What Are The Best Investments if The FED Raises Interest Rate?

By Nico Omer Jonckheere26 Agustus 2015

Will and CAN The Fed Increase Interest Rates For The First Time Since 2006?

“Actions Speak Louder Than Words”

“Number of times in past 9 ½ years Fed gasbags have talked about hiking rates: 3767. Number of hikes: 0. Now talking about slowing rate rises?”

-- Tweet from Fred Hickey on May 27, 2015

FOMC Reaction- Sept Rate Hike Odds Drop To 40%

There are TWO REASONS why pressure is mounting for US Federal Reserve chairwoman Janet Yellen soon to start raising the cost of credit after six years of easy-money policies:

► Without higher rates, the central bank lacks its most powerful traditional weapon for combating the next recession – cheapening credit.

► Growing recognition that quantitative easing and zero rates have inflated a bubble in asset prices and driven related rising wealth inequality, yet failed to boost economic growth.

5 Reasons Why The Fed Won’t Raise Interest Rates

1) An interest rate increase will make the DOLLAR even STRONGER than it already is.

2) The Fed has been keeping their eye on INFLATION (deflation), but they haven’t hit the magic 2% inflation target since 2012.

3) AMERICA is BANKRUPT and on borrowed time.

4) Back in June, the IMF urged the Federal Reserve to delay a rate increase because of a still-struggling US economy and warned of “significant uncertainties as to the future resilience of economic growth.”

5) The US stock markets are ADDICTED TO FREE MONEY so we may need a bigger balance sheet in the future.

The Dow Jones Industrial Average has gone nowhere since October 31st 2014 – THE END OF QE3…

The War Against Deflation

“I’ve said all along that the Fed will not tolerate deflation, and that it will do whatever it takes to keep the US economy from deflating. On this basis I do not expect the Fed to raise rates this year or next, and it would not surprise me to see the Fed bring in QE4 or something like it.”

-- Richard Russell

What Should You Buy And What Should You Sell?

Source: www.technicalindicatorindex.com

Source: www.chartwatchers.com

Source: www.clivemaund.com

Source: www.clivemaund.com

Source: www.clivemaund.com

Seasonals are poor as Aug., Sept. and Oct. are the worst-performing months of the year.

Summarizing “Investor” Thoughts Today (In 1 Cartoon)

“I’m now predicting that we are going to see a global stock market crash before the end of the year. It’s not only going to be the Dow, it’s going to be the DAX, the FTSE, the CAC, Shanghai, and the Nikkei. There’s going to be panic on the streets from Wall Street to Shanghai and from the UK down to Brazil. You are going to see one market after another begin to collapse.”

--Gerald Celente

The Shanghai index is currently showing some textbook Elliott wave behavior:

Source: www.zerohedge.com

It should come as no surprise that fund managers’ positioning on EM relative to DM is the most extreme on record!

While relative to history, the space is under-owned – by a lot:

This is the most important trend line in the world right now… which way next?

GOLD

Currently the “Gold Optix” is at its second-lowest level in history, undercutting even the low recorded in the year 2000, at the bottom of a 20-year bear market:

Source: www.clivemaund.com

2001 - $2602007 - $1000

1976 - $1051980 - $800

Ironically the asset class that will benefit most from RATE HIKES is the one traders least expect: GOLD!

History Doesn’t Repeat Itself But It Does Rhyme

Source: www.zerohedge.com

Gold bulls will cite the 1970s experience as to why they are not worried about the current slump in the price.

Gold Bullion “Extremely Rare”

Look forward to the second half of the year, when gold prices have historically seen a bump in anticipation of Diwali, which falls on November 11 this year, and the Chinese New Year.

OIL

Source: www.zerohedge.com

WTI Crude has been dropping for 8 straight weeks for the first time since 1986…

Source: www.elliottwave.com

Is Australia The Next Greece?

Even though the Aussie dollar is a RISK ASSET, based upon underlying fundamentals, the Aussie dollar seems much more dependable and trustworthy than the “safe haven” U.S. dollar.

But much more importantly, Australia’s government debt load is miniscule compared to that of the U.S.

Stated simply, the Aussie dollar has been falling because COMMODITY PRICES have been falling.

IRON ORE and COAL prices have been plumbing new record lows:

Australian consumers are more worried about the medium term outlook than at the peak of the financial crisis…

…as China plumbs new depths in MANUFACTURING, just piling on Australia’s woes:

Source: www.zerohedge.com

All eyes are on AUD as it is currently testing a very long-term trend line:

CONCLUSION

I would not be surprised to see the Australian dollar bounce along the bottom here for a while. But over a two- to three-year time frame, the Aussie looks like a

keeper!

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