis is the only thing that matters over the long run. We need to spend the majority of our time on it, instead of trying to discern the direction of countless macroeconomic variables.

~Buffett Shocker #10: Mute the TV

In reference to the talking heads, Buffett writes, “When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: ‘You don’t know how easy this game is until you get into that broadcasting booth.’”

Amen!

In turn, Buffett believes that listening to the predictions emanating from the boob tube is a “waste of time.” So mute CNBC – until Buffett, and occasionally yours truly, comes on, of course. (All right, at least when he comes on.)

If you’re even more courageous, go ahead and cancel your cable service completely.

That’s it for today. Rest assured, there’s much more wisdom to be gleaned from Buffett’s letter to shareholders. If you haven’t already, I encourage you to read it in its entirety. Afterwards, don’t be afraid to let us know what you found the most shocking, insightful, or useful by clicking here.

Ahead of the tape,

Louis Basenese

The post A Hot Trend Warren Buffett Guarantees Will Continue appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: A Hot Trend Warren Buffett Guarantees Will Continue

Article By RoboForex.com

Analysis for March 5^th, 2014

EUR USD, “Euro vs US Dollar”

H4 chart of EUR USD shows bearish tendency within ascending trend. Upper Windows are resistance levels. Three Line Break chart indicates current trend; Heiken Ashi candlesticks confirm correction.

H1 chart of EUR USD shows sideways correction. Upper Window is resistance level. Shooting Star pattern indicates descending movement. Three Line Break chart and Heiken Ashi candlesticks indicate possible support from middle Window.

USD JPY, “US Dollar vs Japanese Yen”

H4 chart of USD JPY shows bullish tendency. Three Line Break chart indicates descending movement; Three Methods pattern and Heiken Ashi candlesticks confirm ascending movement.

H1 chart of USD JPY shows bullish tendency. Upper Window is resistance level. Three Methods pattern, Three Line Break chart, and Heiken Ashi candlesticks confirm ascending movement.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

By HY Markets Forex Blog

Investors who trade gold may want to keep an eye on the situation in Ukraine, as it is having an impact on the commodity. With tensions high in the Crimean peninsula, gold futures increased to a 17-week high, as investors sought a haven from other markets that could be negatively impacted by military action.

However, with Russian President Vladimir Putin’s recent comments saying that there is no immediate need to send troops to Ukraine, gold futures declined, as demand for the haven the commodity provides decreased, according to Bloomberg.

“The situation seems to have calmed down a bit, and that’s pushing gold lower,” Phil Streible, senior commodity broker at R.J. O’Brien & Associates in Chicago, told Bloomberg. “People will continue to monitor data out of the U.S. to gauge strength of the economy.”

Gold is coming off a poor year in 2013, as the price dropped 28 percent, which is the most since 1981. The cause of this steep decline was the record growth seen by U.S. equities. With that said, gold traders should be keeping a close eye on both Ukraine and the equities market moving forward.

Global stocks rebound as tensions ease

Gold wasn’t the only market impacted by Ukraine, as global stocks increased with fears of military action easing. According to CNN Money, markets across the world rebounded after Putin’s announcement. For example, Russia’s main stock index – the Micex – increased 6 percent following an 11 percent drop in the previous day and the Dax in Germany edged up 2 percent after a 3.4 percent decline.

“There has been a distinct change in the tone of the markets today as the Russian-Ukraine crisis stabilizes,” Kathleen Brooks, research director at FOREX.com, told CNN Money. “The latest headlines suggest that Putin has had a change of heart. Putin is still trying to save some face after this situation dramatically back-fired on him.”

One of the biggest reasons markets have been impacted is because the U.S. suspended trade and investment talks with Russia, which is just the first of many possible moves that could be made to keep Putin out of Ukraine. Investors need to keep a close eye on the tensions in Ukraine, as further action taken by the U.S. and other nations could impact stocks, gold and other commodities.

The post Gold Futures Fall With Eased Tension in Ukraine appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By MoneyMorning.com.au

There’s an old saying that you can tell a lot about someone by the company they keep.

Yesterday we found out we were keeping company with billionaire investor Warren Buffett, and CNBC stock market entertainer (some would say clown) Jim Cramer.

We wouldn’t normally see that as a badge of honour. Both characters are about as mainstream as they come.

But in this instance, on this rare occasion, we agree with pretty much every word they had to say. Or rather, they agreed with what we’ve been saying…

The Ukraine crisis came and appears to have disappeared just as quickly – as far as the financial markets are concerned anyway.

The Aussie market went up 0.3% yesterday to close at 5,400 points.

That is, to remind you, just 61 points below the 52-week high. And after taking a drubbing on Monday, Europe’s markets staged a comeback too. The Euro Stoxx 50 index gained 2.7%, recovering entirely the previous day’s loss.

As for the US market, the Dow Jones Industrial average gained 1.4%, more than rubbing out the previous day’s fall.

What more can we say. Financial and political crises just don’t seem to pack the same punch any more do they?

A Perpetual State of Crisis

This brings us back to Buffett and Cramer. Both of them echo the view we’ve held for some time on the impact of supposed crises.

To paraphrase Buffett from an interview he gave to CNBC, if you own a profitable little milk bar in St Kilda would you rush to sell the business just because Russia got into a scrap with Ukraine?

Odds are you wouldn’t. He wonders then, why would investors sell shares in profitable companies for the same reason? He says it doesn’t make sense.

As much as it pains us to agree with an establishment man, Buffett is right. Although we will point out that for two years we’ve held this view on the slew of pretend crises that have hit the market.

Not one of them has had a lasting negative impact on the markets. That includes Dubai’s property and debt crisis, China’s Shibor crisis (we bet you don’t even remember what that was all about), and the Cyprus banking bailout.

The proof is clear and beyond refute. The following chart plots the US S&P 500 (red line) and the Aussie S&P/ASX 200 (blue line) since 2009:

Source: Google Finance
Click to enlarge

As you can see. Since 2009 when there has been a series of one crisis after the other, what has been the impact on the stock market? Stocks have gone up. Perhaps if you knew nothing about stocks and drew a simple correlation, you could even say that stocks have gone up because of these crises!

Of course, that would be crazy.

Even so, it’s not as though there have only been a handful of crises. By yesterday afternoon we had counted out 19 of them. As we drove home from the office last night, we remembered another two.

That’s 21 crises in around 60 months since the start of 2009. Put another way, it’s a brand new ‘crisis’ every three months. And yet seemingly defying the odds stocks keep going up.

Devaluing a Real Crisis

What should you make of all this?

One reason for the constant flood of crises is the desire among some commentators to be the person who calls the top of the market and predict the next crash.

But rather than identifying the one key problem with the world’s economy, the mainstream just runs with any old crisis and then blows it up out of all proportion.

As small-cap analyst Tim Dohrmann told us this morning, ‘The word crisis has been devalued. When a real crisis comes it will take most investors completely by surprise.‘

We mean really, the Shanghai interbank offer rate (Shibor) crisis from last year. Do you remember that? It made front page news in the financial press. A spike in Shibor was apparently the event that would bring down China.

So what happened when Shibor spiked higher? That’s right, apart from short-term stock market volatility, nothing happened. Western markets continued on their way, and China kept growing.

Now, you can rightly ask, ‘So, what is the one key problem that will send markets crashing?’

It’s not difficult. You needn’t even ask. In fact, you’ll find the answer a total bore, which is partly why when it hits, as Tim says, it will take everyone by surprise.

The problem is…the same problem that caused the 2008 meltdown, which is the same problem that caused the 1929 meltdown and Great Depression, which is the same problem that has caused every meltdown, recession and depression in history – the manipulation of the money system by banks, central banks and governments.

Not Fixed, Only Patched Up

It seems to us that folks are already beginning to forget that and instead they’re focussing on the mini-crises that really don’t mean anything to anyone.

But although we may agree on that point with Buffett and Cramer, there is one difference. They believe that governments and central banks have solved or are on the way to solving the global financial system’s problems. Our view is that things have actually got worse due to the half-baked patch-up job by governments and central banks.

So when the same problem reappears it will likely result in a crisis many times worse than that seen in 2008. When that will happen is anyone’s guess.

But until it happens we’ll carry on taking advantage of the opportunity to buy stocks as each new faux crisis appears, then disappears, and the market defies the odds and continues to rally.

Cheers,
Kris+

Special Report: Three Aussie Miners Set to Lead the Resource Sector’s Epic Comeback

By MoneyMorning.com.au

By MoneyMorning.com.au

I was planning to explore the investment landscape of the burgeoning legal marijuana industry in the US today, but it looks like the party’s already over.

Appearing before the Maryland Legislature, Annapolis Police Chief Michael Pristoop testified that 37 people died in Colorado on the first day of legalization from overdosing on marijuana.

What a damn shame. With morbid stats like that, the government can’t possibly allow the legalization trend to proceed any further. People’s lives are at stake!

Except they’re not. Chief Pristoop got those stats from a tongue-in-cheek story in The Daily Currant, a satirical newspaper à la The Onion. He believed it to be legitimate, so he cited it during testimony. Despite the fact that exactly zero people in history have died from overdosing on marijuana.

As you surely know, Colorado and Washington recently became the first states to legalise marijuana for recreational use, joining 18 other states that have legalised it for medical use only. Legalisation is gaining steam across the US, and that’s unlikely to change – if only because, other than citing fake facts, opponents of legalisation have no argument.

Opposition to legalising marijuana is dwindling for the same reason that opposition to gay marriage is dwindling: there’s no intelligent reason to oppose either one. Unless, in the case of marijuana, you’re concerned with its potential to cause more car accidents. But if those are your standards, we should criminalise beer, cellphones, and makeup, too.

One thing’s for sure: the investment world is enamoured with the idea of a brand-new green industry. As an illustration of exactly how hot this infant sector has become, take a look at this screen shot of an email we received this week. It’s a news release from a mining company, announcing its intent to ‘diversify’ into the legal marijuana business:

Click to enlarge

An interesting business decision. I’m not sure what synergies exist between mining and marijuana, nor do I have any particular insight into how Next Gen’s management plans to enter the green business. But I applaud its forward thinking.

Apparently, so does the market. Here’s how Next Gen’s share price reacted to the announcement:

Click to enlarge

It soared over 300%, transforming from a penny stock into a dime stock in one day. Again, Next Gen didn’t grow earnings, discover a new gold deposit, or accomplish anything tangible. It tripled its valuation simply by announcing its entry into the marijuana business. That’s what I call a scorching industry.

So, should you put some speculative money into the hottest cannabis stock? Let’s take a quick tour around the burgeoning industry to get a picture of its investment prospects, focusing on five factors…

1) Profits Will Plummet

Had Al Capone been born in any other era, he would not have amassed a $100 million fortune. It was Prohibition that allowed him to earn extraordinary returns in the otherwise standard business of providing alcohol to people.

Likewise, legal purveyors aren’t going to earn anywhere near the spectacular returns that criminals enjoyed when marijuana was illegal. Drug distributors can become filthy rich because dealing drugs requires taking extraordinary risks. One misstep and you go to jail. Or worse, the rival Mexican cartel mows you down. That risk premium is why illegal drugs are so expensive, and why marijuana costs $300-400/oz in the US. But it won’t for long.

How can I be so sure? Because we already have a glimpse into the future. Uruguay legalized marijuana in December, and an ounce of the stuff costs $28 there, less than 10% of what it costs to obtain it the US.

It’s true that the Uruguayan government controls the marijuana industry tightly and set that $28/oz price. But the cost to produce marijuana there averages just $14/oz. So $28/oz is a reasonable guess as to where the price of marijuana would settle if the market were allowed to clear.

Going forward, profit margins won’t be nearly as fat as they were in the past.

2) The Government Will Be Heavily Involved

At least one guy will unquestionably make a killing from marijuana’s legalization. His initials are ‘U. S.’, and he wears a star-spangled hat.

We’re just two months into legalisation, and taxes are already hefty. In Colorado, marijuana is subject to a 2.9% sales tax, plus a 10% tax on retail marijuana sales, plus a 15% excise tax based on the average wholesale price. Washington is no better – it plans to exact a 25% excise tax, plus an 8.75% sales tax.

All told, taxes in these early-adopting states will be in the neighbourhood of 30%. And that’s before the feds get their cut (more on that momentarily). Further, taxes are the one exception to the rule, ‘What goes up must come down.’ Someday, tokers might look back longingly at that 30%. After all, the average tax on a pack of cigarettes in the US is 42%.

Last, the marijuana industry isn’t going to be the Wild West. Colorado is working to control pretty much every aspect of the market, as evidenced by its 144-page marijuana Rule Book. You can be sure that other states will follow suit.

3) It’s Still Illegal

Though marijuana is now legal in two states, it’s still illegal under federal law. The Obama administration has said it won’t enforce marijuana prohibition in states that legalise it, as long as those states keep it under control. The federal government maintains the same position on medical marijuana, which, somewhat surprisingly, is also still illegal under federal law.

The feds are moving in the right direction, albeit slowly. Two weeks ago, the Treasury Department issued new rules that open the door for banks to do business with legal and licensed marijuana dispensaries.

Of course, once the feds do get on board, they’ll want a piece of the action. So be ready for even higher taxes.

4) Unsavoury First Movers

It’s an unfortunate fact that, because the industry was just decriminalised recently, those best positioned to jump quickly into the marijuana business are those who were already in the marijuana business. In other words: people who were classified as criminals just two months ago.

Not that they were necessarily doing anything wrong by growing and distributing marijuana before it was legal. I’m sure plenty of growers and sellers are good people trying to earn a buck, just like those who grow and sell any other crop.

But as with any emerging industry, the first movers will be those who already possess an intimate knowledge of said industry. And in the case of marijuana, that means people who were running illegal businesses. So if you invest in their companies, you’re entrusting your capital to someone who’s willing to break the law.

As an investor, that should give you pause. Tread carefully, and dial your scepticism up to maximum.

5) Weak Candidates

The investment options in this infant industry are, understandably, limited. We’re a ways off from being able to buy a bushel of hemp on the futures exchange. If you want to invest, you’ll have to go with one of a handful of public companies. And unfortunately, none of them looks compelling.

The six companies in the chart below are the purest plays in the marijuana space. Their performance in 2014 is the stuff of legends – the worst performer gained 243% in the last three months:

Click to enlarge

But dig into their businesses and you’ll soon find that their value comes from their scientific-sounding names, and not from actually making money.

First, the companies are tiny and only trade on the illiquid over-the-counter markets. Before the share price run-up, only one, CannaVEST, had a market cap above $60 million.

What’s worse, most of them don’t have any revenue. And the ones that do generate revenue spend much more than they earn. Not that this is surprising – hardly any business could become profitable in just two months, so we won’t hold that against them. The problem is their valuations: CannaVEST is worth a staggering $1.8 billion today, and most of the others are all in the hundred-million range.

Let’s put it this way: if an entrepreneur walked into the Shark Tank seeking a $1.8 billion valuation for a company that doesn’t make money, Mark Cuban would laugh him out of the room. Speculative money already took these stocks to the moon. By buying one now, your only hope of profiting is for a greater fool to come along and buy it from you at a higher price.

As I see it, because of sky-high valuations, the risks in this blossoming industry far outweigh the potential reward, at least for a retail investor. I’m sure there are some fantastic private deals out there, and if you’re willing to press the flesh and meet some marijuan-trepreneurs yourself, you could make money.

But for non-full-time investors, you’ll want to watch this trend unfold from the sidelines, waiting for either (1) the speculative bubble to pop, so you can pick up some shares for fractions of a penny; or (2) a leader to emerge and demonstrate it can turn a profit.

Dan Steinhart,
Contributing Editor, Money Morning

Ed note: The above article was originally published in The Daily Reckoning US.

Join Money Morning on Google+

By MoneyMorning.com.au

By Alex Eliades

If you’ve done a bit of research into Forex you may have come across brokers offering swap-free trading or indeed charging swaps, otherwise known as rollover charges or overnight fees.

For those of you that are not familiar with swaps you need to understand some basic principles of the currency market and the central banks that control the currencies. You see currencies are tied to Governments that set interest rates in their country and while the US might have an interest rate of 1%, Australia might have an interest rate of 5%. This means that someone with $100,000 USD in their bank account will earn much less in interest than someone with the equivalent AUD in their bank account. When trading a currency pair that has a distinct difference in interest rate between the two currencies, one currency will organically increase in value over the other without any market movement. Therefore, in the Forex market swaps are charged on trades in order to compensate for the polarized interest rates.

Now that you understand about what swaps are and why they are applied to Forex trades you need to understand that beliefs such as Islam do not agree with interest and therefore some brokers have decided to offer swap free Forex accounts for them. Swap free accounts simply do not charge daily swaps or rollover fees on trades that counter the difference in interest rates. This can expose a swap free Forex broker to carry traders to some degree and as such brokers that offer swap free trading often have to put some restrictions in place such as a wider spreads on currency pairs with contrasting interest rates or time limit that the traders are allowed to leave their positions opened.

One important thing to note when searching for a swap free broker is that some brokers only offer swap-free accounts to clients that follow the Islamic faith, and they want proof. Other brokers provide swap-free accounts to anyone that wants one and some brokers have not made it clear whether or not they have any stipulations. Quite often traders that select special swap-free accounts might miss out on certain trading conditions that are only available to standard swap accounts, but this depends on the broker. Some brokers like XGLOBAL Markets have a single account type and offer their best conditions to all traders, which includes a swap-free trading environment that is available to all irrespective of faith.

Written By Alex Eliades

Social mood is another term for the shared inclination of a society. The conflict between Russia and Ukraine is a dramatic example of social mood in action.

By Elliott Wave International

Editor’s note: You’ll find a text version of this article below the video.

For 3 years, Russia’s stock market has been drifting lower. Here is why that’s important.

The stock market shows the mood of society.

And social mood drives social actions — like public protests and even war.

That means that if you follow the stock market, you’ll know what kinds of events are likely to happen in any country.

Social mood is another term for the shared inclination of a society. The conflict between Russia and Ukraine is a dramatic example of social mood in action.

Take a look at this chart. The Russian stock market topped in April 2011. But three months earlier, in January 2011, our European Financial Forecast gave subscribers a warning about the coming reversal.

In fact, as this chart shows, we warned about TWO tops — one in 2008, and then the most recent one in 2011.

Look closer. As you can see, the Russian stock market dropped sharply during the 2007-2009 financial crisis. Then the RTS rebounded, but only in three waves — A, B, C, which is a countertrend move. That’s why, in 2011, it was clear that Russia’s stock market was about to decline.

But stocks weren’t the only things set to turn negative. At the time, our European service also made a forecast that an unstable new social climate that would soon follow. One of our specific forecasts was that U.S.-Russia relations would sour, and that the economies of eastern Europe would unravel.

Over the past three years, we did see economies of numerous central and eastern European countries crash. In Ukraine too, where the stock market is down some 75 percent, negative mood is now driving the country’s politics, putting it on the brink of civil war.

On Monday, March 3rd, Russian shares fell another 12%, in one day. That brings the total decline since the April 2011 peak to about 50%, in-line with our 2011 forecast. Here is a zoomed in look at the latest crash.

Recently, the European Union vice president Vivian Reding told CNBC that she hopes that “common sense comes back and the two sides manage to come together to create a common country in the interest of all Ukrainian people.”

We hope for the same thing. But it is important to realize that as long as social mood is trending negatively, the opposite is most likely to occur.

We’ll be following social mood as it unfolds in this potential center of a new Cold War.

Learn more about our European Financial Forecast here >>

By Dennis Miller

Quantitative Easing (QE) is no longer a surprise, but the fact that it’s continued for so long is. Like many Miller’s Money readers, I believe the government cannot continue to pay its bills by having the Federal Reserve buy debt with newly created money forever. This has gone on much longer than I’d have ever dreamed possible.

Unemployment numbers dropped in December and the Federal Reserve tapered their money creation from $85 billion to $75 billion per month. Why did the unemployment rate drop? Primarily because people whose benefits have expired are no longer considered unemployed. The government classifies them as merely discouraged, but the fact remains that they don’t have jobs.

So, what is the problem? Let’s start with the magnitude of money creation. Tim Price sums it up well in an article on Sovereign Man:

“Last year, the US Federal Reserve enjoyed its 100th anniversary, having been founded in a blaze of secrecy in 1913. By 2007, the Fed’s balance sheet had grown to $800 billion. Under its current QE program (which may or may not get tapered according to the Fed’s current intentions), the Fed is printing $1 trillion a year.

To put it another way, the Fed is printing roughly 100 years’ worth of money every 12 months. (Now that’s inflation.)”

As Doug Casey likes to remind us: Just because something is inevitable, does not mean it is imminent. Well, sooner or later imminent and inevitable are going to meet. Interest rates are depressed because the Federal Reserve is holding our debt. Eventually those creditors outside the Federal Reserve will demand much higher interest rates.

Currently, 30-year Treasuries are paying 3.59%. If interest rates rose by 2%—still below what was considered “normal” a decade ago—the interest cost to our government would jump by 30% or more. It’s hard to imagine the huge budget cuts or tax increases it would take to pay for that.

In the meantime, investors are caught between the proverbial rock and hard place. We cannot invest in long- or medium-term, “safe,” fixed-income investments because they are no longer safe. They could easily destroy your buying power through inflation.

At the same time, the stock market is not trading on fundamentals. It is on thin ice. Just how thin is that ice? Take a look at what happened when the Federal Reserve stopped propping up the economy with money printing.

Each time they stopped with their stimulus the market dropped. In the summer of 2013, Bernanke made his famous “taper” remark and the market reacted negatively, immediately. The Fed has had to introduce more money into the system to stop the slide.

Investors who need yield know they have virtually no place else to go but the stock market. Most realize it is a huge bubble; they only hope to get out ahead of everyone else when the time comes. And we can’t hold cash; inflation would clobber us. So, we’ve been forced into the market to protect and grow our nest eggs.

It reminds me of playing musical chairs as a kid. The piano player would slow down the tempo. We would all grab the back of a chair and get ready to sit. No one wanted to be the one left standing.

Today the band is playing the “Limbo Rock.” Investors are in limbo, knowing the music will stop eventually. We’re all going to have to grab a chair quickly—and the stakes are much higher now.

The chart below on margin debt comes courtesy of my friend and colleague at Casey Research, Bud Conrad.

Investors now have a dangerous amount of money invested on margin—meaning they borrowed money from their brokers to buy even more stock. There are strict margin requirements on how much one can borrow as a percentage of their holdings. If the stock price drops, the investor receives a margin call from his broker. That has to take place quickly under SEC requirements. The broker can also sell the holding at market to bring the client’s account back into compliance.

Record margin debt, coupled with the thought of traders using computers to read the trend and automatically place orders in fractions of a second, paints an uneasy picture. The unemotional computers will not only sell their holdings, they may well initiate short sales to drive the market down even further.

As the lyrics from the “Limbo Rock” ask, “How low can you go?” When the market limbos down, it will likely be faster and further than we’ve imagined.

Why is 2014 different? I’ve been taking stock of 2013 as I prepare our tax filings. Our portfolio did very well last year, thanks in great measure to the analysts at Casey Research. With our Bulletproof Income strategy in place, I am very comfortable with our plans going forward.

At the same time, I am as jittery as a 9-year-old walking slowly around a circle of chairs, knowing that sooner or later the music will stop. The music has played for years now and we are in the game, whether we like it or not. Pundits have gone from saying “this is the year” to more tempered remarks like “this can’t go on forever.” They place their bets on inevitable, but hedge them on imminent.

What can we do? One of the mantras behind our Bulletproof Income strategy is: “Avoid catastrophic losses.” Doug Casey has warned us that in a drastic correction most everyone gets hurt, so our goal is to minimize that damage and its impact on our retirement plans.

Here are a few things you can do to protect yourself.

• Diversify. Not all sectors rise and fall at the same speed. Optimal diversification requires more than just various stock picks across various sectors. Limit your overall stock market exposure according to your age. You don’t have to be all in the market. There are still other ways to earn good, safe returns. International diversification will give you an added margin of safety, too, not only from a market downturn but also from inflation.
• Apply strict position limits. No more than 5% of your overall portfolio should be in any single investment. When I look at the record margin debt, I wonder how so many investors can go hog wild on a single investment. Planning for retirement demands a more measured approach.
• Set trailing stop losses. If you set trailing stop losses on your positions at no more than 20%, the most you could lose on any single trade is 1% of your overall portfolio. The beauty of trailing stops is the maximum loss seldom happens. As the stock rises the trailing stop rises with it, which will lock in some additional profits.
• Monitor regularly. As part of my regular annual review, I go over each one of my stop-loss positions. I use an online trading platform to keep track of them. Depending on the stock, you may want to place a stop-loss sell order or use an alert service that will notify you if the stock drops below your set point. Other investors prefer to use a third party for notification.So, why do I check my stop losses? My particular trading platform accepts the orders “GTC,” meaning “good ’til cancelled.” But GTC really means “Good for 60 days and then you have to re-enter the notification.” Just read the small print.

  Also, sometimes stop losses need adjusting. As a stock gets closer to the projected target price, you may want to reduce the trailing stop loss to 15%, or maybe even 10%, to lock in more profits.

We all want to enjoy our retirement years and have some fun. I sleep well knowing we have several good circuit breakers in place. We may get stopped out of several positions and stuck temporarily holding more cash than we’d like. But that means we’ve avoided catastrophic loss and have cash to take advantage of the real bargains that are bound to appear.

And so the band plays on as baby boomers and retirees continue to limbo.

From the very first issue of Money Forever our goal—my mission­­—has been to help those who truly want to take control of their retirement finances. I want our subscribers to have more wealth, a better understanding of how to create a Bulletproof portfolio, and confidence their money will last throughout retirement.

With that in mind, I’d like to invite you to give Money Forever a try. The current the subscription rate is affordable – less than that of your daily senior vitamin supplements. The best part is you can take advantage of our 90-day, no-risk offer. You can cancel for any reason or even no reason at all, no questions asked, within the first 90 days and receive a full, immediate refund. As you might expect, our cancellation rates are very low, and we aim to keep it that way. Click here to find out more.