Here we are in the midst of the beautiful summer season, yet all is not quiet. So I’m writing again to make some new points that I omitted yesterday.

I realize that many people are concerned about the events that dominate the daily news. While I sympathize with fears and concerns that these headlines engender among our readers, I try not to focus entirely on those currently newsworthy events when I write these notes. I try to write about things that are on the horizon but have not yet become commonly newsworthy.


This is one way, in my opinion, to make money. See the events that have not yet become newsworthy and invest accordingly. When they do become newsworthy sell and take profits.


In my memo of yesterday, I mentioned that an inverted yield curve would be bad for stocks in the U.S. for a few more months. I also said that many countries were starting to get an inverted yield curve. This implied that many stock markets would do poorly for the next few months. Several clients have asked me, so I will say it more clearly. I believe that most major world stock markets will decline for the next few months.


The dollar is fundamentally a very weak currency. If so, why is it hanging around in a trading range going sideways and not falling versus most other currencies? There are two reasons, in my opinion, for this phenomenon.

1. In times of military action the currency of the strong actor will rise. Recent military activity by Israel makes them a strong actor. Most market participants view Israel as a U.S. client state. Thus the U.S. dollar is rising.

2. Currencies of countries where most of the economic activity is based upon commodities and where the commodities are available to large industrial commodity users are attractive. Usually, the currency of the country with the available and useful commodities will rise.

Look at the Canadian Dollar. It has been rising because the country is friendly to Europe, Japan, China, India and the U.S. and exports commodities to all of them. Canada has many valuable commodities such as energy, metals, timber and water and can be counted on to supply commodities if other sources are cut off.


A lot is happening politically in Russia, China, the Mid East, Latin America, India and elsewhere. Stock markets react in the short term to political and military news but in the long run they react to the economic outlook. Thus, military news is important as it impacts the world economic outlook.

As we have been saying, the world economic outlook will be strong, although the economic outlook may slow in the U.S. and Europe. Global stock markets may well be volatile and trending lower for a few months. The investment bright spots in our view will be oil and gold.

I realize that this note could well do with a note of calm, so may I interject the following.

Change will be great for the next few months; however, everything will turn out OK for most investment markets. There could be a substantial diminishment of U.S. global political power as a result of the events now playing out in the Mid East. We may be going from one major world political power to a multi-polar world with China and Russia gaining a lot of influence and with U.S. influence diminishing. This will not signal the end of good investment opportunities, it just requires us to continue our vigilance as investors.

All major economies and the world economy will continue their growth as we move ahead. Many current investment opportunities will turn out well and new ones will arise.

May you enjoy all of the best.